ZURICH (Reuters) – Swiss banks have lowered their profit expectations for the coming years due to falling interest rates and despite higher credit demand after Credit Suisse’s 2023 collapse, Ernst and Young (EY) said on Thursday.
Some 40% of 100 banks questioned in an annual survey ahead of the banking results reporting season said they expect profit to decline over the next 1-2 years, although 85% think operating profit will rise again in the longer run, the consultancy said.
The more cautious outlook follows record results for many Swiss banks in 2023.
Lower interest rates will dent banks’ income statements, said EY Managing Partner Patrick Schwaller, who said Swiss banks were also finding it harder to increase lending volumes.
“Now we are seeing for the first time that the bank balance sheet is once again becoming a limiting factor,” Schwaller told reporters in Zurich.
The collapse of Credit Suisse led to an increase in demand for banking services from its former customers, but the survey found that did not necessarily result in new business.
Smaller banks were often unable or unwilling to take on former Credit Suisse clients because they lacked the scale or were wary of taking over some banking relationships.
“A bad deal from a risk perspective remains a bad deal,” said EY Manager Fredrik Berglund.
Looking ahead, cost reductions, efficiency improvements and artificial intelligence will be big topics in the Swiss banking sector, EY said.
“AI is the biggest lever for banks to realise more value for the customer and the bank,” said EY Partner Marcel Zuend. “We expect the journey to accelerate significantly over the next 12 months.”
(Reporting by Ariane Luthi; editing by Barbara Lewis)
