2006 full-year results: BCV Group turns in record performance

BCV Group has posted the best full-year financials in its history. Gross profit rose year-on-year by 10% to CHF 536m, while net profit improved 17% to CHF 534m. The positive trend in the Bank’s financials over the last several years was also boosted by a favorable economic climate in 2006, allowing the Group to propose the repurchase of the remaining CHF 733.7m of the participation-certificate capital issued in 2003.

Revenues up 6%

Total revenues climbed 6% YoY to CHF 1.1bn. All of BCV’s core revenue streams contributed to this improvement. Despite tough competition, interest income rose 4% to CHF 481m. Fee and commission income rose 11% to CHF 358m, driven by buoyant stockmarkets, the Group's investment policy and strong business trends at wealth-management subsidiaries. Trading income was unchanged at CHF 103m. Other ordinary income rose by 6% to CHF 159m, due mainly to the sale of securities and real-estate held as investments.

Gross profit up 10% on strong revenue trend and solid cost control

Operating expenses rose only 2.4%, to CHF 565m. Personnel costs climbed 3.9%, to CHF 378m, while other operating expenses were held in check at CHF 187m (-0.6%). This rigorous cost control, combined with the increase in revenues, underpinned a 10% YoY rise in gross profit to CHF 536m.

Net profit climbs 17%

Depreciation and write-offs were stable at CHF 91m, while value adjustments, provisions and losses remained very low in 2006 (CHF 8m). Extraordinary income totaled CHF 244m. This figure consists mostly of provision releases generated by the Bank’s pro-active approach to its impaired-loan portfolio, which was facilitated by a strong economic environment, particularly in the real-estate market. As in 2005, the Group chose to strengthen its reserves for general banking risks, with an allocation of CHF 122m. In spite of this charge against income, net profit rose 17% YoY to a record CHF 534m.

Total assets up 5% on a healthier balance sheet

Total assets rose 5% YoY to CHF 36.5bn, essentially reflecting growth in mortgage business and trading activities. Advances to customers increased 1.7% to CHF 22.1bn, despite the sharp reduction in impaired loans, which declined by CHF 612m. Mortgage lending advanced CHF 631m (+4%) to CHF 16.5bn; excluding the effects of CHF 240m of reductions in impaired mortgage loans, this item was up CHF 871m (+5.5%). Other loans fell by CHF 257m, but this decline was caused by impaired-loan reductions. Excluding the CHF 372m decrease in impaired loans, this item rose by CHF 115m (+2%) to CHF 4.8bn. Rising stockmarkets drove a CHF 1.1bn increase in "Other assets", reflecting higher replacement values for derivative financial instruments. On the liabilities side, savings deposits and other funds due to customers were up 4.5% to CHF 786m. Standard savings deposits contracted, as customers moved to higher-paying types of investment, such as time deposits. The Group's refinancing costs continued to show significant improvement, thanks in large part to the 4.9% YoY reduction in long-term borrowings to CHF 6.4bn. Mirroring developments on the assets side, the item "Other liabilities" registered an increase of CHF 1.3bn (to CHF 4.6bn) as a result of rises in the replacement values of derivative instruments. Group equity expanded to CHF 3.4bn at year-end.

Growth in assets under management

AuM rose 13% to CHF 80.8bn, due to the strong financial markets, the excellent performance of the Group's investment strategies and net new money inflows of CHF 3.1bn.

Operating ratios continue to improve

The Group's performance has improved steadily since 2003, and this improvement is reflected in its operating ratios. The cost/income ratio declined from 62% in 2005 to 59% in 2006. This improvement is the result of firm cost control and rising revenues. The net interest margin was stable at 1.39%. Excluding the effect on total assets of rising replacement values, which are unrelated to interest income, the margin was 1.48%. The ratio of impaired loans to total loans dropped from 15% in 2002 to 5% in the reporting period. Finally, return on equity continued to improve, moving from 14.9% to 16.0%.

Proposals: higher dividend (+56%) and final P-C buyback

In light of the sharp improvement in BCV’s financials and Management’s confidence regarding the Group’s future prospects, the Board of Directors will submit a proposal at BCV’s Annual Shareholders' Meeting on 26 April to increase the dividend from CHF 4.50 to CHF 7.00 per registered share.
In addition, the Board will propose a final participation-certificate (P-C) buyback in the amount of CHF 733.7m. This transaction will bring to a close, much earlier than expected, the repurchase of the CHF 1.25bn in P-C capital that was issued in February 2003.

Vaud to receive CHF 794m from BCV

The proposed share dividend and P-C dividend, along with the P-C buyback, mean that Vaud Canton stands to receive CHF 794m from BCV.

Outlook: lasting growth trend

The Bank's growth initiative, launched in 2006, is on track. The preliminary results of this effort include a strong increase in mortgage lending. In addition, many branch offices have been redesigned as part of the Bank's re-branding campaign.
Given the upbeat economic climate that is expected to prevail in 2007, Management’s guidance on 2007 net and gross profit is positive, although the YoY improvement is expected to contract compared to recent years.

Lausanne, Switzerland, 13 March 2007

Contact(s)

Christian Jacot-Descombes, Press Officer
Phone + 41 21 212 28 61
E-mail

Wilhelm Blaeuer, Investor relations
Phone + 41 21 212 20 71
E-mail

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