Unveiling the Secrets: How Troubled Swiss Banks Fought Back

The Swiss banking industry faced a challenging year in 2022 as the effects of the financial market fluctuations took their toll on the profits of local financial institutions.

The Swiss banking industry faced a challenging year in 2022 as the effects of the financial market fluctuations took their toll on the profits of local financial institutions. However, amidst the turbulence, there is a glimmer of hope on the horizon. The recent turnaround in interest rates has ignited a renewed sense of confidence among Swiss banks.

According to the Swiss Bankers Association (SBA) Banking Barometer, aggregate annual profits for Swiss banks declined by 16.3% to CHF6.5 billion ($7.3 billion) in 2022. Nevertheless, when we examine the aggregate operating profit, we see a more resilient performance, with only a slight decline of -0.9% to CHF70.3 billion.

The decrease in profit figures can be attributed to several factors, including the reversal in interest rates, negative developments on the stock markets, and the shifting of client funds in anticipation of the Credit Suisse-UBS takeover. These challenges, as outlined in the SBA report published on Tuesday, impacted the overall balance sheets of banks, leading to a decline of 6.9% to CHF3,340 billion, and a decrease in assets under management of 11.2% to CHF7,847 billion in comparison to the previous year.

However, amidst these setbacks, it is important to highlight a positive momentum in the Swiss banking landscape. Staffing levels in financial institutions continued to grow, marking the third consecutive year of an increase. The number of employees rose by 1.6% to surpass 92,000 full-time equivalents. This growth reflects the resilience within the industry, even as banks navigated through various challenges.

While it may be concerning to observe a declining number of banks, leaving the Swiss financial centre with 235 institutions at the end of 2022, it is crucial to note that this trend has not significantly impacted the overall performance of the Swiss banking sector. As SBA spokesperson Mr. Hess emphasized, this phenomenon is not exclusive to Switzerland, but rather a global occurrence.

Looking towards the future, Swiss banks are cautiously optimistic for the current year. The SBA survey of members indicates that the anticipated interest rate turnaround, leading to significantly higher rates, is expected to have a positive impact on profits. With the potential of improved interest rate conditions, Swiss banks are positioning themselves to seize opportunities and regain their financial strength.

In conclusion, while Swiss banks faced various challenges on the financial markets in 2022, the industry displayed resilience and adaptability. Despite the decline in profits and the decrease in assets under management, the Swiss banking landscape remains robust. The increase in staffing levels and the anticipated interest rate turnaround provide reasons for cautious optimism in the sector. As the Swiss banking industry continues to weather the storm, it is poised for a resurgence in the coming years.