Zürcher Kantonalbank achieves very pleasing consolidated profit – the canton and municipalities participate more than ever before
Media release from 7 February 2025
- At CHF 1,289 million, consolidated profit before taxes is 3.4% above the previous year (CHF 1,246 million); SNB interest rate moves and excellent securities and investment business impact the result
- Result from commission business and services increases by 8.9% year-on-year and exceeds the billion-euro mark for the first time
- As expected, the net result from interest operations will not be able to match 2023, which was an exceptional year
- Client assets rise by around 16% to CHF 520.8 billion; another substantial net new money inflow (CHF 29.8 billion) in managed assets contributed to this growth
- After the exceptional year 2023, Zürcher Kantonalbank achieves its second-strongest operating result in history – the canton and municipalities participate more than ever in the profit with CHF 562 million
- The bank has a strong capitalisation; the figures significantly exceed the regulatory minimum requirements
In the 2024 financial year, Zürcher Kantonalbank generated consolidated profit before taxes totalling CHF 1,289 million (+3.4% compared to the previous year). Taking into account the OECD minimum tax levied for the first time in 2024, this resulted in a total tax expense of CHF 168 million, which is significantly higher than the previous year’s figure of CHF 7 million. Accordingly, the consolidated profit after tax amounted to CHF 1,120 million and is CHF 118 million or 9.5% below the previous year. While the net result from interest operations and income from trading operations were, as expected, unable to match the exceptionally strong prior-year figure, income from commission business and services rose by 8.9% and exceeded the billion-euro mark for the first time.
“We remain committed to our strategy despite the changed market environment: We want to further expand our leading position in the Greater Zurich Area in our core segments of retail clients and SMEs, strengthen our national position in selected segments and capitalise on international opportunities”, says Urs Baumann, CEO of Zürcher Kantonalbank. “In this way, we are diversifying our earnings base in line with our proven risk policy and at the same time increasing the security and stability of our bank. I am delighted that we were able to achieve a very pleasing result with this strategy in a challenging environment.”
The Canton of Zurich and the municipalities participated in the bank’s profit with a record figure of CHF 562 million. In addition to dividends to the canton and the municipalities, this included the OECD minimum tax of CHF 156 million, which went entirely to the Canton of Zurich, as well as compensation for the state guarantee of CHF 31 million. The total participation was CHF 4 million higher than the previous year (CHF 558 million). (This amount includes the profit distribution (dividend) of CHF 528 million in 2023 as well as compensation for the state guarantee of CHF 30 million.) In addition, Zürcher Kantonalbank allocated CHF 140 million in the 2024 financial year as part of its statutory public service mandate – whether in the context of over 400 sponsorship commitments, to promote sustainable investment and financing offers or for microloans to SMEs.
Pleasing net interest income despite declining income from deposit business
Operating income in 2024 totalled CHF 3,088 million, 3.3% below the previous year’s figure (CHF 3,194 million). In interest operations – the bank’s most important income stream – a pleasing gross interest income of CHF 1,737 million was achieved despite the significant cuts in key interest rates by the Swiss National Bank (SNB). While both the interest income in the lending and mortgage business as well as the volume developed favourably, declining interest income in the deposit business was the driving factor behind a result below the previous year’s high figure (CHF 1,870 million).
After taking into account default-related value adjustments and losses from interest operations totalling CHF 57 million (previous year: CHF 49 million), a net result from interest operations of CHF 1,680 million was achieved (previous year: CHF 1,821 million). The mortgage portfolio increased by 5.7% to CHF 106.6 billion. The bank achieved this growth while maintaining its high quality standards in terms of borrowers and financed properties and without a corresponding expansion of its balance sheet.
Net income from commission business and services exceeds the billion-euro mark
Commission business and services performed especially well in 2024: the result in the bank’s second-largest income stream increased by 8.9% to CHF 1,024 million (previous year: CHF 940 million). Commission income from the securities and investment business increased by 12.8% to CHF 1,152 million. The record-high result was largely due to the sharp rise in assets under management over the last two years in a favourable stock market environment.
The bank’s third income stream, the trading business, came in at CHF 353 million and therefore, as expected, could not match the previous year’s very strong result (CHF 415 million). Market momentum in the 2024 financial year was subdued compared to 2023. One exception was the result from client-oriented trading in equities and structured products (CHF 79 million), which exceeded the previous year’s figure by 41.6%.
Targeted investments in growth and innovation
Operating expenses increased by 3.1% year-on-year to CHF 1,731 million and are in line with expectations. The cost/income ratio was 55.0% (previous year: 51.8%) and was still below the target range. The rise reflects the planned increase in investments in growth and innovation. Personnel expenses rose by 3.7% to CHF 1,223 million. This increase is mainly attributable to higher headcount, which compared to the previous year rose by 4.3% FTEs to 5,779 FTEs after adjusting for part-time positions. At CHF 508 million, operating expenses were up 1.9% on the previous year (CHF 499 million). This can be explained in particular by the higher costs for information and communication technology associated with the increased headcount. Both personnel and operating expenses increased in line with expectations and in the course of implementing the bank’s strategy.
