GENEVA, Jan 10 (Reuters) - Swiss banks are starting 2012 in a much more pessimistic frame of mind than the relatively positive note on which they began 2011, according to a survey of 120 banks published on Tuesday by Ernst & Young .
The “Bank Barometer 2012” was conducted by telephone in December and included private, regional, cantonal and foreign banks operating in Switzerland. It excluded the two biggest Swiss banks, UBS AG and Credit Suisse Group AG .
The majority of banks, or 55 percent of those surveyed, forecast a slight downturn in financial markets, the same number that expected a slight improvement a year ago.
In the 2011 survey, none of the banks had been willing to say they viewed the outlook “very negatively”, but in the latest survey 3 percent said just that, while none described the likely situation for the coming year as an outright “positive”.
Overall they saw tougher competition and a worsening business environment than a year ago, although a majority, especially regional and cantonal banks, still said their business was developing “positively” or “somewhat positively”.
“Banks are probably now being more realistic in their assessment of prospects compared to the far more optimistic views a year ago,” Iqbal Khan, a partner in Ernst & Young’s banking & capital markets division, said in a statement.
“Even though opinions are more modest, we can see that Swiss banks have fared well in the global financial crisis and European debt crisis so far.”
Among the findings, 72 percent of the banks saw a negative or very negative impact from increasing regulation of the banking sector globally, up from 50 percent a year ago.
And optimism about passing on the costs of increased regulation has evaporated. A year ago, one in three banks thought they could pass at least half the cost to their clients, whereas now almost two-thirds of banks expect to pass on less than a quarter of the cost.
Regional and cantonal banks saw an increased likelihood of a fundamental overhaul of the way bankers are paid, although private and foreign banks saw less chance of that than a year ago. However, unlike a year ago, none of the banks was prepared to rule out such an overhaul happening.
“Although the vast majority of those surveyed believe that stakeholder returns will decrease, large-scale job cuts are not necessarily on the agenda for the coming months,” the survey said.
Just over half the banks expected more writedowns and provisions this year, and a further 8 percent saw a strong increase. That contrasts with two-thirds who expected no change in risk provisioning a year ago and none who saw a big increase.
In lending policies, 59 percent expected Swiss banks to be more restrictive in the coming year. Last year 58 percent had predicted no change in lending policies.
The anticipation that the Swiss banking sector will consolidate has hardened in the past year, with 65 percent of respondents expecting to see consolidation in the next six to 12 months, up from 47 percent a year ago. Private banks and regional banks were particularly convinced of the likelihood of consolidation, the survey said. (Editing by David Holmes)