Julius Baer Slumps as CEO Limbo Creates Strategic Uncertainty

(Bloomberg) — Julius Baer Group Ltd. shares fell the most of any major European bank on Thursday, as sharply lower profit and worries over a leadership gap overshadowed progress in regaining client funds. 

The Zurich-based wealth manager said net income fell 15% in the first half of the year, driven by higher funding costs and interest payments. Shares were down 10.6% at 12:09 in Zurich.  

The appointment of Goldman Sachs Group Inc. veteran Stefan Bollinger as new chief executive this week dispelled some uncertainty about how the firm will move past the damaging Benko affair of last year, in which a $700 million exposure to the bankrupt property tycoon led to steep losses. Yet Bollinger isn’t due to take over until next year, risking leaving the firm rudderless for many more months. 

“It appears that Julius Baer is in a bit of strategic limbo until the new CEO arrives,” said Anke Reingen, an analyst at RBC Capital Markets in London. 

The Zurich-based bank did report an acceleration in client inflows, evidence that some confidence is returning after clients had begun pulling cash out after November’s Benko revelations. Net inflows came in at 3.7 billion Swiss francs ($4.2 billion) in the six months to June.

 “We had a difficult start into the year,” Interim Chief Executive Officer Nic Dreckmann said in an interview with Bloomberg Television’s Anna Edwards and Kriti Gupta. “Since then we have had a momentum. All the way to June, inflows were north of 3%, in all of our major markets.”

Assets under management came in at 474 billion francs, up 11% from the end of 2023 driven by rising stock markets. 

Private Debt

Baer has said that they expect the wind-down of the private debt business at the heart of the Signa collapse to largely be completed by 2026. That portfolio declined to about 600 million francs in the first half of 2024 from around 800 million francs at the end of 2023.

The bank didn’t detail any fresh plans to return capital to investors, or update on the progress of a regulatory investigation started into the failings that led to the Benko exposure. 

Chairman Romeo Lacher has said that the bank plans to stick to its pure wealth-management business, and while the firm hired about a hundred extra relationship managers since last year, it takes time for that push to bear fruit. 

Net interest income in the first half slumped 52% to 223 million Swiss francs, driven largely by clients shifting out of current accounts to time and call deposits, the bank said. At the same time, commission and fee income grew 14%. The bank said it was increasing its cost-reduction target for 2023-2025 by 10 million francs. 

On inflows, the bank said it saw strong new money arriving from Europe, as well as India, Singapore and the United Arab Emirates. Net new money was down by almost half on the same period last year.

–With assistance from Levin Stamm.

(Updates with shares from second paragraph)

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