Negative interest rate environment, customer asset fees, low returns on reinvestment, lending prohibition, account closures – in this interview, Head of PostFinance Hansruedi Köng explains how PostFinance is dealing with the current challenges.
In 2019, we generated earnings before tax of 240 million francs. That’s 20 million francs or around 9 percent more than in financial year 2018.
Our investment portfolio continues to include high-yield bonds from earlier investments that are now reaching maturity but which, in the current interest rate environment, we can only reinvest for very low returns. Margins therefore remain under pressure, and interest income will continue to fall, although we should see the decline slow down somewhat.
At present, interest rates on the financial markets are negative across the board, both in Swiss francs and in euros. And the market does not seem to be expecting interest rates to rise in the medium term. We can no longer absorb the negative market interest rates ourselves, and are therefore increasingly passing them on to our customers. Our approach is to look at the entire customer relationship: customers who use a wide range of our products and services receive a higher threshold than customers who only park their cash with us.
At the moment, I don’t expect that small savers will at some point have to pay a customer asset fee at PostFinance. But nobody knows what the world will look like two or three years from now.
The lifting of the lending prohibition requires the consent of Parliament.
We want to develop our savings customers into investment customers, and we are launching completely new solutions in the investment area, which will also be available digitally. For example, private customers will be able to invest in a digital asset management mandate from as little as 5,000 francs.
The lifting of the lending prohibition requires an amendment to the Postal Services Organization Act. The Federal Council mandated this at the beginning of September 2018. The Federal Administration is currently drafting a bill to be submitted for consultation and, based on the results of that consultation, the Federal Council will then send draft legislation with its dispatch to Parliament. I cannot comment on the exact timings. But what is clear is that partial privatization will be off the table if Parliament opposes the lifting of the lending prohibition. Because nobody will invest in a bank that is not allowed to issue loans.
We would of course like to have clarity as quickly as possible, because this decision is important for the future of PostFinance. However, we are focusing on work where we have matters firmly under control, which includes consistent implementation of our digitization strategy. In this area, we have closed gaps between us and our competitors in the past few months. And with the successful launch and positioning of the Valuu mortgage platform, we have demonstrated our pioneering spirit and innovative strength.
Working with the Board of Directors, the Executive Board is currently drawing up various scenarios for our strategic focus for PostFinance in the future. I can say no more at this point in time. However, I do assume that by summer 2020 we will have set our course for the strategy period from 2021, and we will of course then announce it.
The negative interest rate, a monetary policy measure implemented by the central banks, has long since spilled over to the financial markets. Interest rates are not expected to rise in the medium to long term, as is shown by the negative yield on ten-year Swiss government bonds. In this market environment, PostFinance can no longer find profitable investments for the customer deposits entrusted to it, and is therefore increasingly obliged to pass on the negative market rates to its customers.