Swiss banks with poorer cost efficiency
Published: Wednesday, Sep 4th 2024, 10:30
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Overall, Swiss banks were less cost-efficient than their European competitors last year. While the Europe-wide cost-income ratio of 55.1% was the lowest since 2013, Switzerland was significantly higher with an average of 60.9% (adjusted for one-off effects).
However, the difference is mainly due to the business models of Swiss banks, writes the consulting firm Bearingpoint in a press release published on Wednesday. For example, local financial institutions are more focused on asset and wealth management than their European competitors.
According to the report, the leading countries in terms of cost efficiency are the Nordic countries with an average cost-income ratio of 39.9 percent and Spain and Portugal with 42.5 percent.
Moderate profit increase
According to Bearingpoint, European banks increased their pre-tax profits by an average of 38.9% in 2023. This improvement is "due in particular to the very high 82.4 percent increase in interest income for European banks, ensuring the return of traditional banking business after years of zero interest rate policy", the authors say.
Switzerland is also significantly worse off than the European banks in terms of profit growth. Excluding the one-off effect of the takeover of Credit Suisse by UBS, pre-tax profits in Switzerland would have increased by 7.5 percent in 2023, according to the report.
However, here too, the "high-commission asset and wealth management business in conjunction with the comparatively moderate key interest rate increase led to lower growth rates in net interest income", the press release continued. Meanwhile, Switzerland remains the leader in the commission business, even if the commission margin has declined in 2023.
Efficient banks invest in IT
Bearingpoint also establishes a link between cost efficiency and investment in IT. Banks with a cost-income ratio of 55 percent or lower invested twice as much money in their IT infrastructure as banks with a lower cost efficiency ratio.
"Digital pioneers operate more efficiently overall, are more flexible in terms of their administrative costs and are therefore better able to adapt to circumstances at short notice," Bearingpoint partner Robert Bosch is quoted as saying in the press release.
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