Market Research

Over Half Of Swiss Private Banks Are Knocking On Heaven's Door - KPMG

Josh O'Neill Assistant Editor 11 September 2017

Over Half Of Swiss Private Banks Are Knocking On Heaven's Door - KPMG

The consulting behemoth conducted its study in collaboration with the University of St Gallen, analysing 85 of Switzerland's 114 private banks.

Between 60 and 70 Swiss private banks are facing problems so serious they could force them to shut shop or sell up, according to a new study by Big Four firm KPMG

As money managers in the Alpine State cope with the demise of bank secrecy laws, negative interest rates and disruptive technologies, the sector must strive to cut costs and consolidate so players can reach a sustainable size. 

But many of the affected banks will be forced to exit the market, KPMG's study suggests. 

“I‘m convinced that at least half will disappear,” KPMG manager Christian Hintermann said, and added many of these banks were now making losses. “It’s ultimately a question of how long their owners want to carry these losses.” 

The study, conducted by KPMG in collaboration with the University of St Gallen, underlines the steady decline of the Swiss private banking sector, with the number of entities having dropped by over a third from 180 in 2005.

And this is expected to worsen, according to the study of 85 of Switzerland's 114 private banks. 

Despite cost-cutting programmes, private banks have failed to reduce their costs quickly enough to keep pace with their more rapidly declining earnings base, KPMG says. The world's largest wealth manager, UBS, and Credit Suisse, Switzerland's second-biggest bank, were not included in the study. 

Last year, the median operating income margin – the ratio between a bank's earnings and its average assets under management figure – of private banks with Swiss operations fell to 89 basis points, the lowest-ever level, as a result of lower net commission income from cautious clients and intensified competition. 

Still, KPMG's data suggests that a maximum of 10 to 15 of the private banks would be able to grow and attract substantial numbers of new international clients.

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