Clarity on Swiss Private Banks

2023 looked like a remarkable year for Switzerland’s private banks as they turned around their fortunes to improve median profitability, return on equity (RoE), and cost-income (C/I) ratios. The reality is more complex, however. Improvements were mainly on the back of a significant increase in interest income, which benefited smaller banks in particular. This masked reduced efficiency, growing cost bases, stagnant core business with assets under management (AuM) at the same level as three years ago, and lower commission income. What happens when interest rates come down?

Banks of all sizes still need to improve performances. As interest income falls, they must focus on their cost bases, which grew significantly in the past year and as efficiency ratios showed a clearly negative trend. They particularly need to generate higher levels of net new money (NNM). Many took the path of hiring relationship managers (RMs) from UBS and CS in 2023, which may start to yield returns later this year or into next year.

Read more about how banks performed in 2023 and how their performance compares to prior years and overall trends.

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Christian Hintermann

Partner, Financial Services

KPMG Switzerland

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Key findings

Some of the key takeaways from banks’ performances:

Interest income boosts small banks’ profitability and C/I

While banks of all sizes benefited from greater interest income, smaller banks received a particular boost due to low interest expense.

This was enough to improve the industry’s median RoE by 60%, and median C/I ratio from 81% to 74%. This uptick may reverse as interest rates fall.
…driving a surge in the number of strong and upper-mid performers

The number of strong and upper-mid performers has grown from 30 to 50 over the past three years.

Strong banks formed the largest cluster for the first time in our study’s history, driven by a surge of small banks joining their ranks.
Generating NNM remains a challenge

AuM is only slightly above 2018 and 2019 levels, with NNM insufficient to drive growth.

Many banks are pinning their hopes on the relationship managers they hired from UBS and Credit Suisse, though it may be late 2024 or in 2025 before these investments start to pay off.
…as efficiency declines and growing FTE numbers drive up costs

Operating expenses have risen by CHF1 bn since 2021, as commission income fell by CHF1.9 bn and AuM is down 10%. Efficiency ratios are worse, with many banks coping only due to the interest income boost.

As they hire more FTEs amid stagnant business volumes, banks need to look at their expanding cost bases.
M&A comes to a hard stop

Deal activity halted in 2023 and 2024, except for two deals including UBS’s acquisition of Credit Suisse, the first ever takeover of a global systemically important bank.

There were no private banking deals so far in 2024. Poor growth, weak NNM and higher cost bases may force banks back to the acquisitions trail.

Discover how Switzerland’s private banks performed in 2023

Number of private banks and M&A

Aside from UBS’s acquisition of Credit Suisse and Julius Baer’s divestment of Kairos in Italy, 2023 was uneventful in terms of M&A. As high interest rates eased the pressure on smaller banks to sell, activity ground to a halt. This cessation of M&A is likely to be temporary, however.

Industry performance

The number of Strong and Upper Mid performers is up from 30 to 50 since 2020. This is driven primarily by small banks, which pushed their median ratios higher last year. Large banks remain the strongest, however, with the lowest C/I ratios and consistently robust performances.

Assets under management and net new money

A low growth dynamic dominates Swiss private banking. Industry AuM is up only slightly on 2019 levels. NNM was low in 2023, partially thanks to a strong Swiss Franc, and 27 Swiss banks saw NNM outflows. The hiring of RMs from UBS and Credit Suisse may – or may not – help this year.