BCV Group's 2002 Results

BUSINESS TRENDS WERE SATISFACTORY DESPITE THE DIFFICULT ECONOMIC AND FINANCIAL CONTEXT

In spite of the unfavorable economic and financial trends in 2002, BCV Group's operating income for fiscal 2002 is satisfactory. Gross profits fell by only 3% YoY, and amounted to CHF 320 mn for the period under review. The net loss posted (CHF 1.2 bn) results from last fall's decision to restructure the Bank's balance sheet by increasing provisions and shareholders' equity. BCV's recapitalization was completed at the end of February 2003, which means the Bank has a strong capital base to support its moves to return to net profitability.

Revenues Up in 2002

BCV Group's total revenues rose by 2.25% in 2002, to CHF 858.5 mn. The subsidiaries' share of total revenues rose from 11.7% in 2001 to 18.3% in 2002 as a result of the full consolidation of the IT company Unicible on 1 July 2002. On a like-for-like basis in terms of the scope of consolidation, Group total revenues were down 3%.

Net interest income was stable during the period (down 1.6% to CHF 429 mn), which constitutes a solid performance given the marked decline in interest rates during the year. The interest margin as a percentage of balance-sheet total actually improved slightly, from 1.21% in 2001 to 1.22% in 2002.

Net commission income for the period came in at CHF 276 mn. Although net income from wealth-management activities declined by 12.5%, other commission income rose by 9.3%. Trading posted a profit of CHF 60.4 mn thanks to increased earnings from transactions on currencies, banknotes and precious metals and a sharp reduction in losses on securities. Other operating income, boosted in the period under review by CHF 50 mn linked to the consolidation of Unicible, amounted to CHF 93.3 mn in 2002. This was 25.7% or CHF 32.3 mn less than in 2001, when a large non-recurring profit on the sale of shares in Orange Communication was booked.

Expenses Held Under Control

Uncible's consolidation is behind a 12% increase in Group personnel, to 2,679 full-time equivalents, and a 9.6% increase in personnel costs, to CHF 346.5 mn. On a like-for-like basis in terms of the scope of consolidation, BCV Group employed 2,322 full-time equivalents at end-2002 as against 2,326 at end-2001. The Group held other operating expenses steady, at CHF 192 mn (down 0.9% on 2001). Group-wide total operating expenses amounted to CHF 538.5% (up 5.6%), with subsidiaries accounting for 24.2% of the total. On a like-for-like basis, operating expenses were down 0.5%.

Operating Income Practically Stable

Falling as it did by only 3% to CHF 320 mn, BCV's 2002 gross profit shows that the Group performed well, given the very difficult climate prevailing in 2002. On a like-for-like basis in terms of the scope of consolidation, gross profits amounted to CHF 307.1 mn (down 6.9%).

Net Income Affected by Need to Boost Equity and Provisions

The Consolidated Income Statement shows a net loss of CHF 1.2 bn for the period, which is a direct result of the measures to strengthen BCV's capital base announced on 29 October 2002. The net loss thus comprises CHF 850 mn booked to valuation adjustments, provisions and losses as well as CHF 250 mn booked to the reserve for general banking risks. This loss has already been covered by a participation-certificate issue amounting to CHF 1.25 bn, which was completed on 28 February 2003.

BCV provided detailed information on these operations at the EGMs held on 30 October 2002 and 5 February 2003.

Balance Sheet Slightly Down

The Balance Sheet total fell by 2.7% or CHF 965 mn to CHF 35.1 bn. This was mostly due to a voluntary reduction in the items "loans and advances to banks" and "funds due from banks". As in 2001, these items were reduced in order to lower equity-requirement-related needs.

A Decline in the Demand for Loans

Total loans and advances to customers fell by 3.7%, or CHF 959.4 mn, to CHF 25.03 bn. This decline relates to the troubled economic conditions during the period, as is shown by commercial loans' having dropped far more (down CHF 871.5 mn or 8.6% to CHF 9.25 bn) than mortgage loans (down by CHF 87.9 mn or 0.5% to CHF 15.78 bn). As for the other items listed under Assets, financial investments fell by 14.8%, or CHF 332 mn, to CHF 1.92 bn, with two-thirds of the drop resulting from reduced equity-security positions. The sharp rise in other assets (up 54.8% or CHF 816 mn to CHF 2.31 bn) relates in particular to increased replacement values of derivative financial instrument transactions.

Client Deposits Held Up Well

On the liabilities side, customer accounts and long-term borrowings amounted to CHF 27.2 bn at end-2002, a slight drop (CHF 291 mn or 1%) from the previous year. The amount booked under customer accounts diminished by 2%, or CHF 176 mn, and stood at CHF 8.34 bn on 31 December 2002. Medium-term notes (off 7.8%, or CHF 48 mn, to CHF 577 mn) were hit by falling interest rates. Valuation adjustments and provisions rose significantly (up 47.5%, or CHF 788 mn, to CHF 2.45 bn) in line with the decisions made last fall. As for shareholders' equity, the 2002 share-capital increase added CHF 628 mn, and CHF 250 mn was booked to the reserve for general banking risks during the period. After recognition of the net loss on 2002 of CHF 1.2 bn, shareholders' equity amounted to CHF 1.17 bn at 31 December 2002, or CHF 332 mn less than a year earlier.

Back on Track in 2003

BCV Group's operating income in 2002 shows that it can generate solid cash flows. This augurs well for 2003. The Group now has the capital base to meet the challenges of a difficult economic climate. The participation-certificate issue of February 2003, which totaled CHF 1.25 bn, brought shareholders' equity back up to over CHF 2.3 bn, while provisions now amount to over CHF 2.4 bn. This gives the Bank a solid capital base.

The Bank's goal for 2003 is to post a net profit. The cost-control, risk-management, and process-streamlining measures which are being rapidly implemented within the Bank should make this goal a reality in spite of the continuingly difficult trends on the markets and in the economy in general.

Lausanne, 25 March 2003