You can also listen to the interview in the audio version.
Long waits for interest rates to fall, and with it cheap money, can bring disappointment. According to the head of Moneta Money Bank, the drop in rates will not revive the economy. In addition, he does not expect mortgage interest rates to fall below 4.5 percent.
His bank expects the first downward shift already at the end of December. “We expect a reduction in the main rate from seven percent to six and three quarters. We’ll see if it comes true,” adds Spurný, adding that the vast majority of rate cuts will occur next year. The rates are also key for the bank because it has changed significantly over the last year precisely because of their amount – today it has a balance sheet of more than 450 billion crowns, i.e. about one hundred billion crowns more than a year ago.
“So we have to finance a much bigger bank. That is why we are carefully preparing for how we will react to the reduction in rates,” says Spurný. And he adds that the bank redraws its price lists on a daily basis. “We look at the interest rate market, put a kind of premium on it and change the rates accordingly. Technically we do it on a weekly basis or we choose not to.’
A significant drop in rates will not come
However, a significant decline and the big recovery associated with it will not come, and Tomáš Spurný is thus tempering the great expectations associated with the prospect of cheaper money. “If rates start to decrease rapidly, there is a danger that the koruna will lose value against both the US dollar and the euro. And that, of course, would help start another round of inflationary growth,” he says. He says he does not believe that rates could reach pre-Covid levels.
Of course, interest on mortgages is related to this. Today, some developers are luring clients to an interest rate of 2.99 percent – if they buy an apartment completed in the summer of next year. However, according to Spurný, mortgage interest has no chance of reaching this level, rather he expects their level to be 4.5 to five percent. “What was before covid and basically lasted one long decade, from my point of view, will not and cannot be repeated. That’s a chimera,” says Spurný.
In the US, a seven percent mortgage
“If you look at interest rates in the US, they are lower than in the Czech Republic in the short term, and essentially identical in the medium and long term. And the average US dollar mortgage today is seven percent. The market has stabilized there at this level,” he adds.
Coming soon: List of Reports and ranking of the most valuable companies
“I think short rates will go down dramatically. This will help companies from the point of view of financing working capital, however, medium and long-term rates will increase even more, and therefore there will be some disappointment in the development of the rate environment,” adds Spurný, adding that the scenario that everything will go well thanks to the drop in rates now only gives 15 percent chance.
“Our economy, which is at full employment, is producing zero growth today. If I look at the pre-covid years as well, the growth was not admirable. This testifies to the fundamental foundations of our economy,” says Spurný. According to him, the economy must be reformed in order to reach a growth rate of four to five percent, and this will be very difficult, according to him.
A program in which Zuzana Hodková and a permanent team of experts will discuss the behind-the-scenes of the business. These insiders will describe what topics are alive in industry, food, reality, startups, finance, energy or the automotive industry, and explain the key moments and connections.
Insiders are this group of bosses:
- Tomas Kolar from Linet
- Petr Palička from the real estate division of Penta
- Petr Novak from the automotive division of JTEKT
- Tomas Spurny with Moneta Money Bank
- Ondrej Fryc z Reflex Capital
- Martin Durčák from ČEPS
- Karel Pilčík from MP Beautiful
A new bank? Czechs are conservative opportunists
At the same time, a new bank from the Partners financial group announced its entry into the Czech market. How much can he move with the cards dealt in the market? “The new bank has a capital of three billion crowns. The entire banking market is at the level of 590 billion crowns, so in terms of capital, the new bank’s ability to influence the banking market is relatively limited. But if we look at it from the point of view of the power of distribution, I think that the power of distribution of this bank will be at the level of 150 branches and several thousand advisers. This is a very high power, and moreover, all these people are used to working only on commission, and that is a big advantage of this business model,” adds Spurný, adding that the new bank is run by an experienced person, and therefore he definitely does not underestimate it.
However, he points out that Czechs as bank clients are very conservative, pragmatic and opportunistic. “If you look at what has happened in the market over the last 12 months, there have been significant transfers of clients from large banks to smaller ones. This is in the context of the fact that the Czech Republic offers deposit insurance up to 100,000 euros, so people diversify their portfolios of banking houses. I’m not entirely convinced that it’s easy to convince clients to change current accounts and the transactions associated with them,” he adds.
This text is part of the Česká elita project, as part of which Nauzal compiles a ranking of the 100 most valuable Czech companies. The main partner is the Prague Stock Exchange, the project partners are ČSOB, Galileo, Orlen Unipetrol, Deloitte and Kunsthalle.