Jump to content

Banks are preparing for an ‘economic nuclear winter'


Recommended Posts

Banks are preparing for an ‘economic nuclear winter'





The first half of 2016 has been a roller-coaster for financial markets. A combination of uncertainties surrounding the U.K.'s vote to leave the European Union and weaker-than-expected corporate earnings results across the region means a tough second half looms.

European banks, in particular, have had a very tough six months as the shock and volatility around Brexit sent banking stocks south. Major European banks like Deutsche Bank and Credit Suisse saw their shares in free-fall after the referendum's results were announced. In the U.K., RBS was the worst-hit, with its shares plunging by more than 30 percent since June 24.

The current uncertainty over when the U.K. will start the process of quitting the EU has banks on tenterhooks. But a source told CNBC that banks are "preparing for an economic nuclear winter situation."

Speaking on the condition of anonymity due to the sensitive nature of the topic, a source from a major investment bank told CNBC that financial services firms have put together a strategy in place that takes into account the worst-case scenario that could happen by the end of this year.

"This could mean triggering Article 50, referendum in other European nations leading to a break-up of the euro or sterling hitting below $1.20 or lower. The banks are ready for anything now," the source said.

The source further explained that the challenge in 2016 is nothing compared to when the Lehman Brothers collapsed in 2008 and the banking sector is this time a lot more resilient. "Markets hate uncertainty and the events this year have unfortunately created a lot of mystery around what is going to happen next."

Meanwhile, a common theme across second-quarter results has been a warning of uncertain times ahead. From big investment banks to mining firms like BHP Billiton and Glencore to the auto sector, companies have cited uncertainty and volatility in markets as a reason for weak results and have warned that the second half will be challenging.

Following that, a number of banks have cut their exposure to equities due to the volatile nature of stocks in the first half the year. Earlier this month, Goldman Sachs downgraded stocks to "underweight" as part of its 3-month asset allocation citing global equities to be at the upper end of their "fat and flat range."

"The second half of the year is going to be very challenging for U.K. corporates," Craig Erlam, senior market analyst at OANDA told CNBC via email. "Not only are they contending with possible recession in the U.K. and more prolonged slowdown, the uncertainty factor surrounding Brexit leaves planning for the future a very difficult task."

Erlam further explained that a number of companies won't know for a while what the future of their operations in the U.K. will look like.

"I imagine many are already putting plans in place for moving operations abroad should the U.K. lose access to the single market. With companies less likely to invest and recession very possible, the second half of the year isn't looking great, particularly for those companies with greater exposure to the UK."

But while challenges continue to loom, some analysts have said it was important for companies to get on with their business.

"I think the main problem for the second half of the year is the uncertainty caused by Brexit, though that's likely to persist for two years or more, so I suspect companies are likely to roll up their sleeves and get on with their business," Laith Khalaf, senior analyst at Hargreaves Lansdown told CNBC via email.

Khaif explained that the challenges will remain but it is important for industries like banking for instance to focus on maintaining their solvency ratios and "de-risking and simplifying their businesses."




Prepare, prepare, prepare! We are going in for really tough times, be ready, keep your people network in contact, we are not going to like this phase of the coming economy.

Link to comment
Share on other sites

I'm planning for an economic nuclear winter with a MUSHROOM CLOUD OF SALES, higher car count with higher ARO, MORE MONEY in the BANK, wearing the rollers out on the garage doors opening and closing them, and in general a great last quarter and even better first quarter of 2017!!!

  • Like 1
Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Have you checked out Joe's Latest Blog?

    • By Joe Marconi in Joe's Blog
      Typically, when productivity suffers, the shop owner or manager directs their attention to the technicians. Are they doing all they can do to maintain high billable hours? Are they as efficient as they can be?  Is there time being wasted throughout the technician’s day? 
      All these reasons factor into production problems, but before we point fingers at the technicians, let’s consider a few other factors.
      Are estimates being written properly? Are labor testing and inspections being billed out correctly? Are you charging enough for testing and inspecting, especially for highly specialized electrical, on-board computer issues, and other complex drivability work?  Is there a clear workflow process everyone follows that details every step from the write-up to vehicle delivery? Do you track comebacks, and is that affecting production?  Is the shop layout not conducive to high production? For example, is it unorganized, where shop tools, technical information, and equipment are not easily accessible to every technician?  Are you charging the correct labor rate and allowing for variables such as rust, vehicle age, and the fact that most labor guides are wrong? Also, is there effective communication between the tech and the service advisor to ensure that extra labor time is accounted for and billed to the customer? These are a few of the top reasons for low productivity problems. There are others, but the main point is to look at the entire operation. Productivity is a team effort.  Blaming the techs or other staff members does not get to the root cause in most cases.
      Maintaining adequate production levels is the responsibility of management to create the processes that will lead to high production while holding everyone accountable. 
  • Similar Topics

