Julius Baer Group said it would exit its private debt business after writing down all of its loans to the bankrupt Signa companies, and confirmed that chief executive officer Philipp Rickenbacher is stepping down as a result of the matter. 

The Zurich-based lender said it is taking a full loan loss allowance of 586 million Swiss francs (S$909.4 million) related to the exposure, in a statement with full-year earnings on Thursday (Feb 1). Net income at the wealth manager for 2023 slumped 52 per cent from a year earlier.

The decisions may help alleviate weeks of uncertainty around Julius Baer following the disclosure in November that the bank had extended about US$700 million in loans to property magnate Rene Benko’s companies. Rickenbacher, in the top job since 2019, had attempted to push the wealth manager into new business areas including private credit. 

The bank said that deputy CEO Nic Dreckmann would take over the top job until a permanent appointment can be made. David Nicol, chair of the Governance and Risk Committee of the Board of Directors, will not stand for re-election at 2024 Annual General Meeting, Julius Baer said.

Substantial reductions in board and executive compensation will be made, the bank said. 

“I deeply regret that the full loss allowance for the largest exposure in our private debt business has significantly impacted our net profit for 2023,” chairman Romeo Lacher said in the statement. “We are refocusing our lending activity on more traditional areas, which are an important part of our wealth management offering.”

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Rickenbacher took over as CEO in part to restore stability amid a money-laundering probe that saw previous chief executive Boris Collardi issued with a reprimand. His time as CEO has however also been marked by forays into non-traditional businesses for the Swiss wealth manager, including an investment in a crypto bank and moves to offer clients services in digital assets. 

In December, rating agency Moody’s downgraded Baer, cutting its outlook to negative from positive. It cited a culture of higher risk tolerance compared with its closest private banking peers. The Swiss financial regulator Finma had opened an investigation in the lender’s risk-control procedures.

Julius Baer will now wind down the remaining 800 million francs in private credit assets, and refocus its credit business on “areas of historical strength - Lombard and mortgage lending.”

The change in leadership add to a turbulent period for Swiss finance, after the collapse and emergency takeover of Credit Suisse by UBS Group last year. The government has signalled that it plans to overhaul financial oversight and is set to make further proposals in the spring. BLOOMBERG