ZKB posts record result thanks to favorable interest rate environment
Published: Friday, Feb 9th 2024, 15:30
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Zürcher Kantonalbank (ZKB) posted record results at practically all levels in the 2023 financial year. The financial institution benefited above all from the favorable interest rate environment.
ZKB was able to grow "across the entire breadth of the market", explained CEO Urs Baumann when presenting the annual figures in Zurich on Friday. The consolidated profit of Switzerland's largest cantonal bank climbed by 17 percent to CHF 1.24 billion - despite the fact that the cantonal bank used the strong annual result to build up bank reserves of CHF 225 million.
Real estate financing
ZKB achieved a broad-based net new money inflow last year and gained a total of over 28,000 new active clients, the ZKB CEO continued. He emphasized that the inflow of money did not only benefit from the situation surrounding Credit Suisse: "Our net new money inflows were broad-based across all segments and channels."
The bank also provided information about its credit exposure to the insolvent Signa Group of Austrian investor René Benko: the group had been granted a loan for a "low double-digit million amount" to finance a property "in a prime location in Zurich city center", it said. This is not at risk of default, said the CEO. In contrast, ZKB is not involved in a syndicated loan from various banks for Globus financing.
Strong interest business
ZKB's total operating income rose by 16 percent to CHF 3.19 billion last year. This strong growth was driven by the exceptionally strong interest business, where income increased by almost 30 percent. In the first half of the year in particular, the bank was able to benefit from the tailwind provided by the monetary policy of the Swiss National Bank (SNB) and the further rise in the yield curve.
Meanwhile, the volume of mortgages once again increased significantly by 4.2% (previous year: +5.4%). The significantly higher level of interest rates did not significantly dampen demand for real estate financing, noted CFO Martin Bardenhewer. At CHF 100.9 billion, mortgage loans exceeded the CHF 100 billion mark for the first time.
In contrast, ZKB was only able to achieve slight growth in net commission and service income (+1.5%). However, growth in the trading business (+1.6%) was also slow after the strong previous year.
Variable remuneration frozen
Expenses were also higher (+5.3% to CHF 1.68 billion), although this was clearly slower than the increase in income. Higher employee numbers contributed to the increase: ZKB expanded its workforce by 5.5 percent to 5539 full-time positions.
However, personnel expenses grew less strongly than the number of employees, increasing by 2.4%. The bank announced in October that it had frozen variable remuneration at the 2022 level. Without this measure, ZKB employees would have been among the best-paid bank employees in Switzerland in view of the high annual profit, it was reported on Friday.
High profit distribution
The canton of Zurich and the municipalities are also set to benefit from the sharp rise in profits. They will receive a total profit distribution of CHF 528 million - more than ever before.
The ZKB managers were cautiously optimistic about the coming year: the exceptional interest result in 2023 is unlikely to be repeated, the CFO confirmed. "However, we are again expecting a pleasing net profit in 2024."
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