Swiss regional banks among Europe’s strongest

S&P considers the high credit quality both of cantons and of cantonal banks to be stable Keystone

Several Swiss cantonal banks have received glowing reviews in an industry report published by Standard & Poor's (S&P) ratings service.

S&P said it expects the cantonal banks’ strong financial and business profiles to be sustained.

The report said this vote of confidence was based on “the stability of underlying revenues, cost control, the sound shape of Swiss property markets and continued earnings retention”.

“Swiss cantonal banks have been unfazed by the low interest and low growth environment of recent years, making their performances all the more remarkable,” S&P’s credit analyst Bernd Ackermann said in a statement.

“It also demonstrates that well-managed regional banks can successfully cope with inherent restrictions such as limited business and regional diversification and growth opportunities,” he added.

Cantonal backing

Seven out the nine rated Swiss cantonal banks are explicitly guaranteed by their cantons, enhancing their strong credit quality. The other two, BCV and BCGE, benefit from the implicit support of their cantons.

S&P expects the high level of ratings stability for the sector to continue as changes to the existing support mechanisms and ownership structures are unlikely in the medium term.

According to the global ratings agency, the strong fundamentals of most rated cantonal banks benefit from the banks’ strong regional franchise, good cost-to-income ratios, risk-averse strategies and willingness to maintain exceptionally high levels of pure capital.

S&P assigned its first ratings to a Swiss cantonal bank in 1994, and today rates nine of the largest banks out of a total of 24.

The Swiss banking industry as a whole enjoys a good reputation among the Swiss and personal satisfaction with banking service is high.

An annual survey published last month showed that 86 per cent of respondents had a “positive” or “very positive” opinion of their own main bank.

swissinfo with agencies

Key facts

The report by Standard & Poor’s Ratings Services is entitled “Swiss cantonal banks firm up intrinsic profiles, ranking them among Europe’s strongest banks”.
S&P rates nine of the largest Swiss cantonal banks, out of a total of 24.
Zurich Cantonal Bank and Basel Agricultural Cantonal Bank received the top ‘AAA’ rating.