Credit Suisse chairman Urs Rohner said that more consolidation was inevitable, not only within countries but likely across Europe and even amongst bigger banks.
While banks used to be the root of the problem in 2008, they are now «playing a decidedly positive role during the pandemic», said Credit Suisse’s Rohner during a virtual session at the Asian Financial Forum (AFF) 2021.
Financing, liquidity, partnerships and other proactive initiatives have all been conducive to market stability. And to keep momentum, especially in the post-pandemic environment, Rohner underlined the importance of maintaining healthy banks.
Europe Vesus U.S.
Rohner underlined the interest rate differential between the U.S. and the sometimes negative European market as a key driver of not only better interest rate income – $35 billion in the last few years – but also quicker restructuring.
As a result, Credit Suisse has had to reign in on spending, decreasing costs by 25 percent while halving its balance sheet and significantly strengthening capital since 2007. And this in the backdrop of a restrictive market environment that includes increasing control of bank's business models and high cross-border barriers.
«Consolidation Will Occur»
But even such measures may not be enough, according to Rohner, who said noted that margin pressure in the existing low rate environment will continue to place cost management in the spotlight and that banks will eventually need to consolidate to scale up.
«Consolidation will occur within countries, but probably also across European,» he said, adding that this will become possible even for bigger banks especially given expressed ECB support to use supervisory tools for facilitation. «Bank’s ability to make money has decreased. So, there is a really big cost issue.»
Interestingly, Rohner was reportedly in discussions with Swiss finance minister Ueli Maurer last September for a merger with UBS, in a plan led by the latter’s chairman Axel Weber.
Still Hopeful
Despite the challenging outlook ahead, Rohner said he was still hopeful about the future of banking. He highlighted wealth management growth, continued digitalization and Chinese economy rebounding faster than most as reasons to be optimistic.
«I am not negative,» Rohner said, adding that the current environment was in fact a critical moment for banks to demonstrate their ‘USP' (unique selling point) which is to provide advice for difficult and complex financial issues.
«It’s my fundamental belief that having a strong financial services industry in all regions is absolutely paramount to help us get through this crisis.»
