The aggregate balance sheet total of all banks in Switzerland grew by 3.5% in 2021. The SNB significantly reduced its currency market interventions compared with 2020, and this is reflected in the commercial banks’ assets: whereas the banks’ sight deposits with the SNB had grown by around 24% in 2020, the figure in 2021 was just 4.4%.
The balance sheet total of the banks in Switzerland grew further in 2021, increasing by 3.5% from CHF 3,467.2 bn to CHF 3,587.8 bn. On the assets side, mortgage loans remained the largest item by far, while liquid assets posted substantial growth of 11.1%. On the liabilities side, sight deposits were up 10.3% and time deposits 9% despite the increased transfer of negative interest in 2021. After a sharp drop in time deposits in 2020, these increases reflect the higher saving rate during the pandemic33 as well as the relatively swift recovery from the pandemic. The volume of domestic lending rose by a further 2.8% thanks to a 3.4% increase in mortgage loans, which reached a new high of CHF 1,111.6 bn. Other loans, both secured and unsecured, showed a slight fall of 0.7%. As in 2020, the cantonal banks had the largest share of the domestic mortgage market with 37.8%, followed by the big banks with 26.9%.
TRENDS IN 2022
Balance sheet growth in first half of 2022
Trends in 2021
Balance sheet trends by bank category
The aggregate balance sheet total of all banks in Switzerland grew by 3.5% in 2021. The cantonal, Raiffeisen and foreign banks posted the largest year-on-year increases in absolute terms, together accounting for almost two thirds of the total growth. The big banks had the largest share of the aggregate balance sheet total with 44%.
Mortgage loans remain the largest asset item, making up 31.6% of the total. Liquid assets contributed substantially to the growth in total assets in 2021 with an increase of CHF 76 bn. Amounts due from securities financing transactions showed the largest relative increase with 16.3%.
Domestic and foreign mortgage loans rose by CHF 36.9 bn from CHF 1,098 bn in 2020 to CHF 1,134.9 bn in 2021 and thus remained the largest asset item for banks in Switzerland last year with a share of around 31.6%. Liquid assets rose by CHF 76 bn or 11.1% in 2021 and constitute the second-largest asset item. The banks’ sight deposits with the SNB increased by 4.4%, which is in line with the growth seen in prior years apart from 2020, when they rose sharply as a result of the threshold factor for exemption from negative interest being raised. This underscores the swift economic recovery from the COVID-19 pandemic and partly explains the somewhat weaker growth in liquid assets relative to 2020. The Raiffeisen banks stood out from the other bank categories in 2021 with a sharp increase of 59.1% in their sight deposits. This tied in with a 56.2% rise in liquid assets, largely due to high inflows of customer deposits.34 Amounts due from customers rose by CHF 8.9 bn or 1.4% in 2021. Making up 17.5% of total assets, they constitute the third-largest asset item. Amounts due from banks were down slightly by CHF 1.2 bn or 0.5% at CHF 252.1 bn. This was the net result of a 2.4% decline in amounts due from foreign banks and a CHF 2.8 bn (3.2%) increase in amounts due from domestic banks. The CHF 5.6 bn decrease in financial investments is attributable in equal parts to domestic financial investments, which were down CHF 3 bn, and foreign financial investments, which were down CHF 2.5 bn. Amounts due from securities financing transactions showed the largest relative increase with 16.3% This was primarily driven by domestic securities financing business, which rose by 84.7% year-on-year to CHF 38.5 bn.
Fundamental changes in asset breakdown since 2011
The breakdown of assets has changed markedly over the past decade. Liquid assets increased massively from CHF 259 bn in 2011 to CHF 760.6 bn at the end of 2021 in spite of negative interest rates. This was caused by a number of factors. The SNB’s interventions to counteract the Swiss franc’s strength played a significant role as the bank’s purchases of foreign currencies caused counterparties’ sight deposits denominated in Swiss francs to increase. In addition to this, low interest rates made the opportunity cost of holding cash minimal, so the banks placed large quantities of it in sight deposits with the SNB, causing these to grow by a further 4.4% to CHF 623.5 bn in 2021. Domestic and foreign mortgage loans also rose steadily between 2011 and 2021 from CHF 809.4 bn to CHF 1,134.9 bn. Their share of total assets edged up from 29% at the end of 2011 to 31.6% at the end of 2021. This was also due to the persistently low level of interest rates, which bolstered demand for real estate. Demand for residential properties was fuelled in 2020 and 2021 by the pandemic and in particular by multiple lockdowns. Amounts due from banks made up 21.5% of total assets in 2011 but just 7% in 2021. This reduction was caused by, among other things, the banks deliberately scaling back this asset item in order to reduce interdependencies with other institutions. At the same time, it is also linked to stricter regulatory requirements in terms of capital adequacy.
Domestic lending volume
The volume of domestic lending increased by around 2.8% in 2021. Mortgage loans, most of which are granted to private households, make up the bulk of the Swiss lending business with a share of 85.9%.
The volume of outstanding domestic loans came to CHF 1,294.2 bn in 2021. This figure was made up of CHF 182.6 bn in secured and unsecured loans to customers (corporate, public-sector and consumer loans) and CHF 1,111.6 bn in mortgage loans. Overall domestic lending was up 2.8% relative to 2020, which is in line with the trend observed in recent years. Total mortgage loans have increased by CHF 313.8 bn since 2011, with their share of domestic lending rising from 83.6% to 85.9%. While secured loans grew by CHF 4.4 bn in 2021, unsecured loans showed a fall of CHF 5.6 bn.
