Vontobel expects a higher rate of loan defaults in the next few months, meaning bank profits are unlikely to remain as high as they have been, and is toying with various strategies to counter this, its chairman has said.
The chairman of Zurich-based investment house Vontobel, Herbert Scheidt, warned against too high expectations for bank profits in the coming months at a press conference in Lausanne Wednesday.
With a few exceptions, Swiss banks have posted outstanding first-half profits. This was mainly down to the economic recovery sparked by the roll-out of coronavirus vaccination programs in many countries and bullish stock markets.
«Temporary Phenomenon»
«Banks doing so well is a temporary phenomenon that can be attributed to the liquidity provided by central banks,» Scheidt said, adding: «It won't stay that way forever. So far, there have been comparatively few bankruptcies.»
As the global economy recovered various central banks were likely to tighten monetary. This meant Scheidt was expecting «a wave of loan defaults», which would in turn hit bank profits.
Eying U.S, Asian Acquisitions
He cited the more cautious moves on the stock markets in the second half of the year than in the first as an indication that over-exuberance was ebbing.
Scheidt said that it was clear to him that even greater specialization in the potential risks to the banking business was required - especially in the area of fixed-income investments, where in view of continuing negative interest rates, even more know-how was needed.
Despite the uncertain environment, Vontobel sees opportunities for growth. Its focus was on organic growth, Scheidt said, adding that he did not not rule out acquisitions either. More specifically, he could envisage a takeover in the U.S. to expand Vontobel’s Quality Growth Boutique business.
Asian Expansion High Cost
Vontobel would also not be averse to an acquisition in Asia, although this would be much more difficult because, unlike in the U.S, the company was a late arrival and has less of a foothold there, Scheidt said. He also said a very high level of investment would be needed to become profitable in Asia.
In addition to geographical expansion, Vontobel was also looking into entering the private market business, he said. Private market investments range from private equity, real estate, debt securities, infrastructure and natural resources to specialized funds. These tie up capital for longer, but if successful, generate significantly higher returns than traditional financial markets.
New trend
Numerous other banks have already expanded their private-investment capacity in the past 18 months as stock markets have hit lofty heights because private markets move in a way that does not correlate with that of traditional financial markets.
