Clarity on Performance of Swiss Private Banks
Bigger is better in the quest for success
What the future holds for Swiss private banks
See what developments stood out over the past year and what banks’ performances mean for the industry as a whole. Faced with numerous challenges and with many banks struggling to stay afloat, Christian Hintermann discusses what action management teams should take – and shares his insights into the prospects for Swiss private banking.
Head of Financial Services Transformation
Weak performers become the biggest cluster
Twenty-four of 87 banks fell by at least one performance cluster last year. More than one-third of Swiss private banks are now classed as Weak performers. Two-thirds of Weak performers are small banks, which saw cost-income ratios rise to their highest ever levels. Small and medium-sized banks generally were hit hard in 2018, with most posting their worst ever results.
Number of banks by performance cluster
Cost-income ratio <70%
Cost-income ratio 70–80%
Cost-income ratio 80–90%
Cost-income ratio >90%
Assets under Management generation is still far too low
Despite a record number of M&A transactions, legacy clients having been largely cleaned, and the automatic exchange of information being implemented, Assets under Management (AuM) fell in 2018. The vast majority of Swiss banks continue to generate too little AuM, instead relying on external factors such as financial market performance. Amid global wealth creation, Switzerland is losing market share.
AuM development (CHFbn)
AuM fell by 4.2% in 2018, mainly on the back of a downturn in global equity markets. 1.6% growth in AuM through Net New Money and M&A was insufficient to offset this reduction.
Net New Money growth almost hits zero
An increase in Net New Money (NNM) was expected in 2018 on the back of a global market uptick until the end of the year, and after years cleaning up client portfolios and getting to grips with regulatory change. This did not happen. NNM growth was almost zero last year, with more than half of banks being unable to attract more customers than they lost.
Median NNM fell to 0.2% in 2018. NNM growth was negative at half of Switzerland’s private banks, with both net inflows and net outflows falling across the board.
How does your bank compare?
Understanding your peers’ performances is key to assessing your competitive position. With financial data of more than 87 Swiss private banks, our interactive benchmarking tool shows where your bank stands vis-à-vis your competitors across 50 key performance indicators. Use the online version of the tool to explore example data and the benefits it can deliver.
No improvement in Return on Equity for ten years
Return on Equity (RoE) fell even further in 2018 at more than half of banks, especially small and medium-sized organizations. Even Strong and Upper Mid performers were not immune to the decline, with RoE falling at 42% of them and at a staggering 59% of Lower Mid and Weak performers. Overall, the Swiss private banking industry has seen no improvement in RoE for more than 10 years.
RoE remains far below a return of 8–10% which we consider a reasonable target – and continues to fall.
Cost-income ratio hits new high
Only one-third of banks improved their cost-income ratios in 2018. The median ratio rose by 1.9 percentage points to almost 84%, the highest ever level, even exceeding 100% for Weak performers. Driven mainly by small banks, this deterioration is the opposite of what could reasonably be expected following the resolution of most legacy topics and the clean-up of client portfolios.
Cost-income ratio development
Weak performers did particularly badly, with the median cost-income ratio jumping from 91.7% to 100.8% between 2017 and 2018.
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