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Major Swiss banks have done reasonably well in the first half 2020 despite expectations to the worse and in contrast with many European rivals. Why was it so and will it stay that way?

Credit Suisse-boss Thomas Gottstein on Thursday claimed a strong first half result that far exceeded the expectations of banking experts. Others, including UBS, Julius Baer and Vontobel have also presented convincing results over the past two weeks, which nobody could have expected under the circumstances.

Even less so when the result of some European companies are taken into account. Banco Santander, one of the best and most solid banks in Europe, had its first-ever first-half loss and a huge one at that: minus 11.1 billion euros ($13.1 billion), with much of it due to writedowns on loans – due to the pandemic.

Many Troubled Banks

Other European big banks have also been hit hard this first half: Britain's Lloyds has had to increase provisions for loan losses, which led to a massive three-month loss and a first-half profit of a paltry £19 million. HSBC, Europe's biggest bank, has been exposed as well and the normally healthy French BNP Paribas reported a strong decline of its second-quarter profit. Barclays even had a slump in profit.

With those figures in mind, the question arises, of how the Swiss companies managed to escape a similar fate. Here are some indications:

1. Careful Attribution of Loans

Swiss banks seem to award credit following due consideration; they also profit from the fact that many Swiss firms are more resilient than European ones. The way they managed to survive the currency-shock in 2015 after the lifting of the peg to the euro shows how well prepared they were for the crisis.

2. Successful Focus on Wealth Management

The focus of Swiss banks active abroad on wealth management has proved very successful in the first half of 2020. Wealth management was strong in the face of turmoil and Swiss banks avoided the pitfalls of other, more risky business models.

3. Pragmatic Approach to Home Office

Swiss banks moved into the home office faster than anybody else. And the companies didn't just send their staff home – they also made available an infrastructure that helped maintain business as usual. The impairment to the service was fairly minimal as a consequence – not so in other countries.

4. Digital Offering Available at the Right Moment

Digital banking has been a key component of banks' strategies for years. Now, the companies finally were called upon to show something for their endeavors – and demand has proven them right. The much cited acceleration of digital services across the globe has definitely been evident on a Swiss perspective.

5. Diverse Services for Super Rich

The crisis has shown how specific and complex needs the super-rich clients have, faced with unprecedented uncertainties. The two big banks were up to the challenge because they have successfully manufactured an interface between wealth management and investment banking, allowing for an easy provision of individual services for the rich. There are only a few (American) banks that are able to give their clients access to such services.

6. Branch Closures

Even if Switzerland still has too many high street branches, it is no comparison with other countries in Europe. The Swiss banks have been actively optimizing their networks for years and have been quick to close more branches during the lockdown. Some of which may never open up again.

7. Switzerland – a Dividend Haven

The recent extension of its dividend bank by the European Central Bank (ECB) won't make investors happy – finews.com reported. Swiss banks by contrast have announced that they will pay out their planned cash dividends, not least on the background of a reasonably successful first half.

8. Security, Security, Security

In the tough times of the lockdown, Swiss banks both at home and abroad were able to present an image of uttermost stability and security. Pragmatic in their approach to granting loans in Switzerland, but equally so clients abroad. Clients who otherwise face new forms of taxation. The Swiss industry was therefore able to reap a significant amount of net new money.

And the Flipside of the Coin?