In 2024, private banks navigated a volatile global economic landscape marked by fluctuating interest rates and geopolitical tensions. Rising global equity markets enhanced AuM growth with double-digit rates, whilst declining interest rates reduced interest income that served as strong foothold in 2023. As such, profitability waned especially for smaller banks whereas larger banks excelled, capitalizing on their high AuM volume. M&A activity saw a moderate uptick in 2024 after a standstill in 2023.
Market Update 2025
Private Banking Switzerland & Liechtenstein
This report draws on the 2024 annual reports of private banks in Switzerland and Liechtenstein, providing insights into performance developments up to 31 December 2024.
Swiss and Liechtenstein private banks continue to thrive thanks to their stable political framework and robust financial market infrastructure, drawing international demand during uncertain times. However, evolving industry trends encourage banks to reevaluate their business models to remain resilient and responsive to changing conditions.
Grasping how these institutions maneuver through such dynamics is crucial for appreciating their performance. Below are some key highlights from our latest Private Banking Market Update 2025 publication.
Strong volume development backed by financial markets
Despite a volatile market environment, private banks in Switzerland and Liechtenstein saw solid double-digit AuM growth, boosted by rising global equity markets and positive net new money flows. Smaller and medium-sized banks outperformed larger institutions in terms of net new money inflow rates due to bank-specific success factors such as rigorous strategic execution or effective client engagement.
Trend reversal for cost-income ratios amid lower interest income
Large private banks successfully lowered their combined cost-income ratio to below 70%, while smaller and medium-sized banks experienced increased ratios due to their higher reliance on interest revenue. Future success for the private banks may depend more strongly on boosting fee and commission income. Operating expenses generally remained constant, with personnel expenses accounting for two thirds.
Profitability results hint at "size matters" in private banking
Large private banks improved their return on equity in 2024, reaching 11%, while smaller and medium-sized banks reported a decline. This highlights the advantage of scale in the private banking industry, which is accentuated in a low-interest-rate environment. Nonetheless, smaller players can achieve strong bottom-line results with distinctive business models.
Post-standstill: private banking M&A activity picks up
2024 saw a resurgence in M&A activity in the private banking sector, with UBP's acquisition of Société Générale Private Banking (Suisse) SA being the most significant deal in terms of AuM. A gradual consolidation trend is expected as owners of less profitable banks reassess their capital allocation strategies.
Key industry trends keep private banks on their toes and demand flexibility
Private banks face a dynamic landscape requiring strategic adaptation and flexibility. Besides Switzerland's attractiveness as the still number one private banking centre, the fight for client assets among the private banks is ongoing, resulting in margin pressure. Meeting evolving client demands (both traditional and digital), strategically investing in digital transformation, attracting and retaining top talent, and complying with evolving regulation like CRD VI represent additional key topics for private banks. Success hinges on addressing these factors to ensure long-term competitiveness and profitability.
In summary, we foresee these developments to continuously affect the landscape of private banks in Switzerland and Liechtenstein. In the coming years, we anticipate a gradual rather than sudden decline, reducing the count of institutions primarily focused on private banking to fewer than 60. Nonetheless, this reduction is not entirely negative. The banks that remain have successfully adjusted their business models to meet the demands of a rapidly changing environment, showing their strength and ability to face future challenges with agility and flexibility.
