War in Ukraine, inflation, and the end of easy central bank money threaten to unsettle Swiss consumers. At consumer credit bank Cembra, CEO Holger Laubenthal is watching developments very closely.
The benchmark interest rate in Switzerland is likely to claw its way out of negative territory to zero or even into positive territory with the next monetary policy decision by the Swiss National Bank (SNB). This comes as annual inflation forecasts have been raised not only by the SNB but also by many economists. UBS recently raised its projection for annual inflation to 3.1 from 2.7 percent, while economists at Raiffeisen Switzerland, now expect 3 percent instead of 2.5 percent.
Rising prices are likely to cause increasing uncertainty among consumers and reduce their willingness to spend more or take on debt. It is also too soon to determine a resulting trend in retail sales, and while there was a drop in May, sales partially bounced back in June.
Ready for Adjustments
«We have been operating in a dynamic environment with the existing uncertainties and rising interest rates for several months,» Cembra CEO Holger Laubenthal told finews.com. As the head of one of the largest consumer credit banks in the country, he is very close to the mood of consumers. «However, we did not notice any increased reluctance among our customers in the first half of the year. Not even after the SNB measures and the prospect of further interest rate hikes.»
After the SNB raised its benchmark rate by 50 basis points to -0.25 percent, some banks reacted by eliminating balance fees, and now it's only a matter of time before the first institutions will start offering interest on savings balances again. Cembra intends to monitor the situation closely here. «We have already reacted to the interest rate hike both on the credit balance side and in the credit products and made adjustments,» Laubenthal further emphasized. «And we will continue to do so should it become necessary.»
Room for Improvement
Looking at interest rates, Laubenthal expects a gradual increase. «We expect continued development in this environment as well. For many customers and market participants, this is the first time they have found themselves in such an environment,» he notes.
At Cembra, the buy-now-pay-later (BNPL) business has seen strong growth recently. «BNPL is more dependent on consumer spending than other areas. But here, too, we expect further growth,» says Laubenthal. He says this has to do not only with customer behavior but also with the still low market penetration in Switzerland.
Overall, Laubenthal does not expect any serious problems from the end of negative interest rates. «Even if there is a slight nervousness in general, we are dealing here with a normal recurring rhythm in interest rate changes. We can handle that well, as we have shown in the past.»
