The air raid siren sounded in the middle of the interview, and we stood up and went to take cover in the stairwell. Pictet & Cie senior partner Jacques de Saussure kept his cool. "I served in the army," the Swiss banker said calmly.
Today, when many enterprises prefer to postpone launches and inaugurations, private Swiss bank Pictet decided to carry on with business as usual. Geneva-based Pictet, which manages almost $400 billion, inaugurated its branch in Tel Aviv this week.
"We believe that the Israeli economy will continue to grow. We're talking about an economy that is based on high tech, and in the future, it will probably grow strongly thanks to the gas potential. This growth will increase the wealth of the population, creating an opportunity for us and providing a good reason to launch activity in the Israeli market," de Saussure told "Globes" in an interview.
"Globes": Nonetheless, when you personally experience the meaning of Israel's geopolitical tensions, aren’t you perturbed?
de Saussure: "True, there's a risk, but we are convinced that, in the long term, there is great business potential in the Israeli market."
What are your targets in the Israeli market?
"I have been at the bank for over 30 years. When I joined the bank, it had 250 employees and it managed less than CHF 15 billion. Today, the bank has more than 3,000 employees, and its assets exceed CHF 300 billion. No one said that these would be targets. We don’t like to set targets. We simply prefer to grow slowly and naturally."
Pictet is different from the banks we are used to seeing in the European landscape. It was founded in 1805, and it has been sound throughout its 207 years. Its only business is asset management. It has no retail, commercial, investment, or mortgage banking activity.
Why have you never launched other activities?
"We wanted to keep a clean balance sheet and low risk. A second reason is that we wanted to specialize, to focus our energy and management resources on managing assets for private and institutional investors."
Pictet has never made a single acquisition since it was founded, and its growth to managing $400 billion in assets has been entirely organic. "When companies merge, it is necessary to merge management cultures. Customers rarely benefit from such mergers. And if the customer doesn’t benefit, the shareholders won't profit," says de Saussure.
Pictet's ownership structure is also unique. It is not a public company, but a private one. It is owned by eight partners, all of whom work at the bank. "We're here for the long haul, to develop the company and not to maximize profits in the short term," says de Saussure. "The ownership structure is an advantage, because the owners know the business inside-out."
Did you obtain partner status through inheritance?
"Current partners choose the new partners from among the bank's managers. Shareholder status is not passed on through inheritance, although there are shareholders whose fathers or grandfathers were partners in the bank."
There is strong competition for Israeli customers, including by foreign banks. What is your added value compared with your competitors?
"Customers feel alienated in the face of a complex institution like a bank. We are completely different. Also, the contemporary investment world has become complex. It's impossible to be satisfied with investments in stocks and bonds, which is why we offer specializations in different instruments, such as private equity and direct investment in real estate, or in debts of developing countries."
The main advantage of Swiss banks for years was their confidentiality, but tax evasion and money laundering scandals have hurt the banks. Regulators in various countries are determined to tackle these problems, even at the price of affecting banking confidentiality.
Are you worried that the waning of banking confidentiality will cost Switzerland its edge in the industry?
"Many people came to Switzerland because of its banking confidentiality, and there is no doubt that that is no longer what it was. Customers must understand that the world will be more transparent, and that it won't be possible to hide under banking confidentiality to evade taxes. But that does not mean that customers won't need bank advice and services. Banking confidentiality is not the only advantage of Swiss banks. During the financial crisis, Swiss banks demonstrated stability; only one bank needed a government bailout, and that was only because the bank had extensive operations in the US. The fact that Switzerland is a stable country with a stable banking system is very important. Swiss banks have also developed expertise in many fields, such as investment and tax management, and they have added value for customers."
Volatility will continue
de Saussure says that the Israeli market is in much better shape than the European economy. "Before, when European countries fell into a crisis, there were solutions such as devaluing the currency, but this solution is no longer relevant for countries in the eurozone."
What do you expect in Europe?
"We believe that the eurozone will survive, but that various countries will have to take many measures to deal with the crisis by buying bonds and providing liquidity to banks, as well as aid for other countries under certain circumstances. The result is that we will see more market volatility, weak growth figures, and a weaker euro to encourage growth."
de Saussure also believes that there will be a battle between central banks over weakening the euro. "Many central banks want to weaken their currency to encourage growth. This can be seen in Europe, the US, Japan, and even Switzerland. Because of this, we see negligible interest rates in many places around the world. The question is which central bank will take stronger measures to weaken their currency further against the other banks."
Why don’t you think that the eurozone will break up?
"There are no clear rules how to break up the eurozone. For example, what would happen to an Italian company that borrowed money from a German bank - in which currency will it repay the money? A strong German currency would make it harder for the company to repay the debt, but a weak Italian currency might cause the bank losses.
"Dismantling the eurozone is liable to result in chaos, even a catastrophe. It would be the end of the era of global investment. The cost of breaking up the eurozone would be much higher than the cost of solving the crisis - even for the strong countries."
Published by Globes [online], Israel business news - www.globes-online.com - on November 22, 2012
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