BCV Group in 2001

SATISFACTORY RESULTS IN A DIFFICULT CONTEXT

Although the parent company's decision to increase credit risk provisions affected the Group's 2001 results, in which a net loss of CHF 381 million was posted, the development of the Group's business during the period under review was positive in several respects. Improved interest margins and the encouragingly moderate drop in commission income in spite of a bear market make manifest the continued progress of BCV Group's drive to diversify its sources of income.

Income affected by market trends

Total income amounted to CHF 840 million, 14.2% below that of the previous year. This is essentially due to the bear market's effect on the value of securities portfolios, which is reflected in the loss of CHF 18 million posted in trading operations, a drop of CHF 107 million from fiscal 2000. Interest income, up 5.5% to CHF 436 million, was sufficiently above the targeted goal to allow for a significant improvement in the interest margin, which has now attained 1.21% and is thus quite close to our objective of 1.25%. Total commission operation income fell 10.5%, to CHF 297 million, while asset management income fell by only 17.5%, a result which compares quite favorably with the market average for the period under review. This drop was partially offset by a sharp rise in commissions on loan operations, which results mainly from brisk business in documentary credit for the financing of international commodities trading. As for the results posted by the other ordinary banking activities, they show a drop of 13.6%, to CHF 126 million, and include the profit taken on the sale of part of BCV's stake in Orange Communication, as well as drops in the value of certain other share positions. Operating expenses came to CHF 510 million, a 1% increase on fiscal 2000. In spite of the increase in staff numbers during the year, personnel expenses fell, as the variable portion of employee compensation, which varies with gross profit, decreased. Other operating expenses, and particularly IT expenses, rose by slightly more than 10%.

Gross profit thus came to CHF 330 million in the period under review, 30% below that of fiscal 2000. Depreciation, value adjustments, provisions and losses totalled CHF 1.33 billion, as a consequence of the measures taken by the parent company to strengthen credit risk provisions. With the addition of CHF 700 million of extraordinary net income resulting from the liquidation of the Bank's free reserves, and after deduction of CHF 75 million of extraordinary expenses and CHF 10 million for taxes, the net loss for the period under review comes to CHF 381 million. At the General Shareholders' Meeting of 23 May 2002, the Board of Directors will propose that this loss be covered by a transfer of CHF 390 million from capital reserves.

Balance Sheet Total Down

The balance sheet total fell by CHF 1.17 billion, or 4.9 %, to CHF 36.1 billion. This is essentially due to voluntarily reduced in inter-bank business, which had sharply risen during the previous year. Business with non-banking clients was rather more stable. On the liabilities side, deposits and borrowings show a slight decrease of CHF 201 million, or 0.7%, to CHF 27.5 billion for fiscal 2001. The fall in savings was much more limited than that of the previous year, (-1.4% to CHF 8.52 billion), as was that in cash bonds (down 4.9%, to CHF 625 million). The Bank's other liabilities towards clients show a more marked decline (-6.4%, to CHF 8.08 billion), which springs from the decision not to renew certain time deposits, given that re-financing needs were covered by long-term borrowing (up 5.2%, to CHF 10.27 billion). As a consequence of the above-mentioned accounting operations made by the parent company, valuation adjustments and provisions have increased by 81.6%, to CHF 1.66 billion, while shareholders' equity has fallen by CHF 1.17 billion or 43.7%, to CHF 1.5 billion. The recapitalization plan that will be submitted to the Shareholders' Meeting should bring in CHF 600 million, thus allowing the Group to attain a tier 1 equity ratio of more than 8%, as against 6.4% on 31 December 2001. On the assets side, lending volume dropped slightly (down 1%, to CHF 26 billion), as a rise in mortgage loans of 3%, to CHF 15.87 billion, did not quite compensate for the decline in other advances to clients, of 4.9%, to CHF 10.12 billion.

Prospects

Although the economic and financial climate remains difficult, an improvement in the situation is possible during the course of the year. Given these uncertainties, predictions for the coming year must be made somewhat prudently. Nevertheless, the Group's goal for the coming year is to improve gross profit by 10 to 15% over fiscal 2001. In addition, BCV will seek to ensure its continued competitive edge in an increasingly tough market by developing an operating expenses reduction project. Its goal is to gradually implement roughly CHF 40 million in annual savings by 2005. A study is currently being carried out on a set of cost-cutting measures, one of which involves a gradual reduction in personnel of roughly 10%. In the event that such a measure were taken, it would be effected through normal staff turnover.

Lausanne, 19 March 2002