5 minute read 10 Jan 2023
winding road mountain valley

EY Banking Barometer 2023 – turning points

Authors
Patrick Schwaller

Managing Partner Audit Financial Services | Switzerland

Reliable and trusted business partner. Gets things done. Pragmatic. Enjoys mountaineering.

Olaf Toepfer

Banking & Capital Markets Leader | Switzerland

Transformation leader. Passionate about shaping the banking industry of tomorrow. Father of three kids.

Corina Gruenenfelder

Lead Sustainable Finance Consulting for Financial Services | Switzerland

Enthusiastic sustainable finance leader. Passionate about climate risk modelling and quantitative risk & analytics. Diversity & inclusiveness advocate. Mountaineer & backcountry skier. Avid traveler.

Isabelle Staiger

Partner, People and Workforce | Switzerland

Guides companies through business transformations with a focus on leadership and employees - corporate culture, DE&I, leadership and change management.

5 minute read 10 Jan 2023

Read article in German, Read article in French

Banks show resilience despite a turbulent fiscal year 2022. And are now at a turning point. Due to the turnaround in interest rates, banks expect higher margins in the longer term - and are therefore optimistic about the future. This is shown by the Banking Barometer 2023.

In brief :
  • The war in Ukraine, high energy prices, problems with supply chains, the rise in inflation and the accompanying interest rate hikes have kept banks very busy in 2022.
  • Despite numerous challenges, banks continue to show great resilience.
  • In view of the uncertain situation, the focus in 2023 is on cost efficiency, talent management and sustainability.

Banks in Switzerland are going through a period of turning points and facing new challenges. 2022 was a year marked by geopolitical and global economic uncertainties. The optimism with which Swiss banks began the new calendar year after a fantastic 2021 proved to be short-lived as war broke out in Ukraine. The resultant direct and indirect consequences in many respects represent turning points that will determine future developments. The inflection point seen in interest rates is a particular focus for banks.

Against the backdrop of current economic and geopolitical uncertainties, the shift from a focus on growth to cost discipline and efficiency enhancement is not really surprising.
Patrick Schwaller
Managing Partner Audit Financial Services | Switzerland
  • This is apparent from the EY Banking Barometer 2023.

    A total of 100 banks in Switzerland were polled for the Banking Barometer in November 2022. The institutions surveyed include private banks, foreign banks, regional banks and cantonal banks. This is the 13th year assurance and advisory firm EY has conducted the study in Switzerland.

Winding road in mountain valley at sunset in autumn. Aerial view of asphalt road in Passo Giau. Dolomites, Italy. Top view of roadway, mountains, meadows with orange grass, blue sky and gold sunlight

Download the EY Banking Barometer 2023 here:

Download

Banks show resilience and are optimistic

Banks in Switzerland have certainly shown resilience, in other words the ability to react to crises and even seize them as an opportunity. According to the latest EY Banking Barometer, around three-quarters of the banks polled expect operating profit for the financial year just ended to be positive.

Growth

78%

of the banks report growth in operating business.

There is uncertainty about how the economy will perform as a result of current macroeconomic events, and higher interest rates are increasing the risk of credit defaults – especially on residential mortgages and SME loans. But above all, the inflection point in interest rates marks a return to higher margins in the key interest margin business and in the longer term can be seen as a return to normality. In the short term, though, it may trigger the occasional correction. Virtually all the banks surveyed expect a positive performance in their operating business in the longer term.

Outlook 2023

98%

are optimistic about the long-term future.

Growth and innovation topics were dominant in the preceding years, while cost optimisation was somewhat less significant. New market players with a decentralised and heavily digitalised business model have forced traditional institutions to adopt more innovation and growth strategies. As a consequence of the highly uncertain environment at present, it would seem banks are now keen to again focus more closely on cost-cutting programmes and efficiency improvements. Almost twice as many participants as last year (36%, up from 19%) stated that they will be focusing on these issues this year. 

Efficiency and costs

36%

are taking a new approach to striving for greater efficiency and cost discipline.

Structural change requires skills to be developed on an ongoing basis

Customer needs and expectations are seen as the most important driver for structural change. Advisory services should place greater emphasis on the added value for customers. Only around one-quarter (26%) of the banks polled support the view that shifting from producer-centric advice to an approach based on needs and expectations is a primary lever for profitable income growth.

Products & Services

26%

aim to increase needs- and demand-oriented counseling

Sustainability, and increasingly also the shortage of skilled staff, are issues that have been very high on banks’ strategic management agenda for some time now. 

For a sustainable improvement in value creation, an increase in customer centricity is indispensable.
Olaf Toepfer
Banking & Capital Markets Leader | Switzerland

Just 5% of the institutions polled claimed to have no difficulty recruiting skilled workers. The survey indicates that it is mainly corporate culture and the quality of management that affect a company’s attractiveness as an employer and its ability to retain staff for the long term, rather than purely monetary incentives.

The topic of sustainability has continued to gain relevance in the Swiss financial sector and has been accelerated by increased regulation.
Corina Gruenenfelder
Lead Sustainable Finance Consulting for Financial Services | Switzerland

Sustainability criteria in lending and the investment process have become more important. 96% of banks say they integrate sustainability in their investment advice. Only 4% (down from 11% the previous year) state that they do not take account of sustainability aspects when providing investment advice. Despite the ongoing wave of regulation, only 34% of Swiss banks now feel that the status quo in terms of regulations governing sustainability is satisfactory (compared with 40% a year earlier). 66% of the banks are keen to see the existing regulations fleshed out further given the lack of comparability and differing interpretation and implementation from bank to bank.

Summary

The results of the latest EY Banking Barometer show: Banks in Switzerland are facing new challenges. In addition to changes in interest rates and inflation, important topics for banks in the future will be cost reduction, increased efficiency, needs-based customer advice and sustainability. Added to this is the shortage of skilled workers.

About this article

Authors
Patrick Schwaller

Managing Partner Audit Financial Services | Switzerland

Reliable and trusted business partner. Gets things done. Pragmatic. Enjoys mountaineering.

Olaf Toepfer

Banking & Capital Markets Leader | Switzerland

Transformation leader. Passionate about shaping the banking industry of tomorrow. Father of three kids.

Corina Gruenenfelder

Lead Sustainable Finance Consulting for Financial Services | Switzerland

Enthusiastic sustainable finance leader. Passionate about climate risk modelling and quantitative risk & analytics. Diversity & inclusiveness advocate. Mountaineer & backcountry skier. Avid traveler.

Isabelle Staiger

Partner, People and Workforce | Switzerland

Guides companies through business transformations with a focus on leadership and employees - corporate culture, DE&I, leadership and change management.