- Robust operating income of CHF 1,165 million
- Decrease in operating expenses underscores high cost discipline
- Client assets reach a record CHF 315.5 billion
- Net inflow of new money of CHF 2.5 billion
- Extremely strong capital position with common equity tier 1 (CET1) ratio of 17.2% and leverage ratio of 6.6%
Zürcher Kantonalbank delivers net profit of CHF 418 million in the first half of 2019
Press release from 23 August 2019
Zurich, 23 August 2019 – Zürcher Kantonalbank generated net profit of CHF 418 million in the first half of 2019, a decrease of around 5% compared to the result for the same period of 2018. Operating income declined by almost 4%, reflecting continued low interest rates and geopolitical uncertainty. This reduction was partly offset by a 3% decrease in costs.
Martin Scholl, Chief Executive Officer, stated: “We delivered a very solid result for the first six months of 2019, even if the challenging market environment impacted to some extent on our operating performance compared to the strong result for the first half of 2018. Highlights during the period include our continued strong cost discipline as well as the broad-based inflow of new money.”
Commenting on the outlook, Martin Scholl added: “Developments in the interest rate environment will continue to prove challenging in the second half of the year. At the same time, geopolitical conditions and the slowdown in global economic growth are likely to cause further uncertainty in the markets. I am nevertheless convinced that with our diversified business model and our close proximity to our clients, we will achieve another good result in the second half of the year.”
Robust operating income
Operating income totalled CHF 1,165 million in the first half of 2019, compared to CHF 1,211 million in the same period of the previous year. Continued low interest rates and the competitive environment impacted in particular on interest operations – the bank’s main income driver. In view of the slowdown in global economic growth and subdued levels of client activity, income in the investment and trading business also declined.
Net interest income decreased by 3% to CHF 606 million compared to the first half of 2018, mainly reflecting the negative interest rate environment, which increased the pressure on margins. The mortgage business – the main component of interest operations – grew by CHF 888 million or 1% in the first six months of 2019. Zürcher Kantonalbank thus continued to grow at a slightly slower rate than the market. In addition to competitive conditions in the mortgage business, this reflects Zürcher Kantonalbank’s commitment to high standards of quality when issuing mortgages. In total, mortgage loans grew to CHF 82.1 billion as of mid 2019.
Net commission and fee income totalled CHF 387 million. This reduction of almost 3% compared to the first half of 2018 was primarily due to lower income in the securities and investment business, which declined by almost 7% on the back of uncertainty in the financial markets as well as last year’s sale of Swisscanto Funds Centre Ltd. In contrast, commission income from lending activities grew by 20% and income from the other service business rose by 3%.
Trading income decreased by 9% to CHF 138 million compared to the first half of 2018, as higher income from trading in bonds and in interest rate and credit derivatives was unable to offset the decline in trading in foreign exchange, bank notes and precious metals as well as equities and structured products.
Reduced cost base
Operating expenses decreased by 3% to CHF 683 million compared to the first half of 2018. As a result of disciplined cost management, reductions were achieved in both personnel costs (-2%) and in other operating expenses (-6%). The cost/income ratio was 59.1%, compared to 58.4% at the end of the first half of 2018.
Impairments on participations as well as the depreciation of tangible fixed assets and intangible assets totalled CHF 56 million, compared to CHF 65 million in the first half of 2018. Changes in provisions and other impairments and losses totalled CHF 7 million, compared to CHF 5 million in the same period of the previous year. As a result, Zürcher Kantonalbank generated an operating result of CHF 419 million in the first half of 2019, corresponding to a decrease of around 4% compared to the same period of the previous year.
Taking account of extraordinary income of CHF 1 million (first half of 2018: CHF 8 million) and after the deduction of taxes of CHF 2 million (first half of 2018: CHF 5 million), a net profit of CHF 418 million was recorded for the first half of 2019.
Record client assets and good net inflow of new money
Client assets grew by CHF 20.3 billion to a record CHF 315.5 billion in the first six months of the current financial year. The net inflow of new money contributed CHF 2.5 billion and positive market developments accounted for around CHF 17.7 billion of the growth in client assets.
Capital position remains extremely strong
Zürcher Kantonalbank has an extremely strong capital position, which is also reflected by its capital ratios. The risk-based capital ratio on a going-concern basis was 19.3% as of 30 June 2019, compared to 18.6% in mid 2018, and the common equity tier 1 (CET1) ratio was 17.2%, compared to 16.3%. The leverage ratio on a going concern basis decreased to 6.6% from 6.8% at the end of the first half of 2018.
Zürcher Kantonalbank thus significantly exceeds regulatory capital requirements. It also meets the additional gone-concern requirements that entered into effect at the start of 2019 for systemically relevant banks with a domestic focus, both on a risk-based and an unweighted basis.
Detailed figures and additional explanations on the half-year results 2019 can be found in the press release with financial indicators and in the "Half-yearly Report 2019".