Fund manager Guy de Blonay sees the future of financial services in technology. The Jupiter Asset Management veteran tells finews.com why in Switzerland he picks stable specialists over big names.
Guy de Blonay is a Swiss native, but has nothing of a home bias when it comes to picking financial stocks. In fact, the veteran of Jupiter Asset Management has just one Swiss name in his portfolio: Banque Cantonale Vaudoise, or BCV.
The listed, state-backed bank is an attractive pick thanks to its ling-term reliability and a dividend yield of 4.5 percent, London-based de Blonay told finews.com. He sees similar bets on the stability of Switzerland's economy in lesser-known banks like Valiant or Berner Kantonalbank, whom he met with this week during a home visit.
«Difficult to Tackle»
What about the Swiss giants UBS and Credit Suisse? «I stay away from the global investment banks because of their structure, size, compensation structure and margin pressure,» de Blonay said. «It’s very difficult to tackle these issues in an efficient and timely way.»
Unlike the stock of local players like BCV, the big banks including Julius Baer don't produce the returns investors hope for. The shares of these banks, more exposed to global economic swings, yield less than smaller players. Beyond that, they each have specific problems, de Blonay notes.
«Julius Baer for instance has a new CEO who needs to sort out the strategy. Global investment banks are struggling with their clients’ lack of interest in being active,» he notes. Outside of Switzerland, Deutsche Bank illustrates how difficult it is to revive a tumbled lender.
Sharing European Costs
Despite their vulnerabilities, de Blonay is against a union of Switzerland's largest banks. By contrast, consolidation among Europe's battered financial institutions is overdue, he notes.
«There is more fat to cut at global investment banks, though, before these banks would need to merge. In Europe it’s a different story. To stay competitive, banks there may have to merge their cost base.»
The cost focus and thin margins present another problem for Europe's banks: it is far more difficult to justify investments in technology. In fact, they should be investing at least ten percent of their revenue into information technology.
Aggressive Americans
While UBS CEO Sergio Ermotti emphasizes that this is the case at his bank, banks such as HSBC can't keep pace.
«The Americans are quite aggressive and they understand the threat and the need,» the fund manager said. «I’d even argue that within a few years Banks like BofA and J.P. Morgan are effectively going to turn into fintech companies..»
The surge in tech competition is a tangible threat: while U.S. banks are pouring a collective $115 billion into technology to build a so-called new ecosystem for their clients, Europe lags with $87 billion, according to de Blonay's estimates.
Irrelevant Neo Banks
Swiss banks are vying heavily with their U.S. counterparts for the super-rich clientele poised to benefit from the tech advances. That's why UBS and Credit Suisse – unlike BCV – cannot be satisfied with simply keeping up.
He is far more sanguine on the threat posed by new entrances like Revolut of N26: «Banks aren’t interested in the small fry clients who leave for a one-trick pony like Revolut. They care more about the big tickets and these clients are not going to leave for Revolut. That’s why I don’t think it’s going to be that important in the future.»
