Julius Baer wraps credit review with further write-down

ZURICH (Reuters) -Julius Baer on Monday announced additional loan loss allowances of 149 million Swiss francs ($184 million), concluding a credit review that the Swiss bank says will help it "turn the page" on legacy issues.

The review prompted the banking group to wind down a portion of its loan book that no longer fits with its strategy, it said. 

The lender added that it expects full-year 2025 net profit to come in below 2024 levels. Its shares were down 3.5% at 0845 GMT, against a 1.2% rise in the wider European banking index. 

Julius Baer is "not quite there yet" in terms of resuming share buybacks, CEO Stefan Bollinger said, as it remains under an ongoing enforcement procedure by Swiss regulator FINMA.

A discussion with FINMA on potential share buybacks can start at the end of February at the earliest, when Victoria McLean, formerly of Goldman Sachs, will join as chief compliance officer, Bollinger told investors.

The bank said the conclusion of the credit review marks the final phase in addressing legacy issues that previously led to a series of losses, write-downs, and a management overhaul.

The latest write-down relates mostly to the income-producing residential and commercial real estate book, while the Lombard loan book and the traditional residential mortgage portfolio are resilient, the Swiss company said.

"With our clear strategic focus, our revised risk appetite framework, and overall strengthened risk function and processes, we are now entirely aligned around our core wealth management proposition," Bollinger said.

Analysts at Bank Vontobel noted an improved cost-income ratio but mixed trends for the period from July to October, with net new money growth slowing down.

"We expect investors to react negatively to the update," Citi analysts said in a note.

Julius Baer intends to upgrade its IT infrastructure in Switzerland, CFO Evie Kostakis said.

Reuters reported last week that Julius Baer has chosen software provider Temenos to replace its ageing core banking system in the Swiss home market. Kostakis said on Monday the bank did not comment on individual vendors.

Assets under management reached 520 billion Swiss francs by the end of October, Julius Baer said, driven by net new money of 11.7 billion francs year-to-date and rising stock markets, which more than offset the drag from a stronger Swiss franc.

Separately, the bank said it had received in-principle approval to open a new advisory office in Abu Dhabi.

Scheduled to open in December 2025, the new office will cater to ultra-high-net-worth individuals, family offices, and entrepreneurs.

($1 = 0.8078 Swiss francs)

(Reporting by Ariane Luthi; Editing by Friederike Heine, Sherry Jacob-Phillips and Jan Harvey)