UBS Group AG chief executive officer Sergio Ermotti joined Wall Street peers warning that income from lending would come under more pressure after a sudden reversal in expectations for interest rates globally.
Even as Switzerland’s largest bank yesterday posted its best quarterly result in almost a decade, lower net interest income already weighed on its key wealth management unit, while its investment banking business was dragged down by a continued slump in trading.
Net interest income “will come under pressure, not only because rates had a complete U-turn in respect of expectations,” Ermotti said in an interview with Bloomberg Television’s Manus Cranny in Zurich, Switzerland.
In addition to the impact on US bonds, “we also had headwinds from the euro and the Swiss franc rates. At the end of the day, if you sum it up, this is a huge change,” he said.
With global growth slowing, central banks have been forced to reverse course after spending much of last year leaning toward tightening monetary policy.
US Federal Reserve Chairman Jerome Powell and his colleagues look primed to cut interest rates by a quarter of a percentage point later this month, while the European Central Bank is also on the verge of more stimulus.
That has prompted Wall Street firms to signal that income from lending is likely to decline, should policymakers follow through.
Bank of America Corp and Wells Fargo & Co indicated their biggest revenue source would decline in the second half of this year, while JPMorgan Chase & Co forecast a decrease from its record first half.
How many times central banks cut rates this year would likely determine how steep the drops are.
The problem is particularly pronounced in Europe, where lenders have been punished by sub-zero interest rates for half a decade, while their US peers enjoyed nine interest rate increases by the Fed since late 2015.
Ermotti said such a policy was something very difficult to emerge from, leaving cost reductions as a key lever to improve earnings
“We have to now assume that rates will stay lower for a longer period than expected,” Ermotti said.
“That’s the reason why we are very focused on mitigating actions in respect of what we do on our cost base and finding ways to execute on our other growth initiatives,” he said.
Separately, Brexit vulnerabilities might stop the Bank of England from raising interest rates even if their forecasts imply a need to do so, bank policymaker Michael Saunders said.
A smooth departure from the EU, which the bank’s forecasts assume, is very uncertain, Saunders said in a Bloomberg interview. That means that even relatively hawkish projections would have a smaller-than-usual influence on his immediate policy vote.
Saunders has led the charge for the Bank of England’s last two interest-rate increases, but his remarks suggest he is in no rush to begin another push.
“The economy right now is clearly not overheating — the underlying pace of growth, stripping out all of the funny effects, inventories, car shutdowns and so forth, is weak and below trend,” Saunders said.
In the bank’s previous round of forecasts, “the link from the forecast to my actual vote was quite loose,” he added.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last