The number of private banks operating in Switzerland as of mid-year was five fewer than a year earlier at 96, a study by consultancy KPMG showed Tuesday.

The challenging market conditions were especially difficult for small private banks. Their sales collapsed by around 13 percent in 2020. In the study carried out by KPMG and the University of St. Gallen (HSG), small private banks are defined as those whose assets under management amount to less than 5 billion francs.

The large private banks have shown themselves to be more resilient to the coronavirus pandemic and despite difficult circumstances were even to increase their sales slightly in 2020 by 0.8 percent. Medium-sized private banks’ turnover fell 7.2 percent.

Unequal cash inflow

Investors' money was also unevenly distributed. In 2020, assets under management increased by 3 percent to just under 2.94 trillion Swiss francs ($3.22 trillion). This was mainly due to a 3.3 percent year-on-year growth in net new money to 94.5 billion francs.

Large private banks in particular were able to attract a great deal of new money. Around 95 percent of net new money was garnered by seven of the largest private banks. In total, 48 banks reported positive net new money and 35 negative.

Low interest rates, digitization

Above all, the low interest rates weighed on the banks’ results.

At the same time, small private banks are increasingly hitting up against their limits when it comes to digitization and increasing regulation. This combined with high pressure on margins and the need for economies of scale is driving consolidation.

Eight Mergers

Eight consolidation deals were announced between July 2020 and July 2021. At the same time, the number of private banks operating in Switzerland fell to 99 from 101. There are currently 96 private banks in Switzerland; and after the completion of the previously announced transactions there will probably be 93, the study said; and the trend is likely to continue.

«In our opinion, there is still a great need for consolidation, especially in the case of small and medium-sized private banks,» KPMG banking expert Christian Hintermann said in the press release on the study.

«We are therefore assuming that the level of mergers will remain high over the next 12 months.» Hintermann said he expects the number of Swiss private banks to shrink by another quarter in the medium term. In 2011 there were 158 private banks in Switzerland.