UBS takes a counter-intuitive approach to loyalty programs. Negative interest rates are only charged for holding cash. The Swiss bank lowers the threshold for this unattractive offer to 250,000 francs (281,000 US dollars). However, if customers get enough of their bank’s financial products, they end up not having to pay.
The big wealth manager explained its anti-sales initiative in one go Employee memo on Tuesday. It was a glimpse into the pain negative interest rates cause banks.
Negative interest rates from the Swiss National Bank are not intended to encourage banks to grant loans, as is the case with the European Central Bank. They will certainly not help the profits of Swiss banks. Typically, when loan prices go down, income is squeezed, especially if funding rates stay the same.
The aim is to weaken the Swiss franc, which has global port status. Manufacturing makes up almost a fifth of the economy, twice as much as finance. A high Swissie hurts Alpine Metal Bashers.
The gloss of the currency has created a liquidity trap. Even PostFinance, the Postbank, debits depositors with more than 100,000 francs on their accounts. Insurance companies that seem to have no room for their domestic funds are now offering residential mortgages.
Many Swiss employ banks. For example, UBS is the country’s third largest private employer. However, financial service groups are politically unpopular. The SNB’s interest rate policy is in line with this and puts a strain on large finances with the aim of helping engineers and the supply chain of small companies
Including estimates for the last year, UBS’s net interest income in its two largest businesses – wealth management and retail / corporate clients – will have moved sideways since 2016, according to Visible Alpha. Overall, net interest income has accounted for 15 to 20 percent of UBS Group’s sales over the past few years.
UBS’s wealth management arm has approximately $ 2.7 billion in invested assets. Losing some customers with lower margins won’t hurt much. The wider pressure on profitability from low interest rates is a much bigger problem for Swiss banks.
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