The Swiss and Italian business, which falls under the umbrella of the Zurich private bank, made a splash in 2023 with some growth coups. But it now can be seen that the EFG bankers over there have been struggling with outflows.

EFG International’s maneuvers made big waves in the domestic banking sector last year. The Swss-based private bank’s double coup at the prestigious ski resorts of St. Moritz and Gstaad has already become the stuff of legend; the institution successfully recruited the entire existing team from Credit Suisse (CS).

The teams started work at the beginning of the year, which was also celebrated at a welcome event at the Zurich headquarters.

Praise From the Chairman

EFG chairman Alexander Classen recently told finews.ch that EFG CEO Giorgio Pradelli himself and Franco Polloni, the head of the Swiss and Italian markets, were involved in recruiting the CS staff. «Remarkably, we’ve succeeded in recruiting two team heads with great connections in the UHNWI segment,» the chairman said at the time. «One would assume these individuals had received offers from the competition.»

Classen is anticipating great things from the newly hired private bankers. They are expected to contribute around half of the Group’s net new money to the Bank this year. In 2023, this share was even more important. As stated by EFG on Wednesday during the unveiling of the annual results, around 5.1 billion Swiss francs of the 6.2 billion Swiss francs in net new money came from client relationship managers (CRO) who were hired after the start of 2021.

The Problem With the Interest Rate Turnaround

Yet in the Swiss and Italian business, which EFG classes as a single market area, the growth balance was negative. In the region, 3.1 billion Swiss francs in assets flowed out of the bank in 2023. If the Lombard loans are added to clients funds, there was a decrease of 3.7 percent compared with the previous year as a result. Meanwhile, all other regions increased new money last year.

The bank explained this due to the reduction of credit positions and lower risk profile of Swiss and Italian clients; this trend was observed industry-wide in 2023 and is primarily due to the interest rate turnaround. This led to Lombard loans being more expensive, while interest rates on cash products improved. Wealthy private individuals then responded by liquidating their securities accounts and stopped borrowing new money.

At a media conference on Wednesday, the bank’s management told finews.ch that Switzerland and the U.K. are the two «most mature» market regions, i.e. those that have been served the longest. In Switzerland, credit volumes have fallen to a certain degree. The management confirmed the trend: «The Lombard lending process is becoming more complex, and some clients believed it was the right time to exit their exposure.»

Growth Expected in 2024

Switzerland and Italy are naturally in the spotlight at EFG. One is the official home market, the other has become hugely important in the group since Ticino-based bank BSI was snapped up. And EFG boss Pradelli comes from the northern Italian city of Turin. The private bank must therefore strive to push the growth lever forward again here in the months to come.

On Wednesday, the management said all regions could see growth in new funds ranging from 4 to 6 percent. But Switzerland is more to the lower end of this target range.

Collaborator: Jule Woermann, Samuel Gerber