Swiss Banks' Profits Dipped In 2011 - SNB

Tom Burroughes

15 June 2012

Swiss banks logged total profits of SFr13.5 billion ($14.2 billion) last year, SFr300 million less than in 2010, as they contended with a harsher climate for the Alpine state’s traditionally secretive banking laws and the negative impact of the strong Swiss franc and tough markets, new figures show.

The Swiss National Bank, the country’s central bank, gave aggregate figures for a total of 312 banking institutions in its regular annual round-up of the industry. Swiss banks account for a sizeable chunk of the country’s gross domestic product – on some estimates, about 12 per cent.

The report was issued at the same time – as reported elsewhere by this publication – that the SNB warned Credit Suisse of the need to improve its capital position in the event of a sharp deterioration in the world economy. It also raised concerns about some other Swiss banks, such as UBS.

The Swiss banking industry has been at loggerheads with the US tax and justice authorities in recent years. The country’s biggest bank, Zurich-listed UBS, for example, settled civil and criminal charges in 2009 with the US over claims that it enabled wealthy US citizens evade tax. As part of the settlements, thousands of UBS client names have been transferred to the US, representing a breach of Switzerland’s bank secrecy rules that date back to 1934. The Swiss and US governments are currently seeking to agree an across-the-board deal settling issues of information exchange and disclosure involving up to a dozen institutions.

Of the 312 banks covered, 260 reported an annual profit (2010: 267) and 52 reported an annual loss (2010: 53). Gross profit was slightly down on the previous year’s figure. Net trading income and net income from commission business and services declined, while net interest income was up. Staff expenses declined; staff numbers, by contrast, increased slightly. In balance sheet business, another significant increase in domestic mortgage holdings was recorded.

Among other details of the SNB report, it noted that liquid assets also rose sharply, driven by SNB measures to increase liquidity on the money market. On the liability side, both sight deposits and savings deposits rose significantly, while time deposits and fiduciary liabilities declined further. Customer holdings of securities in bank custody accounts also decreased. Lower share prices in Europe and the fall in the value of the euro contributed to this decrease, it said.

Fiduciary funds have more than halved since 2008. Whereas fiduciary funds managed by banks came to SFr382.4 billion in 2008, in the year under review they stood at SFr177.4 billion. They declined by 12.1 per cent year-on-year. Fiduciary funds invested in dollars and euros fell by just under 10 per cent.

The number of employees, measured in terms of full-time equivalents, rose slightly, increasing by 532 or 0.4 per cent to 132,542. This rise can be ascribed both to employees in Switzerland and those abroad, the SNB said.