Zuercher Kantonalbank had almost the same first-half profit as last year. The contribution of Swisscanto, a fund manager acquired two years ago, is offsetting stagnant interest income.

Zuercher Kantonalbank (ZKB), Switzerland's biggest cantonal bank, had a profit of 393 million Swiss francs in the first six months of 2016, unchanged from the previous year, the company said in a statement today.

The strong performance was helped on by higher-than-expected net interest income and income from trading operations, the bank added.

Operating income rose 5 percent to 1.15 billion francs, driven by a 15 percent increase in net commission and fee income, which totaled 360 million francs. The improvement reflects the successful integration of Swisscanto, whose results for the first half of 2015 were not taken into account for the entire reporting period.

Diversification Strategy

Assets under management increased to 260.2 billion francs from 257.5 billion francs at the end of 2015.

ZKB had acquired Swisscanto to better diversify its sources of income – a successful undertaking, it seems. The bank still generates 51 percent of its income with the interest business, but that share had been as high as 70 percent in recent years.

Net interest income was also almost unchanged at 582 million francs, a strong result against the backdrop of continued negative interest rates. The mortgage business increased 1.8 billion francs in volume.

«Sound Profit» in 2016

«Economic challenges and uncertainty in the international markets are likely to persist in the second half of the year,» said ZKB CEO Martin Scholl. «Despite the difficult environment, we still expect Zuercher Kantonalbank to deliver a sound profit for the financial year 2016.»

With the integration of Swisscanto, operating expenses rose as well – adding 1 percent to 684 million francs. The bank took charges for impairments on participations as well as the depreciation of tangible fixed assets and intangible assets of 65 million in the reporting period, compared with 49 million in the same period of the previous year, weighing on the company's profit.

The increase was mainly due to the ordinary write-off of goodwill from the acquisition of Swisscanto.

ZKB's cost-income ratio improved to 59.1 percent from 61.5 percent a year ago.