Market analysts have forecasted that 2012 will prove to be one of the most difficult years for Swiss banks since the global financial crisis began in 2008. The two market leading Swiss banks – UBS and Credit Suisse – are showing poor half year results which indicate that each institution will lose at least 1 Billion CHF each by the end of the year.
The losses by UBS and Credit Suisse are attributed to the Investment Banking sector which is being negatively affected by market stagnation. Both banks have reacted to the losses by contracting their work forces. UBS has announced cuts of nearly 1500 jobs in London, Hong Kong and Singapore. It is expected that Credit Suisse will announce similar cuts after Christmas. Both banks are hoping to cover these losses by increasing the revenues of their private banking units. It is hoped that expansion of their retail business both in Switzerland and in the international market will help stem the tide.
Smaller private Swiss banks are also struggling. Due to the ongoing litigation initiated by the US tax authorities against Wegelin, Julius Baer, and other small banks, clients have growing concerns about potential tax and privacy issues in the Swiss banking system. Information on numbered and personal Swiss accounts are more and more accessible to the authorities. Additionally, Swiss banks are now to become tax agents for their clients in respect to tax authorities. The banks have to adjust to these new realities with updated software and personnel training – the implementation of which are costly and time consuming.
The lingering effects of the financial crisis, a stagnant investment market, litigation and stricter international tax codes have all had a negative effect on Swiss Banks in 2012. Market watchers are eager to see whether the banks, both large and small, are able to adjust and cope with the challenges, whether there will be changes to the Swiss banking system or if there will be further mergers that will help create a more stable banking environment.
Kirill Ganin
Head of the Geneva branch
Oracle Capital Group
