2015 Banking Barometer: Rise in assets under management and an increase in net income despite a challenging environment. Stable employment trend expected for 2015

Basel, September 03, 2015 Despite ongoing structural change, shrinking interest margins and a challenging market environment: the Swiss banks reported a rise in both assets under management and net income in 2014. Companies and private individuals benefitted from intact bank lending. Domestic mortgage loans rose moderately by 3.6 percent. A slight decrease in staff levels in 2014 reflects the more difficult framework conditions. The banks expect the employment trend to remain constant or improve slightly in the second half of 2015.

The banking sector once again made a significant contribution to Switzerland’s prosperity in 2014. It generated around 6 percent of total economic performance and recorded net annual profit of CHF 7.4 bn. The sector employed over 104,000 people (full-time equivalents) and paid a total of CHF 2.6 bn in income taxes and taxes on earnings. An overview of the key figures for the 2014 business year:

  • The banks in Switzerland managed CHF 6,656 bn at the end of 2014. Compared to 2013, this represents an increase of CHF 518 bn. This rise is the result of an increase in securities holdings, savings and investment liabilities to customers, and time deposits. The banks also benefitted from strong inflows from emerging countries and transition countries in Europe. These inflows more than compensated for the decrease in assets from Western Europe arising from tax settlements.
  • The share of foreign assets under management continues to account for slightly over 50 percent. With a market share of 26 percent, the Swiss banking sector remains the global leader for cross-border wealth management.
  • Aggregate annual profit of the profitable institutions rose by 19.3 percent to CHF 14.2 bn. The losses generated by the unprofitable institutions also rose, by 25.9 percent to CHF 6.8 bn. The big banks and foreign-controlled group of banks were the primary drivers behind the annual profits and losses. The banks paid taxes amounting to CHF 2.6 bn (a 36.8% increase year-on-year).
  • Lending by banks in Switzerland to companies and private individuals remained intact. The domestic credit volume amounted to CHF 1,072.5 bn. This corresponds with a moderate increase compared to the previous year. Domestic loans rose by 3.6 percent, which represents a less significant increase than in the previous three years. This is likely also due to the measures introduced in the mortgage lending segment, including the amendments to the self-regulation of the banks.
  • The banks’ balance sheet total rose by 6.8 percent to CHF 3,041.7 bn, predominantly due to the expansion of foreign positions held by the big banks and the rise in mortgage lending.
  • At the end of 2014, the banks in Switzerland employed 104,053 people. Staff levels decreased by 1,682 jobs or 1.6 percent in 2014. This reflects the more difficult economic and regulatory framework conditions faced by the banks. The average unemployment rate in the Swiss banking sector was 2.5 percent, and therefore significantly below that of the overall economy (3.2%). According to an SBA survey, the banks expect the employment trend to remain unchanged or improve slightly in the second half of 2015.

Challenges stimulate structural Change

2014 presented numerous challenges for the banks in Switzerland, which had a negative impact on costs and margins. This situation, combined with the rapid developments in the digitalisation segment, is likely to lead to further structural change and consolidation in the banking sector. While there were still 283 banking institutions operating in Switzerland in 2013, the number decreased to 275 at the end of 2014. The number of institutions therefore decreased by eight.

The Swiss National Bank’s (SNB) decision in January 2015 to lift the minimum euro exchange rate and introduce negative interest rates on sight deposit accounts places a particularly heavy burden on the banks in Switzerland. On the one hand, as an export industry, they are affected by the high franc exchange rate. On the other hand, the negative interest rates have an adverse effect on the business activities of the banks, in particular for those with a domestic focus.

Strengthening the Swiss capital market and improving framework conditions

A balanced relationship between capital market and credit financing is beneficial when it comes to ensuring sufficient financial resources for companies in all phases of the economic cycle. Traditionally, credit financing – particularly for the financing of small and medium sized companies – has been the predominant form of financing in Switzerland; debt financing on the capital market (e.g. through issuances) is the exception. In international comparison, momentum in the Swiss capital market has seen weak development due to unattractive framework conditions, in particular for foreign issuers. In order to stimulate this business, focus must be placed on the following areas: abolition of the withholding tax and the stamp tax on issuance, introduction of the paying agent principle and sustainable solutions for Coco bonds (contingent convertible bonds). A further measure for increasing the appeal of the Swiss capital market is the creation of a hub for foreign exchange trading of the Chinese currency, the renminbi, which is well underway thanks to the endeavours of the SBA.

Information for editors

The Swiss Bankers Association’s (SBA) annual Banking Barometer brings together the key figures and developments in the Swiss banking centre. The study is based on data from the SNB as well as the results of surveys conducted with member institutions. The study will be presented to the public today at 9.30 a.m. in Zurich.