At CHF 72 million, expenses in connection with value adjustments on participations and depreciation and amortisation of tangible fixed assets and intangible assets were slightly below the previous year’s figure (CHF 75 million). The line item “Changes to provisions and other value adjustments and losses” shows a provision of CHF 8 million (previous year: release in the amount of CHF 28 million). This change is mainly due to the development of provisions for default risks on credit lines granted, for which larger releases were made in the previous year.
Higher tax expense due to OECD minimum tax
In 2024, Zürcher Kantonalbank achieved a very pleasing consolidated profit before taxes of CHF 1,289 million, which is CHF 43 million or 3.4% above the previous year, whereby reserves for general banking risks totalling CHF 225 million were created at that time to strengthen equity.
Tax expense for the 2024 financial year amounted to CHF 168 million and significantly exceeded the previous year’s figure (CHF 7 million). The increase is primarily due to the introduction of the OECD minimum tax. This will be fully credited to the canton when determining the dividend to the canton and municipalities in accordance with the Cantonal Banking Act on Zürcher Kantonalbank. In 2024, the OECD minimum tax amounted to CHF 156 million. The consolidated profit after tax stood at CHF 1,120 million and was 9.5% below the previous year’s figure (CHF 1,238 million). The return on equity totalled 8.0%, taking into account the OECD minimum tax, compared to 9.3% in the previous year (without the OECD minimum tax).
Strong growth in client assets
Client assets amounted to CHF 520.8 billion as at 31 December 2024 (previous year: CHF 450.8 billion), of which CHF 457.3 billion related to assets under management (previous year: CHF 395.8 billion). In terms of assets under management, this is due on the one hand to a significant and broad-based net new money inflow totalling CHF 29.8 billion (previous year: CHF 27.4 billion). In addition, the positive market performance and other effects totalling CHF 31.7 billion (previous year: 12.6 billion) contributed to strong growth. In 2024, Zürcher Kantonalbank gained around 30,900 new clients – thanks in part to its free everyday banking service ZKB Banking.
Leading role in the Swiss capital market business
Zürcher Kantonalbank is the leading Swiss partner for capital market transactions (issues of debt capital and equity instruments). In the equity capital market business, the bank acted as lead manager for 14 transactions of issuers listed on the SIX Swiss Exchange and in other functions and on other exchanges for another nine transactions. On the debt capital market, Zürcher Kantonalbank managed the issue of 117 bonds worth CHF 21.5 billion. Zürcher Kantonalbank is the market leader in the CHF domestic segment. Additionally, 44 transactions worth CHF 10.0 billion were carried out for the central issuing body Pfandbriefzentrale of the Swiss cantonal banks AG. By supporting Swiss companies, cantons, cities and municipalities in raising capital, Zürcher Kantonalbank fulfils an important economic function.
Significantly above regulatory requirements thanks to strong capital and liquidity situation
At CHF 202.6 billion, the bank’s balance sheet remains almost unchanged from the previous year (CHF 201.3 billion), reflecting the bank’s responsible growth. The bank holds around a quarter of its total assets in the form of highly liquid assets, mainly in the form of SNB deposits. Zürcher Kantonalbank continues to have an extremely strong capitalisation. The risk-based TLAC ratio (total loss-absorbing capacity) was 25.7% (previous year: 26.8%), which is significantly higher than the capital adequacy requirements of 19.7% as a systemically important bank. The unweighted TLAC ratio (leverage ratio) rose from 9.4% to 9.8% and is also well above the required 6.4%. All liquidity ratios remain at a very high level, comfortably fulfilling the regulatory requirements. For example, the liquidity coverage ratio was 142% (previous year: 147%) and the net stable funding ratio (NSFR) 116% (previous year 117%).
The rating agencies Fitch, Moody’s and Standard & Poor’s left their ratings for Zürcher Kantonalbank unchanged at AAA and Aaa, respectively. Zürcher Kantonalbank is also one of the safest universal banks in the world on a stand-alone basis (i.e. without taking any support from the Canton of Zurich into account), as evidenced by the stand-alone rating of aa- (Standard & Poor’s).
Outlook
“The macroeconomic environment remains challenging. We expect competition in the Swiss banking centre to intensify and pressure on margins to increase in 2025. The interest rate level, driven by possible SNB interest rate cuts, could also reduce expected interest income. Thanks to our strategy and our diversified, long-term business model, we still expect to generate an attractive consolidated profit in 2025”, says Urs Baumann.