2007 full-year results - BCV posts net profit of CHF 477 million

Banking revenues rise Revenues held practically stable at CHF 1.1bn (-1%) in spite of the transfer of IT subsidiary Unicible's operations to IBM on 1 June 2007. Excluding the effects of the Unicible transfer, banking revenues would have been up 4%. In a highly competitive environment, the Group was able to increase net interest income by 5% to CHF 505m. Despite difficult stockmarket conditions, particularly in the second half of 2007, fee and commission income increased 5% to CHF 385m. However, trading income declined by 22% to CHF 73m. Other ordinary income was down 22% to CHF 124m, due mainly to the Unicible transfer.

Stable gross profit Total operating expenses fell 1% to CHF 559m. The main downward factor was the Unicible transfer, while increased business volumes and the development of strategic projects had an upward impact. Excluding the Unicible transfer, total operating expenses would have risen 5%. Personnel costs declined by 8% to CHF 348m, while other operating expenses rose 13% to CHF 211m. This essentially reflects a reclassification of personnel costs to operating expenses following the outsourcing of IT services. Gross profit, at CHF 529m (- 1%), held close to the record achieved in 2006 thanks to a stable trend in both revenues and expenses. Excluding the effect of the Unicible transaction, gross profit would have risen 3%. The cost/income ratio was unchanged at 59%.

Higher tax charge weighs on net profit Depreciation and write-offs declined 6% to CHF 85m, while value adjustments, provisions and losses remained stable at CHF 10m. As in previous years, the Bank continued its policy of reducing the level of impaired loans and optimizing recoveries. It was therefore able to release provisions, driving extraordinary income up 16% to CHF 283m. However, the total tax burden increased by CHF 75m to CHF 99m, as the tax credits relating to losses posted in 2001 and 2002 have now been used up. As in 2006, the Group opted to bolster its reserves for general banking risks with an allocation of CHF 140m. In spite of this charge against income, net profit amounted to CHF 477m (11% below the record achieved in 2006). This figure is still extremely high thanks to extraordinary income, which is expected to decrease significantly in the years ahead.

Total assets rise 7% Total assets increased by 7% to CHF 35.3bn, fueled mainly by a rise in customer deposits and growth in lending and trading activities.

Among items on the assets side, mortgage lending expanded by CHF 303m (+2%) to CHF 16.8bn; excluding the reduction in impaired mortgages, this item would have been up 3% (+CHF 483m). Business lending rose 2% (or CHF 117m); excluding impaired-loan reductions, this item would have been up 7% (or CHF 413m). Trading portfolio assets increased by CHF 641m thanks to stronger trading and financial market activities.

On the liabilities side, customer accounts rose 11% to CHF 21bn. Savings deposits declined 4% to CHF 8.1bn. Other funds due to customers rose 25%, the result of a fresh influx of funds and of customer interest in other forms of investment such as time deposits.

Growth in assets under management The Group's assets under management grew by 4% to CHF 84.3bn, with net new funds amounting to CHF 2.8bn.

New financial targets All the financial targets set in 2003 have now been achieved. In formulating its new targets for the next three to five years, BCV has three main goals: to continue to fulfill its legally mandated mission, to create sustainable value for shareholders and to remain among the top cantonal banks in terms of performance. With this in mind, Management has set a return-on-equity (ROE) target of 13-14%. The new cost/income objective is 57-59%, reflecting the Group's intention to maintain a firm grip on costs despite upward pressure on expenses related to business development and investments in the IT project.

Shareholders' equity strategy and dividend policy Given the significant improvement in the Group's risk profile and its strong capitalization, Management has decided to optimize shareholders' equity. It is targeting an SFBC capital adequacy ratio of 145% (Group level) in the long run. This corresponds to a BIS Total Capital Ratio of around 14% and a Tier 1 ratio of around 12%. These targets reflect Management’s intention to optimize the equity base over the coming years; equity not needed for business development at BCV will be returned to shareholders as a function of the Bank’s financial capacity. This strategy will be implemented with all due caution and may take several forms, including a reduction in the par value of shares, a share buyback or an extraordinary dividend. Moreover, BCV has not ruled out the possibility of repurchasing shares as part of the partial divestment project recently announced by Vaud Canton, the Group's majority shareholder.

With regard to future dividend policy, BCV has decided to target a payout ratio of 60- 80% over the long term, given the completion of the P-C capital buyback program last year.

Proposal to distribute CHF 400m to shareholders by doubling the dividend and reimbursing over 50% of the share's par value As an immediate consequence of the new shareholders' equity strategy, the Board of Directors will recommend an increase in the dividend from CHF 7 to CHF 14 per registered share at BCV’s Annual Shareholders' Meeting on 24 April together with a par-value repayment CHF 32.50 per share. The Group thus proposes to distribute CHF 400m to shareholders, or the equivalent of CHF 46.50 per share.

Financial outlook Following the crisis years of 2001 and 2002 and their repercussions, BCV's financials will return to normal in 2008. Extraordinary income is projected to drop significantly and the Group will no longer benefit from loss-related tax credits. Barring changes in the economic climate and the financial markets this year, BCV expects a similar level of gross profit to that of 2007 and a decrease in net profit.

--- END press release 2007 full-year results - BCV posts net profit of CHF 477 million ---

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