Industry News

Swiss private banks under pressure

Monday, 11 September, 2017

The number of Swiss private banks has fallen from 163 in 2010 to 112, according to the latest KPMG analysis of the industry.

The smaller banks have been hardest hit, says KPMG. Forty-one of the 105 that were operating in 2010 have since ceased their operations or been taken over. The causes include falling operating income margins, stagnant assets under management and, in many cases, a net outflow of client cash.

Over half the banks experienced net outflows in 2016, amounting to an overall loss of CHF43 billion – almost 3 per cent of total assets under management, says the report. Some of this could have been due to banks repositioning themselves, exiting 'non-core' markets and client segments, but the fact that more than a quarter of the banks announced an operating loss during the year suggest that their shareholders' value is being diluted by low returns, and much more consolidation and rethinking is needed. KPMG suggests that two of the most promising strategies are providing more tax advice to clients, and purchasing client portfolios in selected areas.

KPMG believes the Swiss banking sector is not responding fast enough to its troubles. 'For most banks, a lack of radical actions on both the business and operational sides has worsened their position', says the report. 'The decline in operating income margins accelerated significantly in 2016 to its lowest level in seven years, and gross profits are falling.'

One of the authors, Christian Hintermann, said he was convinced that at least half the banks will disappear: 'It is ultimately a question of how long their owners want to carry these losses', he told news agency Reuters.

For the moment, however, the process of consolidation appears to have slowed. Large banks are less eager to mop up the smaller ones, partly due to suspicions regarding their compliance history. At the same time, the proprietors of smaller banks are less willing to sell out for a low price or an asset deal.

Sources

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