Zürcher Kantonalbank once again achieves an encouraging half-year result

Zürcher Kantonalbank has once again achieved an encouraging half-year result in a challenging environment. Its consolidated profit before taxes amounts to CHF 689 million (previous year: CHF 681 million); after the first-time application of the OECD minimum tax, the bank generated a consolidated profit after tax of CHF 601 million (previous year¹: CHF 677 million). “I am delighted that we continued to generate an encouraging result in the first half of 2024 following the exceptional year in 2023. This shows that we are on the right track and are continuously expanding our leading position in the Zurich economic area. Our diversified and stable income structure is once again proving its worth,” says Urs Baumann, CEO of Zürcher Kantonalbank.

The bank generated operating income totalling CHF 1,560 million in the first half of 2024 (previous year: CHF 1,687 million). All major income streams contributed to this performance. In interest operations – the bank’s most important income stream – a good net result was achieved totalling CHF 858 million (previous year: CHF 946 million). The previous year’s high figure was characterised by non-recurring special factors. In addition to the return to a positive interest rate environment, the bank benefited in particular last year from the slower-than-expected shift of client funds to higher-yielding investment opportunities.

^{(1 The tax expense, assuming that an OECD minimum taxation had already been introduced in 2023, would have totalled around CHF 111 million, which means the consolidated profit would have fallen to CHF 570 million.)}

Positive market environment strengthens investment activities

The bank’s second-largest income stream – the commission business and services – performed especially well. The result increased by 7.1% to CHF 509 million (previous year: CHF 475 million) and therefore more than offset the reduction in income due to the launch of the free ZKB Banking service. This increase is mainly due to commission income from securities trading and investment activities (CHF 557 million), which rose by 9.4% compared to the same period last year. Client assets totalled CHF 488.7 billion, which corresponds to growth of around CHF 37.9 billion since the beginning of the year. The factors that contributed to this growth included the positive market performance (price, interest rate and currency trends) totalling CHF 24.1 billion and the ongoing encouraging net new money inflow of CHF 10.0 billion. In the first half of 2024, Zürcher Kantonalbank gained over 28,000 new clients – thanks in part to ZKB Banking, the bank’s free everyday banking service.

The bank’s third income stream, trading activities, came in at CHF 177 million and therefore, as expected, could not match the previous year’s exceptionally strong result of CHF 252 million. This outcome reflects the lack of momentum in the first half of 2024.

Targeted investments in growth and innovation

Operating expenses totalled CHF 859 million in the first half of the year and were therefore CHF 41 million or 5.0% higher on the previous year. This rise reflects the planned increase in investments in growth and innovation. Personnel expenses rose by 3.0% to CHF 612 million. This increase is attributable to higher headcount, which compared to 30 June 2023 rose by 315 FTEs to 5,652 FTEs after adjusting for part-time positions. The higher general and administrative expenses (+10.3%) reflect higher costs for maintenance and licences, and also the expansion of the workplace infrastructure for the additional employees. The cost/income ratio (CIR) is 54.7% and has normalised again compared to 48.7% in the same period of the previous year. The CIR is still below the target range.

Decline in value adjustments and lower depreciation and amortisation

Value adjustments on participations as well as depreciation and amortisation of tangible fixed assets and intangible assets, at CHF 32 million, were CHF 11 million or 25.9% lower than in the previous year. This decrease is due in particular to the goodwill amortisation of the participation in Swisscanto in the amount of CHF 8 million, which expired in 2023. The line item “Changes to provisions and other value adjustments and losses” shows a net release of CHF 10 million (previous year: net release of CHF 5 million). This increase is determined largely by the net release of provisions for off-balance-sheet default risks totalling CHF 12 million.

Encouraging half-year result

The bank generated a consolidated profit before taxes totalling CHF 689 million for the first half of 2024. This corresponds to a year-on-year increase of CHF 8 million or 1.2%, whereby CHF 150 million in additional reserves for general banking risks were recognised in the first half of the previous year. The OECD minimum tax has been levied for the first time in 2024. As a result, the tax expense of CHF 88 million in the first half of 2024 is significantly higher than the comparable figure last year (CHF 4 million). The consolidated profit after taxes for the first half of 2024 amounts to CHF 601 million (previous year²: CHF 677 million). The return on equity totalled 8.6% compared to 10.4% in the previous year.

^{(2 The tax expense, assuming that an OECD minimum taxation had already been introduced in 2023, would have totalled around CHF 111 million, which means the consolidated profit would have fallen to CHF 570 million.)}

Stable balance sheet

Both total assets and the balance sheet structure present a stable picture. A key influencing factor is the ongoing robust real estate market in the Zurich economic area, which is also reflected in the mortgage portfolio. It expanded by 2.2% to CHF 103.1 billion compared to the end of 2023. Zürcher Kantonalbank achieved this increase while maintaining its high quality standards with regard to borrowers and financed properties. On the liabilities side, customer deposits rose slightly from CHF 101.5 billion to CHF 102.3 billion.

Strong capital and liquidity base

Zürcher Kantonalbank has an excellent capitalisation. Its risk-based total loss-absorbing capacity (risk-based TLAC ratio) was 26.0% as at 30 June 2024 (previous year: 23.9%). The risk-based equity ratio included in the TLAC ratio on a going-concern basis is 18.0% as at 30 June 2024 – this ratio, which is unchanged compared to 30 June 2023, significantly exceeds the current capital adequacy requirement of 13.8%.

The TLAC leverage ratio rose from 8.2% to 9.4%. The leverage ratio (going-concern), at 6.6% (previous year: 6.2%), is also well above the requirement of 4.5%.

The bank’s liquidity situation is likewise extremely robust. The liquidity coverage ratio (LCR) is 146% as of mid-2024 (previous year: 147%).

The rating agencies Fitch, Moody’s and Standard & Poor’s continue to assign Zürcher Kantonalbank a rating of AAA and Aaa respectively. Even on a stand-alone basis without taking into account any support from the state, Zürcher Kantonalbank’s aa- rating (Standard & Poor’s) indicates it is one of the safest universal banks in the world.

Outlook

“Last year’s exceptionally high result from interest operations will not be repeated to the same extent in 2024. I am nevertheless confident that we will achieve an attractive result. My confidence is based on our growth strategy in Private Banking, Corporate Clients and Asset Management, which has positioned the bank very well operationally despite the normalised interest rate environment,” says CEO Urs Baumann.

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Half-yearly Report (PDF, 232 KB)

Half-yearly financial statements (PDF, 81 KB)