Zürcher Kantonal­bank delivers record half-year profit of CHF 541 million

Zürcher Kantonalbank achieved a record profit of CHF 541 million in the first half of 2022 (first half of 2021: CHF 487 million). This was driven by strong performance in interest operations and the commission and fee business, as well as consistent results in trading operations. “I am very pleased that we have delivered this excellent half-year result, which follows on seamlessly from our record year in 2021 and was achieved despite the difficult market environment and the high level of geopolitical uncertainty,” stated Martin Scholl, CEO of Zürcher Kantonalbank.

Strong performance in interest operations

In the first six months of 2022, Zürcher Kantonalbank grew its operating income by 6% to CHF 1,344 million, paving the way for this excellent result. All of the bank’s main income streams contributed to this growth.

Interest operations – which remain the bank’s most important income stream – achieved an especially positive performance, with gross income rising by 4.5% to CHF 667 million in the first half of the year. This positive development is mainly attributable to increased income from the secured interbank business, effective asset and liability management, and higher interest rates – particularly in US dollars. The bank assesses credit default risks and other risks on a continuous basis and recognizes the corresponding value adjustments and provisions. In the first half of 2022, net newly recognized value adjustments decreased by CHF 21 million year on year to around CHF 17 million, of which CHF 7 million relates to expected losses. Overall, net interest income rose by a pleasing 8.4% year on year to CHF 650 million. The mortgage portfolio, which is an important driver of interest income, grew by 2.5% to CHF 94.1 billion in the first six months of the year. The bank remains committed to its high standards of quality in the mortgage business.

The commission and fee business also achieved a very pleasing performance with income of CHF 473 million. This represented a further increase of 5.3% compared to the record result for the first half of 2021 and mainly reflects the positive impact of income from the securities and investment business, which benefited from a strong inflow of new money.

Trading income, which was already at a very high level, also continued to improve: Compared to the first half of 2021, it rose by 1% to CHF 211 million – even in a market environment affected by corrections and uncertainty.

Growth in income base far exceeds rise in costs

Operating expenses totalled CHF 765 million in the first half of 2022, up by 3.9% compared to the prior-year period. This increase was primarily due to slightly higher personnel expenses. General and administrative expenses were unchanged at CHF 210 million. Since the growth in the income base far exceeds the rise in costs, the cost/income ratio decreased to 56.2%.

Value adjustments on participations and depreciation and amortisation of tangible fixed assets and intangible assets totalled CHF 54 million, almost in line with the prior-year period (CHF 53 million). In the item “Changes in provisions and other value adjustments and losses”, a release of CHF 12 million was recorded in the first half of 2022 (first half of 2021: CHF 13 million).

This led to an excellent operating result of CHF 537 million for the first half of 2022 (+9.2% compared to the prior-year period). Including extraordinary income of CHF 8 million mainly resulting from the sale of real estate, and after the deduction of taxes of CHF 4 million, a profit of CHF 541 million was recorded for the first half of 2022, up by 11% compared to the profit for the prior-year period.

Strong inflow of new money, negative market performance

From January to June 2022, the bank recorded a pleasing net inflow of new money of CHF 17.8 billion (first half of 2021: CHF 11.8 billion). This positive development was, however, unable to offset negative market performance: Overall, customer assets decreased by CHF 21.1 billion in the first half of 2022 (–5.1%). As of 30 June 2022, customer assets totalled CHF 388.1 billion.

Capital base remains solid

The risk-based capital ratio on a going-concern basis remained high at 17.6% as of mid-2022, compared to 17.9% as of 30 June 2021, far exceeding the required level of 12.86%. The leverage ratio on a going-concern basis of 6.0% as of 30 June 2022 also far exceeded the regulatory requirement of 4.5% for systemically relevant banks.

Outlook

“High inflation, interest rate hikes by central banks, the war in Ukraine and other geopolitical developments will remain a source of uncertainty for the rest of the year. This will also be reflected by the markets,” stated CEO Martin Scholl. “I am confident, however, that Zürcher Kantonalbank will generate another pleasing result in the second half of 2022 since – with its diversified business model – it is well equipped to navigate challenging periods. I am handing over the reins of a solidly positioned bank to my successor Urs Baumann.”