2023-11-27 09:17:00
Zurich (awp) – The large credit provision revealed in November by Julius Bär is clearly linked to the Austrian investor in difficulty René Benko. Despite this disappointment, the wealth manager said he was solidly capitalized and able to withstand a possible collapse of these loans, which seemed to more or less reassure investors.
The credit provision of 70 million Swiss francs recorded by Julius Bär, which the bank disclosed at the end of November, is mainly linked to “the largest single exposure” in its portfolio of loans granted to wealthy individuals. This financial provision is linked to René Benko, a source at the AWP agency indicated on Monday.
The total value of this exposure amounts to 606 million Swiss francs, divided into three loans granted “to different entities within an unidentified European conglomerate”, according to a press release.
Various media had previously reported that the bank had been affected by the financial setbacks of investor René Benko, owner of the Signa group. The Zurich bank is said to have financed the purchase of the Globus department stores by Mr. Benko and his Thai partners four years ago.
Loans to this entity are guaranteed by counterparties linked to commercial real estate and the luxury sector. The wealth manager indicated that he had “taken measures to protect his interests and preserve the value of the counterparties”. This loan portfolio must now be restructured and the bank might “prudently” make further adjustments.
Even in the possible event of a total loss on these loans, the group’s hard capital ratio (CET 1) would be higher than 14% and the bank “would be clearly profitable”, she said.
At the end of October, the private credit portfolio, an activity inherent to the services granted to its ultra-rich clients, totaled 1.5 billion Swiss francs and all loans granted by the bank totaled 41 billion. The other two largest loans to individuals amount to 216 million and 140 million and are not linked to the real estate sector.
What quality for guarantees?
“We regret that a single exposure has created uncertainties for our shareholders,” lamented managing director Philipp Rickenbacher, quoted in the press release, adding that the Zurich establishment “is very well capitalized”, the CET hard capital ratio 1 standing at 16.1% at the end of October. Faced with these difficulties, the boss indicated that the group would review its lending activity to wealthy individuals.
At the end of November, the bank warned that it expected an annual net result this year lower than that recorded in 2022, the year in which it had recorded a net profit (IFRS) of 950 million Swiss francs, due to an increase in provisions on credits of 82 million and an increase in the tax rate.
Julius Bär subsequently confirmed its objective of returning around half of the adjusted net profit to shareholders, with the dividend per share expected to be at least comparable to that of the previous financial year.
On the Swiss Stock Exchange, investors seemed to have difficulty evaluating these announcements, causing Julius Bär shares to fluctuate between rise and fall. Around 10:13 a.m., the stock fell 1.2% to 46.21 Swiss francs, in an SLI index down 0.19%.
Vontobel analysts, for their part, questioned the quality and value of the guarantees linked to these loans held by Julius Bär. Their counterparts at the Zurich Cantonal Bank, for their part, believe that these announcements should dispel doubts regarding further write-offs.
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