Julius Baer Plunges as Bank Announces Cuts But No Strategy Plan
(Bloomberg) — Julius Baer Group Ltd shares dropped more than 10% after the Swiss wealth manager announced job cuts and a governance revamp but left analysts waiting for a more detailed plan to boost growth.
New Chief Executive Officer Stefan Bollinger announced at his first results presentation that the executive board is being cut to five members from 15, and the bank will seek an additional 110 million Swiss francs ($120 million) in annual cost savings.
That will translate to about 400 jobs in Switzerland, equivalent to about 5% of the workforce, deputy CEO Nic Dreckmann said on a media call.
In charge for less than a month, Bollinger’s first step enacts a focus on costs that he announced as soon as he arrived. Baer is seeking to pull off a turnaround since steep losses linked to the Benko real estate collapse in 2023 exposed weaknesses in risk management and governance.
Pre-tax income for 2024 missed estimates but client inflows came in better than expected. Analysts noted the mixed results, as well as a lack of detail yet on the bank’s plan to grow its business.
The bank didn’t give any further details on a mooted buyback plan, and said it would present a strategy update, including new medium-term targets, ahead of the summer.
Julius Baer shares dropped as much as 10.7% in Zurich on Monday, trading at 57.50 Swiss francs as of 9:49 a.m.
Annual profit for 2024 increased to 1.02 billion Swiss francs, more than double the 2023 amount which was impacted by losses linked to the Signa bankruptcy. Assets under management grew 16% to 497 billion francs, according to the statement.
Analysts at KBW said the results were “underwhelming.” The bank’s gross margin came in at 83 basis points, lower than the 2023 level. However the cost-saving announcement and better client flows should help support the shares, they said.
Leaner Board
Last week Bloomberg reported the executive board changes and that Baer had discussed reducing the workforce by 10% or less. The bank had about 7,400 employees at the end of 2023.
“A new leadership structure and a leaner executive board will increase accountability,” Bollinger said in a statement.
The results of an investigation by regulator Finma into risk control lapses linked to the Benko affair are expected to be announced soon, potentially giving Baer the opportunity to detail its plans to return capital to shareholders, Bloomberg reported last week.
The focus on cutting costs matches concerns raised by analysts in recent quarters. Baer’s cost-to-income ratio has deteriorated steadily since 2021, as expenses grew faster than revenue.
In his first town-hall meeting on Jan. 9, Bollinger addressed the cost issue head on, saying that there had been a lot of hiring without corresponding revenue growth.
The new executive board will consist of the CEO and Deputy CEO Dreckmann, Chief Risk Officer Oliver Bartholet, Chief Financial Officer Evie Kostakis, and Group General Counsel Christoph Hiestand.
–With assistance from Macarena Muñoz.
(updates with shares)
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