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Julius Baer boss Rickenbacher loses his job in the wake of the Signa bankruptcy

The pressure has now become too great after all. The CEO of private bank Julius Baer, Philipp Rickenbacher, has to resign. He is thus bearing the consequences of his bank's high level of lending to the troubled real estate group Signa.

As the bank announced on Thursday, Rickenbacher is stepping down as CEO of the Group with immediate effect. He will be succeeded ad interim by his deputy and former Chief Operating Officer (COO) Nic Dreckmann.

The resignation comes a good two months after the Zurich-based asset management bank reported on the first multi-million franc value adjustments and indirectly confirmed the loan exposure of over 600 million francs to the Signa companies of real estate investor René Benko.

While the asset management institution had initially hoped to sit out the affair, the continuing mistrust of investors is also reflected in the price of Bear shares, which recovered only moderately from a 20 percent drop at the end of November.

Unexpected cluster risk

The fact that Julius Baer, under Rickenbacher's leadership, took such a lumpy risk with the dazzling Austrian investor came as a surprise to many observers. With his unpretentious manner, the Group CEO, who took over in 2019, seemed to stand for prudence and a down-to-earth attitude - a welcome contrast to the time of longstanding CEO Boris Collardi. His time in office had been characterized by strong growth thanks to acquisitions, but also by persistent problems with compliance with money laundering regulations.

Like Rickenbacher's direct predecessor Bernhard Hodler, who had taken over the management of the bank after Collardi's abrupt departure, Rickenbacher himself was initially occupied with coming to terms with the Collardi era.

The involvement in FIFA corruption cases and bribery at the Venezuelan oil company PDVSA in particular weighed heavily on the private bank: at the beginning of 2020, the Swiss Financial Market Supervisory Authority Finma imposed a temporary ban on Julius Baer from making major company acquisitions due to "serious deficiencies in the fight against money laundering".

Efficiency and growth programs

The private bank and its CEO seemed to have learned the lesson: Control and compliance systems were expanded and all client relationships were scrutinized in a multi-year campaign. Julius Baer also expressly refrained from setting itself targets for net new money growth - it said it was more interested in "sustainable profit development".

In contrast, Rickenbacher pushed ahead with cost programs that resulted in efficiency improvements and rising margins. In 2021, Julius Baer recorded net profit of more than CHF 1 billion for the first time. The performance in terms of assets under management remained more modest, although this was probably due not least to the weak financial markets in recent years.

New questions about risk management

The fact that the institution, which likes to differentiate itself from the big banks as a "pure play" asset manager, apparently also granted a large number of risky "private loans" to ultra-rich clients came as a negative surprise to many observers. In November, Julius Baer put its so-called "private debt" loans at around CHF 1.5 billion in total.

The damage is also likely to go beyond the dampening effect on the 2023 annual result. Like many other private banks, Julius Baer has also strengthened itself with numerous new client advisors in the wake of the Credit Suisse collapse. In the current race for big bank clients, weeks of negative headlines are unlikely to help.

Finma is also likely to take a very close look at the matter. It is now up to Rickenbacher's successor to lead the bank out of the line of fire.

©Keystone/SDA

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