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Austrian property mogul Rene Benko is understood for throwing lavish events. Now the music has stopped, the dancing is over and the hangover is kicking in. An empire, together with stakes in luxurious buildings like Selfridges in London, is in freefall as business property costs crater.
The board of Benko’s firm Signa has ousted him. The focus has shifted to lenders. Julius Baer seems to be considered one of them. A buying and selling replace included massive provisions and successful to income on Monday.
Investors marked shares down sharply, wiping SFr1.4bn ($1.5bn) from the Swiss financial institution’s market worth. That is many occasions the a number of of the SFr70mn of latest provisions the financial institution expects in November. But this 12 months’s banking turmoil and the demise of Credit Suisse are contemporary within the reminiscence. The good thing about the doubt is subsequently briefly provide. Julius Baer will now should stroll a effective line between the dictates of shopper privateness and shareholder transparency to shore up confidence.
Baer says it can not disclose which purchasers writedowns relate to. But we do know that issues with Benko’s ventures are coming unstuck quick. Signa minorities are calling for him to relinquish his voting rights for a recapitalisation to go forward. Media stories declare losses totalled greater than €500mn final 12 months.
Baer’s full publicity is unknown. The financial institution had SFr43bn of loans excellent on the half-year mark, together with SFr8bn in mortgages which might be largely on Swiss residential property. The the rest are Lombard loans secured on shopper property. These are the seemingly supply of present ache.
To put these figures in perspective Credit Suisse, had SFr530bn of publicity on the finish of 2022. It was engaged in dangerous funding banking and had a reckless angle to danger.
Baer is a unique animal. But the provisions solely add to a way that the financial institution has didn’t capitalise on Credit Suisse’s collapse. Inflows proceed to disappoint.
Baer ought to quantify its single shopper exposures. That can be one option to settle the market’s nerves.