Private banks to benefit from strong interest business in 2023
Published: Wednesday, Jun 26th 2024, 11:20
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Swiss private banks benefited from the favorable interest rate environment last year and proved to be in strong shape. However, the assets under management of the institutions only increased slightly due to the strength of the Swiss franc, as a study published on Wednesday by the consulting firm KPMG shows.
On the earnings side, the private banks benefited from an increase in interest business of more than a quarter to over CHF 5 billion in 2023, according to the KPMG study "Clarity on Swiss Private Banks". However, income in the commission business fell by 4 percent. Overall, the private banks' income increased to over CHF 20.5 billion from CHF 19.9 billion in the previous year.
Small private banks strong
According to KPMG, small private banks benefited the most last year. As they paid comparatively low interest rates on their customer deposits, they were able to increase their net interest income by almost 60 percent, according to the study. Overall, the small institutions were able to increase their income by 20 percent, with gross profit rising by two thirds to 528 million francs.
The medium-sized private banks were also able to significantly increase their interest income and achieve sales growth of 10 percent, but suffered setbacks in the trading business. Gross profit nevertheless rose by a good quarter to CHF 817 million.
The eight large private banks improved their net interest income to a lesser extent (+11%), as they pay their clients higher interest rates than the smaller banks, as KPMG notes. At the same time, the commission business of the "big banks" declined, so their total income stagnated and gross profit fell by 8% to CHF 4.4 billion.
Weak inflow of new money
There was only a slight increase in assets under management, which rose from 2.9 trillion to 3.0 trillion. The price gains on assets were wiped out by the appreciation of the Swiss franc. Net new assets of CHF 67 billion were therefore primarily responsible for the increase. The large institutions were more successful in collecting new client assets (+2.8 percent) than the medium-sized (+1.8 percent) and smaller banks (+1.4 percent).
There were no takeovers or mergers in the private banking sector in 2023 - apart from the CS takeover by UBS. The exception was the sale of the Italian Julius Baer subsidiary Kairos to the Italian Anima Holding. However, the KPMG experts believe that the pressure to consolidate will increase again as the "interest rate wave subsides".
KPMG examined 73 Swiss private banks in a study conducted in collaboration with the University of St. Gallen (HSG). The authors of the study count Edmond de Rothschild, EFG, J. Safra Sarasin, Julius Baer, Lombard Odier, Pictet, UBP and Vontobel among the "Big 8" private banks.
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