Led by growth in their trading and service sectors, Swiss banks enjoyed a 17 percent jump in earnings in 2005 despite a slowdown in their interest-earning business, according to a new report by BAK Basel Economics. Interest earning and other conventional banking accounted for 33 percent of Swiss banks’ total operating income of $56 billion, down from 38 percent in 2004 and 42 percent in 2003.

Favorable market conditions, including rising equities and commodities prices, drove a 60 percent jump in trading-sector earnings. Improved equities markets also spurred a rise in assets under management by 25 percent over 2004, boosting earnings in the commission-based and service sectors by 13 percent.

Income in the interest-earning segment fell slightly despite higher credit volumes. The report, Banking Barometer 2006, attributed this drop to increased competition and increased refinancing costs that suppressed banks’ interest margin.

The report predicted a strong 2006 for Switzerland’s banks—with growth levels matching 2005’s—due to continuing positive performances in equities markets and the overall economy, as well as optimistic investor sentiment. The report was commissioned by the Swiss Bankers Association, a self-regulatory body representing the country’s banking industry. The Banking Barometer is published annually.

—Andrew Farrell