The Zürcher Kantonalbank (ZKB) has decided to withdraw from Austria and sell its subsidiary there to the Liechtensteinische Landesbank (LLB). The investment in Austria was ill-fated from the start, with legacy issues at the Salzburger Privatinvest Bank (PIAG) causing reputational damage to ZKB. Despite dealing with these issues, ZKB never gained a solid footing in Austria and fell short of expectations in terms of customer assets.
The decision to withdraw from Austria is not only logical from a business perspective but also from a regulatory standpoint. The taxpayers of the Canton of Zurich should not be at financial risk for a bank’s foreign ventures. State involvement in the domestic banking business, especially one that does not align with the bank’s strategic priorities, is questionable. With digitalization allowing for nationwide growth without the need for physical expansion, leaving Austria was a necessary move for ZKB.
Digitalization has blurred geographical boundaries in the financial sector, allowing for growth without the need for physical presence in every location. State-guaranteed banks operating outside their home canton can distort competition and pass on risks to taxpayers. The withdrawal of ZKB from Austria reflects a shift towards focusing on existing markets and strategic priorities, rather than risky foreign ventures that do not align with the bank’s core objectives.
In conclusion, the decision of ZKB to withdraw from Austria was long overdue and reflects a strategic reevaluation of the bank’s priorities in light of changing market dynamics and regulatory pressures. By focusing on digitalization and serving existing markets more effectively, ZKB can continue to grow and thrive without the need for risky foreign investments.