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IFBC Study: Swiss banks create more value
Zurich (ots) - Clear owner strategies and systematic equity management are prerequisites for sustainability
In 2006, many Swiss banks increased the value they create for their owners. However, over a seven-year observation period only a small number succeeded in turning their capital to profitable use and achieving profitable growth. These are the findings reached by the Zurich corporate consultancy firm IFBC in its second study on "Value creation in the Swiss banking industry" (Wertschaffung in der Schweizer Bankenbranche) which examined more than 40 Swiss banks belonging to the four categories of cantonal banks, regional banks, major banks and private banks.
The gratifying economic environment and the positive performance of the financial markets in 2006 brought record results for many Swiss banks and led to a marked improvement in value creation for the benefit of owners. The biggest increase in value in 2006 was posted by the major banks and in particular UBS. A clear improvement is also in evidence in the case of the private banks, which recorded strong growth - partly thanks to the positive performance of the stockmarkets - while at the same time keeping their costs under control. Another point which deserves to be highlighted is the value creation achieved by the cantonal banks over the past year. 14 banks succeeded in generating a return on equity which exceeded their equity costs and 15 institutions made progress in comparison with the previous year. In the regional banks category, it was mainly the smaller players that achieved an increase in value creation, while their larger counterparts were not quite able to maintain their performance levels.
Over a longer observation period the study presents a less rosy picture - with only a small number of Swiss banks creating value for their shareholders on a sustained basis. In addition to the two major banks and the majority of private banks, this includes the four cantonal banks of Basel, St. Gallen, Aargau and Schwyz, the Raiffeisen Group and Migrosbank.
The study also concludes that capital efficiency - one of the key factors involved in value creation - is not recognized as such and exploited (or at any rate not sufficiently) by many banks. According to IFBC Managing Partner Thomas Vettiger, who led the study, this confirms the experience that the legitimate financial concerns of the owners of various banks are still not given sufficient consideration. On the strategic level of the board of directors or bank council, options for action in connection with the use of capital and capital repayments should be periodically evaluated with the focus on value creation. Regardless of a bank's legal form and specific operating environment, its management must be guided by the basic economic principles which apply and take decisions accordingly.
IFBC ( www.ifbc.ch)
IFBC is a corporate consultancy firm focusing on financial management. It supports national and international companies in the implementation of a value-oriented management policy in the areas of Corporate Finance and Corporate Treasury as well as in special matters of legal interpretation.
ots Originaltext: IFBC