BCGE Group. Interim profit (in CHF millions) Net profit (in CHF millions)

Transcription

1 ANNUAL REPORT 2008

2 BCGE Group BCGE GROUP CONSOLIDATED KEY FIGURES Balance sheet (in CHF million) Total assets 13,690 12,498 12,571 12,783 13,892 Loans to clients 10,017 10,305 10,362 10,996 11,386 Client deposits and borrowings 12,072 11,207 11,175 11,569 12,782 Shareholders equity Income (in CHF million) Interest income Commission income Trading income Other ordinary income Total income Operating expenses Gross profit Depreciation, valuation adjustments, provisions and losses, and extraordinary income Interim profit (in CHF millions) Net profit (in CHF millions) Assets managed and administered (in CHF billion) 16.7* Total staff in full-time equivalent units in number of persons Ratios (in %) Shareholders equity/total assets Gross profit/shareholders equity Return on equity (ROE) Expenses/Income Data per bearer share (in CHF) Shareholders equity Gross profit Net profit Dividend Stock market data (parent company) History of bearer share price (in CHF) high low at year-end Market capitalisation (in CHF millions at 31 December) 792 1, Number of shares in thousands 5,721 5,721 5,721 5,721 5,721 Shareholders equity/number of shares * See page 34.

3 Standard & Poor s rating Banque Cantonale de Genève: A/A-1/Stable (latest rating as at 12 December 2008) BCGE stock exchange reference (symbol) Stock exchange listing SIX Swiss Exchange Reuters BCGE.S Bloomberg BCGE SW Telekurs BCGE Stock number ISIN number CH Structure of BCGE capital of CHF 360 million Number of shares A registered shares, par value CHF 50 2,651,032 B registered shares, par value CHF 50 1, 590,620 Bearer shares, par value CHF 100 1,479,179 BCGE share ownership 16,78% 34,87% Registered State of Geneva City of Geneva Geneva municipalities Bearer State of Geneva City of Geneva Geneva municipalities Private individuals Information actionnaires@bcge.ch Groupe Banque Cantonale de Genève Communication and investor relations Nicolas de Saussure Telephone: +41 (0) Fax: +41 (0) Postal address Case postale 2251 CH Geneva 2 7,27% 14,96% 4,09% 0,16% 21,87% Distribution of voting rights 21,12% 43.88% 9,14% Registered State of Geneva City of Geneva Geneva municipalities Bearer State of Geneva City of Geneva Geneva municipalities Private individuals 9,42% 2,57% 0,10% 13,87% BCGE: made in Geneva banking solutions A UNIVERSAL BANK SINCE 1816, BCGE OFFERS EXTREMELY COMPETITIVE AND HIGH-QUALITY BANKING SERVICES TO PRIVATE, CORPORATE AND INSTITUTIONAL CUSTOMERS IN GENEVA AND ITS SURROUNDING AREA. BCGE PROPOSES A DIVERSE RANGE OF SERVICES RANGING FROM ORDINARY BANKING FACILITIES, PRIVATE BANKING, ASSET MANAGEMENT, PENSION SCHEMES, MORTGAGES, CORPORATE AND LOCAL AUTHORITY LENDING. IT OPERATES A TRADING ROOM AND OFFERS FINANCIAL ENGINEERING, CORPORATE FINANCE AND GLOBAL COMMODITY FINANCE SERVICES. THE BCGE GROUP ALSO HAS A SUBSIDIARY IN THE FRENCH RHÔNE-ALPES REGION, BANQUE CANTONALE DE GENÈVE (FRANCE) IN LYON AND ANNECY. THE GROUP EMPLOYS 845 PEOPLE (789 FTE).

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5 BCGE Annual report 2008 Contents Key figures Cover Message from the Chairman 3 Message from the Chief Executive Officer 5 Mission and strategy 8 BCGE Contents 1 Seven complementary internal divisions 14 Organisation chart 16 Your Bank: at your service and close to hand 18 The financial markets in The Geneva economy in the face of adversity 24 Business review Key facts of 2008 Stability 38 Retail banking 39 Private banking 41 Corporate 44 Financial institutions and public bodies 47 Modernisation 48 Risk control built into the Bank s strategy 52 Talents and skills 60 Shareholder information and corporate governance consolidated financial statements and notes financial statements and notes, parent company 111 Addresses Back cover

