Covid: Swiss private banks ‘got off relatively lightly’

Swiss private banks increased their assets under management to almost CHF3 trillion last year © Keystone / Gaetan Bally

Swiss private banks managed to increase their assets under management to CHF2.9 trillion ($3.15 trillion) last year, an increase of 2.8% on 2019.

“The year 2020 was dominated by the Covid-19 pandemic, yet the Swiss private banking sector still got off relatively lightly compared to other industries,” consultancy firm PwC said in its Private Banking Market Update 2021, published on Thursday.

“Thanks to the quick recovery of global markets, Swiss private banks could broadly sustain their assets under management (AuM) base and, as such, worse consequences could be prevented.”

The largest inflows of net new money were recorded by the larger private banks with more than CHF10 billion in AuM. They achieved an increase of 3.4%. However, the smaller private banks with less than CHF2 billion in asset suffered, with net new money outflows of 2.8%.

“Clients seek trust in large banks during uncertain times due to their financial stability,” PwC said, pointing out that the bigger banks are particularly strong in the growth markets of Asia-Pacific, Latin America and the Middle East.

Merger pressure

Due to the persistent negative interest rates and strong competition, the operating margin of private banks fell by seven points to 82 basis points. The large banks suffered particularly, with a drop of 11 points to 67 basis points. Smaller and medium-sized banks, on the other hand, were able to maintain their margin at around 90 points.

The continuing strong competition between private banks and the low net interest income mean the consolidation pressure among the banks continues to increase, according to PwC. Six acquisitions took place in 2020. In the future, there could be more acquisitions or mergers, especially among smaller banks.

The PwC report covered 82 private banks in Switzerland.