Ladies and gentlemen, welcome to the BCV Full Year 2024 Results Conference Call and Live Webcast. I am Valentina, the call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions in writing via the relevant field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Pascal Kiener, CEO. Please go ahead.
Thank you very much. Good afternoon, everybody. Let me jump on page four. Sorry, I have some problem with my throat, but I will try to keep my voice during this call. I think those are the key messages on our result. First of all, we are in an economy which is still resilient. The Swiss and the world economies are doing quite well, about something like 1%, 1.5% growth. As you can see, we had in 2024 a strong growth in the mortgage business. First of all, the market is quite dynamic in this part of Switzerland. Second, as you know, due to the merger of UBS and Credit Suisse, we could take some market share. Third point for me is quite an important one. Our revenues are quite stable, and here you can see the effect of, let's say, the diversification of BCV.
BCV is the most diversified cantonal bank. We had a bad year, I would say, in the revenue interest aspect, given to the interest rate environment following the decrease in rate by the Swiss National Bank, and that was almost compensated by the commission business and trading income, and our results are down 6% for the net result, minus 6%, which is a bit less than anticipated and better than we had in the first half. However, I consider those numbers being very good. The second best full-year result, given the fact that 2023 was quite a record year in Switzerland for banks, not only for BCV, but also for all others.
Since we have good results and we are quite confident going forward, based on our strategy, based on our financial strengths, and based on the development of the economy around Lausanne, we decided to increase the dividend by CHF 0.1, which is CHF 4.5 per share. Page five, I'm going to comment. Some comments on page six. The 8% increase in the mortgage business. If we consider the other loans, so mostly SMEs, minus three means basically stable, a bit more than stable for SMEs, and the reduction is due to the ongoing decrease and paying back of COVID loans. In terms of deposits, you see if we add up the two components, you see a slight increase, and the same for AUM due to net new money coming from different segments, as well as the performance of our investment portfolio.
Two women joining BCV, one in the Board of Directors, succeeding Ingrid Deltenre, who will retire. And the first woman in the Executive Board of the whole story of BCV, Anne Maillard, is going to join us as the head of retail banking, sorry for my voice, replacing José Ciano. And you see that our financial ratings are still very good, no change here. And in terms of ESG rating, you see that we have good rates, and we had an upgrade from ISS recently. Now we are in the Prime category. I think this is also quite good. And if you took all those ratings, I mean, there are one or two more which are not mentioned here, you can see that BCV is one of the best cantonal banks in terms of ESG rating. Now, retail banking, basically, this is an ongoing business, slow development. This is like diesel motor.
With an exception, last year, the mortgage business grew at seven%, which is quite a lot. But again, this is mostly due to a dynamic market, but also to the UBS-Credit Suisse merger, where we could take some market share. Now, if you look at revenues, everything, profits, this is up. I mean, I don't know how familiar you are with division accounting in universal bank, but you know that the transfer price between the Corporate Center and the different business units plays a big role. And here, basically, you have a reflection of higher interest transfer price from the Corporate Center to the retail banking unit. This reflects the interest rate environment. This is clear that the value of the savings or the deposits in retail banking are higher today than some months ago. So this is why the Corporate Center paid this unit a better transfer price.
I always mention to analysts to be very careful with divisional numbers because it depends really on the model that every bank is using to transfer money from the Corporate Center or, let's say, transfer monkey money because this is right pocket or left pocket. So this is why I think those numbers are important, but they are less important than the overall number of the bank. Now, corporate banking, different situation. SME is doing quite well. You can also see that the deposits are up, which means that the SME in Canton Vaud or around Lausanne are quite liquid. So this is a good sign of Vaud economy. Real estate firm up 14%. This is again due mostly to the merger of UBS and Credit Suisse.
Large corporates, the loans are slightly up, and then deposits. This is really very volatile depending on whether we need money or not, or liquidity. We pay less or more. Trade finance, again, the same story as last year. Due to the geopolitical environment, we are very careful in this business. You see that the volume on average is down 10%. Also, a good sign of the economy is that there is very limited new financing needs for SME. So the SME overall around Lausanne are doing quite well. Wealth management, you see the effect of the market, the good performance. Some net new money also coming from new customers, or we could get a higher market share for each customer. Also, growth in the mortgage business or private banking. Again, revenue, operating profits are up, so quite good. Trading, everything is up.