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7 Message from the Chairman Only the fittest weather the storm Who could have imagined a year ago the extent of the hurricane that has hit the world s financial activities since the beginning of 2008? We have seen masts snap, sails torn to pieces and supposedly unsinkable ships go down. Only a few have been able to trim their sails in time, take shelter in a port or hold their course. In this taxing environment, the strategy of prudence, followed by the Bank since 2000, has proven highly effective and has shown itself more than ever to be well-suited to prevailing market conditions. This strategy has led the Bank to focus on expanding business with qualitative long-term performance, whose rewards it is now reaping. A/A-/stable: S&P rating raised Against the turbulent background seen at the end of the year, the fact that the Standard & Poor s agency increased BCGE s rating on 12 December confirms that the Bank s strategic choices are the right ones. The agency s report that was issued with the new rating highlights a considerable number of positive points, both in the financial profile and in the Bank s business model, which are bound to please its shareholders and clients and prove to the Bank s senior management that it should not be tempted to change tack. A summary is given on page 38. No subprime exposure, no Madoff The Bank s excellent risk management has protected both its clients and itself from the major value-destroying products that hit the headlines in Our institution continues to follow a course that supports the real economy, in which simplicity and common sense go hand in hand. That means that it only offers its clients services for which it feels completely comfortable with the content and with which it shares the architectural principles. It is convinced that this methodology protects it from a considerable number of undesirable risks, particularly fraud or speculation-related risks. Strategic revenue strong The Bank s strategic revenue sources performed well, considering the general climate. The interest spread resisted particularly well, mainly thanks to strong growth in mortgage business. It amounted to CHF million (+5.8%), making up two-thirds of the Group's revenues. Despite the sharp drops in the financial markets, commissions held their ground and were only 5.1% lower at CHF 92.7 million. Assets under management and administration amounted to CHF 16.7 billion (see page 34). The Bank has managed to attract funds from numerous new clients. Dividend maintained at 2007 level and considerable contribution to public authorities Considering that the drop in net profit primarily reflects the effects of the economic situation and is not attributable to a reduction in the Bank s operational capacity, the Board of Directors has decided to propose that the Ordinary General Meeting approve a dividend equalling that of the excellent 2007 financial year. The payment will therefore be 6% of par value, representing CHF 6 per bearer share and constituting a global distribution of CHF 21.6 million. The total contribution made to the public authorities, first and foremost to the Canton, will amount to CHF 30.1 million, an increase of 0.7 million. Modernisation of the IT system The Board of Directors closely monitored the colossal task of preparing for the IT migration and its actual implementation. Such a large-scale project makes great demands on all the staff concerned. The Board is very grateful to all those involved for their dedication. They have helped to ensure the Bank s competitiveness for the next twelve to fifteen years. In terms of the budget, the project has been well run and will allow reduced IT costs over the coming years. Cost overruns were strictly limited to desired improvements and formally agreed perimeter modifications. In this context, the Board of Directors has decided to earmark a limited part of the reserve for general banking risks to cover these extra expenses. Some banking secrecy should be maintained A great debate was initiated at the beginning of 2009 on banking secrecy. As far as we are concerned, we would like to state our total support of this Swiss particularity which, when applied carefully and ethically, helps to make Geneva one of the best financial markets in the world. Towards the end of the Fondval era In June 2008, the winding up of the Fondation de valorisation des actifs de la Banque Cantonale de Genève marked the end of an era for the Bank. The debts taken on by the Fondation de valorisation in 2000 have thus been greatly reduced and only amount to CHF million on the 2008 balance sheet, i.e. 5.9% of the initial amount. The transfer of 34 properties in the first few weeks of 2009 to the State of Geneva, through the acquisition of a share in a major real-estate company, has further reduced this amount. I would like to take this opportunity to highlight once again the excellent work carried out by the Fondation which, admittedly helped by a favourable property market, has succeeded in selling many properties at prices significantly higher than the original estimated values. In doing so, it has reduced the overall loss rate to below 39% from an initially estimated 50%. A thank you to staff and management The Board of Directors joins me in thanking the Executive Board for the sound conduct of its duties. It would also like to express its gratitude to all managers and employees and highlight their competence and efficiency. In the fiercely competitive environment and stormy economic situation currently being experienced, only the best crews can come through safe and sound. We can be proud that the BCGE team is one of these. BCGE Message from the Chairman 3 Michel Mattacchini Chairman

