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IFBC Study: Swiss banks create more value

Zurich (ots)

Clear owner strategies and systematic equity
management are prerequisites for sustainability
In 2006, many Swiss banks increased the value they create for
their owners. However, over a seven-year observation period only a
small number succeeded in turning their capital to profitable use and
achieving profitable growth. These are the findings reached by the
Zurich corporate consultancy firm IFBC in its second study on "Value
creation in the Swiss banking industry" (Wertschaffung in der
Schweizer Bankenbranche) which examined more than 40 Swiss banks
belonging to the four categories of cantonal banks, regional banks,
major banks and private banks.
The gratifying economic environment and the positive performance
of the financial markets in 2006 brought record results for many
Swiss banks and led to a marked improvement in value creation for the
benefit of owners. The biggest increase in value in 2006 was posted
by the major banks and in particular UBS. A clear improvement is also
in evidence in the case of the private banks, which recorded strong
growth - partly thanks to the positive performance of the
stockmarkets - while at the same time keeping their costs under
control. Another point which deserves to be highlighted is the value
creation achieved by the cantonal banks over the past year. 14 banks
succeeded in generating a return on equity which exceeded their
equity costs and 15 institutions made progress in comparison with the
previous year. In the regional banks category, it was mainly the
smaller players that achieved an increase in value creation, while
their larger counterparts were not quite able to maintain their
performance levels.
Over a longer observation period the study presents a less rosy
picture - with only a small number of Swiss banks creating value for
their shareholders on a sustained basis. In addition to the two major
banks and the majority of private banks, this includes the four
cantonal banks of Basel, St. Gallen, Aargau and Schwyz, the
Raiffeisen Group and Migrosbank.
The study also concludes that capital efficiency - one of the key
factors involved in value creation - is not recognized as such and
exploited (or at any rate not sufficiently) by many banks. According
to IFBC Managing Partner Thomas Vettiger, who led the study, this
confirms the experience that the legitimate financial concerns of the
owners of various banks are still not given sufficient consideration.
On the strategic level of the board of directors or bank council,
options for action in connection with the use of capital and capital
repayments should be periodically evaluated with the focus on value
creation. Regardless of a bank's legal form and specific operating
environment, its management must be guided by the basic economic
principles which apply and take decisions accordingly.
IFBC ( www.ifbc.ch)
IFBC is a corporate consultancy firm focusing on financial
management. It supports national and international companies in the
implementation of a value-oriented management policy in the areas of
Corporate Finance and Corporate Treasury as well as in special
matters of legal interpretation.

Contact:

Thomas Vettiger
Managing Partner
IFBC
Riedtlistrasse 19
8006 Zürich
Phone: +41/43/255'14'55
E-Mail: thomas.vettiger@ifbc.ch

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