US tax crackdown hits Swiss private banks
Nina Larson/AFP · 20 Aug 2014, 18:01
Published: 20 Aug 2014 18:01 GMT+02:00
- Swiss aid in tax probe of former French footballer (19 Aug 14)
- UBS turns in strong profits despite disputes (29 Jul 14)
- UBS 'to pay French $1.5 billion over tax evasion' (23 Jul 14)
- Tax evasion fine soaks Credit Suisse in red ink (22 Jul 14)
"The impact of the US tax program is making its mark on financial statements," a study by consultancy firm KPMG and Switzerland's University of Saint Gallen found.
The study, based on the analysis of the annual reports of 94 private banks in Switzerland, showed that smaller institutions had been hit in 2013 by slumping profits and low growth in assets.
In addition to dealing with a difficult financial climate, institutions specializing in wealth management had also suffered heavily from US demands that Swiss banks make amends for previously allowing and even helping foreign nationals hide assets from the taxman at home, the study showed.
The wealthy Alpine nation reached deals with the United States last year aimed at ending years of dispute over Swiss banking practices that have allegedly cheated US tax authorities out of billions of dollars.
More than a dozen Swiss banks have been under criminal investigation by the US Justice Department, including the country's second largest bank Credit Suisse, which was slapped earlier this year with a hefty $2.6-billion fine.
Another 36 private banks have signed up to a programme where they acknowledge they may have unwittingly helped US citizens dodge taxes and agree to pay large fines in exchange for avoiding criminal prosecution.
Profitability looks bleak
The US tax programme had prompted around a third of the banks to set aside 900 million francs ($988 million) in provisions for potential fines and to cover consultancy fees.
Thursday's study showed that in 2013, valuation adjustments, provisions and losses had on average risen from 4.7 percent to 13.6 percent of the banks' gross profit.
"For one quarter of banks, this represented almost half of their gross profit," the study said.
Two-thirds of the banks analyzed had only created very small provisions or none at all, the study said.
It predicted these numbers would continue to rise.
In terms of profitability the situation also looked bleak, the study found.
One in three private banks in Switzerland were operating at a loss in 2013, compared to one in five a year earlier.
In addition, many clients withdrew their holdings last year, the study showed, with 54 percent of small banks and 50 percent of medium-sized banks experiencing net asset outflows.
Big banks, meanwhile, raked in the vast majority of the 18.6 billion francs in net new money that entered the sector last year.
A range of mergers and acquisitions also helped big banks -- defined as those managing more than 25 billion francs in assets -- to boost their market share by a third since 2006, to 78 percent, the study showed.
"All in all, larger banks seem more likely to be on the winning side of things," Christian Hintermann of KPMG Switzerland said in a statement.
"They're earning the highest returns on equity and continuing to expand their market dominance," he added.