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9 Message from the Chief Executive Officer 2008: a year of trying times, a year of progress No banking institution, whatever its size or wherever it operates, will have come out of last year unscathed. Extreme events 1 and unprecedented index variations occurred one after the other. In this series of rogue waves, each institution has been tested in terms of its strategic positioning, its security and defence system against risks and its ability to retain its good standing and credit. The BCGE comes out of this trying time stronger than ever. It has gained more clients, it has increased its market shares in strategic sectors, its rating has been increased and it has effected a major technological change. Even its staff numbers have grown slightly. All these developments allow it to face 2009 and its medium-term growth with gusto and put it in a strategic position to seize the opportunities offered by a banking market under reconstruction. More clients 12,600 extra clients (11,900 retail and 700 corporate clients) represent exceptional growth, admittedly accelerated by the clientele's disappointment with certain institutions that were more exposed to the international financial crisis. This development is due to the constant improvement of what the BCGE has to offer. Its offer has expanded in numerous domains: comprehensive wealth advice, pension planning and inheritance advice, and increased technical capacities in Internet banking. The offer has also been strengthened in terms of infrastructure: the creation of a new branch in the heart of a district that represents the Geneva of the future, the modernisation of several branches and an increased number of automated teller machines (ATMs). Thirdly, the offer has been expanded for companies with the creation of an equity investment vehicle. Finally, its capacity to finance public bodies has been increased thanks to a joint venture with French banking partners. The growth in client loyalty should also be noted. In this respect, attention should be drawn to the satisfaction shown by our clients in wealth management thanks to an investment management method that has remained careful and prudent. No structured products, no artificial hedge funds. No unfulfilled promises of guaranteed performance. In other words, no get-richquick schemes or short-cuts. The quality of our investment management and, in particular, the strength of our performances in a context of extreme crisis give us a reputation of solidity and stability that allows us considerable potential for growth in private banking 2 and in asset management. Greater market share Sometimes cited for its prudent conduct, BCGE reaped the rewards of a strategy of restraint and high risk selectiveness in With its basis of shareholders equity strengthened year after year, considerable liquid reserves 3 and some of the most favourable refinancing costs on the market, BCGE has managed to gain market share in numerous domains, including the strategically important property mortgage financing. There has been a net growth of more than CHF 399 million in mortgages with high-quality clients and a low-level risk profile. A second example in the area of corporate financing is provided by the fact that BCGE, assisted by the new market landscape, has managed to develop relationships with numerous new companies, including major Swiss groups. Furthermore, it has reinforced its central supporting role in the regional economic fabric as regards SMEs and the self-employed. to integrate the institutional management branch Synchrony Asset Management into BCGE, to galvanise its private banking subsidiary Anker Bank by transforming it into a national network of private banking branches, and to introduce a fully electronic document management system (paperless office). The objectives of these profound changes have been fully met, even if, it must be said, it demanded extraordinary efforts from all the Bank's units. BCGE is grateful for its clients' patience and loyalty and for the exceptional commitment of its staff, who allowed this technological culture shock to be absorbed with flexibility and determination. Although there was a temporary fall in service quality in some areas, the data was transferred in full and on schedule. In addition, new facilities have been put at the disposal of the clientele, especially in netbanking. Now that this major step has been completed, the Bank is focussing on capitalising on the advantages of the new system and on perfecting the quality of the production and availability of the service. This state-of-theart platform will also allow productivity to progressively increase to a higher level of excellence. Coinciding with the arrival of a new head of private banking, Jean-Louis Platteau, in the second half, the integration of Anker Bank has been a complete success and the BCGE private banking branches in Zurich, Lausanne and Lugano now form solid bases for development in the Swiss market. The same can be said for the asset management activity which, with an excellent financial year, has gained a foothold in German-speaking Switzerland. Despite a slight slowdown in results due to investments and the economic situation, 2008 was a year of remarkable progress. Your bank is well equipped to tackle a greatly changed and very risky environment. The economic outlook will probably not make its task easy. In order to succeed, it can rely on a reservoir of high-level talent that is united and well organised. A simple principle prevails in the minds of our executives: quality creates quality. Its strategy and its forces will allow it to continue to increase its already high return on shareholders equity and its intrinsic value. The stock market should recognise the share s significant potential 4 as soon as the generalised banking crisis shows the first signs of calming down. It will also be able to distribute an increasing sum to all its stakeholders, as is currently the case. BCGE Message from the Chief Executive Officer 5 Greater credibility The upgrading of a credit rating by a major international agency during a financial year like that of 2008 bears witness to BCGE s resilient and counter-cyclical character. By steering clear of the temptation of easy finance, the Bank has gained credibility in the face of all its competitors. Greater technological and operational power BCGE set itself several major goals for 2008: to carry out an IT migration to the platform used by the majority of the cantonal banks, to standardise payement transfers with two other cantonal banks, Blaise Goetschin Chief Executive Officer 1 Losses suffered by banks (around USD 3,600 billion) could exceed their stock market capitalisation", hypothesis formulated by Professor Nouriel Roubini, S. Frochaux, L'Agefi, 23 January BCGE showing higher revenue margins and asset net inflow than Swiss average, McKinsey Private Banking Survey 2008, January All you need is cash announced The Economist dated 22 November 2008, summarising the vital importance of maintaining comfortable liquidity in the heart of the banking crisis. 4 Despite prudent management, BCGE is undervalued compared to its equivalents in other cantons, interview with the managers of the AMG Substanzwerte Schweiz fund, Le Temps, 19 January 2009.

10 Banking solutions are like loaves of bread: they are best when they are not churned out en masse. Ghezal Hakami is the head of the BCGE Grand-Saconnex branch. Her five-person team is at the disposal of individuals and companies established in the region. The Grand Saconnex branch has recently been completely modernised. Located between the airport, Palexpo and the international organisations district, it attracts a clientele with widely varying needs.

11 Retail banking services JUST LIKE AN ARTISAN BAKER TURNS CEREALS INTO ALL KINDS OF DELICIOUS BREAD ON A DAILY BASIS, BCGE S 300 OR SO CLIENT ADVISERS PROVIDE HIGH-QUALITY FINANCIAL SOLUTIONS WITH ESSENTIALA LONG TRADITION EVERY DAY IN 23 BRANCHES.

12 Mission and strategy An innovative strategy founded on high-quality banking services made in Geneva 8 BCGE Group s main presence is in the Geneva financial market, but it is also to be found elsewhere in Switzerland and in France. It offers banking services to a clientele consisting of individuals, companies and institutions. The Group is made up of the Banque Cantonale de Genève parent company, located in Geneva, its branches in Zurich, Lausanne and Lugano, and of its subsidiary Banque Cantonale de Genève (France) in Lyon and Annecy. It also includes Capital Transmission, a subsidiary specialised in equity financing during business transfers, and Swiss Public Finance Solutions (SPFS), a joint venture with Groupe Crédit Foncier de France engaged in offering financial advice and intermediation services to public authorities on the Swiss market. As at 31 December 2008, the Group employed 845 people (788.6 full-time equivalents) and had total assets of CHF 13.7 billion. PORTRAIT OF THE BCGE GROUP 1816 Today a full-service regional bank, Banque Cantonale de Genève (BCGE) provides the community with the Canton s densest banking network, with 23 branches, three 24-hour zones and 106 ATMs. BCGE is the central source of the Bank for individuals and for corporate finance, particularly for SMEs and the Geneva property sector. BCGE also offers private banking services and financial asset management for institutional clients. It plays a key role in supporting and boosting the regional economy. BCGE is listed on the Swiss stock exchange SIX Swiss Exchange (code: BCGE). It employs 809 people With its headquarters in Lyon and a branch in Annecy, Banque Cantonale de Genève (France) SA is a 100%-owned BCGE subsidiary. It offers company finance and property services to companies and individuals, in addition to wealth management for private clients. BCGE France is a logical and efficient feature of a dynamic economic zone that is taking shape between Lyon and Geneva. The French subsidiary benefits from the support of the parent company in the area of refinancing. Banque Cantonale de Genève (France) SA employs 36 people. CAPITAL TRANSMISSION SA 2008 Capital Transmission SA finances and invests in business transfer and expansion operations in the region. It runs a fund of CHF 50 million, which allows it to finance the long-term expansion of companies or to allow their consolidation and transfer, by acquiring a minority share or through mezzanine financing. Capital Transmission does not engage in the running of financed entities. It focuses on companies with the potential to contribute to the regional economy and likely to create jobs. The company completes the range of corporate finance services offered by BCGE Benefiting from an ability to obtain considerable public financing and the experience of Swiss and French specialists in finance for public authorities, Swiss Public Finance Solutions (SPFS) offers finance models to public authorities in Geneva and Switzerland as well as to public-law corporations. It also develops long-term refinancing solutions for other cantonal and regional banks. SPFS is based in Geneva and held by BCGE (50%), Crédit Foncier de France (40%) and Caisse d Epargne Rhône-Alpes (10%). SPFS establishes contact, defines the requirements and draws up the operational plan: the participating banks then undertake the financing as such. BCGE ANNUAL REPORT 2008

