Banking Barometer – Results for the year solid but down as outlook turns gloomy

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• Almost half of the banks questioned (46%) expect operating profit for the current financial year to fall.
• Just under two-thirds (65%) expect interest margins to stabilize, albeit at a low level.
• Nevertheless, almost all institutions (94%) expect operating profit to rise in the long term.
• Only a third of the banks surveyed (33%) expect an increased need for risk provisioning for their SME lending in the short term.
• AI has been adopted by almost eight out of ten banks (78%), up from just over half in the previous year (53%).
• More than half of the banks polled (57%) see the greatest strain on their future income coming from rising operating costs.
• ESG issues and sustainable investment have lost considerable momentum in 2025.

Zurich, 8 January 2026 – Banks in Switzerland and Liechtenstein can again look back on a successful financial year. However, the outlook is gloomier. After years of strong results thanks in part to comfortable interest margins and high interest rates, margins are coming under renewed pressure at the same time as rising operating costs are weighing on income and major investment is still pending. Despite this challenging environment, banks remain optimistic. They have a solid capital, customer and business base.

The results of the EY Banking Barometer 2026 show: For the more than 100 financial institutions from Switzerland and Liechtenstein that were surveyed, the main themes in the coming years include optimizing their own results in an unfavorable interest rate and cost environment, as well as dealing with the potential of AI in the right way. Christine Mengers, Assistant Director, Markets & Business Development, Financial Services EY Switzerland, said: “At a time when income growth is still important but increasingly hard to achieve, cost cutting and efficiency gains remain a focus.” This is the 16th year that auditing and consulting firm EY Switzerland has published the study.

Results for the year solid but down as outlook turns gloomy

Although banks will continue to post solid results for the year just ended, they will be below the level of the previous two years. Thus, almost half of the banks questioned (46%) expect operating profit for the financial year 2025 to fall, compared with 39% in the previous year. This means sentiment is at its lowest level for 15 years. After years of strong results, geopolitical and macroeconomic developments have led to the Swiss policy rate being gradually reduced to 0% again. A zero interest rate environment offers barely any room for maneuver for optimization both in the lending and deposit business.

Survey participants remain optimistic in the long term: 94% of banks expect operating profit to increase (previous year: 85%). This expectation underlines the resilience of the Swiss banking sector. Francesco de Gara, Partner, Audit Financial Services EY Schweiz, said: “Despite geopolitical uncertainty, interest rate cuts and the burden of US tariffs, Swiss banks appear to be resilient. Many institutions expect a fall in profits in the short term, but the sector remains optimistic in the long term and is relying on the strength of the Swiss financial center.” Another positive factor is that 67% of the institutions polled said they had gained new customers.

The performance of banks’ current operating business varies sharply between banking groups. Regional and cantonal banks, which generated record profits in a higher interest rate environment, are more sensitive to the rate cuts: 59% and 60%, respectively, expect operating profit to fall. Private and foreign banks are much less pessimistic, with 36% of each having negative expectations. Thanks to a robust stock market performance up to now and net inflows of funds, they are enjoying stable fee and commission income.

The benefits to banks from interest margins are constantly diminishing

Net interest income is the main source of income for many Swiss banks. Banks’ interest margin fell continuously as interest rates fell. However, there are signs of a stabilization in the interest margin. Just under two-thirds of banks (65%) expect interest margins to stabilize or even increase – a significant rise of almost 40 percentage points compared to the previous year's figure of 26%. The background to this were zero interest rates being reached, as well as the expectation that negative rates would not be introduced for the time being and more selective lending on the part of the banks.

SME financing still profitable – cantonal banks expect increased credit losses in the future

A third of the banks surveyed (33%) expect an increasing need for impairment losses and provisions for SME loans in the next 1–2 years – unchanged from the previous year (33%). As in the previous year, however, cantonal banks are by far the most pessimistic: 64% of the cantonal banks surveyed expect an increasing need for impairment losses and provisions in the short term, and in the long term as many as 79%. One of the reasons for this is that cantonal banks, with a market share of over 50% in some cases depending on the canton, are more active in this segment as the principal bank for SME customers and are more heavily exposed as a result.

Banks in Switzerland and Liechtenstein still expect very low rates of default in their residential mortgage business. Although the proportion of institutions that see an increasing need for impairment losses and provisions has gone up slightly in both the short and long term compared with the previous year from 7% to 9% and 14% to 17%, respectively, it remains at a historically low level. 

Rising operating costs weighing most heavily on future income

A clear majority of the institutions surveyed (57%) expect the greatest strain on their income in the next one to two years to come from rising operating costs. The main drivers are costs associated with the expansion and maintenance of IT systems, as well as investment in innovation and cybersecurity. In particular, management of cyber risks associated with third parties is continuing to worsen and is considered to be the greatest challenge by 79% of the banks surveyed. Meeting regulatory requirements is also an important cost factor for some institutions.

There is clearly considerable change under way in how Swiss banks use external service providers. At 44%, almost half of the institutions opt for traditional outsourcing: an external provider carries out defined activities or processes based on the customer’s specifications. However, around a quarter already use managed services: an external provider is responsible for the result and bears end-to-end responsibility for a series of processes and functions. The sector is in a period of transition from a fragmented state shaped by its history towards more heavily industrialized operating models.

Introduction of AI makes rapid progress

AI has not just reached Swiss banks and been in evidence; it has also become established – in some cases by being implemented. The proportion of banks that have solely got as far as discussing AI and its introduction fell to 22%, down from 38% last year. Thus, the vast majority of banks (78%) are already busy implementing AI projects (previous year: 53%). They are doing so to varying degrees but here, too, the figures are different to last year. 5% said they have actually integrated AI into many applications already.

Marcel Zünd, Partner, Head of Strategy & Execution Financial Services at EY Switzerland, said: “With the increasing social use of AI, structural change is advancing ever faster and banking is no exception. Going forward, the crucial question will be whether banks are focusing on the right thing and are going to maximize the potential that AI offers them.”

Sustainability: Quo vadis?

ESG and sustainable investment have lost considerable momentum, and it seems many customers are actually less interested than initially expected. Sustainable financial products are still a legitimate niche area that is mainly relevant for institutional investors or wealthy private clients. For many banks, regulatory requirements and the costs of data collection and reporting are out of proportion to the returns it is possible to generate. Against this backdrop, the topic as a whole has become less strategically important. 86% of banks expect customer demand for sustainable financial products to stagnate or decline in the medium to long term.

The biggest challenge for Swiss banks when it comes to sustainability is still sustainability and climate reporting (30%), followed by calculating carbon footprints (14%), risk management and greenwashing (11% each).

If you have any questions, please contact: daniele.mueller@ch.ey.com. 

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