Zuercher Kantonalbank posted a 5 percent decrease in net profit in the first half of 2019 amid continued low interest rates and a challenging geopolitical environment. The bank still managed to set one record.

The negative rates in Switzerland affected the country’s largest cantonal bank: profit dropped to 418 million Swiss francs ($424 million) in the first six months from 439 million a year ago, despite a reduction of its cost base by 3 percent.

Operating income at Zuercher Kantonalbank declined 4 percent to 1.17 billion francs, which the bank said reflected the low rate environment and geopolitical uncertainties. Interest operations are the bank’s core income driver. Net interest income was down 3 percent to 606 million francs. Income in the investment and trading business also declined. Net commission and fee income was 387 million, down 3 percent year-on-year, primarily due to lower income in the securities and investment business.

Reduction in Operating Expenses

Trading income decreased 9 percent to 138 million francs as higher income from trading in bonds as well as interest rate and credit derivatives was unable to offset the decline in trading in foreign exchange, precious metals, equities and structured products.

The bank was able to offset some of the decline in operating income by cutting its costs. Expenses dropped to 683 million, with personnel costs down 2 percent and other operating expenses down 6 percent.

Cautious Outlook

The Zurich-based bank also had a new record to report, with assets under management rising to 315.5 billion francs by the end of June. Net new money amounted to 2.5 billion and the rise in asset prices contributed with 17.7 billion francs.
The cost-income ratio was slightly worse than in the year-earlier period, reaching 59.1 percent from 58.4 percent.

Zuercher Kantonalbank provided a cautious outlook for the remainder of the year, with CEO Martin Scholl evoking the «challenging» conditions in his statement. «Geopolitical conditions and the slowdown in global economic growth are likely to cause further uncertainty in the markets,» he said. Still, the bank expects a «good» result in the second half of 2019.