The Vaud Cantonal Bank has reported stable earnings overall and has issued significantly more mortgages. However, operating expenses have also increased, so that group profit no longer reaches the level of the first half of 2023.
After its record year in 2023, Banque Cantonale Vaudoise (BCV) has slowed down somewhat. Its annual report presented on Thursday Half-year financial statements shows that group profit, at CHF 221 million, is 8 percent below the figure for the first half of 2023.
At least operating income reached the previous year’s level at a good 580 million francs. In the interest business, which is important for cantonal banks, BCV managed to keep net income (interest income minus interest expenses including changes in value adjustments) stable at 290 million francs, in contrast to most of its competitors. The bank explains that the less favorable interest rate environment was offset by the increase in business volume.
Trading business pays tribute to interest rate environment
The environment in terms of financial markets was more favourable than in terms of interest rates. Due to the associated high transaction volume in the private customer segment, income from commission and service business rose by 7 percent to 181 million francs.
BCV suffered a setback in its trading business, where profits fell by 15 percent to 89 million francs. This is primarily due to the fact that active management of the balance sheet has proven to be less profitable in the current interest rate environment, explains the bank, which is not entirely unscathed by the interest rate turnaround implemented by the National Bank.
Personnel costs increase sharply, OECD minimum tax burdens
Operating expenses are less stable than the income side, rising by 5 percent to 284 million francs. BCV attributes the significant increase in personnel expenses by 7 percent to 194 million francs to an increase in staff in the IT and cybersecurity areas as well as to “projects to further develop the bank, particularly in the asset management area”. In contrast, operating expenses only increased by 1 percent to 89 million francs, while depreciation amounted to 39 million francs (+8 percent).
At CHF 258 million, operating profit is 6 percent below the previous year. The tax burden remained the same at CHF 37 million despite the lower taxable profit, notes the BCV, because the tax rate increased with the adoption of the proposal to introduce the OECD minimum tax for companies in June 2023.
Repayment of Covid loans compensates for increase in corporate sector
The increase in net new money was rather modest at 1.1 billion francs or 1 percent. Together with the increase in value due to investment performance (3.2 billion), assets under management increased to 117.2 billion francs (+4 percent).
In its lending business, BCV benefited from a “dynamic real estate market”. The mortgage volume rose 5 percent to 33.3 billion francs. Other loans remained almost unchanged at 6.1 billion. The Vaudois have apparently granted more loans to companies, but the increase was offset by ongoing repayments of Covid-19 loans.
Refinancing also via mortgage bonds
On the liabilities side, customer deposits rose only slightly by 1 percent to 36.7 billion francs. The second most important source of refinancing for BCV’s assets is the funds raised through bonds from the Pfandbriefzentrale, which reached 8.9 billion francs (+5 percent). Liabilities to banks also rose sharply to 7.6 billion francs (+28 percent).
The balance sheet total now amounts to 60.5 billion francs, 3 percent more than at the end of 2023. For the entire 2024 financial year, BCV expects business to be comparable to that in previous semesters, but with a result that is below the record level of 2023 – a figure that should also be of interest to investors who have invested in BCV registered shares.
