Swiss financial institutions are coming under pressure from all sides. So not only is competition strengthening, but major shareholders are also likely to interfere – loudly.
One of Europe’s most valuable startups has just made an important move. Neobank N26 announced that it will change its legal form from a limited liability company (GmbH) to a stock corporation (AG).
One of the leading digital banks, which is also active in Switzerland, is preparing for an IPO. And thus is for the next growth step. This is a downright warning to the competition.
An AG is also associated with a board of directors. This keeps a closer eye on business and strategy than a GmbH. The composition of the board is impressive. For example, the widely known fintech investor Marcus Mosen, who had previously been head of the payment service provider Concardis, serves as chairman.
“We will become profitable as a company in the next two years or so,” the head of Berlin-based neobank N26, Valentin Stalf, also told “Welt” newspaper.
But German financial market regulator Bafin had recently anyway placed a growth brake on the fintech.
N26 is currently allowed to grow ‘merely’ with a maximum of 50,000 new customers per month. With figures like these, Swiss banks’ ears are likely to flap anyway, because many credit institutions cannot even show such figures in a year.
Rising interest rates help
However, it is not only in terms of new customers that the competition, which currently only offers free euro accounts in Switzerland, wants to shake up the market.
N26 reported a loss of 172 million euros for the past year. Gross revenues were only around 182 million euros. On the road to profitability, the interest rate turnaround is now also helping, Stalf said.
“The average customer has 3,000 euros in his account. If the ECB pays us two percent for this, we earn 60 euros a year per customer on this alone – a good contribution to profitability,” he calculated by way of example. The rising interest rate level therefore not only helps the traditional banks, but also the emerging competition.
“Next year, we want to expand (our offering) to equities to get our users ready to go when the stock markets pick up again,” the N26 chief further explained. This, too, should make the established banking world sit up and take notice.
On top of that, Stalf defended the involvement of Chinese online group Tencent in N26, despite geopolitical tensions. He said it has invested in many highly successful Western companies, such as Tesla, Snapchat and Spotify.
“The influence of Chinese backers with us is limited because they only own a few percent of the shares. And our contact as management is primarily our supervisory board anyway,” the N26 co-founder said.
Money from oil sheikhs
And that’s where you get to the second problem for the Swiss banking world. Credit Suisse has just announced it is getting a new major shareholder from Saudi Arabia. Gulf Arabs are already shareholders in the big bank. Now, one was actually accustomed to the fact that the investors only push the coal over and otherwise rather restrained act.
But since Friday of last week, we know that things can turn out differently. The major British bank HSBC has come under intense pressure from a major Chinese shareholder, as reported by the “Wall Street Journal“.
The Chinese insurance company Ping An Insurance, an anchor shareholder of HSBC, played loudly to the media on Friday its demands for a restructuring of the financial institution. It said the bank, in which Ping An owns about 8.3 percent, should radically cut costs and allocate capital within the bank in a completely different way.
For months the Chinese have been trying, more or less via the public, to persuade the bank to restructure and spin off HSBC Asia. But so far they did without success. HSBC wants to present itself as an international bank and there belongs the business in Europe, America and just Asia united to it.
Now however, it loudly expressed itself on Friday the chairman of the board of directors as the Ping An fortune manager, Huang Yong. The insurer, as one of the largest shareholders, is very concerned about the performance, the dividend as well as the market capitalization of HSBC, it was said.
On those three measures, HSBC is well below those of a peer group, as well as below the expectations of many shareholders, he said. So this will increase public pressure on the money house.
And Yong also said what the Chinese expect in concrete terms. HSBC should aggressively cut costs. This would have to be done specifically in terms of personnel, IT and head office expenses.
The British bank itself tersely rejected those demands. It said that it would argue with older statistics. HSBC’s chief financial officer Even Stevenson, however, has already thrown in the towel. And this, although he had actually been a promising candidate for the CEO post.
The wind of foreign shareholders who have no relationship with the home market will soon blow more harshly in this country as the number of major foreign investors increases.
This is all likely to become a challenge for the Swiss banking center, in addition to more flexible competition from new banks.