    • By ASOG Podcast
      Leave This Business MISTAKE In 2022
    • By nptrb

      Premium Member Content 

      This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

    • By Joe Marconi
      Marconi: You Can (and Will) Survive an Economic Downturn
      Joe Marconi
      December 12, 2022 Speaking with shop owners around the country, it appears that the recent surge in business may be showing signs of vulnerability. For most automotive repair shops, the past few years have been a comfortable ride with sales and profits exceeding expectations. While no one can predict what will happen in the future, should we be concerned at this point?  
      The COVID pandemic may have been a challenge for businesses in general. However, it proved to be a minor blip on the economic radar screen for most repair shops. Yes, there were some areas around the country where business slowed to a crawl and some repair shops had to close their doors permanently. But for the most part, the conditions caused by the pandemic created the perfect opportunity for most auto repair shops. Will this perfect opportunity lead to the perfect storm?  Let’s take a closer look.  
      Due to the pandemic, many repair shops received some monetary relief in the form of the Economic Injury Disaster Loan, the Payroll Protection Program, and more recently, the Employee Retention Tax Credit. The concern is what these programs are having on the economy. Another issue is this: Did these programs give us a false sense of accomplishment, boosting our cash reserve when most shops experienced an increase in business?  
      If we are honest with each other, then we need to consider two things. How many of us were prepared for such an extraordinary event as COVID? And how much of the recent boon in our businesses resulted from anything we did?  Most shops are reaping the rewards of ideal conditions caused by factors that were mainly out of our control 
      Today, we face high inflation, rising interest rates, parts shortages, a technician shortage, rising wages and a possible recession. Is this all doom and gloom? No, of course not. As a former shop owner who spent 41 years working in the trenches, I have lived through many economic downturns and survived. From each economic downturn, the hardships endured led to valuable business and life lessons for those willing to view the tough times not as stumbling blocks but as stepping stones to a better future. 
      The strategy now for shop owners is to build their companies to prepare and withstand the unknowns. You cannot assume things will stay the same. They never do. Complacency can be just as damaging as fear and negativity. Revisit your key performance indicators to ensure you continue earning a profit. Build a healthy cash reserve. If needed, adjust your pricing, margins and labor rates. Get your personal finances in order, too. Continue your marketing efforts, especially if you feel you are heading into a slowdown. Don’t make the mistake that so many companies make and pull your advertising budget to cut expenses. Bump up your training programs and invest in new technology. Perhaps the most important component in preparing for the future is assembling a great team of employees and creating a workplace environment that tells your employees, we care, and we want you to stay 
      Our economy goes through wild swings, combined with good and bad times. The truth is that no economic situation is sustainable forever. The companies that prepare and grow their companies in the best of times will make it through the tough times. However, surviving is not the goal; thriving is. Become diligent with your approach to your company. Work hard today to grow your business in every aspect. Preparation, combined with hard work, will always pay off in any economy.  
    • By Joe Marconi
      As a business coach with Elite Worldwide, I speak to many shop owners around the country about their struggles and concerns. At the top of that list is driving more profit to the bottom line.  Some of the questions I hear are: Should I increase my marketing budget?  Should I raise prices and my labor rate? Is it a car count issue or an ARO issue?  Or should I improve my procedures and policies? All of these are great questions and the right questions. 
      However, the first step in improving your business is to ask yourself: Do I have the right people employed at my auto repair shop?  
      Whether you are struggling in business or having a banner year, your future depends on the quality of people you assemble around you. Do all you can to take care of your employees. Listen to them, and include them in on ways and ideas to build your company.  Make them feel important. 
      When you assemble a great team of employees and take care of that team, trust me, profit will follow. 
    • By carmcapriotto
      Hear from 3 shop owners that provide financial education for their employees. Setting our employees up for success in life goes beyond signing paychecks. Watch the Episode on YouTube John Gustafson, Gustafson Brothers, Huntington Beach, CA. John’s previous episodes HERE Russell Crosby, Russ’s Wrench Auto Repair, Clinton, NJ. Russ’s previous episodes HERE Shawn Gilfillan, Automotive Magic, Kenvil and Lake Hopatcong, NJ. Listen to Shawn’s previous episodes HERE Key Talking Points
      Orientation at John's shop- offer to sponsor each team member’s membership in the Dave Ramsey personal financial series if they choose to participate. John also offers whiteboard sessions to team members or groups of team members on Business Math and another session on Personal Math. The personal math includes the team member on the whiteboard listing their assets, liabilities, after-tax spendable income, expenses, cash flow either pos or neg, 6-month reserve, and investment savings buckets. Mentor/mentee thought process- the owner is the mentor Lunch and learn with financial advisors, mortgage broker etc $100 a month invested at 25 years old, by the time you retire it will be about 1,000,000 Getting the partner/spouse involved is key Transparency with business financial numbers Employees sharing with others how the Dave Ramsey Progam has helped The stress that is lifted when you can create your budget to be workable Social media impact- keeping up with the jones’ Getting ahead of debt with the debt snowball- paying off debt in order of smallest to largest. When the small debt is paid in full, you roll the minimum payment you were making on that debt into the next smallest debt payment Educating the younger generation- setting their future in a positive direction
      Connect with the Podcast Aftermarket Radio Network Subscribe on YouTube Visit us on the Web Follow on Facebook Become an Insider Buy me a coffee Important Books Check out today's partners: Shop-Ware: More Time. More Profit. Shop-Ware Shop Management getshopware.com       Delphi Technologies: Keeping current on the latest vehicle systems and how to repair them is a must for today’s technicians. DelphiAftermarket.com
      Click to go to the Podcast on Remarkable Results Radio

  • By nptrb, in Automotive Industry,

    By nptrb, in Automotive Industry,

  • Our Sponsors

  • Create New...