Regional Banks: Surprising Future Market Predictions

regional banks: surprising future market predictions. swiss regional banks anticipate a tightening of interest margins in the coming years, yet the current outlook remains positive, according to a recent survey. the «2024 regional banks industry analysis» reveals that most respondents continue to see growth opportunities and maintain an optimistic view of the current situation. previous survey results showed sharp fluctuations in interest margins and long-term outlooks. however, conditions have since stabilized, and most key indicators have returned to their long-term averages, experts report. interest income remains particularly important for regional banks, with the mortgage sector generating the majority of the participating banks' revenue. «around 70 percent of respondents expect interest margins to narrow over the next three years,» the study authors noted. by comparison, only 17 percent had anticipated this development last year, and just 14 percent in 2022. click to zoom in. the general assessment of the situation remains positive but slightly below last year's figures. on a scale of 1 to 10, the average score for 2024 is 7.64, down from a record 7.90 in 2023. when evaluating their own institution's situation, the average score stands at 8.00, slightly below last year’s 8.14. click to zoom in. regarding the long-term outlook, if the current trends continue, 18 percent of respondents believe the market environment for regional and cantonal banks will be better in ten years. this is the second-highest result in the last five years. on the flip side, 21 percent expect conditions to be worse, the second-lowest value in five years. click to zoom in. regulation and it costs. the top challenges identified by survey participants include stricter regulations, rising it costs, and increasing concerns over data security and cyber-security. issues related to recruitment and staff development have also gained importance, alongside concerns over increased competition. conversely, concerns around economic weakness, volatility in the real estate market, and shifts in corporate culture have diminished. rising personnel costs pose a challenge for banks, and they are considering various responses. efficiency improvements were cited by 89 percent of respondents, followed by resource allocation aligned with revenue potential (50 percent) and flexible working models (43 percent). notably, 25 percent mentioned adopting ai as a solution, while 14 percent plan to raise prices and fees. only 4 percent are considering layoffs or taking no action. growth opportunities declining. most growth opportunities, except for geographic expansion, have seen a decline in average scores compared to last year. the highest priorities are digital channels and partnerships/outsourcing, while fintech acquisitions and active participation in industry consolidation are ranked lower. the study also found that cryptocurrency remains a low priority for most regional banks. only two of the 23 respondents mentioned plans for future crypto adoption, with most lacking significant expertise in this area. focus on advisory quality. when asked about measures to expand advisory services, there was some disappointment regarding service centers. the quality of care and advice remains the top priority. the assessment of the impact of digital channels, as well as the initiative of management and employees, was slightly less reserved. however, it was noted that «the overly high expectations from the covid era have not been met». banks rated their resilience to crises slightly lower than before. however, the financial health of private customers was viewed more positively than last year. ambivalence regarding cs takeover. the survey also inquired about the effects of ubs’s acquisition of credit suisse. «how do you evaluate the new swiss banking landscape and the changed competitive conditions for your institution?» responses varied widely, ranging from «neutral» to «irrelevant for us», and extending to «increased competition». some regional banks believe they may benefit from a potential increase in business volume, while others expressed concerns about over-regulation and the risk of ubs becoming too large for switzerland. this representative survey was conducted by zern & partner on behalf of otx research between july 1 and august 9, 2024, and is based on responses from 28 banks.