Julius Baer is set to review its private wealth business following the bankruptcy of an unnamed property group, which is believed to be Austria-headquartered Signa.
In a stock exchange notice today (27 November), the group revealed, without naming Signa, that it possessed three loans to different entities within "a European conglomerate" that was now restructuring, totalling CHF 606m (£545.4m).
Earlier reports by the FT and Bloomberg pointed to Signa as the European conglomerate mentioned by Julius Baer in its stock exchange notice.
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The loans, which relate to "commercial real estate and luxury property", had already led the firm to set aside CHF 60m (£54m) earlier this month but it has added it would make further adjustments if needed.
However, under a "hypothetical loss scenario", its common equity tier one capital ratio would drop from 16.1% to 14%, well above its regulatory requirement of 8.2%, leaving it "significantly profitable".
The loans to Signa are the single largest exposure in the firm's private debt business, which holds CHF 1.5bn of structured credit.
Julius Baer's share price dropped sharply following the announcement, before recovering slightly to a drop of 1.4% at time of publication, according to data from Morningstar Direct. It has fallen 13.3% over the last month.
Across all lenders, Signa owes approximately €13bn, according to analysis by JP Morgan. It had amassed a €27bn property portfolio that has been damaged by rising interest rates, leading it to declare bankruptcy earlier this month.
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Philipp Rickenbacher, CEO of Julius Baer, said the firm is "very well capitalised and has been consistently profitable under all circumstances".
He added: "We regret that a single exposure has led to the recent uncertainty for our stakeholders. Together with investing and multi-generational wealth planning, financing is an inherent part of the wealth management proposition to our clients.
"On this basis, together with the board of directors, we will review our private debt business and the framework in which it is conducted."
