Balance sheet

The aggregate balance sheet total of all banks in Switzerland grew by 4.5% in 2020. The SNB’s intervention on the currency market affected the composition of the commercial banks’ assets. The banks’ sight deposits with the SNB showed a marked increase compared with the previous year and thus remain at a very high level.

The balance sheet total of the banks in Switzerland grew further in 2020, increasing by 4.5% from CHF 3,317.6 bn to CHF 3,467.3 bn. The cantonal banks accounted for half of this increase. On the assets side, mortgage loans remain the largest item by far, while liquid assets posted strong growth of 26.1% in 2020. On the liabilities side, there was a sharp increase of 29.2% in sight deposits last year, whereas time deposits were down 16%.

The volume of domestic lending continued to rise, with secured loans increasing by almost 20% to a new high of CHF 84.3 bn. As in 2019, the cantonal banks had the largest share of the domestic mortgage market with 37.3%, followed by the big banks with 27.5%.

Trends in 2021

Balance sheet total grows in first half of 2021

Trends in 2020

The aggregate balance sheet total of all banks in Switzerland grew by 4.5% in 2020. As in 2019, the cantonal banks posted the strongest growth in absolute terms. They were responsible for almost half of the total increase. The big banks have the largest share of the aggregate balance sheet total with 45%.

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Assets

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Mortgage loans remain the largest asset item, making up 31.7% of the total. Liquid assets contributed substantially to the growth in total assets in 2020, increasing by 26.1% year-on-year to CHF 141.7 bn. Banks’ sight deposits with the SNB grew almost as strongly (by 24.1%).

Domestic and foreign mortgage loans rose by CHF 33.3 bn from CHF 1,064.7 bn in 2019 to CHF 1,098.0 bn in 2020 and thus remained the largest asset item for banks in Switzerland last year with a share of around 31.7%.

Liquid assets rose sharply (by CHF 141.7 bn or 26.1%) in 2020 and constitute the second-largest asset item. This increase was linked to strong growth of 24.1% in banks’ sight deposits with the SNB. All categories apart from “other banking institutions” increased their sight deposits. The cantonal banks in particular played a key role in the trend, increasing theirs by almost 41%. One reason for this strong growth in the crisis year that was 2020 is the increase in the exemption threshold factor for sight deposits banks hold with the SNB.

Amounts due from customers fell slightly (by 0.2%) to CHF 1.5 bn in 2020. Making up 17.8% of total assets, they have dropped to third place in the order of asset items.

Amounts due from banks rose by a weak CHF 0.9 bn or 0.4% to CHF 253.3 bn. This was the net result of a 5.1% decline in amounts due from domestic banks and a CHF 5.6 bn (3.5%) increase in amounts due from foreign banks.

The CHF 13.1 bn increase in financial investments is almost entirely attributable to domestic financial investments, which rose by CHF 12.2 bn. As regards amounts due from securities financing transactions, the domestic and foreign trends diverged. Whereas the domestic total increased slightly, the foreign total fell by around CHF 32 bn.

Fundamental changes in asset breakdown since 2010

The breakdown of assets has changed markedly over the past decade. Liquid assets increased massively between 2010 and 2020 – from CHF 106.1 bn to CHF 684.6 bn. This was caused by a number of factors. The SNB’s intervention 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. Despite the fact that negative interest rates have been in place since January 2015, the banks stepped up their sight deposits with the SNB by a further 24.1% year-on-year to CHF 597.2 bn in 2020.

Domestic and foreign mortgage loans also rose steadily between 2010 and 2020 from CHF 767.1 bn to CHF 1,098.0 bn. Their share of total assets climbed from 28.3% at the end of 2010 to 31.7% at the end of 2020. This was also due to the persistently low level of interest rates, combined with the fact that demand for residential properties was bolstered in 2020 (and continues to be in 2021) by the pandemic and in particular by multiple lockdowns.

Amounts due from banks made up 22.2% of total assets in 2010 but just 7.3% in 2020. This reduction was caused by, among other things, the banks deliberately scaling back this asset item in order to reduce interdependencies with other banks. 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 3.7% in 2020. Mortgage loans, most of which are granted to private households, make up the bulk of the Swiss lending business with a share of 85.4%.

