Julius Baer under pressure: Can EFG and new strategies save it?

Julius Baer under pressure: Can EFG and new strategies save it?

Julius Baer, ​​Switzerland's third-largest private bank, is facing a profound crisis, compounded by a new write-down of 130 million francs on its loan book. The pressure on the bank is enormous, especially after the reputational damage caused by a credit scandal, which must be addressed by new CEO Stefan Bollinger. Business activity fell short of market expectations, which had a negative impact on share prices - they temporarily lost more than six percent on Wednesday, after the share price had already fallen by over 13% following the publication of disappointing annual results. NZZ reports that the bank's problems particularly affect private debt loans and the mortgage portfolio.

The Financial Market Authority (Finma) has also initiated proceedings against Julius Baer, ​​which arise from extensive investigations into the bank's operations. This comes against the background that the bank had to write off its entire exposure of 606 million francs to the failed Signa real estate group in 2023. In view of these challenges, the bank is planning a strategic realignment, which includes, among other things, the reduction of around 400 jobs, which corresponds to around 5% of the workforce.

Management restructuring and cost reduction measures

Stefan Bollinger is aiming to reduce the board from 15 to 5 members in a major management overhaul to promote accountability and discipline. In addition, chairman Romeo Lacher is scheduled to resign at the annual general meeting in April. Julius Baer expects to achieve savings of 110 million francs through cost-cutting measures to improve financial stability and regain investor confidence.

Despite these difficulties, EFG Bank is experiencing strong growth. The bank reported a profit of 130 million francs for the first four months of the year and saw customer assets grow by almost 6 percent to 159 billion francs. EFG plans to write off legacy assets and also expects an extraordinary profit of 45 million francs from insurance compensation. Dim sum daily highlights that EFG does not set sales targets for employees to curb risk appetite.

Outlook and market position

Baer leadership emphasizes that the current impairment is not related to the problematic Benko loans and is planning new, more cautious lending criteria to minimize potential risks. The credit quality review is expected to last until the end of the year. Analysts forecast a slowdown in net new money inflows to around 3% in 2025, adding to uncertainty about the bank's future growth strategy.

Overall, Julius Baer, ​​with client assets under management of 467 billion francs, remains behind Pictet and UBS, the other two big banks in Switzerland. The weakening of the dollar against the franc has resulted in both banks managing fewer customer assets than in the previous year. The pressure on Julius Baer to rethink its strategies and regain customer trust is greater than ever.