Julius Baer Shares Hit 52-Week High as FINMA Closes Probe, Reduces Capital Requirement

Shares of Julius Baer Gruppe AG (SIX:BAER) surged to a 52-week high on Tuesday after Switzerland's financial regulator concluded a long-running enforcement procedure into the bank's past risk-management and anti-money-laundering controls. The resolution removes a significant cloud of uncertainty for investors and reduces a key capital requirement for the wealth manager.

Market Relief Fuels Stock Surge

Julius Baer's stock rose 7.18% to CHF 76.74 in Tuesday trading, touching a 52-week high of CHF 77.26. The performance significantly outpaced the broader Swiss Market Index (SMI), which was little changed on the day.

The positive market reaction reflects investor relief that the regulatory probe is closed and that the resulting capital penalty was less severe than previously mandated. The conclusion also allows the bank to move forward with its capital return plans.

FINMA Halves Capital Penalty

The Swiss Financial Market Supervisory Authority (FINMA) said its investigation found Julius Baer had committed serious breaches of its supervisory duties. The probe centered on a major private-debt credit event and relationships with two high-risk Russian politically exposed persons (PEPs).

According to FINMA, the bank's failures included:

Ad

• Extending loans to a European group that ultimately exceeded CHF 1 billion, breaching internal and regulatory risk limits.
• Ignoring warning signs that led to a CHF 586 million exposure being fully written down by the end of 2023.
• Deficiencies in scrutinizing the source of assets connected to the two Russian PEPs.

As a result, FINMA will require Julius Baer to hold an additional CHF 250 million of Common Equity Tier 1 (CET1) capital. This represents a halving of the previous CHF 500 million requirement, signaling regulatory confidence in the bank's remedial actions.

Outlook and Share Buyback

Julius Baer stated that the issues occurred before its current management team was appointed and that it has since implemented significant remedial measures, including overhauling its risk and compliance frameworks and winding down its private-debt business.

The bank's capital position remains strong. Its reported CET1 ratio stood at 18.5% at the end of June, well above the new de facto minimum of 9.4% mandated by FINMA. With the case now closed, Julius Baer confirmed it has submitted a request to the regulator for approval to restart its share-buyback program.