Total outstanding mortgage loans grew by 3.4% to CHF 1,134.9 bn in 2021. The vast majority (CHF 1,111.6 bn) was attributable to domestic customers. The share of fixed-rate mortgages was 81.7%. The average interest rate on outstanding domestic mortgage loans fell from 1.28% to 1.21%. Mortgages with a term of more than five years have become more popular over time. Their share was just 16.6% in 2011, but it had risen to 28.6% in 2021. In terms of volume, two thirds of all new mortgages were granted to private households at the end of 2021. The cantonal banks’ overall share of the domestic mortgage loan market was 37.8% at the end of 2021, roughly in line with the year-back figure. They were followed by the big banks with 26.9%. In recent years, the cantonal and Raiffeisen banks in particular have increased their shares of the domestic mortgage loan market, whereas the big banks and the regional and savings banks have lost market share. Broken down by lending group, 93% of domestic mortgage loans were categorised as senior in 2021. This group comprises mortgages covering up to two thirds of the property’s market value. No relevant differences between the various bank categories can be discerned. The high share of senior mortgages probably indicates that mortgage lenders are continuing to pursue cautious lending policies. The SBA revised its Guidelines on minimum requirements for mortgage loans in 2019, introducing stricter rules for investment properties.35
In 2021, amounts due in respect of customer deposits accounted for more than half of all liabilities. There was an increase in sight and time deposits compared with the previous year, while other customer deposit and trading portfolio liabilities declined.
The balance sheet item “amounts due in respect of customer deposits” – comprising sight deposits, time deposits and other customer deposit liabilities – rose by CHF 90.5 bn or 4.6% in 2021. This item made up 57.5% of the balance sheet total at the end of last year. The increase was due to growth of around 10% in both sight and time deposits. After falling in 2020, time deposits are moving back towards their level from 2019. Other customer deposit liabilities declined by 8.5% year-on-year. Amounts due to banks fell by CHF 5.3 bn in 2021. This was mainly due to a CHF 6.2 bn fall in amounts due to banks in Switzerland. Amounts due to banks abroad grew by around CHF 1 bn. Trading portfolio liabilities decreased by CHF 2.3 bn to CHF 32 bn, mainly as a result of a CHF 2.9 bn fall in the big banks’ foreign liabilities. The balance sheet item “bond issues, central mortgage institution loans and cash bonds” showed an increase of CHF 3.5 bn, thanks primarily to growth of CHF 14.2 bn in bond issues and central mortgage institution loans in Switzerland. Foreign bond issues and central mortgage institution loans were down CHF 9.7 bn. Most of the domestic increase came from the cantonal and Raiffeisen banks, whereas the big banks were predominantly responsible for the drop in the foreign figure, having posted a fall of CHF 9.6 bn. Only the cantonal and big banks report foreign bond issues and central mortgage institution loans.
Breakdown of liabilities over time
The share of liabilities made up by amounts due to banks fell from 15.7% in 2011 to 11.6% in 2021. As already explained above on the asset side, this shows that interbank business, particularly with banks in Switzerland, has declined over time. During the same period, sight deposits rose from CHF 640.1 bn to CHF 1,281 bn. They constitute the largest liability item by far as at the end of 2021 with a 35.7% share. Meanwhile, the share made up by time deposits fell from 12% in 2011 to 7% in 2021. Low interest rates make time deposits less attractive compared with sight deposits, leading to a rotation out of the former and into the latter.
Balance sheet growth in first half of 2022
The aggregate balance sheet total grew by 1.3% in the first five months of this year. Amounts due from securities financing transactions and other assets showed the strongest growth on the assets side, amounts due to banks and trading portfolio liabilities on the liabilities side.
The aggregate balance sheet total of the banks in Switzerland increased by 1.3% to CHF 3,828.4 bn in the first five months of 2022. Balance sheet growth in 2021 had been driven by sharp rises in liquid assets and amounts due from securities financing transactions, whereas other assets had fallen significantly. In the first five months of 2022, amounts due from securities financing transactions (up CHF 23.8 bn or 12.6%), other assets (up CHF 21.5 bn or 9.2%) and financial investments (up CHF 14.9 bn or 6.1%) were once again the best performing asset items. Trading portfolios in securities and precious metals were down CHF 16.4 bn or 8.2%, probably due to the bear market and rising market volatility since the end of 2021. Liquid assets grew by CHF 0.8 bn or 0.1% between January and May. Mortgage loans appear to be matching last year’s growth in 2022 as demand for real estate remains high. The turnaround in interest rates has improved the gross interest margin in new business.
The increase in liabilities on the balance sheet was driven mainly by a rise of CHF 14.6 bn or 2.9% in amounts due to banks. Trading portfolio liabilities, meanwhile, grew by CHF 1.8 bn or 5.3%. After sight and time deposits both rose in 2021, time deposits were out in front in the first half of 2022 with an increase of CHF 29.4 bn or 10.9%, while sight deposits grew by CHF 18.7 bn or 1.4%. Time deposits have thus regained some appeal. The SNB’s interest rate decision in June can be expected to lend them an additional boost and cause a rotation of out sight deposits and into time deposits.
33 SNB (2022). Swiss Financial Accounts. Financial assets of households, 2021.