Can Migros Bank outgrow the squeeze?
A net interest income decomposition
When a bank's interest income changes, only two things cause it: lending volume or interest margin. We show the decomposition using Migros Bank as a case study.
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Migros Bank's 2025 annual report shows a net interest margin of 0.95% — down from 1.12% in 2019, but a slight recovery from the 0.93% low in 2024. Net interest income came in at CHF 605 million, still below the 2023 peak of CHF 612 million. The loan book grew to CHF 54.5 billion. So is the worst behind?
The answer lies in the decomposition. Every year's change in net interest income has two drivers: the volume effect (how much lending growth added) and the margin effect (how much the narrowing spread cost). When the margin shrinks faster than the book grows, income falls even on a larger portfolio.
The chart below applies that decomposition to Migros Bank from 2019 to 2025. Each bar shows one year's change, split into volume and margin. The cumulative line shows the net position versus 2019. The dashed line is the peer average.
Net Interest Income Analysis
Volume vs. margin decomposition, year over year
Net Interest Margin
%
Loans / Deposits
%
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What this means for Swiss banks
The SNB sits at 0%. The 2023 windfall is fully reversed. Migros Bank still earns 72% of its revenue from net interest income — down from 78% in 2019, but still high enough that a 20 basis point margin move changes the bottom line materially. The slight NIM recovery to 0.95% in 2025 offers some relief, but the structural exposure remains. That pattern is typical for Swiss retail banks.
Two things actually worked over this period: loan book growth (CHF 42.8B to CHF 54.5B since 2019) and cost discipline (cost-income ratio improved from 58% to 55%). Neither is a quick fix. Banks that kept costs tight during the good years now have room to absorb what comes next. Banks that took the 2023 windfall as the new normal do not.
Frequently Asked Questions
What is the interest income squeeze for Swiss banks?
The interest income squeeze describes the structural decline in net interest margins. After a temporary recovery in 2023 driven by SNB rate hikes, margins contracted sharply in 2024 before stabilising slightly in 2025. Swiss banks still earn less per franc of capital lent than they did before the rate-hike cycle.
How has Migros Bank's net interest margin evolved?
Migros Bank's net interest margin was 1.12% in 2019 and fell to 0.93% by 2024. The SNB's rate hikes briefly lifted it to 1.02% in 2023. In 2025, the margin recovered slightly to 0.95%, but remains well below pre-cycle levels. Compared to the peer average of 0.91%, Migros Bank has held up marginally better.
What is the difference between volume and margin effect?
The volume effect measures how changes in lending volume affect interest income: a larger loan book generates more interest revenue, all else equal. The margin effect captures the impact of spread changes: a narrower gap between lending and funding rates reduces income per franc lent. Both effects together explain the total year-on-year change.
Which Swiss banks face the strongest margin pressure?
Banks with high mortgage shares in competitive catchment areas are most exposed. Cantonal banks and mid-sized retail banks feel the pressure most, since net interest income makes up a large share of their total revenue. Larger banks with significant fee income and wealth management can absorb margin compression more easily.
