The Swiss banks have had a good 2023 financial year, as a report by the consulting firm Ernst & Young (EY) shows. 96 percent of all banks in this country expect a significantly better result than in the previous year. A look at the coming years is also correct A large majority of banks are optimistic.
“High interest rates, low value adjustments and the resilient Swiss economy will lead to record results for the banks surveyed in 2023,” is how Patrick Schwaller, Managing Partner Audit Financial Services at EY, classifies the development. The company surveyed over 100 Swiss banks for the “Banking Barometer 2024”.
For bank customers, the bubbling profits do not immediately mean higher interest rates. According to the study, the majority of institutes want to invest the money in strengthening their own funds and thus in risk provisioning. This was reported by 72 percent of the regional banks and 42 percent of the cantonal banks. The foreign and private banks want to invest the money primarily in the further development of business models (38 and 30 percent respectively).
There is optimism in the long term
The banks surveyed are also optimistic about the next one or two years. During this period, 87 percent expect an increase in operating profit. Looking ahead to the next three or more years, almost 90 percent see further growth ahead.
Legend: Zurich’s Paradeplatz as a symbol of the Swiss financial center: Despite the CS bankruptcy, Swiss banks are optimistic about the future. Keystone/Gaetan Bally
The banks’ profits are primarily due to the increased interest rates and the associated higher interest margins. 42 percent of banks expect the interest margin to remain constant in the next one to two years.
16 percent even expect a further increase. However, two out of five banks also predict a further decline in the interest margin, as interest rates could soon have reached their peak.
No increased risk expected for real estate
The banks have good news for property owners. In the short term, only one in five banks expects an increasing need for risk provisioning for real estate due to value adjustments. In the previous year, almost a third of banks assumed this.
Even in the long term, only 36 percent of banks expected a higher risk provision requirement, compared to 43 percent in the previous year. According to the study authors, this speaks for a solid real estate market in Switzerland. Prices would be supported by continued high demand, immigration and declining construction activity.
More regulation after CS bankruptcy
After the emergency rescue of Credit Suisse by UBS last year, the majority of banks expect financial market regulation to be tightened. 62 percent of the banks surveyed assume that liquidity regulations will be tightened. 40 percent expect stricter rules for equity capital. Two thirds also expect the financial market regulator Finma to increase its supervisory activities.