Raiffeisen CEO Patrik Gisel says he is ready to reduce stakes in Leonteq and Avaloq, make acquisitions on behalf of the Notenstein La Roche unit and to close branches. In an interview with finews.ch he also says why he gets up at 5 o'clock every morning.

Mister Gisel, you are soon going to discuss the future of the Swiss financial industry at «Vision Bank» conference. A wide-ranging topic – but what does it mean for Raiffeisen in particular?

One important aspect for sure are the effects of negative interest rates on retail customers. Equities and savings accounts don't yield much anymore – making real estate the more attractive – and increasingly so in the sense of an investment.

Raiffeisen therefore again had a very good and healthy expansion of the mortgage business in the first half of 2016. The situation of business clients is entirely different.

How's that?

At small- and medium-sized companies we observe an investment backlog. Faced with numerous uncertainties, companies are holding back and hoarding cash. Of course, should the economic outlook brighten up, the money might quickly be put to use again.

What we really wanted to discuss was the situation of Swiss banking in general...

The pressure to consolidate will increase further, at private banks, but also at smaller regional banks. I expect another wave of mergers in which we obviously want to participate. Raiffeisen is an active player in the process of consolidation, but restricted to Switzerland.

Is that true for Raiffeisen only or also for Notenstein La Roche, your private-banking business?

A takeover by our private bank is well conceivable. With 22 billion francs in assets under management, the size of our private bank is below the critical mass.

You readily admit that?

Yes. Notenstein La Roche would have to be about double the size in terms of clients’ assets to work independently in the long run. This is our declared goal.

Who would fit Notenstein La Roche?

There are several good private banks in Switzerland considering their future. Since our takeover of the Basel-based private bank La Roche, it is known that we are interested in acquisitions.

«Continuity is ensured.»

Raiffeisen is therefore one of the first companies to be contacted when a transaction is shaping up. We will however only consider a bank that has cleaned up its tax-related business and is firmly rooted in Switzerland. About 70 percent of Notenstein La Roche clients are from Switzerland.

You are mentioning acquisitions. But following the sale of Vescore, the asset management business, one might gain the impression that you are dismantling the empire built by Pierin Vincenz, your predecessor. Am I right?

No. Raiffeisen is supporting the chosen diversification strategy to 100 percent. After all, Pierin Vincenz didn’t define this strategy alone, but in cooperation with the board and the management.

The bank has been on a strongly expansionary path for the past years. A lot of potential has been acquired across many business segments. Over the course of the coming three years, we will have to make the horse power perform.

How difficult is it to fill the big boots of Pierin Vincenz?

Pierin Vincenz has molded the organization in his own way and I’m giving my best to successfully manage the group in my way.

Together we shaped Raiffeisen for many years and together defined the strategy. Continuity is ensured in any case.

In what way are you different from Pierin Vincenz?

We are different characters and employ a different style in many ways. In meetings, Pierin Vincenz used to explain his view of things first. I tend to wait until the others have given their opinion.

«Vescore fits much better at Vontobel.»

Working together – which we did for 15 years – we complemented each other perfectly. Raiffeisen didn’t change its strategy when I took over, but the dynamic and way the management is working changed significantly, partly also due to further changes in personnel.

That much has become public with the sale of Vescore. A U-turn by you?

Asset management – a low margin and highly specialized production form – remained alien within Raiffeisen. At headquarters, we weren’t able to lend enough support.

Vescore fits much better at Vontobel, the new owner. Our strength is much more the direct business with private clients and in distribution.

You haven’t yet mentioned your stake in Leonteq, the derivatives specialist. The company is undergoing its most difficult period since its foundation. The share price is plunging now and again. Presumably, you’re not amused.

Raiffeisen is holding a substantial stake in Leonteq, with almost 30 percent. We also cooperate in the structured products business.

We’re in it for the long term, even if the company has been trapped in a whirlwind of negative news. Following the move by Veraison and the better-than-expected half-year results, the tide has turned.

The 30-percent-stake in Leonteq must be a concentration of risk for your bank?

We said a year ago that selling a smaller part of Leonteq to a strategic investor – who has an interest in Leonteq and adds value – isn’t unthinkable. With the current size, the stake is creating volatility in our books.

How much would you be prepared to sell?

It is difficult to make a prediction and can only be assessed once a strategic investor is available, and it depends on the valuation of the company. Given the volatility of the stock, the valuation in our books is changing almost on a daily basis. Still, we don’t have to adjust the valuation.

What will Raiffeisen look like in two years time?

It won’t be much different at the heart. I want to evaluate our investments by yearend, because the change of IT platform will be the biggest activity by the group next year. Project Rainbow is being executed through Arizon, a joint daughter firm with Avaloq.

It has been rumored that you’re are far behind schedule.

