BCV Capital Increase: a change in terms of the offering

Banque Cantonale Vaudoise announced its satisfaction at the decision of the Vaud Cantonal Government to subscribe to all of the Bank's capital increase, which will be presented to the General Shareholders' Meeting on Wednesday. Indeed, the success of such a public offering would have been uncertain owing to the current stock market situation. In addition, the poor market conditions may also have a negative impact on the results for the 2002 financial year. Standard and Poor's decision to maintain its A- rating on the Bank is also positive, even though its outlook was downgraded to negative. This nuance is not surprising since the short-to-middle term outlook for the whole banking industry has deteriorated since last year.

The Vaud Cantonal Government, in agreement with BCV, has announced today that it is ready to subscribe entirely to BCV's planned capital increase, which was to be proposed to the financial markets on 27 June 2002. Given the current stock market conditions, it would have been difficult for the capital increase to be successful. It will therefore take place in the near future in the form of a classical capital increase operation. The new shares will be offered by subscription to existing shareholders at a pre-determined price, which will affect the value of the subscription rights. The Canton of Vaud will buy back all rights not exercised by the shareholders.

The chances of success for the capital increase have lessened in recent weeks with the stock market downturn. Investors are now having strong reservations about capital increases and indeed two such operations were called off not long ago. The Canton of Vaud and BCV believe that it is important that the capital increase take place in the best possible conditions. Consequently, they have decided to abandon their plan to solicit new investors by means of an offering.

Furthermore, unless market conditions soon improve, which is currently unpredictable, results for the whole banking industry in 2002 may well fall below forecasts. BCV has thus lowered its projections for the current financial year. However, gross profit should show a slight increase over 2001, but provision requirements, affected by the Allied Deals case, will exceed the planned proportion of 0.5% on total lending. As a result, BCV will only just be able to report positive net results for 2002, although this will not be the case for the first half of the year, owing to the provisions to be made on 30 June on Allied Deals.

While BCV's outlook over the short-term is not very favourable, it is more positive over the long term. Once the capital increase has been successfully implemented (which is now certain), the Bank will be able to focus all its energy on pursuing its strategy vis-à-vis the Vaud economy by improving profitability and managing risks in a more efficient manner.

Lausanne, 25 June 2002

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