Bankruptcy and Julius Baer take center stage this Thursday. The Zurich-based private bank faces scrutiny over its financial hit from the Signa Group’s insolvency. Management shake-ups loom as the bank unveils its annual report.

Julius Baer, the esteemed Zurich private bank, is set to unveil pivotal details in its annual report concerning the financial setbacks stemming from substantial loans issued to the now-insolvent Signa Group. The potential reshuffling within the bank’s leadership, triggered by the Signa fiasco, remains a hot topic.

In a late November revelation, Julius Baer acknowledged extending loans totaling CHF 606 million to a “European conglomerate,” widely believed to be the Signa Group, helmed by Austrian realty mogul René Benko. Signa’s holding company and various subsidiaries are currently navigating through debt restructuring. This announcement precipitated a sharp decline in Bär’s share value, plummeting over twenty percent in mere days, a recovery from which remains elusive.

The looming question of loan provisions has kept the financial community on edge. Initial provisions were set at CHF 82 million, with CHF 70 million allocated for the impaired loan exposure. Speculations about additional provisions have been rampant, with estimates ranging from a conservative CHF 100-150 million to a more substantial CHF 400 million predicted by ZKB analysts.

Media speculations have also hinted at a significant write-down, potentially reaching the 400 million mark, which would notably dent the annual profit and affect the bank’s capitalization. Julius Baer’s strategy might lean towards a decisive move, provisioning the entire 600 million at-risk loan, thereby setting a definitive end to this saga. This approach is touted as the most favorable outcome by Morgan Stanley analysts.

Bankruptcy and Julius Baer take center stage on Thursday. The Zurich bank is set to disclose its financial hit from Signa loans. The report may also hint at management changes due to the debacle.

Speculation about head rolls

In November, Julius Baer admitted lending CHF 606 million to a “European conglomerate.” This likely refers to the Signa Group, led by René Benko. Following the news, Julius Baer’s shares plummeted over 20%. The recovery is still pending.

The bank initially set aside CHF 82 million for the loans. Speculations about further provisions have been widespread. Estimates range from CHF 100-150 million to CHF 400 million. Some media suggest a significant write-down might impact annual profits and capitalization.

Julius Baer might opt for a decisive move. Analysts from Morgan Stanley see provisioning the total 600 million loan as a positive step. The clarity on loan collaterals, especially related to real estate and luxury retail, is anticipated.

The Signa loans have stirred discussions about potential executive exits. CEO Philipp Rickenbacher and CFO Evie Kostakis have faced scrutiny. Chairman Romeo Lacher’s position is also under speculation. Yet, the bank’s leadership seems inclined to navigate through the crisis.

Decline in profits

The Signa issue is expected to reduce annual profits by 15-20%. Despite this, the dividend might remain stable. However, a new share buyback program could be less likely or delayed.

Attention also turns to customer reactions and new money inflows. After expanding its advisory team post-Credit Suisse’s decline, Julius Baer’s growth in inflows is closely watched.

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