Blessing Is ‘Cautiously Optimistic’ for Banks in Europe
Commerzbank AG (CBK) Chief Executive Officer Martin Blessing said Germany’s second-largest lender is “cautiously optimistic” on the outlook for the economy and banks in Europe as the region presents opportunities.
“Every difficult situation also presents a chance and I think there are a lot of chances in Europe for Europe as well as for banks,” Blessing said today at a conference in Frankfurt organized by Euroforum. “We have to show the advantages of European integration and the common currency more, which means we have to recognize, secure and develop them.”
Investors drove yields higher on the bonds of Greece, Portugal, Spain and Italy yesterday on doubts Europe’s leaders will be able to stop the sovereign-debt contagion. While states can cut debt and restore confidence by sticking to austerity measures and consolidating their finances, issuing joint euro bonds would hamper those efforts, Blessing said.
“Spain’s debt brake may not have been introduced so quickly if there were euro bonds,” he said. “And I don’t think the French savings package would have been brought under way or that Portugal’s deliberations over the last few days would have started like that” had European states issued joint bonds, the CEO said.
“The only problem is Greece, it is unclear if they’ll be able” to bring down its debt “in our lifetime,” Blessing said, citing a study by the bank on the ability of European countries to lower borrowings to below 60 percent of gross domestic product.
It’s “very unlikely” that Europe will experience a credit squeeze like the one that followed the collapse of Lehman Brothers Holdings Inc. in 2008, Blessing said.
If banks concentrate more on the task of financing the economy, they will become more focused on their home market and Europe can become a “new home market” for the region’s lenders, he said.
In the future, banks will not “bet massively on growth but the issue will be to get cost and risk management under control,” according to the CEO. “Given all that is happening with regulation, the ability to generate profits at banks will be a tick more limited.” Lenders will reduce their focus on proprietary trading, some areas of investment banking and interbank lending, he said.
Commerzbank is working on a cost-reduction plan that may free up personnel capacities at the bank that could be used in other businesses, the CEO said. He didn’t rule out job cuts.
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