Julius Bär: Little room for euphoria

More bad news for the Swiss private bank. A heavy charge has been announced in its update for the first four months of the year. This setback, mainly related to defaults on private and mortgage loans — already in the process of being liquidated — is reigniting questions about the quality of the credit book and overshadowing operating results that were nevertheless better than expected.

This is yet another setback for Julius Bär; troubles have been mounting for two years.

In order, FY 2023 was marked by a sharp drop in results, mainly due to its exposure to Signa, the real estate and commercial empire of Austrian billionaire René Benko, which was unable to raise sufficient funds to avoid insolvency. Julius Bär's CEO Philipp Rickenbacher left the company with heavy write-downs on its books. Subsequently, cost-cutting plans followed, including job cuts, bonus reductions, the discontinuation of share buyback plans, and the suspension of dividend increases. Julius Bär began reviewing its portfolio, for example by discontinuing private lending activities for high-net-worth clients, which accounted for around 2% of its portfolio.

The results that followed reflected lower-than-expected inflows and additional complications due to a lack of market recovery, a stricter risk framework, and uncertainties as FINMA (the Swiss Financial Market Supervisory Authority) continues to conduct a formal investigation into control failures in connection with the losses on Signa.

A painful new charge

Julius Bär announced a net charge of 130m CHF related to a further adjustment of its loan portfolio. As a direct result of this revision, net profit for H1 2025 will be lower than in 2024 (452m CHF). The cost/income ratio automatically rose to 72%, compared with 66% excluding exceptional items, while its pre-tax margin fell by 21 basis points.

While the market feared a repeat of the Signa affair, the new CEO Stefan Bollinger sought to reassure investors, stating that no other significant risks had been identified at this stage. However, caution remains the watchword, especially as several analysts (Citi, JPMorgan) highlight the lack of clarity surrounding the company's outlook for the coming months. A lack of clarity despite a well-preserved balance sheet and positive net inflows (4.2bn CHF). Assets under management remain below the end of 2024 (497bn CHF), penalized by a massive negative currency effect (28bn CHF) and the exit of the Brazilian business (8bn CHF).

For the time being, despite an encouraging underlying situation, questions about risk management—and the actual extent of the portfolio clean-up—continue to weigh on confidence.