To date, the private bank has only made a homeopathic provision for its presumed exposure to the Signa conglomerate. Analysts now expect Julius Baer to recognize far larger provisions in February.

The bankruptcy proceedings for the various Signa companies are progressing. It is therefore now much clearer just how much unpaid debt the creditors of Austrian investor René Benko’s corporate empire will have to swallow.

Analysts at Zuercher Kantonalbank (ZKB) now expect Zurich private bank Julius Baer, which said last November that it had an exposure of 606 million Swiss francs ($701 million) to a «European conglomerate» – meaning Signa – to massively increase its provisions for outstanding loans. The bank had previously recognized provisions of 70 million Swiss francs on the item.

Earnings Consequences

When it comes to the presentation of its annual financial results on February 1, industry experts are expecting the bank to make provisions for loans amounting to 400 million Swiss francs for full-year 2023, according to a report published on Thursday.

According to the ZKB analysts, this could reduce net profit for the past year to 834 million Swiss francs, compared with 2022’s 1.05 billion. The rise in the effective tax rate is also seen as a burden.

Dividends Will Likely Be Paid Anyway

Observers continue to expect Julius Baer to leave its dividend at 2.60 Swiss francs per share. However, they believe the expected stock buyback will now only come to 150 Swiss francs.

A further stock buyback program at Julius Baer comes with conditions attached: Common Equity Tier 1 capital (CET1) that significantly exceeds a ratio of around 14 percent at the end of a financial year will be distributed through stock buybacks in the following year. At the end of October 2023, the CET1 ratio was 16.1 percent.

Low-value deposit

The syndicated loan by various Swiss banks – including Aargauer Cantonal Bank, Graubuendner Cantonal Bank and Migros Bank – are partially secured with properties. Some of the presumed Signa loans from Julius Baer seemed to be less well covered.

According to media reports, the bank also accepted shares in Signa-Holding as collateral. These are now likely to be practically worthless.