Julius Baer: Navigating Stormy Waters to Seize Value in Swiss Wealth Management

The Swiss wealth management sector has long been synonymous with stability and prudent risk management. Yet, even stalwarts like Julius Baer (SWX:BAER) face periodic storms—most recently exemplified by its $156 million writedown in early 2025, tied to a reassessment of its private debt and mortgage portfolios. For investors, this episode marks not an end but a beginning: a critical juncture to assess whether the bank’s aggressive restructuring, cost discipline, and strategic leadership shifts position it to capitalize on undervalued multiples amid a recovering balance sheet.

The Writedown: A Necessary Pruning, Not a Weakness

The $156 million writedown—driven by heightened loan loss allowances in legacy private debt and select mortgage exposures—should be viewed as a deliberate step to purge lingering risks from Julius Baer’s balance sheet. By reducing its private debt book to below 0.4% of total loans, the bank has signaled a clear commitment to risk mitigation. This contrasts sharply with its earlier struggles, including the $586 million hit from Signa Group loans in 2023. The move aligns with the broader strategy to prioritize quality over quantity in its credit portfolio.

Crucially, this writedown is not a sign of fragility but of foresight. As the interim report noted, the bank’s CET1 capital ratio rose to 15.2% in early 2025, well above regulatory requirements (8.3%) and internal targets. This robust capital buffer underscores Julius Baer’s ability to weather market volatility while positioning itself for growth.

Cost-Cutting: A Leaner, Meaner Machine

The bank’s cost discipline has been nothing short of transformative. After achieving CHF 140 million in gross savings by late 2024—surpassing its initial targets—the expanded 2025 program aims to deliver an additional CHF 110 million in annual savings. A 5% workforce reduction in Switzerland, paired with a streamlined executive board (now five members instead of 15), has slashed operational bloat while sharpening focus on client-centric growth.

While the adjusted cost/income ratio remains elevated at 70.9%, this is largely due to one-off restructuring charges. Excluding these, the trajectory is encouraging: recurring costs are stabilizing, and the bank’s gross margin improved to 87 basis points in early 2025, up from 80 basis points in late 2024. The goal? To hit a cost/income ratio below 64% by 2025’s end—a target achievable if the bank maintains its current savings momentum.

Leadership: A New Guard for a New Era

The restructuring of Julius Baer’s leadership is equally pivotal. The departure of long-serving Chair Romeo Lacher and the appointment of a revitalized executive team—including Chief Risk Officer Oliver Bartholet’s successor, Ivan Ivanic (ex-UBS)—signals a shift toward modern governance. Legal and compliance functions are being consolidated under Christoph Hiestand, while the new Chief Compliance Officer will join the board, embedding risk awareness into decision-making.

This realignment is not just about structure but about mindset. CEO Stefan Bollinger’s emphasis on “entrepreneurial agility” and client focus reflects a bank no longer content to rest on its legacy. The opening of an onshore branch in Milan and the completion of its Brazil sale (adding 35 basis points to CET1) further illustrate Julius Baer’s strategic pivot toward high-growth markets and capital efficiency.

Valuation: A Discounted Gem in a Premium Sector

The numbers scream opportunity. At CHF 57.34 per share, Julius Baer trades at a 11.5x P/E ratio, nearly half the European Capital Markets sector average of 15.9x and well below peers like Vontobel (13.3x) and Partners Group (26.5x). A discounted cash flow (DCF) model estimates its intrinsic value at CHF 93.84—38.9% above its current price—suggesting it’s deeply undervalued relative to its peers and fundamentals.

Analysts are taking note. The consensus 12-month target of CHF 61.63 implies a 7.5% upside, but this understates the potential. If Julius Baer achieves its 64% cost/income target and stabilizes margins, the stock could re-rate meaningfully. The PEG ratio of 1.6x further supports this thesis: the stock’s valuation already accounts for slower growth, leaving room for surprises.

Risks on the Horizon, but Manageable

No investment is without risks. The bank’s CET1 ratio, while strong, may face pressure if credit losses resurge. Meanwhile, global market volatility—exemplified by April 2025’s dislocations—could dampen client activity. Yet Julius Baer’s capital cushion and diversified client base (with 60% of inflows coming from Asia and Western Europe) provide a buffer.

The Bottom Line: A Buying Opportunity at a Critical Inflection Point

Julius Baer’s $156 million writedown is not a scar but a scarification—a painful yet purposeful step to shed risk and rebuild trust. Combined with aggressive cost-cutting, leadership overhauls, and a valuation that lags its fundamentals, the stock presents a compelling case for investors seeking exposure to Swiss wealth management at a discount.

As the bank prepares to unveil its revised strategy on June 3, 2025—including new medium-term targets—the time to act is now. The question isn’t whether Julius Baer has stabilized its balance sheet but whether investors are prepared to capitalize on its undervalued multiples as it transitions from crisis management to sustained growth.

The verdict? A resounding yes. For those with the foresight to look beyond the writedown, Julius Baer offers a rare chance to buy a resilient, restructured wealth manager at a fraction of its worth.

This analysis is based on publicly available data as of May 2025. Always conduct your own research or consult a financial advisor before making investment decisions.