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Vaud cantonal bank hammered by bad debts

The BCV is thinking of cutting ten per cent of its workforce Keystone

The cantonal bank of Vaud (BCV) has reported a net loss of SFr381 million ($229.24 million) for 2001 and is considering cutting 220 jobs.

The losses at Switzerland’s fourth largest bank in Lausanne were expected after an audit revealed in December that the BCV had debts of SFr2.3 billion.

The BCV said at the time that it was increasing its credit risk provision to SFr1.7 billion, which would involve a recapitalisation of SFr600 million, half of which was to be met by the cantonal government – the majority shareholder.

Banque Vaudoise collapse

A major headache for the BCV group was the collapse of the Banque Vaudoise de Crédit in 1993. To avoid a “major disaster for the canton’s economy,” BCV assumed the insolvent bank’s SFr3.5 billion in assets and liabilities without any external financial support.

The cost of that operation put heavy pressure on BCV’s results and continues to do so.

BCV has maintained that like the rest of Switzerland, Vaud banks experienced strong turbulences in the 1990s, as they were hit by severe anti-trust measures imposed by the Federal Competition Commission in 1989 and by the general economic downturn, which required the Swiss banking system to generate provisions in excess of SFr90 billion between 1991 and 2000.

In a statement commenting on the 2001 results, BCV said that depreciation, value adjustments, provisions and losses totalled SFr1.33 billion as a consequence of the measures taken to strengthen credit risk provisions.

Covering loss

The board of directors is to propose at the annual shareholders’ meeting on May 23 that the SFr381 million loss be covered by a capital transfer of SFr390 million from capital reserves.

The bank described business in 2001 as “positive”, with improved interest margins and continued progress in the group’s drive to diversify its source of income.

Commenting on the prospects for this year, the BCV said that an improvement was “possible”, although it said that predictions had to be made “somewhat prudently”.

The group said its goal for this year was to improve gross profit by ten to 15 per cent over the 2001 figure of SFr330 million.

It added that it was developing an operating expenses reduction project aimed at cutting costs by an annual SFR40 million by 2005.

BCV said one of the measures under consideration was a general reduction of staff by ten per cent.

In the event that such a measure were taken, it would be made through normal staff turnover, the statement said.

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