Sbc Lifts Payout 20% Ahead Of Merger

Swiss Bank Corporation yesterday reported a 60 per cent increase in 1997 net income to SFr2.1bn, ($1.4bn), which was below some analysts' expectations, but sweetened the disappointment by proposing to raise its dividend by 20 per cent. SBC announced the result at yesterday's extraordinary general meeting, where shareholders overwhelmingly voted to merge with UBS and end SBC's 125 years of independence. Although the profit was in line with the bank's earlier forecasts, it was lower than the SFr2.5bn that some analysts had been forecasting as recently as last December. Net income of about SFr800m in the second half of 1997 was about SFr200m higher than in the comparable period of 1996.

 

, but it was sharply down on the SFr1.33bn earned in the first half of 1997. SBC's profits have been growing faster than those of its two bigger rivals, but the results suggest its trading profits have been hurt by the recent volatility in the financial markets and the problems in south-east Asia. SBC will report a ''technical loss'' of SFr300m for 1997 because of the need to shoulder its share of the SFr7bn restructuring costs of the merger with UBS. Although it will have lost money for two years in a row, Marcel Ospel, SBC chief executive, said the results, before special factors, were comfortably ahead of budget and the dividend would be increased to SFr12 a share to mark the ''successful performance''. He also indicated that the new UBS would aim to pay out between 40 per cent and 50 per cent of its earnings. Mr Ospel, who will be chief executive of the enlarged group, said the new group had set itself some ''very ambitious'' goals. Nevertheless, even if it achieved a sustainable rate of return on equity of between 15 per cent and 20 per cent, it would still be well below that achieved by comparable banks in the US and UK. Mr Ospel said the group's enlarged private banking business, which would be the biggest in the world, will grow revenues by 10 per cent a year and its activities outside Switzerland would be significantly expanded. It will also be the world's fourth biggest asset manager with a goal to deliver superior investment performance and rank in the top third of its peer group. Revenues on this side of the business are targeted to grow by 12 per cent a year and the emphasis will be on globalising investment fund distribution and expanding pension fund management. In investment banking, the aim is to be one of the top five international investment banks. Mr Ospel also went to some lengths to back up UBS's claims that the two banks were not suffering a massive defection of clients as a result of the merger. SBC had enjoyed a net inflow of client funds since the merger announcement which was a clear sign of customer confidence, he said. Copyright Financial Times Limited 1998. All Rights Reserved.