Julius Baer does not rule out more provisions for his 627 million exposure to a European conglomerate

The Swiss entity will review its private debt business

MADRID, 27 Nov. (EUROPA PRESS) –

The Swiss bank Julius Baer confirmed this Monday that most of the provisions announced last week are related to a nominal exposure of 606 million francs (627 million euros) to “a European conglomerate” and has indicated that it will remain cautious in record additional valuation adjustments as necessary.

On November 20, the Swiss entity announced that it had recorded provisions worth 70 million francs (72 million euros) in the group’s credit portfolio after October 31, 2023, adding that it does not expect the level of net profit for the entire year reaches that of 2022.

In this sense, Julius Baer has confirmed that this amount was mainly related to the largest individual exposure in its private debt loan portfolio.

“This nominal exposure amounts to 606 million francs and includes three loans to different entities within a European conglomerate,” the financial firm has indicated.

On this issue, the bank has highlighted that the aggregate exposure to this group of clients is secured by multiple collateral packages related to commercial real estate and luxury retail and is now subject to a longer-term restructuring.

“Julius Baer has taken steps to protect its interests and preserve the value of its collateral and, where appropriate, the Group will continue to be prudent in recording additional valuation adjustments as necessary,” it said in a statement.

Likewise, he specified that, as of October 31, 2023, the private debt loan portfolio amounted to 1,500 million francs (1,553 million euros), as part of a total loan portfolio of 41,000 million francs (42,441 million euros). euros).

As such, the exposure mentioned above “is the largest in the private debt loan portfolio”, while the remaining portfolio comprises loans to unrelated counterparties and various sectors with solid asset quality.

“The second largest private debt risk amounts to 216 million francs (223 million euros), the third to 140 million francs (145 million euros), none of which is related to the real estate sector,” said the bank, adding that the remainder of the portfolio consists of considerably smaller exposures to 19 unrelated counterparties.

“Julius Baer is very well capitalized and has been consistently profitable under all circumstances,” said Philipp Rickenbacher, CEO of Julius Baer Group. “We regret that a single exposure has caused recent uncertainty for our stakeholders,” he added.

In this sense, the banker highlighted that, along with investment and multigenerational wealth planning, financing is an inherent part of the wealth management proposal for clients.

“On this basis, together with the board of directors, we will review our private debt business and the framework in which it is carried out,” he warned.

The Swiss entity has assured that it has a solid capital position with a CET1 ratio of 16.1% as of October 31, 2023, significantly above the regulatory requirement of 8.2%, adding that, even in a hypothetical loss scenario In total, the pro forma CET1 capital ratio as of October 31, 2023 would have exceeded 14% and Julius Baer would have remained significantly profitable.

In this way, it has reconfirmed its capital distribution policy, according to which it targets a dividend payout rate of *50% of adjusted net profit attributable to Julius Baer Group shareholders, with a dividend per share at least equal to dividend per share of the previous year.

In addition, under this policy, CET1 capital that significantly exceeds a CET1 capital ratio of around 14% at the end of a financial year will be distributed through a share buyback program launched in the following year, unless opportunities for acquisitions that are strategically consistent and financially attractive.

‘Bloomberg’ had indicated that the client in question would be the Signa business group of Austrian magnate René Benko, adding that one of its subsidiaries declared bankruptcy last Friday in a Berlin court and warning that a total insolvency of Signa Prime could represent a shock to European real estate markets.

Likewise, sources familiar with the situation have informed the ‘Financial Times’ that Julius Baer is one of Signa’s largest lenders.