Julius Baer boss Philipp Rickenbacher: Benko as a test

Visiting a Swiss private bank can be intimidating. The wealth is never ostentatiously displayed. But between the high-quality furniture and selected art, some guests get the feeling that they don’t belong here at all.

A good banker succeeds – more through his manner than through his words – in removing this doubt from visitors: But of course you are welcome here!

The tangible bank boss

In this respect, Philipp Rickenbacher, the 52-year-old boss of Julius Baer, ​​is an excellent banker – precisely because he doesn’t come across like an old-school customer advisor. He wears a short haircut instead of an elaborate blow-dry hairstyle and goes without a pocket square. He rarely wears anything more than the industry-obligatory Hermès tie, the epitome of subtle luxury.

Even more than such attributes, it is Rickenbacher’s appearance that makes him appear straightforward and unpretentious. After almost twenty years at Julius Baer, ​​he knows a lot about the banking business, but remains modest in conversation and never turns into a teacher. He speaks good English, but always lets a slight Swiss accent shine through when he presents Julius Baer’s half-year figures.

All of this makes him comprehensible. Rickenbacher – who likes to say that he grew up on Rickenbachstrasse in Rickenbach, i.e. in the country – could be the corporate customer advisor next door with whom the loan for the new factory building needs to be discussed. He is the head of – by many criteria – the largest private bank in Switzerland.

However, a boss who has been under pressure for weeks: his bank has granted Tyrolean real estate king René Benko more than 600 million francs in loans in recent years. Because the Austrian’s corporate empire is collapsing, Julius Baer is now also fighting for its loans – and its reputation.

The financial markets reacted violently in mid-November when the bank indirectly admitted its Benko risk. The share price fell by a fifth and has not recovered since. Many simply did not believe that Rickenbacher’s private bank could do such large and opaque transactions with a high-risk customer. The aura of the banker next door has been tarnished.

Scientists, consultants – bankers

The reason Rickenbacher doesn’t seem like a traditional private customer advisor is because he isn’t one. He studied biotechnology at the ETH until 1997 and then worked for seven years as consultants at McKinsey. Then came the move to “Zum Bär”, at that time still a small private bank with a strong connection to the founding family.

Until then, Rickenbacher’s path is similar to that of many top Swiss bankers. As a result, he rose within the bank, but mainly took on positions behind the front: in trading and later for a long time as head of the structured products unit. In 2019, he also briefly managed business with external asset managers before taking over the management position from Bernhard Hodler.

Only a few observers outside the bank were aware of Philipp Rickenbacher at the time. His career gave rise to discussion: Doesn’t a private bank need an inveterate “customer guy” at the top in order to keep the world’s super-rich happy and in the bank?

But Rickenbacher knew Bank Bär like no other – and he embodied its return to solid craftsmanship.

The shadow of his predecessor, Boris Collardi, always hung over Bär and Rickenbacher. With an excellent international network, the bon vivant had used a daring acquisition strategy to transform Julius Baer into one of the largest private banks in the world, which was also better known among the rich in Asia than almost any other Swiss financial house.

At the same time, Julius Baer found itself in the headlines and on the radar of the Financial Markets Authority (Finma) because of its role in a series of money laundering and other scandals. The supervisory authority punished and reprimanded the bank unusually harshly in 2020.

Rickenbacher was already in charge. He had to vow to improve, and from then on he had to demonstratively be the anti-Collardi – towards customers and employees, but also for Finma and for the Swiss public.

Romeo Lacher, the Chairman of the Board of Directors of Julius Baer, ​​justified Rickenbacher’s choice in the 2019 NZZ interview as follows: “Philip Rickenbacher spoke in favor of the fact that he knows the organization and culture of the bank, but is self-critical enough to know what the bank needs now and what needs to be done better.”

Risk and return

Rickenbacher’s task was extremely demanding from the start. In short, Julius Baer should continue to grow and remain as profitable as the bank was under Boris Collardi – but the new boss should do this without taking the same risks. However, the natural laws of banking are still in force: only those who accept certain risks have the chance to achieve returns.

At the beginning, Rickenbacher seemed to succeed in the feat. He emphasized that Julius Baer is only a private bank; This means that she is always at her customers’ side, free from conflicts of interest. This was well received after the Greensill scandal at Credit Suisse, which was also due to the bank’s internal association of the product forge in asset management with its asset management.

Under Rickenbacher’s leadership, Julius Baer adjusted the compensation models of its customer advisors. The incentives should be more long-term focused. The advisors should no longer bring on board customers who are too risky in order to gain their own bonus, thereby causing problems that the bank would later have to pay for.

Nevertheless, the Zurich bank managed to retain good customer advisors and also attract some new talent. In 2021, Julius Baer achieved record results, breaking the billion mark in annual profit for the first time. The good market environment helped Rickenbacher: the ultra-low interest rates had pushed up customer assets and the bank was earning money from the fees.

In any case, Rickenbacher seemed to be the right man in the right place. Julius Baer even digested the interest rate turnaround in 2022, which led to a sudden collapse in asset prices and severely hit Swiss private banks.

Why Benko harms Rickenbacher and Bär

Philipp Rickenbacher’s appearance and his public image explain why the story of the Benko loans is bothering him: Isn’t his Julius Baer not as risk-free as everyone believed? Was that just a facade?

The sooner the bank can draw a line under the matter, accurately quantify the loss and write it off, the better. Whether Julius Baer will end up losing 200 or 300 million francs is irrelevant. However, there are currently many indications that the unraveling and dissolution of Benko’s empire will take a long time.

Rickenbacher also has to convince institutional investors of Julius Baer again. They were completely surprised by the high concentration of risk that the bank had built up with the Signa Group and Benko and lost trust. So far, despite appropriate attempts, Julius Baer has not been able to regain this trust. This is a key reason why the share price remains very low.

The fund managers – who in turn have to be responsible for investments – apparently did not receive enough information about Julius Baer’s further commitments to buy the shares again with a clear conscience. They doubt whether Rickenbacher’s team is really that good at choosing the right risks.

Banking blogs are already more or less clearly calling for Rickenbacher’s resignation. However, within the bank there is no single culprit for the Benko case. Of course, the board of directors around President Lacher could now point the finger at Rickenbacher, dismiss him and thereby signal determination. But that would make things a little easier for himself, after all, the risk committee of the board of directors also approved the loans to Benko as the highest authority.

Leadership question or not: For now, Rickenbacher is no longer the private banker next door. And it won’t happen again any time soon.