Bankers prepare for globalisation ‘reset’ in second Trump presidency

1:01 pm Tuesday, December 03rd, 2024

(Corrects company name in last paragraph to Alvarez & Marsal, not Alvarez & Marshal)

By Lawrence White and Sinead Cruise

LONDON (Reuters) -Globalisation is being reset by U.S. President-elect Donald Trump’s trade tariff threats and worries about regulatory arbitrage between Wall Street banks and their international rivals, senior bankers said on Tuesday.

Trump said last month he would impose a 25% tariff on all products from Mexico and Canada, and an additional 10% tariff on goods from China, on the first day of his second term, raising concerns about global trading relationships.

However, Trump’s proposed tariffs would not dramatically hurt BBVA’s business in Mexico, the Spanish bank’s Chief Executive Onur Genc told the FT Global Banking Summit in London.

“We are not at all concerned”, Genc said.

“If the labour cost in the U.S. is 100, the cost in Mexico is 10 … so you’re putting 25% tariffs on 10(%),” he said, adding that meant the country would remain competitive.

BBVA is among the most exposed foreign lenders to any shift in Mexico’s competitive standing and economic growth following the proposed tariffs, with BBVA Mexico the biggest bank in the market and delivering 47% of the Spanish group’s income in 2023.

OPPORTUNITIES

Trump’s proposed tariffs could disrupt supply chains worldwide but also open up opportunities for banks across Asia and the Middle East, Tanuj Kapilashrami, Chief Strategy and Talent Officer at Standard Chartered, said in response to a question at the same event.

Separately, European Central Bank board member Piero Cipollone said U.S. import duties could lower economic growth and inflation in the 20 countries sharing the euro.

Some commentators have predicted a wave of financial deregulation on Wall Street during Trump’s second spell as president, adding to speculation that ‘Basel Endgame’ rules designed to shock-proof the global banking system will not be rolled out in the United States at the same pace as in Europe.

C.S. Venkatakrishnan, CEO of Britain’s Barclays said he was still hopeful the rules would be adopted at roughly the same time, which would support the efforts of European lenders to remain competitive with their U.S. rivals.

“It’s realistic … the world has invested a lot in this,” he said, adding: “We get carried away and look at personalities, but the U.S. is a country of great and strong institutions, and it knows it has a very important role to play in the international world.”

European bank executives are concerned that the superior returns enjoyed by U.S. banks in recent years could grow yet further if Trump’s measures favour his home market.

North American banks are outpacing their European peers in revenue generation, with net interest margins of 1.8% compared to just 1.2%, research from professional services firm Alvarez & Marsal showed on Tuesday.   

(Reporting by Lawrence White and Sinead Cruise, editing by Alexander Smith)