Balance sheet
The aggregate balance sheet total of all banks in Switzerland contracted by 4.9% in 2023. This trend, which has been ongoing for some years, is mainly driven by the big banks and largely caused by shifts in customer funds.
The balance sheet total of banks in Switzerland declined again in 2023, by 4.9% from CHF 3,339.7 bn to CHF 3,177.0 bn. Mortgage loans remained the largest item by far on the asset side, with liquid assets the only other item to grow compared with 2022, up 2.4%. The remaining asset items fell back, notably amounts due from customers (mainly abroad) and banks, down CHF 77.4 bn and CHF 37.1 bn respectively. On the liabilities side, there was a clear continuation in the trend of sharp declines in sight deposits (down 23.8%) and increases in time deposits (up 50.2%). Despite this shift, amounts due in respect of customer deposits fell by 4.9%. There was a large drop at the big banks, which can be traced back to outflows of customer assets following the Credit Suisse takeover. The volume of domestic lending edged up once again, by 1.9%, thanks to domestic mortgage loans, which increased by 2.3% to a new high of CHF 1,179.2 bn. Other loans, both secured and unsecured, saw a slight decline of 1.0%. As in 2022, the cantonal banks had the largest slice of the domestic mortgage market, at 39.1%, followed by the big banks at 24.9%.
iStock.com/Jeremy Poland
Trends in 2023
Balance sheet trends by bank category
The aggregate balance sheet total of all banks in Switzerland fell by 4.9% in 2023. The big banks were especially hard hit, accounting for almost 65% of the decline. By contrast, the Raiffeisen banks saw an increase of 5.9%, making them one of the few bank categories to witness positive growth. The cantonal banks’ balance sheet total fell by a minimal 0.5%. The big banks still held on to the largest share of the aggregate balance sheet total with 40.0%, compared with 41.2% in 2022 and 44.0% in 2021.
Figure 11
Assets
Figure 12
Figure 13
Mortgage loans remain the largest asset item, making up 37.8% of the total, a further increase year-on-year. Liquid assets stabilised in 2023 after a sharp drop in 2022, and recorded the largest relative growth on the asset side, up 2.4%. Amounts due from customers and banks were the biggest contributors to the decline in overall assets.
Domestic and foreign mortgage loans rose CHF 25.7 bn year-on-year in 2023, from CHF 1,174.5 bn to CHF 1,200.2 bn. Higher interest rates led to slower growth compared with 2022, but demand for real estate continues to be high. Mortgage loans thus remained one of the largest asset items for banks in Switzerland last year, accounting for some 37.8% of the total. Their share rose due to an increase in the loan volume while balance sheets were being shortened as a consequence of a decline in almost all the other asset items. Liquid assets, the second most important asset item on Swiss banks’ balance sheets, were the only other category to record growth, up CHF 12.6 bn or 2.4%. This followed a sharp drop of CHF 226.5 bn in 2022 corresponding to a marked decline in banks’ sight deposits at the SNB. Both appeared to stabilise in 2023: liquid assets recorded modest positive growth, while banks’ sight deposits at the SNB fell by 3.1%, markedly less than in 2022. The growth in liquid assets is probably due in part to higher liquidity requirements at Credit Suisse at the beginning of the year. The decline in sight deposits can be explained by higher benchmark interest rates and the resulting increase in the opportunity cost of holding liquidity. Amounts due from customers fell by CHF 77.4 bn or 13.8% in 2023. Noticeably, the overall decline was almost entirely attributable to amounts due from customers abroad, which dropped by CHF 75.6 bn (20.2%). This fall was mainly in evidence at the big banks, and may be due to companies establishing a second banking relationship abroad following the takeover of Credit Suisse. Amounts due from other banks likewise fell, by CHF 37.1 bn or 16.5%, because of a 19.5% drop in amounts due from foreign banks and a CHF 14.4 bn (13.4%) decline in amounts due from domestic banks. Amounts due from securities financing transactions were also down 16.6% in 2023. Financial investments likewise declined, after rising sharply in 2022: they were down 6.8%, with domestic financial investments decreasing by 13.7% and those abroad stabilising, up 0.2%. The balance sheet shortening is largely attributable to the big banks. Domestically oriented banks either extended their balance sheets (in the case of the Raiffeisen banks), or kept them constant (as with the regional banks). Only the cantonal banks reduced their balance sheet totals, which contracted by 0.5%.
