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Despite geopolitical uncertainties, interest rate cuts, and pressures from U.S. tariffs, Swiss banks remain resilient. In the short term, many institutions expect declining results, but in the long term, the industry remains confident and relies on the strength of Switzerland's financial center, according to the EY Banking Barometer 2026.
In brief
- Swiss banks face continuing margin pressure and rising costs, with the current sentiment deteriorating to the lowest level of the last 15 years but gradually improving in the short to long term.
- Stable credit quality, resilient SME lending, strong client base and weaker but still solid results support long-term confidence.
- Banks increasingly focus on cost discipline, AI-driven efficiency and revenue diversification to turn reaction into action in a more complex and unstable environment.
The results of the EY Banking Barometer 2026 reflect a sector at a strategic crossroads. Swiss banks can once again look back on a solid although weaker financial year, and short-term expectations have significantly deteriorated. External uncertainty, declining interest margins and rising operating costs are weighing on near-term performance. At the same time, long-term confidence in the Swiss banking model remains remarkably high.
This tension between short-term pressure and long-term optimism defines the Swiss banking outlook in 2026. The key question for banks is no longer whether the environment will remain challenging, but how actively they choose to respond.
Solid results, but momentum is fading
After several years of strong performance driven by rising interest rates and wide margins, the operating result of Swiss banks is coming under pressure. 46% of the surveyed institutions expect a decline in their operating result for the current year (previous year 39%), marking the most cautious short-term sentiment since the pandemic.
The current situation must be seen in context. Results remain solid by historical standards and the comparison base is high. A normalization of earnings was to be expected as interest rates returned to zero. Nevertheless, the margin pressure banks are facing highlights structural challenges: revenue growth in the credit is becoming increasingly constrained both by the interest rate environment and by balance sheet limitations and capital requirements leading to more selective lending practices .
These developments underline the strategic importance of revenue diversification, for instance growing the fee-based business, and banks are once again required to reassess where sustainable and profitable growth can realistically be generated.
After years of strong results, margin pressure and rising costs are a burden on future success. Maintaining profitability will increasingly depend on efficiency gains and revenue diversification.
Interest margins expected to stabilize – at an unattractive level
Despite the recent decline, 65% of banks expect interest margins to stabilize or even increase over the next one to two years (previous year 26%). This expectation is driven by the current zero-interest environment and the assumption that negative rates will not return in the near term.
Stabilization, however, does not mean relief. Margins are expected to remain at a comparatively low level, limiting earnings potential in the interest business. As a result, maintaining profitability will depend less on volume growth and more on pricing discipline, portfolio quality and operational efficiency.
Overall, SME lending is expected to remain resilient, while cantonal banks turn more cautious
SME financing continues to be assessed as broadly resilient by Swiss banks. 33% of surveyed institutions expect an increase in value adjustments and provisions for SME loans over the next one to two years, unchanged from the previous year.
This stable assessment is noteworthy, as it remains below the long-term average and contrasts with current macroeconomic developments. Rising geopolitical tensions, trade policy uncertainty and weaker economic indicators have increased pressure on many companies, particularly in export-oriented sectors.
This is reflected in a more differentiated picture among cantonal banks that traditionally have a higher exposure to SME lending, and therefore, the majority of cantonal banks expect credit losses in their SME portfolios to increase over time.
Rising costs remains a key concern
Cost pressure dominates the outlook for the coming years. 57% of the surveyed institutions identify rising operating costs as the greatest burden on future success.
Technology plays a central role in this dynamic. Investments in AI, digitalization, core system modernization and cloud migration are essential, yet costly. Regulatory requirements, including increased expectations around operational resilience and third-party risk management as well as cyber resilience, further add to the cost base.
At the same time, these investments also create opportunities. New technologies enable efficiency gains, improve customer experience and enable new service models. The challenge for banks lies in focusing on the use cases that deliver tangible benefits and managing the timing mismatch between upfront investments and the realization of efficiency and profit gains.
Long-term confidence
expect the operating result to increase over the longer term despite short-term pressure.
Cost pressure
identify rising operating costs as the greatest burden on future success.
Interest margins
expect interest margins to stabilize or increase over the next one to two years.
Sustainability and ESG
expect customer demand for sustainable financial products to remain flat or decline.
Despite many challenges, long-term confidence remains intact
Long-term confidence in the Swiss banking sector remains remarkably strong. 94% of surveyed banks expect their operating result to increase over a longer time horizon (previous year 85%).
This optimism reflects the sector’s solid capital and client base, prudent risk management and the continued attractiveness of Switzerland as a stable and resilient financial center. Even in an environment of margin pressure, rising costs, structural change and external uncertainty, banks express confidence in the long-term viability of their business models.
Sustaining this confidence, however, will depend on the ability to balance cost discipline with targeted investment, diversify revenue sources and use technology as a genuine enabler, also to deepen and active customer relationship.
Artificial intelligence as a catalyst for change
Artificial intelligence is established in the Swiss banking sector. 78% of banks are addressing the implementation of AI (previous year 53%), albeit at different levels of maturity.
The primary focus of AI initiatives remains on process automation, where 80% of banks expect the greatest efficiency gains, followed by compliance-related applications. The adoption of AI in customer advisory and investment services gained slightly more attention but still at a comparably low level. Banks remain cautious, particularly due to concerns around data protection and security, the reliability of AI-supported decision-making and continuing insecurity about the future of personal advice.
Despite these reservations, banks broadly expect AI to play an increasing role at the customer interface, especially in retail banking. As AI becomes more deeply embedded in everyday life, customer expectations are likely to evolve further, increasing pressure on banks to integrate AI responsibly and effectively into their service models.
Artificial intelligence is firmly established, but its full impact is yet to materialize. Unlocking broader value will require careful integration and governance.
Sustainability loses strategic momentum
Sustainability and ESG have continued to lose their strategic momentum. 86% of banks expect customer demand for sustainable financial products to remain flat or decline over the medium to long term. Sustainable finance is increasingly viewed as a niche offering, primarily relevant for institutional investors and wealthier private clients.
At the same time, regulatory requirements related to ESG reporting and data remain high. For many banks, the costs and complexity associated with compliance outweigh the commercial benefits of sustainable financial products. This shift has reduced the strategic prominence of sustainability, even though it remains a necessary component of regulatory compliance and risk management.
From reaction to action
The Swiss banking sector finds itself in a phase in which external uncertainty and structural complexity are the norm rather than the exception. In this environment, the distinction between reacting and acting becomes increasingly important.
Banks that actively reshape their business models, invest selectively in technology and strengthen operational efficiency will find themselves better positioned to navigate margin continuing pressure and cost challenges.
The Banking Barometer 2026 shows that Swiss banks are well positioned, but the path forward will require clear strategic choices. Turning reaction into action will be critical to securing long-term success in a rapidly evolving financial landscape.
Summary
The EY Banking Barometer 2026 shows a Swiss banking sector under increasing short-term pressure, but with remaining confidence in its long-term prospects. Declining interest margins, rising operating costs and greater uncertainty are shaping near-term expectations. At the same time, stable credit quality and client base as well as targeted investments in technology support long-term confidence. To remain successful, banks will need to further diversify revenues, strengthen operational and cost efficiency and ensure that investments in technology and transformation deliver tangible benefits.
Acknowledgement
We thank Marcel Zünd, Christine Menges and Francesco de Gara for their valuable contributions to this article.
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