So this is why I mentioned be careful with those accounting numbers. They are correct, but you see there are models behind all those numbers or divisional numbers. And it's clear the bank is doing, I mean, not as good as last year. And the business units are doing better. So the one who is doing worse is basically the Corporate Center . And this is the effect of mostly interest rates. Now, I'm going to turn to Thomas for the more financial part of the presentation.
Okay. Hello, everybody. I'm on chart 14. Just to summarize, we see the stable total income, which we have developed in more detail. We see higher operation costs, which I will come back to, which resides in the operating profit, which is down 5%. Taxes are higher, even though the operation profit is lower, given that we have now the implementation of the minimal tax rate due to the new OECD approach, which then resides in the profit of 441. It's important to underline on page 15 that even though this resides 5%, respectively 6% below 2023 numbers, it's still very high, residing second highest, residing in the history of BCV. It's well above, I mean, it's 15%, respectively 13% above 2022 numbers and above the average numbers before. We are really at a higher level of net result operating profit by now.
That's why we think it's a solid and good result. On page 16, let's see the different sources of income. Net interest income is obviously half of the result, and it is reduced. As you see at the bottom of the page, it is the interest environment which makes results in lower NIIs, whereas the impairment charges are still marginal. It's not a change here. Obviously, you knew that. Now, coming back to the source of revenue, there is obviously we take benefit of the diversified business lines of BCV, where driven by markets and client transactions, commission fees are up by 9%. Going further into interest income on page 17, I want to, and some of you know this game, I want you to be aware that from an economic perspective, we have to look at what we call the economic net interest income.
It’s paid on this page. It is actually the result of what we call NII before BSM, CHF 677 million. And the result of the arbitrage, treasury arbitrage, which is called net income from BSM. And treasury arbitrage, as I remind you, is taking in typically short-term money in forex on the liability side and to swap it into Swiss francs to put that money at the BSM, at the Swiss National Bank. The charge paid on that money on liability side goes directly into the interest accounting result. This is -74. The income from that, the swap, is in trading CHF 96 million, which 96 minus 74 explains 22 in net income from balance sheet management.
We draw attention to this point because from a really pure economic perspective, it is this sum of NII before BSM and net income from BSM, which adds up to CHF 649, which is a real economic revenue, whereas in the year before, it was CHF 654 plus CHF 31, CHF 685 million, so obviously, I'm happy to hear your question on that. It is for accounting reasons that it does not really show up in the accounting numbers. That's why we do this little effort for you, that you have transparency on this point. On page 18, let's get into operation charges. It's quite interesting what's going on there, well, first of all, okay, personal costs are up 6%, but here are some key drivers to understand, well, there are some inflation-driven salary increases.
I think, structurally speaking, half of the, almost half of the resource increase, FTE increase, is due to the strategy of BCV of insourcing the IT hosting services. So this was a service which was paid to the supplier before, which was Kyndryl. And as a last act of our strategy to become an owner of our IT, this is step three, basically, of that strategy. We now insource also that last part of it. So this is a step by personnel cost. The other increase in personnel costs are obviously due to higher cyber security personnel and business development asset management. Now, if we look at other operating expenses, they are down. And even, I mean, from the point of view that we now don't pay any more company for hosting services, there was a strong decrease on this side.
Then, however, there were kind of financial information, other suppliers, which became more expensive. So that's the other operating expenses only decreased by 4%. Last but not least, and I think that's something you're interested in, I guess, is that depreciation amortization is up. Well, we actually accelerated the depreciation of some of those pieces, which we insource now on hosting services. And so you can understand the CHF 82 million of 2024 as a spike, as a peak, where we expect it to be lower in the next years. With regards to headcount, basically, you find the same story, which I just mentioned, in terms of personnel numbers. Adding to this that in our subsidiaries, particularly Piguet Galland, but also the others, we have positive business development, which we see later with additional resources.