The whole project naturally is a huge challenge. I can assure you that we are on course. We don’t have much to spare but we are working hard on the project.

«Our mission is to take digitization to retail banking.»

So far, we’re satisfied. Admittedly, there were some problems with our partner Avaloq, but we are always getting our act together.

You’re pretty much forced to anyway, given that you hold 10 percent in Avaloq.

True, but this is a financial investment undertaken to help Avaloq extend its capital base and enable it to fully acquire B-Source. Taking a bigger stake is neither in ours nor in the interest of Avaloq. Over time, we will rather reduce the stake.

The Swiss fintech industry will develop over the course of the two coming years. What are your plans for digital banking?

Our mission is to bring digitization to retail banking. We have founded the RAItec Lab to develop promising banking services. The four-person group of experts is reporting to me directly, is analyzing the trends and generating ideas for our group. The furthest they’ve come so far is the online mortgage.

Will Raiffeisen one day be fully digital?

Hardly. The question is rather how much consulting we will need in future. We are asking ourselves how certain services, such as in insurance, can be linked digitally.

«I remain convinced about the physical channel even in future.»

I remain convinced about the physical channel even in future. It enjoys priority in our business model, in particular for things like pension provision, buying a house or financial planning.

Paymit and Twint, the two Swiss payment systems, merged to compete against Apple and  – in the medium term – Google. Was this a last-ditch effort before the big players take over the market?

Looking at the capital at hand at Apple or Google, the danger exists. But at the same time there are numerous hurdles for entering the Swiss market and we are much better accustomed to the Swiss mentality. The big players now doubt will enter the market, they will be mainstream and geared towards big volumes. But the Swiss banks have enough possibilities to make a difference.

Wouldn’t it be very interesting for Raiffeisen to form a partnership with Apple?

This isn’t an option at the moment, because I’m convinced that there is space for a Swiss payment solution.

Of course there are companies cooperating with Apple Pay. At the end of the day, the market will decide. For me it is important that there aren’t three other Swiss payment systems.

Is fintech a job killer?

Good question. To answer with conviction, you need to be a prophet. I’m optimistic that fintech will create more new jobs than eliminate old ones. This is of course a generational question; there are people who struggle with change. But change creates new jobs, if Switzerland prepares the ground.

Which means?

Fintechs have to be welcome here and feel good. You should not kill them with taxes.

«We will reduce the number of branches substantially.»

You also have to evaluate new cooperations, for example with the Federal Institute of Technology. That creates new jobs. Switzerland has a good chance if politics is playing along.

Back to our question about jobs: will you reevaluate the number of staff in coming years due to digitization?

For Raiffeisen, the proximity to the customer is essential, digital or real. We created an average 100 to 200 jobs annually over the past years. Last year it was 300, due to Rainbow. We will continue at this level (100 to 200) but at the same time will we reduce the number of branches substantially.

In real terms?

I think the number of branches will fall to 800 over the course of two years. Currently we have 980 branches with 270 legally independent cooperative banks.

What made you choose to take over from Pierin Vincenz?

Taking over is the pinnacle of my career – after 15 years at Raiffeisen. I didn’t have to think long when the offer was made. I’m fully convinced about the business model.

«I'm a big fan of the cooperative model.»

I’m a big fan of the cooperative model. It fits well with banking as we understand it. It is sustainable and transparent. At the same time, there is a deep-going relationship with the customer.

Managers need to compensate for their working hours, otherwise they won’t be working sustainably. How do you that?

In terms of volume I don’t work substantially more than before, even if the number of hours that I’m present has increased massively. What has increased strongly are representational duties. Receptions, events, public debates, things you can’t delegate. But I must say that I like it. I have something every weekend and hardly an evening off during the week. But I like doing it. My way of compensation is sports. And I will stick to it.

That’s why you have that strange piece of equipment on your wrist?

This is not to read my blood pressure, but an activity tracker. It measures my activities, in other words, the number of steps I take every day.

And?

Tonight, I will have made 30,000 for sure, because I ran 15k early this morning. Without sports, I usually do 10,000 to 15,000 steps. But I am careful to exercise enough.

You have to get up early then.

Yes of course. I get up at 5 every morning, exercising a quarter of an hour later. It gives me a great feeling, in particular as my days are so long and varied. It can happen that I discuss with a group of apprentices first thing, meet the Swiss president next, and take part in a public discussion in the evening.

Patrik Gisel, was appointed CEO of Raiffeisen in October 2015. He graduated in business studies at the University of St Gall. He worked as a consultant at Boston Consulting Group as well as in IT at UBS before joining Raiffeisen.

With his experience and given his function at the bank, Gisel has also taken seats on boards at Pfandbriefbank, Helvetia, Notenstein La Roche, Leonteq, Arizon, Six Group and at the Swiss Bankers Association.