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Strong franc to affect Swiss banks' profitability: Julius Baer CEO
[BERNE] The Swiss National Bank's decision to scrap its currency cap will likely hit profitability at many of Switzerland's wealth managers and could speed up consolidation in the industry, the head of one the country's biggest banks said on Tuesday.
The Swiss National Bank's decision to scrap its currency cap will likely hit profitability at many of Switzerland's wealth managers and could lead to consolidation, the head of one the country's biggest banks said on Tuesday.
Switzerland's central bank stunned markets last week when it ended a three-year-old currency cap on the value of the Swiss franc against the euro, sending the currency soaring against the euro.
Julius Baer Chief Executive Boris Collardi said the strong franc would be a concern for many of Switzerland's private banks, which earn the majority of their revenue in foreign currencies.
"Therefore this will directly affect the profitability of Swiss institutions if we don't do anything," Mr Collardi, said at an event in Berne, speaking in his capacity as chairman of the Association of Swiss Asset and Wealth Management Banks.
Mr Collardi said the SNB's decision would result in higher cost-income ratios for some banks, placing added pressure on institutions to merge, sell up or shut down.
He said it was very possible that, over the next five years, this would result in there being about 100 wealth management institutions in Switzerland.
The number of private banks in Switzerland has already shrunk by 24 per cent between 2005 and 2013 to 139 institutions, according to a slide presentation by Mr Collardi, as pressure on margins, increasing regulatory costs and the end of Swiss banking secrecy push the market to consolidate.
Julius Baer, Switzerland's third largest listed bank, said on Monday that it did not suffer any losses soon after the SNB's decision to abandon its cap on the franc.