13 Mission and strategy A complete range of banking and financial services BCGE, the only full-service Swiss bank with its decision-making centre in Geneva, offers a very complete range of services adapted to the needs of the diverse market segments in the regional market. The range of business covers both individual clients living or working in Geneva and public or private companies and institutions. Zurich Lausanne Head office Geneva Annecy Lyon Lugano SERVICES TO INDIVIDUAL CLIENTS Retail banking services The densest banking network in the canton BCGE operates a network of branches that meet the needs of the canton's population. It offers the expertise of 224 client advisers and staff members, 23 branches, three 24-hour zones and 106 ATMs. A complete remote banking service The Bank also makes its technology available via its remote banking capability, either over the Internet ( mobile phone (SMS messages) or by telephone (BCGE Openline voice service ). On-line advisers can offer solutions at BCGE Mission and strategy 9 All day-to-day banking services The bank offers banking services such as current accounts, salary accounts, deposits and withdrawals, foreign-exchange operations, safe-deposit boxes, and credit cards. It also offers financing solutions, such as leasing or personal credit, to assist with short-term projects. A wide range of savings solutions In savings management, BCGE offers a variety of short-, medium- and long-term products, mediumterm notes, money and bond market funds and fiduciary deposits, all on excellent conditions. Experts in property finance BCGE is one of the leaders in mortgage finance in the Canton of Geneva. It finances first or second home purchases both in Geneva, Switzerland and in the nearby part of France. Through BCGE (France) the Group is involved in property for individuals and professionals throughout France. Original and reassuring private banking As a wealth management bank for private and institutional clients, BCGE offers a complete range of services adapted to each client segment. Its presence in Geneva, Zurich, Lausanne, Lugano as well as Lyon and Annecy allows clients to be served throughout Switzerland, in the Rhône-Alps and in France. A transparent investment philosophy The Group recommends adopting a financial model which is reassuring and economical and which boasts a track record of many years, as transparently explained in the brochure entitled The Investment Philosophy of the BCGE Group. This is embodied in the range of BCGE Best of investment mandates. Management is centralised, thus strictly uniform and homogeneous, irrespective of the size of assets and of which part of the Group is administering it. Depending on the client s investment objectives, the portfolios may also be managed by consultants. Local wealth management Many branch clients appreciate the opportunity to entrust their wealth to their local adviser. To accommodate this preference, the 23 BCGE branches provide them with specialised staff who will offer them high-quality services focussing on the maintenance of value and on performance that is in line with their risk-taking capacity.

14 10 Real made in Geneva wealth management The Group also offers a complete private banking service, from wealth, tax and inheritance advice to wealth management. The management philosophy and the rigorous methodology that it applies to each portfolio have shown themselves to be remarkably robust in a period of troubled markets. THE BANK FOR SMALL, MEDIUM AND LARGE COMPANIES With almost one in every two Geneva companies among its clientele, the Bank plays a key part in the Canton s economic network. A very significant volume of financing is provided to small and medium enterprises and allows many companies to operate and develop. For companies in the region, BCGE provides an essential alternative to the big banks, particularly in terms of conditions and the adaptability of the solutions on offer. A vast range of company financing solutions BCGE, together with its French subsidiary, offers financing and cash management solutions to all businesses, whether they are sole-owner-operated, SMEs or larger companies. The parent company has specialised departments for these various client segments. Moreover, the Bank offers financing solutions, such as overdrafts, fixed term advances, capital equipment leasing and numerous other facilities that companies require. Property and construction specialist Investors in property, developers and construction companies all find BCGE solutions for real-estate financing and renovation for all kinds of property: homes, offices or business premises. In France, these services are offered in the Rhône-Alpes and Ile-de-France regions in particular. Expertise in international trade finance BCGE possesses a centre of excellence in the financing of commodities transactions, a key sector in Geneva, which is one of the world s hubs for international trade. The Bank s Global Commodity Finance business unit is active in structuring and making available short-term trade finance linked to the international commodities markets. It is active, in a balanced manner, in financing oil, energy, metals, grain and agricultural products. It also manages a well-targeted portfolio of structured loans. Business transfer and acquisition The transfer and acquisition of businesses are operations that go well beyond the traditional relationship between banks and businesses. For this reason, BCGE has a specialised team dedicated to advising business leaders on equity management, corporate finance and equity finance structuring. It also operates through its Capital Transmission subsidiary (see page 8). BCGE ANNUAL REPORT 2008

