Zürcher Kantonalbank achieved a 5% increase in net profit to CHF 439 million in the first half of 2018 compared to the same period of 2017. The rise in income from interest operations as well as higher commission and fee income were the main drivers of this growth. The cost/income ratio improved to 58.4% as a result of strong cost discipline.
Martin Scholl, Chief Executive Officer, stated: "In the first half of 2018, Zürcher Kantonalbank delivered an impressive operating performance, reflecting pleasing growth in income in our core businesses as well as our continued strict cost discipline. This strong result, which was achieved in a still challenging market environment, shows that we are on the right track with our strategy. In particular, it demonstrates the considerable trust that clients place in us and their high level of satisfaction."
Growth in operating income
Zürcher Kantonalbank reported CHF 1,211 million of operating income in the first half of 2018, an increase of 2% com-pared to the same period of the previous year. This pleasing result is mainly attributable to the growth of its main income streams, with net income from interest operations rising by around 5% to CHF 625 million compared to the first half of 2017. With an increase of 1.5%, the mortgage business - the main component of interest operations - grew in line with the market during the first six months of the year. Compared to the end of 2017, mortgage loans rose by CHF 1,184 million to CHF 80,271 million. This reflects the systematic execution of Zürcher Kantonalbank's strategy of focusing on the quality of its lending portfolio.
Net commission and fee income improved by 5% to CHF 396 million compared to the first half of 2017. This increase primarily reflects the pleasing performance of the securities and investment business, where income rose by CHF 18 million, or around 5%, compared to the first half of 2017.
At CHF 151 million, trading income declined significantly compared to the very high figure of CHF 187 million recorded in the same period of the previous year. This decrease should be viewed in the context of current geopolitical events and the related uncertainty, which negatively impacted the market environment. Market risks in the trading book (Value-at-Risk with a 10-day holding period) averaged CHF 13 million and thus remain at a low level, in line with the first half of 2017.
Interest operations continue to represent the bank's main income driver, accounting for 52% of operating income, fol-lowed by the commission and fee business at 33% and trading at 12%.
Improved cost/income ratio
Operating expenses totalled CHF 706 million in the first six months of 2018, in line with the same period of 2017. At CHF 210 million, other operating expenses rose slightly compared to the figure of CHF 205 million in the first half of 2017. However, this increase was offset by a reduction in personnel costs, which totalled CHF 495 million (previous year: CHF 501 million). Other operating expenses also include compensation for the state guarantee. At CHF 11.3 million, the amount of compensation paid to the canton for the first six months of 2018 was slightly lower than in the first half of 2017 (CHF 11.5 million).
Impairments on participations as well as the depreciation of tangible fixed assets and intangible assets totalled CHF 65 million, an increase of CHF 6 million compared to the first half of 2017. This figure also includes an increase in the regular depreciation of goodwill from the Swisscanto Group due to a further earn-out payment in autumn 2017. The cost/income ratio improved further to 58.4% (first half of 2017: 59.2%).
Pleasing operating profit
In the first half of 2018, Zürcher Kantonalbank generated CHF 436 million of operating profit, corresponding to growth of CHF 19 million or almost 5% compared to the first half of 2017. Group profit totalled CHF 439 million, an increase of 5% compared to the first half of 2017.
Net new money drives assets under management
Customer assets grew by CHF 9.3 billion to CHF 298.2 billion in the first half of 2018. This increase was primarily driven by very strong inflows, especially in the business with institutional customers. In contrast, performance had a negative impact on customer assets.
Capital position remains extremely solid
The total capital ratio was 18.6% at 30 June 2018, compared to 18.8% at the end of 2017 and 17.9% at 30 June 2017. The capital ratio significantly exceeds the risk-based capital adequacy requirements for systemically important banks (14.6% of risk-weighted assets) and reflects Zürcher Kantonalbank's extremely solid capital position. The common equity tier 1 (CET1) ratio was 16.3% at 30 June 2018, compared to 16.5% at the end of 2017 and 15.7% at 30 June 2017. The leverage ratio of 6.8% continued to significantly exceed the 4.0% leverage ratio requirement for systemically important banks.
Commenting on the outlook for the second half of the year, Martin Scholl said: "In view of the unstable geopolitical environment and the related uncertainty, we expect the second half of the year to be challenging. However, thanks to our broadly diversified business model and our close proximity to our customers, we are confident that we can produce another pleasing result in the second half of 2018."
Detailed figures and additional explanations on the half-year results 2018 can be found in the press release with financial indicators and in the "Half-yearly Report 2018".