Insight into private debt exposure amid recent market developments - Julius Bär
| from Bank Julius Bär & Co. AG
27.11.2023, Julius Baer announced in its Interim Management Statement for the first ten months of 2023 on 20 November 2023 that it had booked provisions of CHF 70 million against the Group’s credit portfolio after 31 October 2023. The Group confirms that this amount was primarily related to the single largest exposure in its private debt loan book.
Julius Baer has a strong capital position with a CET1 capital ratio of 16.1% as of 31 October 2023, significantly above the Group´s own floor of 11% as well as the regulatory requirement of 8.2%. Even under a hypothetical total loss scenario, the Group’s pro-forma CET1 capital ratio at 31 October 2023 would have been in excess of 14% and Julius Baer would have remained significantly profitable.
Julius Baer offers private debt as a structured finance solution exclusively within its holistic wealth management value proposition for UHNW clients. As of 31 October 2023, the private debt loan book amounted to CHF 1.5 billion as part of a total loan book of CHF 41 billion. The above-mentioned exposure is the largest in the private debt loan book. The remaining portfolio comprises loans to unrelated counterparties and various sectors with strong asset quality. The second largest private debt exposure amounts to CHF 216 million and the third largest to CHF 140 million, neither of which is related to the real estate sector. The rest of the portfolio consists of exposures of a considerably smaller size to 19 unrelated counterparties.
Philipp Rickenbacher, Chief Executive Officer of Julius Baer Group Ltd., said: “Julius Baer is very well capitalised and has been consistently profitable under all circumstances. 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.”
Capital policy reconfirmed
Julius Baer reconfirms its capital distribution policy, under which it targets a dividend payout ratio of ~50% of adjusted net profit attributable to shareholders of Julius Baer Group Ltd., with the dividend per share at least equal to the previous year’s dividend per share. In addition, under this policy, CET1 capital that is meaningfully in excess of a CET1 capital ratio of ~14% at the end of a financial year will be distributed through a share buy-back programme launched in the subsequent year, unless acquisition opportunities arise that are strategically consistent and financially attractive.
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More information and links:
Julius Bär: Aktuelle Entwicklungen im Private Debt Engagement vor dem Hintergrund der jüngsten Marktgeschehnisse (news article in german on swiss-press.com)