Swiss banks' total profit dropped by more than $11 billion last year – due to one of Switzerland's two biggest banks. Why wasn't this made public until now?

Banks in Switzerland posted 800 million Swiss francs ($845 million) in profits for 2019 – a 10.8 billion franc tumble from the year before, according to data made public by the Swiss central bank on Thursday in an annual compilation. 

Just 800 million francs, from 246 banks in Switzerland? A back-of-the-envelope tally based on disclosure from listed institutes alone contradicts this. According to the Swiss National Bank, 216 of the banks registered cumulative profits of 13.1 billion francs, but 30 Swiss lenders incurred losses of 12.3 billion francs.

Huge Write-Down

The profit tumble is due to one of Switzerland's two major banks, the SNB reported – but both UBS and Credit Suisse reported massive profits last year. Together, their 2019 net profit attributable to shareholders totaled 7.7 billion francs.

The SNB reports that the loss was incurred due to massive adjustments from changing valuation principles for participations, or stakeholdings. Neither UBS nor Credit Suisse mentioned a change in their respective year-end reporting.

Gap From Parent to Holding

The reason for the massive discrepancy is the term «parent companies». The SNB looks at these entities rather than holding companies, which report to shareholders. Parent companies include reporting from Swiss activities as well as foreign subsidiaries which aren't incorporated – meaning they exclude profits from independent arms held in the U.K., U.S., or Asia.

UBS and Credit Suisse traditionally reconcile the subsidiaries they maintain overseas in reporting for their respective holding companies. This means a huge gap between reported financial statements and parent company reporting.

Culprit: Credit Suisse

A glance at the annual reports from the two banks shows that it was Credit Suisse which recorded a massive loss (11.4 billion francs) in its parent company. The reason is «an impairment on participations of 17.951 billion, of which 15.27 billion related to a change of the valuation principle from the portfolio valuation method to the individual valuation method effective
December 31, 2019.»

Credit Suisse noted the surprise write-down follows changes in Swiss law on how subsidiaries are accounted for as a result of too-big-to-fail rules. The write-down and loss are effectively meaningless for shareholders: it isn't relevant to profit, balance sheet, or shareholder's equity.