Investors turn their backs on BZ Bank

The BZ Bank of embattled investment banker Martin Ebner has suffered a dramatic outflow of clients' assets.

The Bank reported it had lost SFr26 billion of client funds as investors pulled out 90 per cent of the funds held in custody accounts.

Once hailed as the champion of the small investor, Ebner has seen his financial empire crumble over the past two years as a result of the global bear market.

BZ Bank is the private Swiss bank within the financier’s heavily indebted BZ Group.

In a statement, the Bank said it had made a profit of SFr1.6 million last year, down from SFr77 million in 2001.

Hidden reserves

However, to make last year’s profit, the Bank withdrew SFr58 million in hidden reserves.

At the end of 2002, securities held in custody with the Bank totalled SFr3 billion (previous year SFr29 billion).

The Bank admitted that the severe financial problems of the parent company in the second half of last year had “given rise to doubt” about its financial status.

The statement added that although both the Bank and the supervisory authority, the Federal Banking Commission, declared that the Bank always fulfilled all legal and regulatory requirements, the Banks suffered a dramatic outflow of clients’ assets.

“Solid as concrete”

The “NZZ am Sonntag” quoted the head of the Banking Commission, Daniel Zuberbühler, as saying that the situation of the BZ Bank was under control and that the Bank was “as solid as concrete”.

However, he said that the survival of the parent BZ Group depended on the value of its stock portfolio.

Earlier this month BZ Group confirmed that it had cut its stake in Italy’s Pirelli company from 7.8 per cent to 2.5 per cent, as part of an ongoing restructuring programme to reduce its debt.

It is believed that Ebner worked out a deal with creditor banks in the middle of last year which gave him a year’s grace on SFr3 billion in loans falling due.

He has since been selling off stakes in major Swiss and European companies, cutting an estimated SFr6 billion in debt in half.

They include engineering firm ABB, Credit Suisse, Sweden’s Investor, chemical company Lonza and insurer Baloise.

Last year, the BZ Group sold its investment funds to the cantonal bank of Zurich due to mounting debt.

swissinfo with agencies

Key facts

BZ Bank’s net profit in 2002 slid to SFr1.6 million, down from SFr77 million the previous year.
The Bank withdrew SFr58 million from hidden reserves.
The head of Switzerland’s Federal Banking Commission says the BZ Bank is as “solid as concrete”.
Martin Ebner has sold substantial stakes in ABB, Credit Suisse, Lonza, Investor and Pirelli.