15 Financial engineering for companies With BCGE Club CFO (Choix Financiers Optimisés, Optimised Financial Choices), the bank provides financial managers in companies and public authorities, as well as the leaders of companies involved in property, with an expert advisory service on debt management, exchange risk control and cash optimisation, centred on companies and public authorities. Based on a detailed financial analysis, BCGE Club CFO offers different coverage strategies depending on the level of risk desired. BCGE Club CFO is also intended to be a forum for financial management and risk control. Several times a year, it organises meetings with business leaders to discuss current economic and financial topics and to present studies and the thoughts of our CFO advisory activity. BCGE Mission and strategy 11 Dynamic trading room in the Geneva financial centre BCGE is one of the rare banks in Geneva to give its clients the benefit of easy and personalised access to the financial markets, through its status as a member of the SIX Swiss Exchange, as a holder of an A licence. The trading room operates under the open architecture principle and is completely independent in the choice of the products it recommends. The size of its teams favours personalised client relationships and flawless execution of market orders. It deals in currencies, equities, bonds, derivative/structured products and investment funds. The trading room also participates actively in the management of the Bank s assets and liabilities (ALM). Recognised competences in asset management The BCGE Group offers solutions and high-level consultancy for financial asset management, incorporating quantitative and index management, for institutional and corporate clients. Its philosophy, based on open architecture, guarantees a totally independent choice of funds. The Group also offers products orientated towards sustainable management and social responsibility, as well as Swiss secondary equity funds. Major and long-term financing The SPFS subsidiary (see page 8) has been created to respond specifically to the needs of Swiss public authorities with regard to large-scale and very long-term financing. These solutions also target public-law corporations. Furthermore, SPFS offers long-term refinancing solutions to cantonal and regional banks.

16 A COMPLETE RANGE OF BANKING AND FINANCIAL SERVICES 12 INDIVIDUAL CORPORATE INSTITUTIONAL Day-to-day banking Current-account operations Netbanking Salary accounts Young people accounts Solutions for commuters (cross-border or otherwise) Savings management Short, medium and long term Medium-term notes Housing finance Main residence Second home Construction loans Private banking Discretionary investment management mandates Advisory services Pension planning Loans against securities Independent asset managers Personal finance Credit cards Vehicle leasing Personal loans Corporate finance and cash management SMEs Large corporations Professionals and self-employed Property and construction finance Property investors Property development Office property and public corporations Construction companies Property and corporate finance in France Property development in Rhône-Alpes and Ile-de-France Business transfer finance Medium-term business finance International trade finance Trade transaction financing Structured commodity financing Financial services and markets Currencies Equities investment funds Bonds Cash Finance and management of public bodies State and related entities Municipalities and municipal property trusts Parastatal institutions and churches Public property trusts Public bodies outside the Canton of Geneva Financial services and markets Currencies Equities investment funds Bonds Cash management Asset management Passive mandates index management Controlled-risk active investment mandates Active Finest of investment mandates Investment funds Long-term Swiss small and mid-cap investments Active advisory services Optimised financial selection Financial and risk management Cash management Debt management Company consultancy, BCGE Corporate Finance Consultancy in financial and risk management Equity finance BCGE ANNUAL REPORT 2008

17 ARTICLES OF ASSOCIATION AND CAPITAL A wide shareholder base Banque Cantonale de Genève is a public limited company pursuant to article 763 of the Code of Obligations, created according to the constitutional law of 12 March 1993, which came into effect on 1 January 1994 with the merger of the Caisse d épargne de la République et canton de Genève (founded in 1816) and the Banque Hypothécaire du canton de Genève (founded in 1847). Its principal shareholder is the Canton of Geneva, which holds 49.8% of the share capital. The City of Geneva and the municipalities of the Canton hold 28.3% of the capital. 8,460 client shareholders form the core of private bearer shareholders. To this should be added the shareholders who have deposited their securities with third-party establishments. In total, the float amounts to 21.9% of the capital. BCGE Mission and strategy 13 Contributing to the development of the local economy In accordance with article 2 of the Banque Cantonale de Genève Law of 24 June 1993, the principal aim of the Bank is to contribute to the economic development of the Canton and of the region. As a full-service bank it shall handle all operations authorised by the Federal Banking Act of 8 November It shall be managed according to tried and tested economic and ethical banking principles. State guarantee on saving deposits The Canton of Geneva guarantees the refund of principal and interest of savings deposits and pensions at the Bank. The maximum guaranteed amount is set by article 4 of the Banque Cantonale de Genève Law. It is CHF 500,000 per saver and CHF 3 million for the vested benefits of each member deposited in cash with the Bank and for each pension fund. This guarantee, for which the Bank pays the State, is in addition to the deposit guarantee at federal level.

18 14 RETAIL BANKING AND BRANCH NETWORK Johan Bernard Alexander Kroon FINANCE AND RISK CONTROL Eric Bourgeaux OPERATIONS AND CONTROLS Emile Rausis CHIEF EXECUTIVE OFFICER Blaise Gœtschin CORPORATE BANKING Claude Bagnoud PRIVATE BANKING Jean-Louis Platteau ORGANISATION AND INFORMATION TECHNOLOGY Jean-Marc Joris BCGE ANNUAL REPORT 2008

