Interview with Adrian Eggenberger, SZKB

Schwyzer Kantonalbank (SZKB), headquartered in Schwyz, was founded in 1890 and is entirely owned by the canton of Schwyz. The bank operates 23 branches throughout the canton and has approximately 600 employees. In cooperation with IFBC, SZKB developed a new approach for assessing the business model as well as for calculating the debt capacity for its corporate clients. In the following interview, Adrian Eggenberger, Head of Corporate Clients at SZKB, provides interesting insights on the current challenges in corporate banking and the project in collaboration with IFBC.

Where do you perceive the main challenges in corporate banking today and tomorrow?

‍In the financing area in particular, we are exposed to strong pressure in terms of earnings and margins, whereby this is driven by various factors. In addition to the persistent negative interest rate environment, we are increasingly confronted with the market entry of new competitors who are trying to establish themselves in the market with innovative and low-cost alternative solutions. These new entrants are forcing all competitors to make their offers even more attractive, which is noticeably intensifying the competition.

Furthermore, we have to continuously transform our own internal processes in order to benefit from the ongoing progresses in digitalisation and automation. These transformation processes in particular are proving to be especially demanding and challenging in an increasingly regulated environment. In order to secure the bank’s success in the long run and to be able to offer our clients customised, attractively priced and up-to-date solutions in the future, SZKB also depends on stronger networking and cooperation with external partners. By establishing corresponding «ecosystems», we want to make our range of services for our corporate and commercial clients even more comprehensive.

What strategy is SZKB pursuing in corporate banking and how is it structured?

‍The expansion of our corporate banking business is one of the six strategic initiatives of our current strategy. Building on our values of security, trust and quality, we want to remain the undisputed market leader in Canton Schwyz and maintain our high market share and strong reputation as an SME bank among commercial and corporate clients. With targeted acquisitions of first-class commercial and corporate clients throughout German-speaking Switzerland, we are also trying to grow steadily and prudently beyond the cantonal border.

Despite advancing digitalisation and automation, we continue to attach great importance to personal and individual service for our corporate and commercial clients. We can offer smaller commercial clients appropriate advisory services directly on site through our five specifically equipped commercial client centres across the canton. Larger SMEs as well as large clients are served by our specialized corporate client department, which is located in Schwyz as well as in Pfäffikon SZ. With this deliberate distinction, we succeed in bundling our own competencies in the right places to serve the different needs of our commercial and corporate clients in a targeted and beneficial manner.

In 2020, SZKB decided to redesign the methodology for assessing and analysing the business model as well as for determining the debt capacity in cooperation with IFBC. What were the main reasons for this decision?

‍For us, the primary motivation for the redesign was to strengthen our ability to better assess both the opportunities and the risks in the area of corporate financing. With the new approach, we are increasingly focusing on future developments, when analysing the business model and the debt capacity and thus shifting the previously rather retrospectively driven assessment of credit exposures in the direction of a sustainable perspective.

What are the key elements of the new concept for business model and debt capacity analysis at SZKB?

‍In cooperation with IFBC, we have developed a differentiated approach for the business model analysis. With the establishment of a simplified as well as a comprehensive business model analysis, we will be able to systematically determine the sustainable profitability of our commercial and corporate clients depending on the complexity as well as the risks of the financing exposures by segment.

The sustainable free cash flow ultimately serves as the basis for determining the debt capacity. Within the new framework of debt capacity assessment, we will henceforth rely on a purely uncollateralised approach and will thus be in a position to make a more well-founded and reliable assessment of existing and new unsecured credit financing on the basis of free cash flows. The new approach also enables us to treat any self-owned commercial properties in comparison to rented commercial premises according to uniform principles in terms of the credit assessment.

How does the new approach support the strategy implementation in corporate banking?

‍First and foremost, with the distinction between a simplified and a comprehensive business model analysis, we have created two elements that enable us to meet the requirements for a lean and segment-specific process in the financing business in a more targeted manner. The new concept will also provide us with the necessary tools to develop an even better overall understanding for our clients. With a dialogue on a par with the client, we can provide enhanced individual support and identify and realise opportunities for the expansion of business relationships at the same time.

How will the new approach be implemented and where do you see the biggest challenges in that respect?

‍For the implementation, we rely on the already existing solution of our partner for rating and financial analysis. Of course, the technical implementation entails certain hurdles that have to be overcome in the course of the roll-out. However, I see the biggest challenge in establishing the philosophy associated with the new concept among our employees in the commercial and corporate client business. The paradigm shift from a historical view to a more forward-looking analysis approach represents a fundamental reorientation of credit analysis. In order to establish the increased focus on understanding the respective business model and on the forward-looking assessment of the client’s sustainable profitability, we will accompany our employees by providing practice-oriented and targeted training.

Why did SZKB choose IFBC as its partner?

‍In the decision-making process, both IFBC’s professional know-how and long-standing experience in this area were of key importance to us. Retrospectively, the high-quality standards and the professionalism of the advisors were equally convincing. Over the entire course of the project, we can look back on a constructive, goal-oriented and productive collaboration.

Adrian Eggenberger  has been working in corporate banking at Schwyzer Kantonalbank for more than nine years and has been Head of Corporate Clients since November 2019. He began his career in the Swiss banking centre in the Risk Transformation and Capital Management division of UBS. Adrian Eggenberger holds a master’s degree in economics with a focus on corporate finance.

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