×

CNBC Transcript: Boris Collardi, CEO of Julius Baer

Following is the transcript of a CNBC interview with Boris Collardi, CEO of Julius Baerat at the 2016 WEF India Conference.

All references must be sourced to a "CNBC Interview"

Interviewed by Martin Soong, Anchor, CNBC Asia Pacific

Martin Soong (MS): The focus is on technology and what's going to happen in the future.

Boris Collardi (BC): Absolutely. We were discussing today, the fourth industrial revolution - the convergence of science and technology and how that's affecting all industries around us. We're having several panels with leading experts about the topic and it's been very engaging so far.

MS: What do you think will be the biggest disruptor in the next 12 months?

BC: I think if we start from our industry…I think the technology of block chain is going to affect the way that we intermediate products and services within the financial industry. How we go about doing transactions. For different industries, it will be different things, but for all of them, the underlying thing will be technology and advances in science.The communication speed of the internet is changing the way we share information and data, and that's the underlying trend.

MS: Boris, I wanted to ask you something that is very relevant - the Deutsche Bank situation. You have a relationship with the bank. What do you think is the overall impact on European and global banking?

BC: Look, I think 2016, we're seeing again the fact that different parts of the industry have done differently their homework when it comes to balance sheet repair. And this, in a macro environment is now very difficult. We're looking now at a European banking sector under pressure. There's pressure for profitability and margins in a negative interest rate environment, and at the same time, the sector is not capitalised, or not well-capitalised enough to withstand some of the shocks that we're experiencing.

We're seeing valuations that may not reflect what the net asset value should or could be, or the book value. On the other side, we're anticipating more restructure and consolidation in the sector. So I think we're probably going to be seeing more volatility in the European banking sector. The US banking sector I think is out of the woods, well-capitalised and did their homework well. Profitability is good and we're going to see probably the same kind of agenda in the Asian banking sector, which has done also its homework quite well, so I think the focus right now is on the European banking sector, and we have to ensure that banks are well-capitalised and can withstand this moment of crisis and high volatility.

MS: Would JB reconsider doing business with Deutsche?

BC: I think that's part of our day-to-day, normal course of business. We're currently assessing how we do business, with whom, and with what limits. We're continuing to do business with Deutsche.

MS: You've recently been talking about acquisitions. Upheavals always bring opportunities, but you've also warned about "atomic bombs" in the industry. Is there anything you're watching for and looking for?

BC: We're very active in the market as you know, but at the same time, we're a little more on the passive side than we used to be, simply because also in M&A there is a cycle. I think when everyone is quite keen on acquisitions, and you see on the market there is competition happening, that isn't necessarily, I think, from a macro point of view, when you should be doing acquisitions.

The last large acquisition we did was in 2012. You might recall this was a phase of disruption in the financial markets. I think it's better to try to move in an anti-cyclical way. That's the reason why we're refocusing our efforts now mainly on organic growth. Having said that, there will be a sector in disruption as I spoke about before, and I'm sure there will be opportunities for us in the years to come, with larger players that will discontinue their wealth management activities.

MS: The sterling pound is at 31-year-lows. There's lots of concern about what this means for the UK and for the UK-EU relationship. How are you setting yourself up for the next year when the process of Brexit will begin?

BC: Look, there's always a silver lining in everything. With uncertainty comes volatility, and frankly, that's not a bad thing for us to be able to do our job and accompany our clients. Clearly, I think now there are different levels of how one should look at Brexit. There is the political level, where rhetoric is and has to be strong - the will of the people and new leadership in place.

I think there's the reality of the financial markets, which are bracing themselves for the worst, but then there will be the economic reality, and I'm sure, we will see next year, a more constructive agenda, once positions are clear. As we speak, I think both parties, Europe and UK are preparing themselves for negotiations, so I think it is too early to say how it will go.

I am a believer that there will be a pragmatic solution. I don't think the UK has any economic interest to be decoupled from Europe, neither Europe has any interest to be decoupled from the UK, and in particular for the financial sector.

So I'm sure we will be in a much more constructive mood, and things will look better next year than how we anticipate them to be as we spend this morning here.

MS: Just a quick final question - What about the Fed and the potential for a hike in rates towards the end of the year? What's your view on when they'll lift rates and whether or not it's the right thing to do?

BC: Look, I think if I look at one of the issues that we're having in general with economic growth in the world, I think it's a collateral effect of the fact that we've exhausted negative interest rate support for the market. Frankly, negative interest rates have not worked as has been believed by the central bank. We're going to be reversing that trend, with the Fed leading the way. I think it may happen this year - I think that's a post-election topic. I think until the US election, nothing will happen, which is something that we anticipated.

We're going to see a jobs report today, I think momentum should be good on the indicators to set the stage for interest rates post the US election later on this year.