Zurich (Reuters) – Asset manager Julius Baer is scaring investors with a profit warning and open questions about a business relationship with real estate investor Rene Benko’s ailing Signa Group. In view of loan provisions and higher taxes, the Swiss bank on Monday forecast falling profits for 2023, after the institution had earned a bottom line of 950 million francs in 2022.
During the month of November alone, Bär recorded value adjustments on the loan portfolio of 70 million francs.
According to a recently published report by “Business Insider”, Bär is said to have lent a total of around 600 million euros to the Signa Group. A person familiar with the matter said Baer is exposed to Signa and is likely to write off some of those loans. Bär did not want to comment on the question of whether Signa or its founder Benko were customers and had triggered the provisions.
In addition to prestige properties such as the Chrysler Building in New York, the Signa Group also includes the department store chains Galeria in Germany and Globus in Switzerland. Like many real estate companies, Signa is under pressure due to high construction costs and rapidly rising interest rates. The Austrians maintained business relationships with a number of financial institutions. According to an insider, the group has loans outstanding from almost all well-known Austrian financial institutions.
Regarding the impairment, Bär said: “The overall quality of the loan book and balance sheet remains unaffected, with consistently strong capitalization and high liquidity providing sufficient capacity to absorb any risks arising from the group’s business activities.” But investors took off, and bear stocks on the stock market fell by over 13 percent to a low for the year.
While the impact of the credit losses appeared manageable, questions about risk management were unavoidable, Jefferies analysts said. “Investors may be wondering how a single customer – if indeed this is the case – has resulted in such a large loan provision and whether there could be further outsized individual customer exposures.”
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Not only were the value adjustments and the profit outlook disappointing, but also other financial key figures. Bär collected a net 10.3 billion francs from customers in the first ten months of the year. The money came from Switzerland, Great Britain, Germany, Hong Kong, Japan, the Emirates and Israel, among others. However, analysts had expected more. In the first six months, Bär had raised new money of 7.1 billion francs from its competitor Credit Suisse, which was taken over by UBS, thanks in part to the crisis. From July to October the growth rate was only around half as high as that of its rival EFG International.
Bär is investing in future growth by hiring a net 75 customer advisors and with a promising pipeline for further new hires, the bank said. The financial institution now employs a total of 1,323 advisors. However, these new hires would also have contributed to an increase in the cost-income ratio to almost 68 percent from 66 percent in 2022 as a whole. Bär wants to improve to under 64 percent by 2025. But from today’s perspective it seems difficult to achieve this target, explained Vontobel analyst Andreas Venditti.
(Report by Oliver Hirt and Noele Illien. Edited by Elisa Martinuzzi. Edited by Olaf Brenner. If you have any questions, please contact our editorial team at [email protected] (for politics and economics) or [email protected] (for companies and markets).)
2023-11-20 20:32:45
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