19 Seven complementary internal divisions CEO Office Blaise Goetschin, Chief Executive Officer The office is responsible for providing services across the BCGE Group as a whole. It supports the CEO in his leadership, planning and oversight responsibilities for the Bank and its subsidiaries. It manages and documents his relationships with senior management and internal regulatory agencies as well as with external institutions and clients. It is responsible for marketing and product management and also includes human resources and training, in addition to legal assistance, institutional communications, corporate affairs and investor relations. Finance and Risk Control Eric Bourgeaux, Member of the Executive Board The division s mission is to define and direct the Bank s financial strategy. It seeks strong and competitive financing and manages the financial structure in a dynamic manner. The division also monitors risks and ensures all the Bank s activities are subjected to controls. As the Bank has one of the few trading rooms in French-speaking Switzerland, the division provides the Bank s clients with the best possible service for the full range of securities and foreign-exchange transactions. The financial engineering supports the Bank in its offering of innovative solutions to corporate and institutional clients in the areas of interest-rate and foreign-exchange risk management. The BCGE Asset Management business unit, specialised in quantitative and index management for institutional and corporate clients, is attached to this division. Retail Banking and Branch Network Johan Bernard Alexander Kroon, Member of the Executive Board The division serves all the people of Geneva and residents of the Canton and of the surrounding area. It offers its services to individuals, the selfemployed, small businesses and professionals. The division has a relationship with one out of every two people in the Canton. Through its network of 23 branches, three 24/7 banking zones and its 106 ATMs, the division provides banking services close to where clients live or work, offering a complete range of products and services, as well as a call centre and a website Its full-range advisory service is original, professional and offers high added value, allowing clients to carefully structure, protect and profit from their assets with a focus on pensions. Private Banking Jean-Louis Platteau, Member of the Executive Board (since 15 October 2008) The division is responsible for private-banking clients in Geneva, the rest of Switzerland, and abroad, through two specialised business units: PB Geneva and PB Switzerland. It analyses the wealth situation of clients and offers investment solutions tailor-made to their particular needs. It implements the investment strategy of the Group. Approximately 9,400 clients have entrusted the Bank with the management of their wealth. The division also offers a dedicated service for estate planning and global wealth analysis, pursuing innovations and proposing new products and services in line with the Bank s investment philosophy. Operations and Controls Emile Rausis, Member of the Executive Board The division is responsible for the technical and administrative structure, management and control of the Group s business to meet the needs of the front-office divisions. It develops synergies and makes savings in administrative processing, monitors and controls risks associated with lending, and handles distressed situations. Its responsibilities also extend to the management of Bank and BCGE pension fund properties as well as nonbanking properties for resale, and to the management of the Bank s nonstrategic financial assets. The division also includes the Bank s operational activities, as well as logistics. Organisation and Information Technology Jean-Marc Joris, Member of the Executive Board The division structures, manages and controls the Bank s information technology and is in charge of establishing and implementing the Bank s organisational architecture. Its mission is to improve customer service, optimising productivity and modernising equipment while closely following cost guidelines. In 2008, the division concentrated on the complex process of adapting all the Bank's activities to the Finnova IT platform. Started in November 2006, this project was completed on 2 October 2008 on time and in line with the established standards. BCGE Seven complementary internal divisions 15 Corporate Banking Claude Bagnoud, Member of the Executive Board As a partner of businesses and public bodies in the Canton and surrounding area, the Corporate Banking Division is in contact with approximately 5,000 large corporate or public-sector clients and so makes a decisive contribution to the economic life of Geneva. With a broad range of financing products, it provides loans to corporate clients for their working capital and projects, as well as supporting clients merger and acquisition activities. The division provides financing for real estate developments and the construction industry and is involved in the financing of international trade. It is also active in the French market through a dedicated department, in close cooperation with BCGE France.

20 Organisation chart As at 1 March 2009 EXECUTIVE BOARD Blaise Goetschin I, III, VI, VII Chief Executive Officer Mathias Baitan Chief of Staff and Planification 16 Nicolas de Saussure Communications and Investor Relations Elisabeth Ray Tang Human Resources Pierrette Jaton Klopfenstein Marketing Felice Graziano Legal RETAIL BANKING AND BRANCH NETWORK CORPORATE BANKING PRIVATE BANKING Johan B. A. Kroon III, V, VII Claude Bagnoud I, III, V Jean-Louis Platteau II, III, V Member of Member of Member of the Executive Board the Executive Board the Executive Board Christophe Chevassus I Financing SMEs and Self-employed François Kirchhoff I Swiss Corporate Clients Jérôme Monnier French Corporate Clients Léonard Graz (interim) Business Development and PB Chief of Staff Alexandre Scala Centre Sector Charles Käser I Real-estate and Construction Yves Spörri Financial Institutions and Public Bodies BCGE PRIVATE BANKING GENEVA Giovanni Lo Bué North Sector Maurice Pierazzi Corporate Finance Patrick Senger Business Development and CB Chief of Staff Franco Furcolo Swiss Clients André Frossard West Sector Misha Nagelmackers-Voinov Personal Finance Amin Khamsi II International Clients Fabien Rei East Sector Pierre-Olivier Fragnière I GLOBAL COMMODITY FINANCE Jean-Louis Platteau (interim) European Clients Albert Gallegos Financial Planning Centre Serguei Chesternine Energy Desk Philippe Terrier Metal Desk Frédéric Constantin Independent Porfolio Managers Tiziano Magri Business Development and Branch Network Ivan Pougnier Soft Desk and Structured Deals Josiane Tistounet Risk and Collateral Department Gaëlle Dalla-Costa Private Banking Support Gérard Demierre Operations Alain Bochet BCGE (FRANCE) SA WHOLLY-OWNED BCGE Eric Wesse II, Sales Department Christian Stampfli, Company Secretary Marie-Claude Boulmier, Administrative Director BCGE ANNUAL REPORT 2008