Breakdown of assets over time
The breakdown of assets has changed substantially over the past decade. Liquid assets rose sharply between 2013 and 2021, from CHF 399.4 bn to CHF 760.6 bn. There were two reasons for this: firstly, the SNB’s interventions to bolster the franc by buying foreign currency and thus increasing its counterparties’ sight deposits in CHF; and secondly, low interest rates, which meant that with the opportunity cost of holding cash minimal, banks placed large sums in sight deposits with the SNB. Liquid assets saw their first sharp decline in 2022 (down 29.8%) following interest rate hikes, before stabilising in 2023 (up 2.4%). There was also a trend reversal in amounts due from customers, which rose steadily from CHF 564.7 bn in 2013 to CHF 626.6 bn in 2021, but have since fallen back by 23.0% up to 2023, largely because of changes in amounts due from customers abroad. Amounts due from banks made up 16.2% of total assets in 2013 but just 5.9% in 2023. Banks have been deliberately scaling back this asset item in order to reduce interdependencies with other institutions. Domestic and foreign mortgage loans rose continually, from CHF 844.0 bn in 2013 to CHF 1,200.2 bn in 2023, boosting their share of total assets from 31.0% to 37.8% at the same time. Years of low interest rates led to a rise in property sales and prices. Despite the negative impact of the current interest rate turnaround, demand for real estate remains high, with shortage of supply and a very low level of construction activity continuing to support prices.
Domestic lending volume
The volume of domestic lending increased by around 1.9% in 2023. Mortgage loans, most of which are granted to private households, make up the bulk of the Swiss lending business with a share of 86.6%.
The volume of outstanding domestic loans came to CHF 1,362.0 bn in 2023, with CHF 182.8 bn attributable to secured and unsecured loans to customers (corporate, public-sector and consumer loans) and CHF 1,179.2 bn to mortgage loans. Overall domestic lending was up 1.9% in 2023, slightly below the average for the last five years. In total, mortgage loans have risen by CHF 309.4 bn since 2013, with their share of domestic lending up from 83.2% to 86.6%.
Figure 14
Total outstanding mortgage loans increased by 2.2% in 2023, to CHF 1,200.2 bn. The vast majority of this figure (CHF 1,179.2 bn) was attributable to domestic customers. Fixed-rate mortgages accounted for 73.4%, down 3.6 percentage points year-on-year. According to the Federal Office for Housing, the average interest rate on outstanding domestic mortgage loans rose from 1.33% to 1.72% in 2023. Consequently, growth in mortgage loans was below average compared with recent years. In a multi-year comparison, mortgages with a term of more than five years have become more popular, with their share rising steadily from 22.5% in 2013 to 27.1% in 2022. This was followed in 2023 by a marked fall to 24.7% as a result of interest rate hikes and growth in variable-rate new mortgages. In terms of volume, 58.7% of all new mortgages were granted to private households at the end of 2023, this figure having been mostly above 66% up to the end of 2022. During this period, the volume of owner-occupied residential properties for which new mortgages were granted to private households fell by 4.3%, while the volume of residential properties rented out by private households dropped by 5.1%. By contrast, the volume of residential properties rented out by companies rose by 6.3%. The cantonal banks’ overall share of the domestic mortgage loan market was 39.1% at the end of 2023, slightly higher than the previous year’s figure. The big banks were in second place, with 24.9%. 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 out. This trend continued in 2023, with the big banks falling by 1.2 percentage points while the cantonal and Raiffeisen banks gained 1 percentage point. Broken down by lending group, 94.3% of domestic mortgage loans were categorised as senior in 2023. This group comprises mortgages covering up to two thirds of the property’s market value. The high proportion of senior mortgages suggests that 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.
Figure 15
Figure 16
Liabilities
Figure 17
Figure 18
In 2023, more than half of liabilities consisted of amounts due in respect of customer deposits. Time deposits were up 50.2%, a sharp increase year-on-year, set against falls in sight deposits (down 23.8%) and most of the other liability items. This trend reflects a shift by customers towards long-term investments in response to the interest rate turnaround.
