The fallout from the coronavirus crisis is an opportunity for lenders, cantonal bank CEO John Haefelfinger tells finews.com. He is directing his credit specialists to exercise caution in emergency loans.

John Haefelfinger, you're working from home while some of your CEO peers are in the office. Can Basellandschaftliche Kantonalbank be run from your home?

It's important for a CEO to be present at times like this. How he or she implements this is up to each one of us. Ninety percent of our employees are now working from home. I want to role model that the bank is running despite most of us working remotely. Of course I regularly visit those people who need to be physically in the bank due to their roles.

There's a huge risk of infection spreading. What happens if the CEO goes into quarantine?

We've planned for this scenario. We divided up top management into two groups early on and ensured that my deputy, Herbert Kumbartzki – as CFO, he runs the finance and risk management divisions – and I didn't meet in person, and that the people around us don't cross paths. I could probably work from home, even if I am quarantined.

How's the health of BLKB?

We'll have more write-downs than we budgeted at the beginning of the year. We're seeing a lot of commission and fee activity. We sometimes have to warn clients of overreactions in financial markets. We're in close touch with our small- and mid-sized business clients in order to identify their needs and help them with mid-term planning.

«Our refinancing costs have risen»

In our private client business, demand for new mortgages has dropped. The uncertainty of our current situation is palpable. 

Has BLKB lifted mortgage lending rates?

Yes, in line with the market. We want to stay true to our role as a stable, reliable partner for mortgage lending in the current crisis, but we're not immune to the vagaries of capital markets. As a top-rated cantonal bank, our refinancing rates have risen. We're monitoring the market very closely.

There seems to be uncertainty in the money market. Cantonal banks were swamped with money after 2008/09. Is this happening at BLKB again?

Absolutely. Clients appreciate that we subjugate our interests to those of the local economy. In a first phase, we made a 85 million Swiss franc, zero interest loan facility available to clients that we're taking on our own book. It helps that we are amply capitalized, which was years in the making.

The Swiss government doubled its emergency loan facility for small businesses after just one week. What's the demand in your local economy been like?  

We've granted 850 loans for a total of 105 million francs as part of the government-guaranteed lending facility. The emergency loans are going to be used up very quickly – which begs the question of what happens next. Companies will need fresh liquidity for months to come. We're already begun planning for this.

The quick pace of lending threatens to short-circuit compliance checks. Will these government-guaranteed loans eventually be written off?

The government's emergency credit package is generous and fast – but it doesn't differentiate much. That's not necessarily a guarantee that the right small- and mid-sized businesses are getting support.

«Drop in supply as well as demand in real estate»

We have a share of 45 percent in corporate banking in our local market, so we know the companies applying for loans fairly well. In reviewing loan applications, we're still exercising the usual caution and doing the regular checks. It takes more than the much-vaunted 30 minutes for us to grant a loan. We believe we owe that to taxpayers.

You mentioned longer-term planning. Isn't everyone flying blind on that?

We're in touch with specialists on how the real estate market may develop – we see demand as well as supply receding. We hope for a rebound in financial markets, but we're heavily reliant on other countries like the U.S. Globalization and the reliance of local economies on each other make forecasts extremely difficult.

You used to oversee shipping finance at Credit Suisse, one of the most global businesses there is. Will the coronavirus bring globalization to a standstill?

Anywhere in the economy and business, we're looking for the «just-in-time» principle. Processes are streamlined, which means major dependency on other parties.

«The dependencies will usher in more crises»

That's why the coronavirus pandemic is pressuring demand as well as supply for companies. Banks need to be thinking about these interdependencies more – for example, in outsourcing services. This will usher in more crises in the future. We have to rate security higher than a short-term return.

Your regulator, Finma, reminded banks twice to reevaluate their dividends for 2019 in view of the crisis. BLKB maintained its payout on certificates – shouldn't you have lowered it?

We paid our dividends on February 27. Our payout policy is a reflection of the success of our business. This has helped us to stock up on capital in the past.

«One-quarter of our branches are open»

We can only pay out as much as we stow towards our capital. Our core capital ratio is 20.4 percent. This illustrates that capital won't be a bottleneck in lending to small- and mid-sized businesses.

BLKB invested significantly in its branches last year – many of which are now closed temporarily. Do you think the easing of lockdown measures will show your bank doesn't really need as many branches?

The significance of cash withdrawals is reduced. Only one-fourth of our branches are open right now. This covers demand in the canton very well. The traditional bank teller isn't at the center of our new branch concept anyway. Instead, we wanted to focus on the advisory experience, part of our ambition to define ourselves as an advisory bank. We needed the branches in order to roll out this strategy.

Those offices are now empty, aren't they?

Right. We're advising our clients only on the phone and through screen-sharing. The quality of advice hasn't suffered. Last year, we equipped each employee with a phone and laptop as part of our transformation to an advisory bank. This has been a huge advantage in settling into working from home.

«Bankers need the humility to not benefit from the crisis»

Our bankers and clients are learning to trust these new channels, thanks to the crisis – this is going to give us a huge lift in digitization.

BLKB is likely to have to rethink investments in the wake of this crisis. Where do you not want to penny-pinch?

In education, which is sacrosanct. I'm utterly convinced that Swiss banks have to invest in their capabilities in order to secure our lead to other financial centers. All front-facing staff complete coursework to become a financial adviser, then a financial planner. We offer anyone responsible for a function our own vocational training in banking of the future. And anyone managing other people takes leadership training.

Cantonal banks could pool their costs. Will this crisis prompt a cooperative approach among them?

Cantonal lenders have been in intense contact in the last few weeks over how to navigate the crisis – that's positive. The environment represents a huge opportunity for all banks, and us cantonal institutes in particular. As an industry, we could demonstrate that we're here for our clients even in stormy times – show that we're an indispensable part of the the economy.

We also need to have the humility to not benefit from the situation. Cantonal banks can show what the state guarantee is worth. If we manage that, we'll come out of this as the strongest force in Swiss banking.

John Haefelfinger has been the CEO of BLKB, the cantonal lender of  Basel's environs, since 2017. The 48-year-old worked for Credit Suisse for 20 years before joining the local lender. An Italian-Swiss dual citizen, Haefelfinger was most recently head of corporate and specialty lending for Credit Suisse's main wealth arm. BLKB's balance sheet totals more than 27.3 billion francs and the bank employs 750 people.