Zürcher Kantonalbank achieves half-year profit of CHF 487 million – the second highest in its history
Press Release from 27 August 2021 (Ad hoc announcement pursuant to article 53 LR SIX Exchange Regulation and section 16 BX Swiss)
- Income in commission and fee business reaches a record high CHF 449 million
- Customer assets grow by 8.3% to CHF 391.8 billion; excellent net inflow of new money of CHF 11.8 billion
- Slight decrease in operating income to CHF 1,268 million, largely compensated for by lower operating expenses
- Pleasing half-year result, surpassed only by the result for the first half of 2020 on the back of exceptionally high trading income
- Continued strong capital position, significantly exceeding regulatory minimum requirements
Zurich, 27 August 2021 – Zürcher Kantonalbank achieved a net profit of CHF 487 million in the first half of 2021. This is the second-highest half-year result in the bank’s history and was only surpassed by the net profit of CHF 537 million in the first half of 2020 – due primarily to exceptionally strong trading income.
“I am delighted that after the record figures for the first half of 2020, we are now once again able to present a very pleasing result,” stated Martin Scholl, CEO of Zürcher Kantonalbank. “This is a renewed confirmation of the effectiveness of our diversified and stable business model, even in challenging times.”
Operating income decreases slightly
In the first half of 2021, Zürcher Kantonalbank generated operating income of CHF 1,268 million. This 3.2% decrease compared to the same period of the previous year is mainly attributable to the trading business. At CHF 209 million, its result was significantly higher than the long-term average but it declined by CHF 64 million or 23,4% – falling below the level of trading income recorded in the exceptionally good first half of 2020, which was strongly influenced by corona-driven market volatility. The largest proportion of this decline occurred in the trading of bonds, interest and credit derivatives, with income decreasing by CHF 58 million compared to the first half of 2020.
The commission and fee business achieved a particularly strong performance, with income rising by 11.3% year on year to a record CHF 449 million. This reflected higher income from the securities and investment business – driven in particular by income from the funds business as well as from management and advisory fees.
In interest operations – which remain the most important pillar of the bank’s income – gross interest income rose by 1.9% year on year to CHF 638 million. The continued growth in lending volumes is offsetting the pressure on margins. Changes in value adjustments for default risks and losses from interest operations of CHF 38.1 million resulted in net interest income of CHF 600 million (–3% compared to the first half of 2020). This includes CHF 11 million of value adjustments for expected losses, which have to be recognised with effect from 2021.
The mortgage business – the main component of interest income – grew by 2.3% to CHF 89.7 billion in the first six months of the year. Despite strong volume growth, Zürcher Kantonalbank remains committed to its high standards of quality.
Lower operating expenses
The slight reduction in operating income was largely compensated for by lower operating expenses of CHF 737 million (first half of 2020: CHF 773 million). Personnel costs decreased by 6.5%, primarily reflecting the non-recurrence of the one-off anniversary payment made in the first half of 2020. However, general and administrative expenses were unchanged at CHF 210 million. As a result of the lower income base, the cost/income ratio rose to 56.4% (first half of 2020: 55.2%).
Value adjustments on participations and depreciation and amortisation of tangible fixed assets and intangible assets of CHF 53 million were CHF 5 million below the comparative figure for 2020, mainly due to lower value adjustments on participations and lower depreciation on bank buildings and other real estate. In the item “Changes in provisions and other value adjustments and losses”, which included the creation of a provision of CHF 8 million in the first half of 2020, a release of CHF 13 million was recorded in the first half of 2021.
This led to an operating result of CHF 492 million for the first half of 2021, representing an increase of 4.7% compared to the same period of the previous year. Including extraordinary income of CHF 0.8 million (first half of 2020: CHF 25 million) and after the deduction of taxes of CHF 5 million, a net profit of CHF 487 million was recorded for the first half of 2021 (–9.2%).
Growth in customer assets, strong capitalization
Customer assets grew by CHF 30.1 billion to CHF 391.8 billion in the first half of 2021. This result was driven in particular by a pleasing net inflow of new money of CHF 11.8 billion, as well as positive market performance (CHF 17.6 billion).
The risk-based capital ratio on a going-concern basis remained high at 17.9% as of mid-2021, compared to 17.5% as of 30 June 2020. The leverage ratio on a going-concern basis of 6.0% as of 30 June 2020 (6.2% as of mid-2020) also far exceeded the regulatory requirement of 4.5% for systemically relevant banks.
Outlook
“Economic indicators are developing positively, even if they point to a slight slowdown in economic growth in the third quarter,” stated CEO Martin Scholl. “Nevertheless, we are confident that we will deliver another pleasing result in the second half of 2021.”