Julius Bär warns that further loan write-downs cannot be ruled out.
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Swiss private bank Julius Bär has disclosed the credit position of Austrian property entrepreneur René Benko and his struggling Signa holding company, warning that further write-downs cannot be ruled out.
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The largest single position within the private debt loan book amounts to CHF606 million ($686 million), Julius Bär announced on Monday, without naming Benko. The bank also confirmed that the provisions of CHF70 million, which have been recognised since the beginning of November, are “largely” attributable to this position.
According to the bank, the total private debt loan book amounts to CHF1.5 billion. The next largest positions after Benko are CHF216 million and CHF140 million. These loans did not go to property entrepreneurs. The remaining portfolio consists of 19 significantly smaller positions.
According to the bank, the shaky exposure to Benko comprises three loans to different entities “within a European conglomerate”. The loans are collateralised by several packages of security in connection with commercial real estate and luxury retail. The exposure is now being restructured for the long term.
Julius Bär has taken measures to protect its interests and preserve the value of the collateral provided, the financial institution stated. Julius Bär emphasised that if further value adjustments were necessary, these would continue to be booked “prudently”.
Even in a hypothetical scenario of a total loss, the pro forma ratio of common equity tier 1 capital (CET1 capital) would have been over 14% at the end of October 2023, the bank calculates. Julius Bär would thus have remained clearly profitable.
The loans to Signa are at risk because the highly complex and indebted property group is struggling to survive. Some subsidiaries have already had to file for insolvency.
“We regret that a single exposure has led to the current uncertainty among our stakeholders”, Group CEO Philipp Rickenbacher was quoted as saying in the press release. The private debt business and the framework in which it is operated will now be reviewed.
At the same time, the bank is attempting to calm the waves that have arisen: Julius Bär is confirming its capital distribution policy, according to the communiqué.
Specifically, the bank is aiming for a dividend payout ratio of around 50% of the adjusted net profit attributable to shareholders. In addition, the dividend per share should be at least as high as in the previous year.
In addition, there is a possible share buyback. Julius Bär intends to distribute the common equity tier 1 capital, which significantly exceeds the ratio of 14%, in the following year via a share buyback. The condition is that no attractive acquisition opportunities arise.
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