The balance sheet item “amounts due in respect of customer deposits” – comprising sight deposits, time deposits and other customer deposit liabilities – fell by CHF 91.9 bn, or 4.9% in 2023. This item made up 56.6% of the balance sheet total at the end of last year. The decline was due to a sharp (23.8%) drop in sight deposits, which the strong growth of CHF 165.2 bn (50.2%) in time deposits was not sufficient to cancel out. It can be partially explained by a rotation into time deposits in response to higher interest rates and probably also by uncertainty leading to outflows of customer funds from Credit Suisse. The most noticeable drop in recent years has been in sight deposits from abroad, as a result of which domestic assets have risen as a proportion of the total since 2021, from 59.8% to 73.6%. Amounts due to banks fell by CHF 22.4 bn in 2023, mainly due to a CHF 55.1 bn drop in amounts due to foreign banks. By contrast, amounts due to domestic banks grew by around CHF 32.7 bn. The main contributor was the big banks, which were up CHF 37.0 bn. The cantonal banks saw declines in amounts due to banks both abroad and in Switzerland. Trading portfolio liabilities were CHF 3.2 bn lower at CHF 28.0 bn. Bond issues, central mortgage institution loans and cash bonds were down by CHF 15.5 bn, primarily on the back of a CHF 22.4 bn drop in foreign bond issues and central mortgage institution loans, set against a modest increase of CHF 4.2 bn in the domestic figure. The decline in the foreign figure is due to the big banks, since they are the only ones to hold foreign bonds and central mortgage institution loans.
Breakdown of liabilities over time
The proportion of liabilities accounted for by amounts due to banks fell from 14.3% in 2013 to 12.2% in 2023. As with the assets side, this shows that banks’ interdependencies, particularly with other banks in Switzerland, have been reduced over time. Having dropped sharply over the last two years, sight deposits rose once again, to CHF 823.9 bn, almost on a par with the 2013 figure of CHF 827.2 bn. They remain the largest liability item, accounting for 25.9% at the end of 2023. Time deposits made up 15.6% in 2023, up from 9.9% in 2022 and almost twice as high as in 2013, having mostly been below 10% in the intervening years. Low interest rates made time deposits less attractive than sight deposits, leading in many cases to a rotation out of the former and into the latter. This trend has reversed since 2022 on account of the interest rate turnaround, with large-scale shifts back into time deposits.
Balance sheet growth in the first half of 2024
Swiss banks’ aggregate balance sheet total grew by 2.9% in the first half of 2024, making up for the decline seen in 2023. On the asset side, amounts due from banks, amounts due from securities financing transactions and trading portfolios in securities and precious metals saw strong gains, while liquid assets and financial investments slipped back. As regards liabilities, bonds, central mortgage institution loans and cash bonds fell, while amounts due to banks and trading portfolio liabilities rose sharply.
The aggregate balance sheet total of banks in Switzerland increased by 2.9% to CHF 3,380.8 bn in the first five months of 2024, making up for the sharp decline in 2023. One main reason for this is probably the further rise in the capital markets, which is reflected in an 11.4% growth in trading portfolios in securities and precious metals and an 8.6% increase in amounts due from securities financing transactions. Another is the effect of adjustments to the banking statistics due to the migration of the accounting standards and account structure previously applied by Credit Suisse entities into those of the UBS entities. This has led to strong (24.5%) growth in amounts due from banks. Mortgage loans moved upwards in the first months of 2024, increasing by CHF 15 bn or 1.2%. Although higher interest rates put the brakes on demand for property, it remained strong thanks to sound household budgets and an increasing willingness to pay. Liquid assets fell by a further 3.8%, continuing the marked reduction seen over recent years.
The increase in Swiss banks’ liabilities is largely due to growth in amounts due in respect of customer deposits (up CHF 73.7 bn or 4.0%) and amounts due to banks (up CHF 79.5 bn or 17.8%), but also to statistical effects related to the Credit Suisse takeover, such as differing valuations of transferred assets. Nevertheless, the return to growth following a decline in 2023 underscores that banks in Switzerland remain in robust shape even after Credit Suisse’s demise. Trading portfolio liabilities also rose, by 15.6%. The only substantial falls were in bonds, central mortgage institution loans and cash bonds, which fell by CHF 55.2 bn or 14.6% in the first half of the year. Here again, though, a likely cause is adjustment effects in the banking statistics. Having dropped sharply since 2021, sight deposits stabilised somewhat in the first half of 2024, declining by an, in comparison to previous years, moderate 2.5%. Time deposits saw further strong growth, up 15.2% or CHF 76.9 bn, illustrating their continued attractiveness as interest rates remain positive despite the most recent rate cuts.