European Bank CEOs Are as Divided on Inflation as Everybody Else
The leaders of Europe’s top banks agree they have a lot riding on the recent surge in consumer prices. But when it comes to deciding whether inflation is here to stay, they’re as divided as policy makers and business executives.
On the one side, Deutsche Bank AG Chief Executive Officer Christian Sewing and his counterpart at Nordea Bank Abp are preparing for longer-lasting inflation. Sewing argues it’s time for central bankers start thinking about how to unwind years of negative interest rates that have weighed on lenders’ profitability.
On the other side, Banco Santander SA Chairman Ana Botin and the chief of Swedbank AB are calling it a temporary spike from the pandemic and other factors, although they acknowledge the dangers of price pressures persisting.
Prices for energy, raw materials and transport have surged as economies emerge from lockdowns and supply chains come under pressure, and there’s some anecdotal evidence the rebound is translating into wage pressures in the finance industry. Yet even the top central banks can’t agree on whether the bump in inflation will be sustained and how that will filter through to the bottom line for companies and workers.
Bank of England Governor Andrew Bailey moved to strengthen the case for raising interest rates, saying this month that the central bank will “have to act” to curb inflationary forces. Several European Central Bank officials, meanwhile, have pointed to missing wage pressures when arguing that the current inflation spike is largely transitory.
Here’s a summary of the remarks that some of Europe’s top bankers have made recently on inflation:
|Deutsche Bank CEO Sewing||“The inflation rate in the currency union is unlikely to return in the medium term to the pre-pandemic level. The time has come to talk about a perspective of exiting the monetary policy crisis mode.”|
|Nordea CEO Frank Vang-Jensen||“We have to prepare for some inflation and thereby probably also some increased interest rates in the future.” Clients are reporting price increases across board and “it’s not like 1%. It’s quite big increases that normally will also lead to also pressure on salary levels mid- to long-term.”|
|Santander Chairman Botin||“Is this a temporary issue? I believe it is in the sense that Covid is a one-off and it sort of created a spike.”|
|Swedbank CEO Jens Henriksson||“A number of concerns have arisen, including that inflation is on the rise. All indications are that it is a transitory problem tied to rising energy and commodity prices, semiconductor shortages and the labor market mismatch, but there is a risk that it persists.”|
Johan Torgeby, CEO of SEB AB, warned on Wednesday that the finance industry was already seeing “a lot of anecdotal evidence” that costs are rising for compensation and technology.
“If the inflation is maintained on a more permanent high level, it will affect us just like any other company,” he said on a conference call with analysts. “There will be a cost increase in the bank that has not been planned for or foreseen.”
©2021 Bloomberg L.P.