On page 20, total assets are up, mainly driven by the mortgage loan increase, which has only become mentioned, but also in the continuing building of financial investments as a liquidity reserve. On page 21, at the liability side, while the increase was basically financed by an increase in customer deposits, it increased in bonds and mortgage-backed loans, as you can see. On page 22, now we come back to asset management, which is up almost 6%. Half of it driven by market performance, the other 3.2 billion on net new money. And they are, as you can see, from all major business lines, individual SMEs, institutional, large corporates. So we are with 3.2 billion in a kind of normal level. We don't have the lumpy jumps as we had in 2023. We didn't have those in 2024.
Now, if we get to some capital ratios, I mean, the capital ratio is very interesting. Obviously, I mean, doing so much more mortgage loans had an impact on our CET1 ratio, which brought risk-weighted assets up, even though equity increased slightly. Now, as you already know, but I want to reinforce this, I mean, Basel III framework has a positive impact on BCV. It is now in force since January 1st, and it will basically compensate the decrease we saw over 2024. The LCR is on a solid level and is well managed. The relation of HQLAs to net cash outflows is in good order. It has, for technical reasons, lower because I don't want to get into it, but you can ask more questions if you want, and the net stable funding ratio is on a solid level, which is 118.3%, slightly decreasing.
I can get also more technical topics here if you like, function of your questions. Now, the key element, of course, is that following the solid and good results, we decided, or we decided, we proposed to the AGM to increase dividend by 10 cents to 4.40 CHF. Now, it's a really important point to see that this is the key element to say we are confident in the earning capacity of our bank. We step up, even though the net result is lower than 2023. I think that's a really important point to understand. And because you remember this beautiful dividend policy, which is ours now for 16 years, is characterized by commitment and intervals on Swiss francs, not on payout. And it has an implicit rule that we don't like to step back. We never step back. Remember, we had financial crisis 2008. We had oil crisis 2012, 2013.
We had negative interest 2015. We had COVID 2020. Those things were never budgeted, but we managed quite well through them and stayed in line with our dividend policy. Okay. That was my part. Thank you very much, Pascal.
Okay. Just maybe two slides to show going forward that we are quite confident. So in terms of GDP growth or the economic situation in this part of Switzerland, I think we will see, let's say, positive numbers around 1%. I always say that those numbers from SECO or Commission de Conjoncture Vaudoise , I think they are always a bit too positive. But I would expect a growth between 0.8 and 1.2%, both for Switzerland and for Canton Vaud, which means no recession. That's the main point. And in terms of real estate, we expect that prices will slightly go up. Transaction number as well for the market will remain quite dynamic due basically to the low level of interest rates and the ongoing immigration in Canton Vaud.
We were not going to change our approach or strategy in the mortgage business, which we know is a key business for us. I don't expect to have again a 7% or 8% growth because I think the UBS Credit Suisse effect is done. I expect probably to grow more or less in line with the market, which means something like around 4% growth. Except that I think it's going to be more or less business as usual. Okay. I'm done. We are ready to answer your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Webcast viewers may submit their questions in writing via the relative field. Anyone who has a question may press star and one at this time. The next question comes from Ausano Crivelli from ZKB. Please go ahead.
Thank you. Good afternoon, everybody. So a quick question on the decrease on the income side of the interest rate business in the second half of the year. Could you give us some details on the drivers of this decrease other than the lower interest rates on liquidity and the missing interest on the minimum reserves for the latter part of the year? Thanks.
Well, I mean, the key point is that, I mean, everyone knows, maybe I will remind that there's a massive decrease in the Swiss National Bank rates, and still over the second half, where we went basically from 150 to 50 basis points, and this impacted two elements, which we should not forget. Obviously, it's liquidity, which is with the Swiss National Bank, but secondly, it's also the income on the short leg of the IRS swaps, which is also quite significant, so these two elements together, I mean, more than explain the decrease which you observed.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question comes from Andreas Venditti from Vontobel. Please go ahead.
