Swiss private banks experienced strong growth in 2023 thanks to an increase in their interest income, according to a study by KPMG. It was mainly smaller institutions that saw their revenues increase.
In 2023, the revenues of Swiss private banks increased by 3% compared to the previous year, to more than 20.5 billion francs. The study covered 73 companies and was published on Wednesday.
The revenue growth is notably due to the increase in interest income, which increased by 26.5% compared to the previous year. On the other hand, commission activities declined slightly, with revenues down 4%.
“The question now arises as to how exceptional the situation was in 2023,” said Philipp Rickert, head of financial services at KPMG Switzerland, when presenting the study.
Small banks favored
Interest income boosted profitability last year, especially at smaller private banks. Their revenues increased by 20% and their gross profit by two thirds, to 528 million francs. Medium-sized institutions were also able to benefit from this and achieve growth in their turnover of 10%. Their gross profit increased by 27% to 817 million.
However, the same was not true for the large private banks. Due to the decline in commission operations, their total revenues have stagnated. Ultimately, their gross profit fell by 8%, to 4.4 billion francs. “As these large banks often have large customers with significant negotiating power, they generally have to pay them higher interest rates than smaller banks,” KPMG experts found.
Despite this positive development, it is necessary to act, according to Christian Hintermann, expert at KPMG. With the Swiss National Bank’s (SNB)’s second key rate cut this year, interest rate cuts by other central banks and increases in the SNB’s reserve requirements, interest income will decline. On the other hand, interest charges are likely to increase.
Increase in assets
Assets managed by private banks in Switzerland increased slightly in 2023 to reach almost 3,000 billion francs. The main reason for this is a net inflow of new money of 67 billion francs. Large banks saw growth in new funds of 2.8%, mid-sized banks 1.8%, and small banks 1.4%. “Many have probably not achieved their own targets. Those of large private banks for new money growth are often between 3 and 6 percent,” said Christian Hintermann.
The massive hiring of client advisors following the merger between UBS and Credit Suisse apparently had little impact last year. However, this is not very surprising to KPMG experts. “It usually takes months before newly hired customer advisors can convince some of their old clients to change,” said Christian Hintermann.
In 2023, apart from the takeover of Credit Suisse by UBS, there have been no takeovers or mergers in the private banking sector. The exception was the sale of Julius Bär’s Italian subsidiary Kairos to Italian Anima Holding. As the interest rate wave “flattens”, KPMG experts believe the pressure for consolidation will increase further.
However, the situation risks changing again: several takeovers of private banks have taken place this year in the European Union. In the longer term, Christian Hintermann estimates that 20 of the 90 private banks in Switzerland today could disappear.
This article was automatically published. Sources: ats/awp
