The integration of the market leader in Swiss corporate banking offers opportunities for other banks. But Credit Suisse's potential heirs face a more difficult environment, new analysis shows.
UBS CEO Sergio Ermotti wants to maintain market shares of both his bank and its Credit Suisse subsidiary, but he's not kidding himself, acknowledging recently there's a lot of client turnover.
Credit Suisse's domestic corporate banking business, where it's been a market leader, is facing a dilemma. Companies face increased risk if they draw credit from only one major Swiss bank. At the same time, it doesn't make sense for UBS to double its outstanding loans to Swiss companies.
An Easy Game?
Accordingly, third parties have a relatively easy game. According to media reports, companies are knocking on the door of Swiss branches of major foreign banks to diversify their credit lines. An ideal gateway were it not for the hurdle that existing credit agreements usually run for three to seven years.
And until then, business is unlikely to get any easier, two new analyses on the state of the Swiss corporate landscape show.
More Expensive Borrowing
The Lucerne University of Applied Sciences and Arts (HSLU) Financing and Treasury Study, published Wednesday, paints a picture of a challenging environment for corporate financing. Aggressive interest rate hikes to combat inflation are becoming a burden and manifesting themselves in rising financing costs.
This has consequences for debt capital demand and for banks' business with bond issues. Interest-bearing debt capital fell last year for the first time since 2015, the researchers found. According to study leader Thomas Birrer, it's understandable. «In recent years, money was very cheap and many companies made use of attractive credit conditions. With the rise in interest rates, borrowing is now becoming more expensive.»
Stock Market Skepticism
Swiss companies have become more skeptical about using equity capital, with observers finding companies listed in Switzerland are increasingly opting to leave the stock market due to an increased regulatory burden. For banks, lucrative support for IPOs is becoming rarer.
At the same time, companies' overall liquidity holdings declined by just under a tenth to 109.9 billion Swiss francs last year. According to Birrer, there's currently no cause for concern, because «The liquidity situation is basically comfortable.» Companies have over 65 billion francs in untapped firmly committed credit lines.
Dwindling Optimism
The question is how quickly finance chiefs will have to deploy the available funds.
Raiffeisen Switzerland, together with its partners Kearney, Swiss Export, and Angst+Pfister, published a study today on the state of the Swiss SME landscape. Although the analysis focuses on SMEs, trends for large companies can be gleaned from the findings.
The study finds that optimism is waning among the 382 representatives of Swiss SMEs surveyed. Those expecting their company to perform well to very well over the next three years have fallen significantly since 2021.
Higher Risk of Setbacks
Along with high energy and raw material prices, access to skilled workers and personnel and murky bilateral relations between Switzerland and the EU are seen as the greatest risks over the next twelve months.
That increases the risk of setbacks for the financial institutions providing loans to Swiss companies. As always in banking, it's important to determine one's risk tolerance. Help in a difficult environment is an ideal prerequisite for long-term partnerships, but bankers can be just as easily burned in the process.
