European Bank CEOs Are as Divided on Inflation as Everybody Else

Christian Sewing, chief executive officer of Deutsche Bank AG, speaks during the Christian Democratic Union (CDU) Economy Day 2021 conference in Berlin, Germany, on Tuesday, Aug. 31, 2021. The top brass of Angela Merkel’s conservative bloc is holding their annual economics summit along side some of Germany’s key business leaders in Berlin. , Bloomberg

Nicholas Comfort, Bloomberg News

Oct 21, 2021

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(Bloomberg) --

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:

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.”

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