Promote joint action: ZKB wants to go after UBS with other cantonal banks

The bank in Zurich has a lot of plans. But since it is of systemic importance and works with state guarantee, it prefers to hold back a little. Of course it wants to grow, but not too much. He wants to make a profit, but not too much. Wants to attract customers but please don’t talk too loudly. And above all, it wants to be the “nearby bank”, as it has promised in every advertisement for 25 years. Although it has long operated throughout Switzerland and covers half of the country with advertising posters for private banking services.

ZKB encourages colleagues to adopt a common approach

The attack has been going on for a long time: after private banking, the next hunting ground is corporate Switzerland. ZKB now wants to expand further into areas where big banks are at the forefront in this sector, namely syndicated loans. Many banks join forces to jointly offer a large loan to a corporate client; In this way, the risk is distributed. According to reports, ZKB aims for stronger cooperation with other cantonal banks; The leadership will be in the largest of them, ZKB.

As one cantonal banker explained, at the end of August he campaigned for a common approach among cantonal banks. At an event organized by the Cantonal Association of Banks VSKB, a representative of ZKB presented the plans and urged people to take advantage of the opportunity arising from the acquisition of CS.

However, this issue was not included in the meeting agenda. Officially, there are no VSKB projects for official cooperation between cantonal banks, says the union representative. However, it could not be ignored that the issue was discussed unofficially within the association.

ZKB spokesman Marco Metzer confirms this claim: “As the new number two on the national market, Zürcher Kantonalbank wants to continue to grow in this business as part of its proven risk strategy and to do this by bringing together the financial strength of the cantonal and regional banks. The banks are paying closer attention.” After all, we operate in all the areas of a major bank and with a terrific AAA rating.

The numbers prove this claim. The volume of ZKB’s syndicated loans increased to 8 billion francs in 2021, reaching almost 9 billion francs in 2022. And we may exceed the 10 billion mark in 2023.

Corporate client boss Bühlmann had already boldly announced to the “Handelszeitung” that the growth of its division would double: If ZKB grew by two to three percent a year in its corporate client business, this should now be three to four percent.

Battle for SMB customers

When it comes to big financing tickets at Roche or Novartis, where a billion francs are required, ZKB cannot compete as a leader, but with loan volumes of 50 to 400 million, as in medium-sized companies. ZKB demonstrated how this works when financing medium-sized companies such as Messe Basel, Dormakaba and Meyer Burger.

With the integration of CS Switzerland, a struggle for SMEs has also begun. Companies with a turnover of 100 million to one billion are hotly debated. Many corporate bosses are restless and looking for new banking connections. With the departure of market leader CS, every CEO or CFO has to consider whether they should move to the mighty UBS. “If medium-sized Swiss corporate clients extend their loans or take out new ones, they will be thinking about how they can reallocate their risks to the large merged bank,” says Metzler, the ZKB spokesman.

What he did not say: ZKB wants to grow in this field with a capital increase of 50 to 300 million or a company loan. But there is a paradox: Foreign bankers have announced that they will increase their presence in Switzerland and position themselves as an alternative to CS. Deutsche Bank and Commerzbank are bold and clearly want to grow in Switzerland’s attractive corporate client business. “We are currently inundated with questions from customers,” Commerzbank boss Manfred Knof said in a “Handelszeitung” interview. The current situation offers good opportunities for further growth.

In the competition in Switzerland you can hear the voices but you are confident. Also because SMEs are already choosing the Swiss solution. According to a survey of mid-sized companies by mergers and acquisitions boutique IFBC, 96 percent see cantonal banks as an alternative to Credit Suisse, while the figure for foreign banks is 47 percent. Entrepreneurs explain that this is also because they rely on long-term relationships, whereas with a stranger you depend on the mood at the company headquarters in Paris or Frankfurt.

Rapid growth in large loans

Doing business with companies is attractive because it is long-term and offers margins of 1.5 to 3 percent, depending on risk. There is also the potential for cross-selling by selling additional banking services to companies.

The attack could disrupt politics because they want to raise equity capital substantially, up to 30 percent is open to discussion. Banks as well as company bosses are not keen on this issue because the additional requirements make loans more expensive and also increase the entry barriers for foreign players.