[ZURICH] On his first day as chief executive officer, Stefan Bollinger told staff at Julius Baer Group that they should not be afraid to speak up and reach out to him if there was anything that needed changing. He received more than 1,000 e-mails.
The response underscores the mood at a storied firm that has been tarnished by a series of scandals – and which Bollinger, a two-decade veteran of Wall Street titan Goldman Sachs, was brought in to fix. Within weeks of taking over in January, he cut back most of his management team and introduced a co-head structure for several management roles, another Goldman-style innovation.
But after five months in the role, amid a revamp labelled “underwhelming” by an analyst, bad news from the past and internal resistance keep complicating his plans for the future.
A regulatory investigation into the firm’s US$700 million loss from the collapse of Rene Benko’s real estate empire, a legacy money-laundering penalty and yet another write-down of real estate loans are some of the ghosts that Bollinger and new chairman Noel Quinn need to banish before they can progress towards the goal of making Baer “the most admired wealth manager in the world”.
In interviews with current and former staff, who requested anonymity to discuss private information, a picture emerges of a bank struggling for balance as a different, energetic management style – emphasising individual accountability and ownership of risk – meets a more consensus-based mentality.
Bollinger’s arrival has energised some parts of the 135-year-old Zurich bastion, and alienated others. How far he can push the transformation of the Swiss bank’s culture – and how long investors will give him – will be key to his chances of success.
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“No organisation can be successful without the right culture,” Bollinger said at the bank’s investor day earlier this month, adding he aims to foster a focus on “performance and ownership”.
A spokesperson for Julius Baer declined to comment.
The remarks – and the fact that he held the event in London, a first for the Swiss firm – add to evidence of the new tone under Bollinger, the first CEO since 2009 to join from outside Julius Baer. A former co-head of private wealth management for Europe, the Middle East and Africa at Goldman in London, the 50-year-old is seeking to address failings that have dogged Julius Baer for years: pursuit of growth at the expense of risk management and a lack of accountability for mistakes.
Since 2015, the Zurich bank has had brushes with US authorities over its role in the Fifamoney-laundering affair. It was implicated in the corruption scandals at Venezuelan oil producer PDVSA, which saw one of its bankers imprisoned. Former CEO Boris Collardi departed in 2017 after overseeing a rapid expansion across Latin America.
Philipp Rickenbacher left the top job in the wake of the Benko affair, but the firm has yet to put the matter to rest. Julius Baer is under investigation by Swiss regulator Finma for lapses in risk management related to Benko’s Signa. At the core of the probe is the internal structure that allowed the massive exposure to a single client to be waved through.
The announcement of the Signa investigation in February triggered a 13 per cent plunge in the shares, as the market realised that a hoped-for share buyback programme was now even further away. Investors who have stuck with the stock over the past decade have been rewarded with an anaemic single-digit price gain.
Ensuring that the Finma investigation progresses quickly so he can re-focus on returning money to shareholders is high on Bollinger’s to-do list. Yet the burden of regulatory issues could make it more difficult for him to cut costs as planned. He’s already had to water down an efficiency target inherited from previous management.
The mission for Bollinger is complicated by entrenched interests within the bank. They run all the way up to the board of directors level, according to a source familiar with the matter. The arrival of another powerful outsider in former HSBC Holdings CEO Quinn as chairman is expected to shake up we have-always-done-it-this-way mentality, the source said.
“Noel Quinn said that there is a culture that needs to change,” said Andreas Venditti, a banking analyst with Bank Vontobel in Zurich. “They have realised there is something wrong that they need to address.”
Bollinger’s career to date has focused on clients – vital in the wealth management business – but he has no previous experience running a large bank. Since taking over, he has been focused on meeting clients and building a relationship with investors and regulators.
In his first week alone, the new CEO went to Geneva, Singapore, Hong Kong and Dubai, according to a post on his LinkedIn page. He slept on the plane rather than in hotels on the whirlwind tour, according to another source familiar with the matter.
Internal stakeholders say they have not seen much of him, which may have encouraged resistance to a number of his proposed measures. An attempt to change the compensation structure of relationship managers, for example, went nowhere, two sources familiar with the situation said.
Julius Baer’s “regional heads are very powerful and it was perhaps inevitable that they would resist Bollinger’s reforms”, said Venditti.
Some of Bollinger’s Goldman-style innovations seem aimed at fixing cultural problems, such as introducing the co-head structure for some management roles to share power and prevent fiefdoms, or promoting stock ownership even at lower ranks. Encouraging employees to speak out is yet another cultural trait he brought over from the US firm.
The house-cleaning has won the Swiss national praise from employees keen for a new start. At the same time, it’s left him open to accusations by others that he does not understand how the culture at Baer works and has not taken the time to find out, according to two people.
The support of Quinn is key for the new CEO also in that respect. The first-ever chairman at Julius Baer who does not hail from Switzerland led a series of strategic reviews at HSBC, and he is experienced in exactly the kind of complex stakeholder management that Bollinger is facing now.
The two were offered a reminder that the bank’s past keeps coming back to haunt it in May, when Julius Baer had to reveal a financial penalty from a six-year-old money-laundering case and a previously undisclosed, 130 million Swiss franc (S$205 million) writedown of real estate loans.
The hit brought back memories of the Benko debacle that has rattled the firm for the past two years. As rumours of the Austrian investor’s troubles started to mount in the second half of 2023, the atmosphere inside the bank started to change notably, according to two former employees. People grew agitated and nervous. There was also an unwillingness to question authority, either out of a belief that nothing would change or because people feared the repercussions, said one source.
Within months, Julius Baer had to write off the entire exposure to Benko and his Signa, sacked Rickenbacher and then-chairman Romeo Lacher, and announced it was getting out of the private credit business entirely.
Despite such setbacks, the bank’s new leadership can rightly point to the fact that investors, for now, still hold out hope. The firm’s price-to-book ratio, a measure of investor confidence in its prospects, is still higher than at neighbour UBS Group.
Julius Baer has “a great brand, great people, great business model”, Bollinger said this month. “This franchise has all the ingredients to capture future opportunities.” BLOOMBERG
