Recovery of a divided industry
Clarity on Performance
of Swiss Private Banks
After years of structural change, Switzerland’s private banks are finally recovering and made significant progress on the back of bull markets. While turning their attention to strategy they still need to improve, since a market downturn could reverse the current optimism.
Clarity in 100 seconds
Consolidation slows down
2017 produced a record number of 16 M&A transactions. There was a particular peak in acquisitions and disposals abroad over the past 18 months as banks actively adjusted their business portfolios. And current bull markets are pushing up prices, which may encourage further divestments in the short term.
Number of Swiss private banks by AuM
56 banks have exited the market since 2010. Although the consolidation slowed in the first half of 2018, a number of loss-making banks remain. Now may be a good time for them to actively consider a sale.
Where is your bank today?
Strong markets support improvements
Bull financial markets helped two-thirds of the banks improve their RoE in 2017. But the overall picture is one of marked contrasts. While RoE rose significantly at more than 80% of the banks in the category of strong and upper mid performers, less than half of mid and weak performers saw any improvement.
RoE development (CHFbn)
82% of the banks above the median improved their RoE by an average of 1.8 percentage points. Those below the median saw an increase of 0.8 percentage points. Overall, the median fell from 4.5% to 4.0%.
The gap widens
A widening gap between banks is evident in the cost-income ratio. Around 80% of banks in the stronger half of the industry substantially improved this key measure of operational performance in 2017. Far fewer banks in the weaker half improved at all.
Cost-income ratio development
The median cost-income ratio fell only slightly, yet while strong and upper mid performers improved, the weaker half of the industry remained almost unchanged.
Seeking new money
Favorable global equity markets drove performance increases last year, accounting for around 90% of AuM growth. NNM remained disappointingly low – and negative for the group of medium-sized banks.
AuM development (CHFbn)
While the main driver of AuM growth in 2016 was M&A, it was booming equity markets in 2017. NNM was a mere CHF21bn in 2017, with around half of the banks experiencing net outflows of assets.
Income and expenses grew in parallel
Bull market performances largely contributed to a 10% increase in the industry’s operating income. However, operating expenses grew at almost the same rate. But the non-recurrence of substantial fines from 2015 helped the industry return profitability to an even footing.
Industry financial statement
Our industry figures are the aggregate of the annual financial statements of our constant sample of 90 banks. The increase in average FTEs pushed operating expenses higher, almost in line with the rise in operating income.