Baer Tells Clients With Smaller Accounts to Add Funds or Go

(Bloomberg) — Julius Baer Group Ltd. is telling some clients with lower balances at the bank to increase the amount of funds they invest with the wealth manager or go elsewhere, according to people familiar with the matter.

Using different thresholds according to the country of operation, Julius Baer is seeking to ensure that a given business relationship is worth the cost and compliance risks it entails, the people said, who asked not to be named discussing private matters. The bank has stopped on-boarding certain higher profile clients, or politically exposed persons, one of the people said.

The move is intended to protect profitability and prevent the bank’s brand from being diluted, another person said. In Switzerland the threshold is around 1 million Swiss francs ($1.3 million), whereas in Hong Kong it can be as high as 5 million francs, one of the people said.

The Zurich-based bank under Chief Executive Officer Stefan Bollinger is seeking to refocus its strategy on pure wealth management after a period of turbulence following soured loans to bankrupt property mogul Rene Benko. Swiss regulators are also increasing focus on client risks, and HSBC Holdings Plc’s Geneva-based private bank ended relationships with more than 1,000 Middle Eastern clients earlier this year.

Julius Baer shares extended gains after the report, trading up 0.8% at 60.68 francs as of 3:58 p.m. in Zurich. The stock has gained 3.4% this year.

A representative for Julius Baer pointed to a statement made by the bank in November, when it said that it’s implementing a revised risk framework .

At Baer’s strategy update in June, the firm said it had scrapped medium-term targets for profitability, and instead re-introduced a goal for net new money, a key metric for wealth managers.

Julius Baer is still under investigation by regulator Finma over the risk-management lapses that led to the Benko losses. The loan write-offs contributed to profit being cut in half for 2023 and the departure of previous CEO Philipp Rickenbacher.

At the same time as Baer is seeking to secure new funds for wealth management, it is dialing back on risk elsewhere. Last month the bank said it was running down around a dozen lending positions amounting to 700 million Swiss francs that no longer matched the bank’s new risk appetite framework.

The positions are linked to clients that were given loans but where a hoped-for wealth management business case did not materialize, the bank’s Chief Risk Officer Ivan Ivanic said.

As part of the drive to ensure that Julius Baer adequately takes risk into account when doing business, the firm earlier this year decided to reduce the bonuses for relationship managers who generate revenue from high-risk clients, people familiar with the matter said at the time.

(Updates with shares in fifth paragraph)

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