The Swiss private banking sector will face a wave of consolidation of smaller institutes, which will find it increasingly difficult to avoid the "profitability trap" of rising costs and falling margins, according to a study released Tuesday by PricewaterhouseCoopers.

"Our analysis of the years 2006 to 2009 and a look at the future allow us to assume that the pressure on the Swiss private banking sector will persist or even increase yet further, especially for smaller institutions," said the study, authored by Martin Schilling and Joerg Altmann.

Several small private banks such as Swiss units of Commerzbank AG (CBK.XE) and ING Groep NV (ING) have been snapped up in recent months, but not as many as experts had predicted.

The outlook for more deals comes as smaller private banks, like EFG International AG (EFGN.EB), navigate a more transparent banking environment, with the traditional banking secrecy that has long attracted clients to Switzerland changing dramatically.

The smaller banks including Julius Baer Group AG (BAER.VX) typically don't have the funds to compete with their larger peers, such as UBS AG (UBS) and Credit Suisse Group (CS). The bigger Swiss banks have the advantage of having much more cash to put toward expansion, which they began pursuing far earlier than their smaller rivals.

The bank-secrecy problems have been accentuated by lackluster business for private banks since the financial crisis, which sent clients hidebound from riskier products, which typically earn banks fatter margins. At half-year earnings, many private banks said clients were still keeping substantial parts of their assets in cash products, which translate to scant revenue for the banks.

-By Katharina Bart, Dow Jones Newswires; +41 43 443 8043; katharina.bart@dowjones.com