Swiss banks are optimistic about the future
Published: Thursday, Jan 11th 2024, 10:50
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Swiss banks expect record results for the 2023 financial year. The vast majority of banks are also optimistic about the coming years.
Swiss banks are doing better than they have for a long time. According to the "Banking Barometer 2024" published by consulting firm EY on Thursday, 96% expect a significantly better operating business performance for the 2023 financial year than in the previous year. "High interest rates, low value adjustments and the resilient Swiss economy will lead to record results for the banks surveyed in 2023," says Patrick Schwaller, Managing Partner Audit Financial Services, assessing the development.
For bank customers, however, the bubbling profits do not immediately mean higher interest rates. According to the study, the majority of banks want to invest the money in strengthening their own funds and thus in risk provisioning. This was stated by 72 percent of regional banks and 42 percent of cantonal banks. The foreign and private banks primarily want to invest the money in the further development of their business models (38% and 30% respectively).
Optimism prevails in the long term
The banks were also optimistic about the next one to two years. In this period, 87 percent expect an increase in operating profit. With a view to the next three or more years, almost 90 percent even see further growth ahead.
The banks' bubbling profits are mainly due to the rise in interest rates and the associated higher interest margins. 42 percent of banks expect the interest margin to remain constant in the next one to two years. 16 percent even expect a further increase. However, two out of five banks are also forecasting a further decline in the interest margin, as interest rates could soon have peaked.
No increased risk expected for real estate
The banks have good news for property owners. In the short term, only one in five banks expects an increase in risk provisioning requirements for real estate due to value adjustments. In the previous year, just under a third of banks still expected this.
Even in the long term, only 36% of banks expect higher risk provisioning requirements, compared to 43% in the previous year. According to the authors of the study, this speaks for a solid real estate market in Switzerland. Prices are being supported by continued high demand, immigration and a decline in construction activity.
More regulation after CS bankruptcy
Following the emergency rescue of Credit Suisse by UBS last year, the majority of banks expect financial market regulation to be tightened. The main focus will be on stricter requirements in relation to liquidity and capital adequacy regulations, according to 62% and 40% of banks respectively. Two thirds also expect the Financial Market Supervisory Authority Finma to step up its supervisory activities.
Just over 100 private, foreign, regional and cantonal banks in Switzerland were surveyed as part of the banking study. Two thirds of them are based in German-speaking Switzerland and a quarter in French-speaking Switzerland. 7 percent come from Ticino. EY has conducted the survey annually since 2010.
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