Swiss banking's transformation has hit a traditional bastion of revenue and profits, finews.com can report exclusively from a an industry study. Banks will need to leave their comfort zone to compensate.
Corporate banking rarely gets much love: until now, it has been a given that Swiss banks can count of long-standing ties to big firms for a regular stream of business and revenue.
That is changing, finews.com can report exclusively from a Roland Berger study set to be released on Thursday: revenue from corporate banking are drying up, says the consulting firm.
Up To 10 Pct Drop
Banks' corporate banking income dropped to roughly 10 billion Swiss francs last year, according to the study's authors. This translates to a fall of as much as 10 percent since 2011.
Germany's banks have suffered a more dramatic tumble of more than 15 percent to just 30 billion euros.
Non-Banking Upstarts
Ultra-low interest rates, rising regulatory requirements and the increasing influence of digitization have taken a bite out of this traditionally stable and reliable business for banks, as well as the emergence of rivals from outside of the industry.
Robert Buess (pictured above), «banking» partner at Roland Berger in Zurich, told finews.com «We see that pension funds, insurers, and private equity firms are increasingly breaking into this business. Crowd-providers are accentuating competition in an already hotly-contested market.»
Only Response: Cost-Cutting
The numbers show that the threat is even more pronounced in Germany – a bad omen for Switzerland's banks. The study illustrates that a wide swath of banks rely primarily on corporate banking for revenue, which they are heading off with cost cuts.
«To counter the rising pressure with cost cuts won't be enough,» Buess warns.
Instead, banks should seek to understand – and meet – changing client needs, he urged. Good terms, ease and professionalism are a must, but transparency and an increasing digital offering for advice and execution is also becoming more important.
Dangerous Comfort Zone
«Banks need to catch up or they will lose market share to newer, more dynamic providers,» the study's authors write. Buess sees banks lingering in the comfort zone, even as it crumbles around them, instead of examining their business models and seeking answers to the digital riddle.
He urges lenders to differentiate themselves and set accents instead of being a banking supermarket with all client segments and product categories. For example, banks can specialize on advising corporate clients on their financial needs, and draw products from other firms, he says.
Still others can specialize as product experts, while a third group can seek out opportunities in technical solutions and infrastructure.