21 Monique Seiss Baudry Internal Audit FINANCE AND RISK CONTROL OPERATIONS AND CONTROLS ORGANISATION AND INFORMATION TECHNOLOGY Eric Bourgeaux III, V, VI Member of the Executive Board, CFO Pierre Sauvagnat II, III Financial Markets and Treasury Emile Rausis I, IV, V, VI Member of the Executive Board Alain Voirol I, IV Expertise and Organisation Jean-Marc Joris VI, VII Member of the Executive Board Philippe Bailat VI, VII Organisation BCGE Organisation chart 17 BCGE PRIVATE BANKING SWITZERLAND Yvan Nicolet General Accounting Bernard Matthey IV Debt Recovery and Workout Christian Kemper VI Information Technology Jean-Louis Platteau (interim) Branch of Zurich Marc Doerks III Financial Control Hans-Joerg Frey Credit Administration Racheleano Mecozzi Branch of Lausanne Michel Maignan III, V, VI Risk Management and Compliance Catherine Million Market Transactions Armando Adamo Branch of Lugano Constantino Cancela II BCGE ASSET MANAGEMENT Fabrice Fournier Clients and Services Administration Pierre Weiss II Asset Management Patrice Lefebvre Daily Banking Services Urs Buser II Portfolio Management Christophe Marin Logistics Jean-Luc Lederrey II, III Financial Studies I Member of the Credit Committee II Member of the Investment Strategy Committee III Member of the ALM Committee IV Member of the Credit Thierry Angele Investment Services Risk Commission V Member of the Risk Committee VI Member of the Information Technology Strategy Committee VII Member of the Strategic Organisation Committee

22 Your Bank: at your service and close to hand A network of 23 branches and 106 ATMs

23 1 Bellevue Route de Lausanne 329 Beata Frey 2 Bernex Rue de Bernex 284 Bernard Bessire 3 Carouge-Marché Rue Saint-Victor 39 Jean-Noël Borgognon 4 Champel Avenue de Champel 45 Sandrine Charpin 11 Jonction Boulevard Saint-Georges 2 Stéphane Bonnin 12 Lancy-Centre Route de Chancy 67 Nicolas Bézaguet 13 Meyrin-Cité Rue De-Livron 19 Loris Rizzo 14 Onex Avenue du Gros-Chêne 14 Cécile Huber-Luquiens 21 Vernier Route de Vernier 219 Jean-Claude Buzzi 22 Versoix Route de Suisse 37 Patrick Guex 24/7 BANKING ZONES 24 Corraterie Rue de la Corraterie 4 25 Hôpital Cantonal Rue Micheli-du-Crest Vésenaz Route de Thonon 45/47 Juan Chinchilla BCGE Your Bank : at your service and close to hand 19 5 Délices Rue des Charmilles 1 Stéphane Bonnin (interim) 15 Pâquis Place de la Navigation 10 Dominique R. Philippoz 26 Palexpo Palais des Expositions STAND-ALONE ATMs 27 Airport 6 Eaux-Vives Rue Versonnex 13 David Bottoli 16 Plainpalais Rue de Carouge 22 Martial Cruchet 28 Carouge-Rondeau Rue Ancienne Halles de Rive Boulevard Helvétique 27 7 Florissant Route de Florissant 66 Maria-José Molla 17 Plan-les-Ouates Place des Aviateurs 5 Benjamin Trama 30 Hôpital Beau-Séjour Avenue Beau-Séjour Hôpital de Belle-Idée Chemin du Petit-Bel-Air 2 8 Grand-Lancy Place du 1 er -Août 1 Stéphane Kursner 18 Praille-Acacias Route des Acacias 49 Dominique Jean Ducret 32 Hôpital de gériatrie Route de Mon-Idée 71/73 33 Mairie de Troinex Chemin de la Grand-Cour 2 34 Parking du Mont-Blanc 9 Grand-Saconnex Route de Ferney 169 Ghezal Hakami 10 Ile Quai de l Ile 17 Alexandre Scala 19 Servette-Wendt Avenue Wendt 54 Giovanni Lo Bue 20 Trois-Chêne Rue de Genève 78 Fabien Rei 35 Rue de la Servette Hôtel des Finances Rue du Stand Services Industriels de Genève SIG Chemin du Château-Bloch 2 38 Geneva International Airport Halle de fret Route Douanière

24 A clear and careful investment philosophy. Amin Khamsi is in charge of the International Clients department within BCGE Private Banking. His excellent knowledge of Europe and the Middle East, and his many years of experience in the profession, allow him to offer the Bank s wealth management services to a local and international clientele.

25 Private Banking TRANSPARENT IT TAKES THE LIGHT OF DAY TO REVEAL THE VALUE OF THE UNCUT STONE AND THE SKILL OF THE CUTTER. IN THE SAME WAY, BY DIRECTING CLIENTS TOWARDS FUNDAMENTAL AND TIMELESS VALUES, BCGE PRIVATE BANKING ADVISERS PROTECT AND DEVELOP THE ASSETS ENTRUSTED TO THEM.