Yes. Thank you very much for taking my questions. Maybe you explained the competitive situation that had some impact on the high mortgage growth we've seen last year, and this, you said, should normalize this year. Maybe you could elaborate a bit on the impact on commercial margins in the business, and also if you could, yeah, maybe talk a bit about refinancing, how you see this going forward, and maybe if you could add a bit more of color in terms of outlook, what you would expect this year. Thank you.
Outlook for the bank or for the mortgage business?
For both. Thank you.
Thank you. Okay. Let's start with the mortgage business. You see, I mean, I think this is a situation that all Swiss banks are facing. So the refinancing is a bit more expensive. You can see that in the Centrale de lettres de gage. You see that for all the banks. You can also see the different loans that have been taken by banks. So you see that the cost of refinancing is a bit higher. Interesting enough, banks are not totally able to transfer that to the market. There is a strong competition on the mortgage market, and basically, the commercial margins are therefore under pressure. They're going slightly down. Probably with time, we might see an increase in the commercial margin due to two reasons. First of all, it takes time so that banks react, and customers accept, blah, blah, blah.
Second, you see, the prices now for mortgages are so low that maybe for a customer, 1.6%-1.7%, doesn't make a big difference. But the situation has been like that for the last, let's say, what, seven, eight months. And I don't see for the time being that the situation will completely change. It will depend on the next, let's say, loans we're going to make or we're going to see in the market. So we don't know exactly why it's like that. I mean, there are several, I say, tentative explanations. One is UBS had to reimburse quite a lot of money to the SNB, so absorbing liquidity from the market. In addition, as you know, on 1st of September, all banks had to increase their liquidity reserve from SNB. So it means for BCV, CHF 700 million.
So there was not a liquidity squeeze, but basically, many banks had to, in a way, slow down their growth in credit. I'm not saying stop, to slow down. And most banks, including ZKB or any bank system, I think they're doing their 2025 budgets under kind of a refinancing constraint. So probably they could grow more in the credit business if probably the refinancing side was easier. I'm not saying there's a liquidity crisis. Don't misunderstand me. I'm just saying that this is not as easy as it used to be, and it's a bit more expensive. And we have, in a way, all banks to transfer this increase in refinancing cost to customer and credit business. This is quite easy in the SME business. It's a bit more complex or difficult in the mortgage business, which, as you know, is very competitive.
How long that will last, I don't know. I think the main effect is done, in a way, because I don't expect now the refinancing costs going up further. They should decrease over time. I'm quite convinced. How long does it take? I don't know. For the second question going forward, if you tell me where it's going to be the interest rate in six months, I will tell you my guidance. No, I mean, joking apart. You see, it's quite difficult. I mean, good analysts should know now BCV. I don't expect to have a kind of CHF 350 million net profit next year. That would be too low. I don't expect as well to have a CHF 469 million like in 2023 with the current interest rate situation.
But since we have decided to increase the dividend to CHF 440 , you can expect that we will be able to do that without too much problem. So I don't want to give a number because you see that number could be plus minus CHF 25 million - CHF 30 million , depending on the level of interest rate. Are we going to have negative interest rates in September? I don't know. Nobody knows. The trend is towards decreasing rates. Now, whether it's going to be negative or not at the SNB, I don't know. And then even if it becomes negative, what's going to be the situation of SNB? Are they doing the same with the banks as they did in the last time when they had negative interest rate? We don't know. So this is why it's quite difficult to make a guidance plus minus CHF 30 million .
And I don't want to be due to SIX rules. I don't want to be forced to have a kind of profit warning in one direction or the other direction in 10 months from now. But you can assume that you know the business model of BCV. You can see the fluctuation. And since we have decided to increase the dividend, we are quite confident that we will have good results, results that will enable us to pay the dividend. Now, whether it's CHF 4.25 or CHF 4.35 , I don't know. And nobody knows.
Perfect. Thank you very much.
Thank you.
For any further questions, please press star and one on your telephone. Ladies and gentlemen, there are no more questions at this time. I would now like to turn the conference back over to Pascal Kiener for any closing remarks.
Okay. Thank you very much. This is the only closing remark I have. Thank you, guys. Bye-bye. See you next time or talk to you next time. Bye-bye.
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