Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong growth in the mortgage business, driven by a dynamic market and population growth in Switzerland.
- Stable revenues despite a challenging interest rate environment.
- Second-best H1 results in the company's history, despite being below last year's performance.
- Retail banking performing well with a 4% mortgage growth and increased transaction activity.
- Solid financial ratings and a stable deposit base, indicating strong financial health.
Negative Points
- H1 results were below last year, with a decrease of EUR 6 million.
- Trade finance business volume down 9% compared to last year due to geopolitical uncertainties.
- Higher operational costs driven by IT integration and cybersecurity investments.
- Increased tax rate due to new OECD minimal tax rate regulations, resulting in CHF 3 million higher taxes.
- Loan-to-deposit ratio at its highest since 2011, indicating potential stress on funding ratios.
Q & A Highlights
Q: Can we expect the number of staff growth to normalize after the final step of in-sourcing?
A: Yes, the growth is expected to level off. The IT integration is complete, and asset management hires have been made. We do not anticipate further significant increases in staff numbers in the near future. (Pascal Kiener, CEO)
Q: Should we expect the high growth rate in mortgage loans to continue in the next half year?
A: A slight leveling off is expected, but growth should remain between 7% and 10%. The interest rates have gone down, making it cheaper to get a mortgage, which helps maintain growth. (Pascal Kiener, CEO)
Q: How should we think about net interest income margins given potential rate cuts from the SMB?
A: We expect a solid NII in H2 2024, but significant growth should not be expected. The SMB's rate cuts will impact liquidity earnings, but mortgage growth and margin defense should help balance this. (Thomas Paulsen, CFO)
Q: What is your target for the loan-to-deposit ratio going forward?
A: We target a deposit-to-loan ratio of around 90%. The current high ratio is due to market dynamics and is not expected to be extrapolated. We manage this carefully with our ACO. (Thomas Paulsen, CFO)
Q: Why is there rapid loan growth outside of the home canton?
A: Growth outside the home canton is mostly in real estate funds, which have almost zero risk. These funds are well diversified and have attractive margins. We can stop this business whenever we want. (Pascal Kiener, CEO)
Q: What is your view on the new Basel Committee rates for IRRBB stress test scenarios?
A: We will adjust our calculations but our risk appetite remains unchanged. We expect FINMA to potentially remove the capital surcharge for interest rate risk in the banking book. (Thomas Paulsen, CFO)
Q: What are your expectations for balance sheet management opportunities in H2?
A: We expect opportunities to decrease due to lower interest rates from the Swiss National Bank and fewer volume opportunities for arbitrage. (Thomas Paulsen, CFO)
Q: How many rate cuts are you expecting from the SMB?
A: We expect at least one rate cut of 25 basis points, given the current macroeconomic data. (Pascal Kiener, CEO)
Q: What trends are you observing in deposits in 2024?
A: There is a trend towards term placements due to pricing tactics and demand for deposits, which is expected to continue. (Thomas Paulsen, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
