Julius Baer Shares Drop With Signa Worries Lingering

Julius Baer Shares Drop With Signa Worries Lingering By Bloomberg

(Bloomberg) -- Julius Baer Group Ltd. will likely end up making provisions for about 50% of its exposure to Signa, according to Swiss private bank Vontobel.

The estimate may be adjusted depending on how the situation at Signa evolves, Vontobel analyst Andreas Venditti said in a note on Tuesday.

The exposure is “simply too large” for Julius Baer as it equals 18% of the bank’s most important regulatory capital, he said.

Separately on Tuesday, Morgan Stanley analyst Vishal Shah estimated that the Swiss lender will make about 50 million Swiss francs ($56.8 million) in provisions for Signa next year. Shah downgraded Julius Baer’s stock to an underweight recommendation saying “recent asset quality concerns will weigh until we gain further clarity.”

Julius Baer confirmed yesterday that it has 606 million Swiss francs in exposure to a conglomerate that people familiar with the matter have identified as Signa. That announcement came a week after the lender disclosed it had set aside 70 million francs in early November as provisions for troubled loans.

Julius Baer is part of a large group of banks including UniCredit SpA, Raiffeisen Bank International AG and Helaba that have exposure to Signa, Bloomberg News has reported. It’s not clear how much in provisions, if any, they will have to make as a result of Signa’s problems.

The Swiss lender’s stock fell as much as 4.3% on Tuesday, the seventh consecutive day of declines since the announcement last week. The share price is now at the lowest level in more than a year.

Signa, founded by Austrian tycoon Rene Benko, is potentially facing a string of insolvencies as doubts grow that last-ditch efforts to secure emergency funding will succeed, Bloomberg News has reported. A German unit of the conglomerate has already filed for insolvency.

Vontobel on Tuesday lowered its price target on Julius Baer’s stock to 50 francs from 55 francs and cut share buyback assumptions. Vontobel now expects Julius Baer to reduce its so-called private debt business, which may impact revenue given the high margins the unit has been earning.

The Swiss wealth manager said Monday it is reviewing the unit, which extends loans to some of its wealthiest clients.

(Adds other bank exposures in sixth paragraph)

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Author: Allegra Catelli