Switzerland’s third-largest bank, Raiffeisen Switzerland, has increased its profit and business in the first half of the year. Two aspects about the results provide cause for concern.
Rivals have reason to feel envious: operating income increased faster than costs, boosting operating profit to 532 million Swiss francs in the first six months of the year, Raiffeisen Switzerland said in a statement (in German) today. Group profit rose 18 percent to 434 million francs.
Raiffeisen had the biggest growth rate in trading income, while the biggest source of revenue, the mortgage business, accelerated at a slower pace than in the year-earlier period. The increase in outstanding loans rose 2 percent to 168.7 billion francs.
The retail bank said that higher volumes didn’t fully compensate for the lower interest margin.
IT-Migration Costs
Operating costs rose 4.6 percent to just above 1 billion francs. The main driver of costs was the IT-migration project called «Rainbow» and the introduction of the new core-banking system at private bank Notenstein La Roche.
Raiffeisen said the private bank had a «solid» first half, following a restructuring of its business. Profitability at Notenstein La Roche had increased and costs had fallen, the bank said.
Basis for Future Growth
The introduction of the new core-banking system in the third quarter will proof crucial to boost the efficiency of the private bank and should allow an increase in growth of assets under management, Raiffeisen said. Assets amounted to 19.4 billion francs at the end of June, which compares with 20.8 billion a year ago.
Raiffeisen Switzerland had a risk-weighted capital ratio of 16.8 percent and it expects to be able to fulfill additional requirements without having to resort to extraordinary measures to raise capital. The bank also exceeds the TLAC-requirement for the leverage-ratio with 6.8 percent.
The bank expects the good development of its core business to continue throughout the remainder of the year and forecast a full-year profit in excess of its result in 2016.
