Julius Baer Surges After Finma Ends Probe Into Benko Losses

(Bloomberg) — Julius Baer Group Ltd. rose the most in more than a year after Swiss regulator Finma concluded its enforcement procedure against the wealth manager, removing a long-standing overhang that has weighed on the stock.

Julius Baer said in a statement Tuesday that it’s seeking permission for a buyback following Finma’s decision. Additional capital requirements that were imposed as part of the regulator’s probe will be halved to 250 million Swiss francs ($300 million).

“Today we’ve reached an important milestone, which is a recognition of our efforts over the past 20 months,” Chief Executive Officer Stefan Bollinger said in a statement Tuesday.

The end of the proceedings caps a difficult period for the Swiss firm, which came under scrutiny following steep losses from dealings with Austrian property tycoon Rene Benko. Bollinger, who took over as part of a wide-ranging management shakeup, has had to contend with multiple setbacks as he wound down unwanted assets and staff morale declined.

Julius Baer was unable to initiate share buybacks for as long as the Finma matter hadn’t been resolved, making it one of the most pressing challenges for Bollinger since he took over in early 2025.

Tuesday’s announcements “are important catalysts, not only because they should allow the bank to deploy its significant surplus capital, but also because they provide a tangible signal that regulatory relations are improving,” Citigroup Inc. analyst Nicholas Herman wrote in a note.

Shares of Julius Baer rose as much as 8.8%, the biggest intraday gain since April of 2025, and were trading 7.9% higher at 10:50 a.m. in Zurich.

Baer didn’t say how many shares it’s planning to repurchase. RBC analyst Anke Reingen said analysts were factoring in buybacks of 150 million francs for this year and 600 million francs next year.

Finma, in its statement announcing the end of the proceedings, blasted Baer for “serious breaches of supervisory law” that surfaced in a total of five enforcement proceedings since 2017. It also said it launched proceedings against three former employees of the bank who may be responsible for violating supervisory provisions or guidelines.

The probe into the Benko dealings established “serious shortcomings in credit risk management,” according to the watchdog. Loans weren’t secured by traditional collateral but by the borrowers’ unlisted shares. The relationship with the client group was ridden with “conflicts of interest and misguided incentives.”

Finma widened its proceedings about a year ago to include a separate probe into Baer’s dealings with clients linked to two politically exposed persons from Russia. That probe found “serious breaches of anti-money laundering obligations,” Finma said. The bank failed to verify and scrutinize the origin of assets, and review negative media reports and suspicious client behavior, Finma said. As a result, Finma is confiscating profits of around 10 million which the bank generated in relation to these clients.

In the wake of the Benko scandal, Julius Baer closed the private debt business that had made the loans and reorganized its risk-control framework. It also adjusted its compensation model to better align the incentives of relationship managers with the interests of the bank.

Baer also conducted a review of the lending book, undertaken by an outside party, which coincided with the bank letting some categories of clients go altogether. In December, Bloomberg reported that Baer had told clients with lower balances to either increase the amount of funds held with the firm or go elsewhere.

Finma said it will gradually phase out a temporary ban on new business relationships with politically exposed clients from high-risk countries, confirming an earlier Bloomberg report. The additional capital requirements will be in place until Baer concludes the “divestment of client assets that no longer correspond to the firm’s risk appetite,” Finma said.

Baer said in July that the impact of the clean-up on new client business is expected to continue into 2027.

Finma said Julius Baer will be required to seek approval for payments to shareholders, including dividends. The firm will also have to file reports with Finma until 2032 detailing its “risk, error and compliance culture.”

–With assistance from Levin Stamm.

(Updates shares from first paragraph, rewrites throughout.)

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