Clients lose faith in investment banks

Head of group believes that banks are at a crossroads as regulations increase and strategies are reset

The head of a Swiss banking giant, which has bases here in Canada in both Calgary and Vancouver, has suggested that investors have lost faith in the ability of investment banks to earn money.

Amid negative interest rates and a drop in global confidence, Andrea Orcel, the chief of UBS Group AG’s securities unit spoke to Bloomberg about what he described as a series of conditions that have made investors adopt a “wait and see” approach. He believes that the “pressure has never been as high” for companies to find models that convince people to invest.

In an interview with Erik Shatzker for Bloomberg Television, Orcel outlined the pressure of factors such as sanctions in Russia, the referendum on EU membership in Britain and the impending US election. He points out that revenue for investment banks has slipped amid falling interest rates and low oil prices as well as a cool-off among emerging markets.

Focusing on UBS in particular, the company has seen shares lose around a quarter of their value this year as part of a wide sell-off of European investment banks. Thousands of jobs have gone as the company switched its focus to its wealth management arm.

Orcel points out that investors are openly questioning strategies and business practices and described the situation as a “crossroads” with increased regulation and numerous competitors resetting strategies to adjust to the market.

Despite this, Orcel believes that UBS will have an advantage going forward, suggesting the bank has “clarity… stability… and a sense of purpose.”