SBA industry forecast: confident outlook despite hesitant economic momentum

The Swiss Bankers Association has updated its “Swiss Banking Outlook” industry forecast. According to the experts surveyed, economic development in Switzerland will no doubt be relatively subdued and is unlikely to provide any major impetus for the financial markets. The respondents are nevertheless confident about the future business development of the Swiss banks, although their expectations are more sober for foreign assets under management. 

For its industry forecast, the SBA conducted a survey of fifteen recognised experts from member institutions between the end of January and the beginning of February 2024, and asked them about their short and medium-term expectations for the development of indicators relevant to banks. The survey is an update of the “Swiss Banking Outlook”, which was first published in September 2023. 

Experts forecast continued solid net income for banks 

Despite the collapse and takeover of Credit Suisse and the associated headlines, fears and demands, the Swiss financial centre proved to be very solid last year. Numerous Swiss financial institutions announced record results for the 2023 financial year, mainly driven by an extremely successful interest business. This was the case in particular for banks with a domestic focus, which generated exceptionally high net income in 2023. As well as benefitting employees, this also had a favourable impact on the Swiss economy and the public sector, particularly the state-owned cantonal banks, which were able to pay out high dividends.  

The experts surveyed by the SBA expect a similarly positive trend for the current and coming year. Net income is likely to vary by individual business segment in relation to the previous year. While the interest business was the key to success last year, the SNB’s looming interest rate cut, combined with intense competition, will probably lead to a decline in the interest margin. In the commission business and services, however, the experts surveyed see potential for growth due to the increase in demand for investment products and higher trading volumes. This could at least partially compensate for the flattening success in the interest business. 

Restrained growth in foreign assets 

The forecast for the development of assets under management from abroad is less positive. Overall, the survey participants expect only moderate growth in assets under management from abroad. As an important export sector, this business area is crucial for the Swiss financial centre and makes a disproportionately high contribution to value creation in Swiss banking. Switzerland is the world leader in the cross-border management of foreign assets, with a market share of 25 percent, but is not growing as rapidly as some rival financial centres.  

The anticipated moderate growth in foreign assets is influenced by two factors. On the one hand, it is likely to be propelled primarily by the market-driven increase in the value of foreign assets already managed in Switzerland. On the other hand, expectations regarding net new money from abroad are mixed. Just under a third of respondents anticipate a net outflow of assets, while the other two thirds predict only a small net inflow of new money. One reason for this could be that Switzerland consistently implements international sanctions, sending out a signal that goes beyond those directly affected. This could benefit less restrictive financial centres.

Cautious economic development expected 

The second focus of the updated “Swiss Banking Outlook” is on consensus forecasts for selected economic indicators. According to the experts surveyed, the Swiss banks will no doubt see only little growth impetus from economic developments in the coming months and years. Weaker demand in the most important sales markets coupled with the challenging geopolitical situation mean that GDP growth will probably be rather modest in 2024 at 1.2%. For 2025, the respondents are already somewhat more optimistic, forecasting GDP growth of 1.5%. However, the potential growth of around 1.75% is unlikely to be achieved. 

Inflation is expected to fall slowly over the same period, although it is already below the upper limit of 2% targeted by the SNB. This decline in inflation is likely to be accompanied before the end of the year by the gradual reduction predicted in the SNB’s key interest rate. The majority of respondents anticipate two quarter-percent decreases by the end of 2024, which they believe will take place in the second half of the year. 

The detailed findings of the survey can be found in the “Swiss Banking Outlook”.


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