The volume of outstanding domestic loans came to CHF 1,259.1 bn. This figure was made up of CHF 183.8 bn in secured and unsecured loans to customers (corporate, public-sector and consumer loans) and CHF 1,075.3 bn in mortgage loans. Overall domestic lending was up 3.7% relative to 2019, which is in line with the trend ob­served in recent years. Overall, mortgage loans have increased by CHF 338.4 bn since 2010, with their share of domestic lending rising from 82.3% to 85.4%, and thus remain the most important form of domestic lending by far. While secured loans grew by CHF 13.9 bn, mainly due to COVID-19 credits, unsecured loans showed a slight fall of CHF 1.2 bn in 2020.

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Total outstanding mortgage loans were 3.1% higher at CHF 1,098.0 bn. The vast majority of this (CHF 1,075.3 bn) was attributable to domestic customers. Some 75% of all mortgages were granted to private households. The share of fixed-rate mortgages was 81.5% in 2020. The average interest rate on outstanding domestic mortgage loans fell from 1.37% to 1.27%. Mortgages with a term of more than five years have become more popular over time. Their share was just 15.5% in 2010, but it had risen to 27.6% in 2020.

The cantonal banks’ overall share of the domestic mortgage loan market was 37.3% at the end of 2020, roughly in line with the year-back figure. They were followed by the big banks with 27.5%. 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, 92.9% of domestic mortgage loans were categorised as senior in 2020. 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.

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Liabilities

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In 2020, amounts due in respect of customer deposits accounted for more than half of all liabilities. There was a marked increase in sight deposits compared with the previous year, while time deposits and other customer deposit 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 158.8 bn or 8.7%. This item made up 56.9% of the balance sheet total at the end of last year. The strong growth was caused by a sharp rise of 29.2% in sight deposits, which offset the falls in the other two components.

Amounts due to banks fell by CHF 14.6 bn in 2020. This was almost exclusively due to a CHF 13.4 bn fall in amounts due to banks in Switzerland.

Trading portfolio liabilities decreased by CHF 2.9 bn to CHF 34.3 bn, mainly as a result of a CHF 2.6 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 12.7 bn, thanks primarily to growth of CHF 25.2 bn in bond issues and central mortgage institution loans in Switzerland. Foreign bond issues and central mortgage institution loans were down CHF 11.7 bn. Most of the increase came from the cantonal banks and the big banks, the only categories that 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 16.4% in 2010 to 12.1% in 2020. 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 571.2 bn to CHF 1,161.6 bn. They constitute the largest liability item as at the end of 2020 with a 33.5% share. Meanwhile, the share made up by time deposits fell from 13.3% in 2010 to 6.6% in 2020. Low interest rates make time deposits less attractive compared with sight deposits, leading to a rotation out of the former and into the latter. A key driver of the strong increase in demand deposits in 2020 is the record high savings rate as a result of the Corona measures.

Balance sheet total grows in first half of 2021

The aggregate balance sheet total grew by 3.0% in the first five months of 2021. Amounts due from securities financing transactions and amounts due from banks showed the strongest growth on the assets side, sight deposits and amounts due to banks on the liabilities side.

The aggregate balance sheet total of the banks in Switzerland increased by 3.0% in the first five months of 2021. This reflects the recovery in the real economy and the positive trend on the stock markets during the first half-year.

After the assets side was bolstered in 2020 primarily by a marked increase in liquid assets, amounts due from securities financing transactions (up 25.2%) and amounts due from banks (up 10.9%) showed the biggest rises in the first part of 2021. These effects are probably linked to market volatility and increased trading activity on the part of customers, which is prompting the banks to take up counter­positions. These two items showed only a weak rise and a fall respectively in 2020.

Liquid assets also increased slightly between January and May, albeit by rather less than in 2020 at 1.4%. Mortgage loans appear to be matching last year’s growth in 2021. Demand for real estate remains high. The pandemic has in fact prompted even stronger growth in the number of people wishing to own their own home and needing to finance it.

The increase in liabilities on the balance sheet was driven mainly by a 2.7% rise in amounts due in respect of customer deposits and a 7.3% rise in amounts due to banks. Trading portfolio liabilities also showed relatively strong growth, rising by 16.2% to CHF 40.0 bn. The economic recovery is also evident in sight deposits, which were up 5.6% in the first five months of 2021, and time deposits, which were up 3.6%. Time deposits have thus regained some appeal.