Swiss private banks: assets under management at record high

The study was led by a team headed by HSG professor Prof. Dr. Tomi Laamanen and KPMG banking expert Christian Hintermann. The key findings at a glance:

• Private banks in Switzerland increased their net profit by just over one billion Swiss francs to more than CHF 4 billion despite declining interest income.
• Assets under management rose from just over CHF 3 trillion to a record high of CHF 3.4 trillion.
• The cost/income ratio only rose slightly as a result of positive financial markets.
• The number of private banks is declining for the first time since 2022 and acquisitions will likely cause this figure to drop from 85 to below 80 by the end of 2025.
• Safra Sarasin’s acquisition of Saxo Bank was the largest transaction with private bank involvement of the past 10 years.

Assets under management at an all-time high

Thanks to a positive trend on the financial markets, private banks increased their assets under management by 14 percent over the course of the past year. They now have CHF 3.4 trillion in assets under management – more than ever before. While net new money of CHF 72 billion also contributed to growth, this figure was relatively low. The medium-sized private banks, in particular, were successful in their efforts to attract new client deposits. “The new client advisors hired at UBS/CS, however, only had a limited impact on new money inflows,” says Christian Hintermann, study author and banking expert at KPMG Switzerland.

Costs continue to rise

Private banks’ operating costs rose by more than CHF 500 million to roughly CHF 15.3 billion in 2024. The cost increase is mainly attributable to higher personnel costs of CHF 10.6 billion (+ CHF 347 million), which account for around two-thirds of total operating expenses. Private banks have reported more than 40,000 full-time equivalents for the first time.

Higher costs in combination with declining net interest income have caused private banks’ cost/income ratio to increase slightly, from 74.3 percent to just over 75.5 percent. Nearly two-thirds of the banks reported a higher cost/income ratio in 2024 than in the previous year, with small banks being the hardest hit.

Despite this increase, the cost/income ratio still remains at a historically low level thanks to very strong financial markets. This is likely to change in 2025, as interest rates will continue to decline and the market environment will become more challenging. “Since the advantages of the exceptional interest rate environment have disappeared and the SNB has lowered its policy rate to zero, banks now have to shift their focus back to their core commission-based business and think about how they can improve it,” says Hintermann.

Medium-sized private banks face particular challenges

While nearly two-thirds of banks recorded a decline in their return on equity, the median of 6.3 percent for this indicator still remains high (previous year: 7.4 percent). Lower interest rates hit small banks hardest – with their return on equity declining from 9.3 percent to 7.5 percent. Twenty-two banks generated a return on equity of more than 10 percent, including five of the eight big private banks (the “Big 8”). Nine banks generated losses and had a negative return on equity.

“Despite a high return on equity, most private banks are unable to cover their cost of equity. The medium-sized bank segment, in particular, now faces the challenge of having to find the right business and operating model,” says Christian Hintermann.

Two successful models: global and diversified or local and focused

That a clear strategic alignment is conducive to success is also confirmed by an analysis performed by the University of St.Gallen (HSG) within the scope of this study. It shows how geographical and product-based diversification impact Swiss banks’ performance. The most successful banks at present can be broken down into two categories: Firstly, those that are diversified both geographically and with respect to the products they offer. Secondly, focused local banks that primarily limit their activities to the Swiss market and a small selection of core services.

“To be successful in the current environment, Swiss private banks must either achieve a critical mass and breadth or else opt in favor of a focused niche strategy, where they can lead in terms of client proximity,” says Hintermann.

Number of private banks on the decline

After remaining stable for three years, acquisitions in the second half of 2024 and first half of 2025 caused the number of private banks to decline further from 85 to 83. Due to announced transactions, the number is likely to fall below 80 by the end of 2025. That means the number of players has nearly halved in the past 15 years, down from 156.

At an international level, the industry’s Big 8 have used acquisitions and divestitures in Great Britain, Denmark and Brazil to further streamline their range of products and services and make them more competitive. Among others, these include Safra Sarasin’s acquisition of Saxo Bank, the largest transaction involving a private bank in the past ten years.

The expectation that the first year of additional regulatory requirements would trigger a large number of transactions in the independent asset management sector did not prove true.

Diversification as a double-edged sword

The new study by the University of St.Gallen shows that Swiss private banks that simultaneously expanded geographically and broadened their service portfolio achieved the best performance between 2015 and 2024. According to study author Tomi Laamanen, these ‘diversified global players’ benefit from economies of scale and high adaptability. However, diversification also harbours risks, emphasises the professor at the Institute of Business Administration at the HSG: according to a detailed evaluation based on this study (download report), banks that rely on a broad offering without expanding abroad often perform worse financially. At the same time, focussed boutique banks with few, strongly positioned offerings in Switzerland prove that profitability is also possible without size. ‘Diversification only works with strategic clarity and operational excellence,’ says Laamanen. According to him, the industry is at a crossroads: ‘Private banks have to make a decision - either to scale globally or to excel in a niche.’ This is the only way to survive in an increasingly complex environment.

Methodology

In the annual “Clarity on Swiss Private Banks” study, KPMG and the University of St.Gallen (HSG) examined a total of 71 private banks operating in Switzerland and assessed their performance as well as the most important industry trends. The major private banks (“Big 8”) include Edmond de Rothschild, EFG, J. Safra Sarasin, Julius Baer, Lombard Odier, Pictet, UBP and Vontobel.

The cost of equity was calculated based on an extended capital asset pricing model. Various factors were considered in this calculation, including the business mix (wealth management vs. asset management), the currency mix of client assets as well as small-cap and country risk premiums for each private bank. In 2024, the minimum cost of equity for banks in our sample was 8.4 percent, the average was 10.9 percent, and the maximum was 13.1 percent.

For more information and the detailed study, please go to: kpmg.ch/pb and to the Deep Dive Report of the University of St.Gallen (HSG).

Image: Presentation of the study at KPMG