SwissBanking
The online magazine of the Swiss Bankers Association
December 17, 2014

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Here lies untapped revenue potential

Here lies untapped revenue potential

A study on the Swiss banking centre analyses the future development of various areas of business conducted by the banking institutions in Switzerland. The study identifies specific activities with as yet untapped revenue potential.

The changes to framework conditions that resulted following the financial crisis represent a significant challenge for the banking business. The tectonic shifts that occurred meant that earlier outlooks regarding business development lost their plausibility. The future prospects of the banking business are now of more interest than ever before; not just for the banks themselves, but also for governments and the general public.

Study reveals substantial opportunities

In response to this, the Swiss Bankers Association (SBA) together with the Boston Consulting Group (BCG) recently published the study "Actively shaping transition – future prospects for banking in Switzerland". The study provides an international comparison of the locational conditions relevant to banks, as well as a medium-term earnings forecast for the Swiss banking sector. The study also analyses the private banking, retail clients, corporate clients, asset management and investment banking business areas in detail.  

In the form of a strategic guideline, the study also highlights the revenues potential that lies dormant in activities that the banks can seek to further cultivate in future. The potential additional gross revenues that can be generated by pursuing these activities is CHF 3.5 bn in 2018. The revenues projected for a business-as-usual scenario would therefore increase by almost 50% to CHF 7.2 bn. It should be noted that there is no business area without potential for growth.

 

Private banking – the heavyweight

At CHF 2 bn, private banking has the largest revenues potential in terms of the total amount. In addition to increased dealings with emerging countries, concrete opportunities also include a so-called UHNWI offensive. This comprises comprehensive wealth planning for very wealthy clients in close collaboration with the corporate clients business and investment banking. Rounding out traditional customer service models through digital technologies, which notably strengthen customer retention, is also particularly promising.

Asset management – a success factor

Accounting for 13% of total revenues, the additional opportunities in the asset management segment are highest in relative terms. The relocation of asset managers to Switzerland from abroad, and the resulting acquisition of additional assets from institutional investors, are the key goals set out in the SBA’s Asset Management Initiative. In order to achieve these goals, marketing efforts surrounding expertise and experience must be increased and a stable legal environment must be in place.

Potential in the traditional business

The retail clients business will remain a stable source of revenues for the banks in future. The focal point of potential revenues in this segment lies in the optimisation of distribution channels. This enables the banks to better analyse customer needs and to provide customers with bespoke solutions using the preferred sales channels.

Untapped potential can also be found in the corporate clients business. SMEs in particular are increasingly conducting their business activities internationally. Banks can provide even more comprehensive support to Swiss companies in their business abroad and can grow the trade finance business in order to generate additional revenues. Strategic decisions aimed at taking advantage of growth opportunities are particularly in demand in turbulent times. The opportunities outlined in the study exist in all business areas and are therefore not only reserved to certain types of banks. Secure framework conditions for the planning process is a key factor for the willingness to look for success off the beaten path. Not only the banks, but also the authorities are therefore called upon in order to ensure future success.