26 The financial markets in 2008 For many, the most turbulent year for decades was one of the worst years ever seen on the stock market. Triggered by the collapse of the US property market, a credit crisis erupted in the United States in summer It appeared, however, to be under control until the beginning of September In fact, since July 2007, central banks had been providing the banking system with an abundant supply of liquidity and the authorities intervened, particularly in the United States, to bail out certain financial institutions that play an especially important role in the economy. A modest fiscal recovery plan had allowed American households to offset the negative effects of the property crash on their income and expenditures. Nevertheless, the situation deteriorated dramatically after 15 September 2008, the day on which it was announced that the American bank Lehman Brothers had gone bankrupt. A wave of panic began to sweep through the international financial system, which was suddenly threatened with paralysis. A series of recovery plans To prevent other major banks from bankrupt, to stabilise the financial system and restart lending, governments and banks in the United States, the euro zone, the United Kingdom and Switzerland rapidly took crisis measures that were exceptional in their extent and nature. These interventions, amounting globally to several trillion dollars, aimed to recapitalise banks, create piggybacking structures for written-down bank assets, guarantee the refinancing of financial institutions, and provide the banking system with colossal amounts of liquidity. Taking the place of lending-averse banks, some central banks, notably the United States Federal Reserve (the Fed), have put in place completely unprecedented mechanisms to ensure the financing of companies. The Fed is thus directly buying up debt issued by American companies and mortgage finance and consumer credit institutions. The real world economy is affected These exceptional measures to support the banking system in crisis have not immediately succeeded in re-establishing credit mechanisms and have not prevented the economy from plunging into a nasty-looking recession, particularly in the United States. Never before has such a sudden drop in economic indicators been seen. Over the space of a few months in 2008, the world economy went from strong annual growth of 4% to a situation of recession. Right up to the beginning of summer, the world economy was threatened with inflation due to the biggest jump in oil prices since the 1970s. Then, in four months, the price of oil dropped to almost a quarter of what it had been, sliding from USD 150 dollars to USD 40 dollars a barrel, with inflation falling by half in the industrialised countries, including Switzerland. This drop in inflation allowed central banks to lower their interest rates aggressively: the Swiss National Bank reduced its benchmark rate (3-month Libor) from 2.75% to 1%. The Fed s benchmark rate went from 5.25% in 2007 to 1% in December The European Central Bank also lowered its key rate from 4.25% to 2.5%. In the United States, where the crisis has hit the hardest, the Obama administration had already announced a massive recovery plan for economic activity, employment and demand. Bonds more attractive than ever The financial markets have been badly hit by the crisis. In 2008, the stock markets dropped by 35% to 50%, with three quarters of the fall occurring after 15 September. Significant falls in prices have also been seen on the corporate bond market. With investors steering well clear of risk, public debt has been purchased at any price and with increasingly trivial yields. Government bonds were one of the rare kinds of assets that recorded a positive performance in BCGE takes a prudent approach In the context of high and persistent levels of uncertainty, BCGE continues to apply its policy of prudent investment. Allocating assets in a conservative but relatively stable way indeed remains the best way of getting through this highly volatile period on the market. BCGE is more certain than ever that its investment philosophy is well-suited to both prosperous periods and times of crisis. Simplicity, rigour, transparency and the choice of the best investment vehicles lie at the heart of this methodology. BCGE ANNUAL REPORT 2008

27 SMI Swiss Market Index in thousands of points 9 Source: Datastream World stock market index, MSCI World in USD BCGE The financial markets in Source: Datastream Oil (Brent) in USD per barrel Source: Datastream Switzerland, 10-year rate, yield on Confederation bonds % Source: Datastream

28 The Geneva economy in the face of adversity 24 Added value grew by 1.2% in 2008 for the seventeen main economic sectors in the canton of Geneva, bringing 2008 gross domestic product to almost CHF 43 billion 1. A 0.7% drop in Geneva s GDP is forecast for 2009, which should take it to CHF 42.3 billion, cancelling out part of the growth recorded in Chemicals are predicted to be one of the three sectors least affected by the economic situation in The world economy should escape deflation Suffering the effects of the crisis, world growth was 3.4% in 2008 and is expected to hit just 0.5% in Governments and central banks have undertaken massive stimulus and support policies. The scope and speed of the response by the authorities and the massive efforts, costing several trillion dollars, made to reflate the economy mean that the dramatic scenario of a world depression can be avoided. Oil becomes a provisional ally The fall in the price of oil has brought about increased purchasing power. The drop in its value means considerable annual savings for petrol consumers, offering them respite that should continue for several months. It reinforces the phenomenon of falling inflation. This has eliminated the dilemma that affected monetary policies in 2008, torn between the fear of recession and the risk of inflation. Central bank rates are historically low in the United States. They will remain low, while a further fall is expected in Europe. The recession will be followed by weak growth in 2010 We expect a serious recession during most of 2009 for the majority of industrialised countries; in emerging countries growth will be substantially slowed. Globally, the credit crisis is having a considerable impact on the morale of companies and households. It is affecting their purchasing decisions, particularly with regard to automobiles and capital equipment. The credit contraction is directly affecting the business, and in some cases the very existence, of many companies in the United States and Europe. This means that GDP could drop by 2% in the United States, in Japan and in the euro zone in The world economy should start to stabilise in the second half of 2009 and progressively come out of the crisis by the end of the year. This will be followed by a long period of weak growth. Some timid signs of stabilisation, which are yet to be confirmed, allow a forecast of possibly faster improvement. The drop in commodity prices has ceased, emerging markets have rebounded and some indicators seem to have reached their low points. Uncertainty is particularly high, as events like those of 2008 had not been seen for several decades. In this context, Switzerland is going through a period of moderate recession, with a 0.8% decrease in its GDP. A moderate recovery is expected in The absorbing of the mountain of debt, principally American, by the rest of the world will also have an impact on the Swiss economy, which will probably not grow more than 1% to 2% for several years. The drop in the oil price has allowed Swiss inflation to shrink; it should amount to 1% in Real interest rates on short-term instruments will remain negative, contributing to the recovery programme. The franc s return to a stable level The franc appreciated against the euro due to the brutal unwinding of interest-rate arbitrage positions between the two currencies. In 2009, it should become stable at a level close to its equilibrium value against the euro, which we situate between CHF 1.50 and BCGE ANNUAL REPORT Geneva s GDP was estimated by the Créa institute, commissioned by BCGE. The figures given in this chapter were updated on 18 February 2009.