Net profit of CHF 305 million sets a new record

Driven by very strong overall earnings momentum, net profit surged by 201% to CHF 305 million (2006: CHF 101 million) to reach a new record. Net profit 2007 adjusted by one-off proceeds comes to CHF 174 million (2006: CHF 141 million), an increase of 23%. The cost income ratio improves to 51.1%, or an adjusted figure of 63.0%.

Outstandingly strong acquisition brings net new money growth of CHF 11.1 billion

Net new money inflow soared to CHF 11.1 billion. Despite the difficult market conditions in the second half of the year, new money acquisition was still strong, at CHF 5.1 billion (1H 2007: CHF 6.0 billion). Assets under Management grew by CHF 9.7 billion to CHF 83.0 billion (+13%).

Dividend increase by 50% to CHF 135 – Share split of 1:100 proposed

On the strength of the excellent operating result and the favourable prospects for the business, the Board of Directors will be submitting a proposal to the Annual General Meeting of shareholders on 23 April 2008 to increase the dividend payable on each class B registered share by 50%, to CHF 135. With regard to the current share price this corresponds to a yield of 2.7%. The Board of Directors would also like to improve the tradability of the share and will therefore submit a proposal to the Annual General Meeting requesting a 1:100 share split. At this year’s AGM, Christoph Ammann, a member of the Board of Directors since 2002, will take over from Georg F. Krayer as Chairman of the Board. A proposal will be made to the AGM of 23 April 2008 to make Georg F. Krayer Honorary Chairman of the Bank. A motion will also be submitted to elect Peter Derendinger to the Board of Directors.

No losses as a result of the subprime crisis

Bank Sarasin & Co. Ltd has successfully forged ahead with the implementation of its expansion strategy in the 2007 financial year. Although the US subprime crisis in the summer of 2007 did affect Bank Sarasin indirectly through its impact on the general market environment, it did not have a direct effect on Sarasin as a company. The Bank’s growth initiatives are built around an inherently low-risk business model. The Bank still has a very low risk profile. The equity ratio improved slightly to 10.8%. The BIS Tier-1 ratio is currently at 17.0% (2006: 18.8%). This is still clearly above the target corridor of 12 to 14% and confirms Sarasin’s solid capital base.

Record operating result

In 2007 the operating result was positively affected by one-off extraordinary proceeds, especially the sale of parts of the brokerage business and the Luxembourg subsidiary. Without any adjustment, operating income rose almost by 50% to CHF 837.5 million (2006: CHF 565.7 million). Adjusting the result by these one-off proceeds, the growth rate came to 17%, or CHF 662.4 million, which was still very satisfying. Revenues rose across the board: net interest income amounted to CHF 104.6 million (+36%), income from commissions CHF 438.6 million (+13%) and income from trading operations CHF 95.9 million (+6%). Other income also rose to CHF 23.3 million, after adjustment, mainly thanks to income from financial investments (CHF 13.3 million) and income from participations (CHF 7.0 million). The difference of CHF 175.1 million between the adjusted and unadjusted figure results from the sales of the brokerage business and the former Luxembourg subsidiary.

The adjusted figure for operating expenses came to CHF 417.1 million, 15% higher than in 2006 (CHF 363.0 million). This rise can be explained by higher personnel costs as a result of a net increase in headcount to 1,170 (adjusted for part-time working), as well as individual performance-based bonus increases. The adjusted cost income ratio improved again, easing to 63% (2006: 64%). This performance is in line with the goal of gradually cutting the cost income ratio to 60% by 2010.

Acquisition success achieved through continuity and quality

As of 31 December 2007, assets under management came to CHF 83.0 billion, an increase of CHF 9.7 billion, or 13%. Net new money acquired in the second half of 2007 amounted to CHF 5.1 billion, not far off the CHF 6.0 billion already acquired in the first six months. Total net new money for the year 2007 ascended to CHF 11.1 billion (2006: CHF 4.2 billion). The successful accrual of net new assets indorses the continuity and quality of the Bank’s organic growth. The result was additionally supported by a strong performance contribution of CHF 3.8 billion. Currency exchange rate effects reduced the market performance in Swiss franc terms by CHF 1.4 billion to CHF 2.4 billion. The purchase of client assets from DWS Investments Schweiz added another CHF 191 million to the assets under management. Ultimately gross growth – taking into consideration the outflow of CHF 4.0 billion in client assets following the sale of the Luxembourg subsidiary – amounted to CHF 13.7 billion, or 19%.

Internationalisation marches onward

In absolute terms, the bulk of Sarasin’s assets, CHF 38.3 billion, are managed in the private client business by relationship managers based at the Bank’s Swiss locations. In the past year, relationship managers at the Swiss locations acquired new money of CHF 4.6 billion, three times as much as in 2006. The other European subsidiaries also improved their acquisition performance, with inflows of CHF 3.3 billion, up by 50%. But the Bank’s subsidiaries in Asia and the Middle East were particularly successful: their net new money inflow of CHF 3.2 billion was seven times higher than in 2006. This excellent result is shining proof of the broad success of Sarasin’s international growth initiatives. The fact that the bulk of new money inflows came from clients with domiciles outside Europe confirms the unbroken trend towards cross-border management of assets.

Client advisors crucial to success

To be able to offer custom-made and individualised investment advice that meets the high standards expected of a leading Swiss private bank, Sarasin relies on highly experienced client relationship managers (CRMs) who are familiar with its international clientele and develop personalised solutions for them. In 2007 the Bank continued to recruit highly experienced CRMs. After adjustment for the sale of the Luxembourg subsidiary, the number of relationship managers of the Sarasin Group rose by 21% to a total of 294. CRM growth was strongest in absolute terms at Sarasin’s locations in the Middle East and Asia, as reflected in the excellent rate of new money growth. When averaged out across the entire Sarasin Group, the acquisition performance of each CRM in the private clients segment improved from CHF 13 million in 2006 to CHF 34 million in 2007, while the figure in the institutional clients business improved from CHF 41 million to CHF 90 million.

The three cornerstones of Sarasin’s growth strategy

In 2007 Bank Sarasin continued to push ahead with its growth strategy as planned. The long-term success of the strategy is built on three cornerstones. Firstly, Sarasin is positioned as an authentic private bank. Secondly, it offers customised services and products and is committed to consistently improving its client-focused and solution-based product offering. Thirdly, the Bank places its emphasis on organic growth in selected markets. The selective expansion of the branch network went ahead, with new offices opened in Frankfurt, Bahrain (subject to regulatory approval) and Qatar. At the same time Bank Sarasin is concentrating on its core skills: The sale of part of its brokerage services to NZB Neue Zürcher Bank, the divestment of the Luxembourg subsidiary to the Crédit Agricole Group and the planned foundation of bank zweiplus Ltd. as a joint venture with AIG Private Bank are the logical consequence of its tighter focus. Rabobank, majority shareholder since April 2007, offers a high degree of security to clients thanks to its strong capital base and triple-A rating.

Outlook for 2008: on course to meet 2010 targets

“Our long-term goals for 2010 still stand”, says Sarasin’s Chairman Georg F.Krayer. “By continuing to strengthen our presence and our offering in our existing locations, we aim to earn a net profit of CHF 200 million, equivalent to growth of 15%.” Bank Sarasin has also set itself a net new money growth target of 10%. To achieve these goals, the Bank will continue to improve the quality of its services as it expands its CRM teams. Sarasin plans to recruit an additional 50 to 60 advisors in 2008.

Christoph Ammann Born in 1950; Swiss citizen; lives in Kilchberg, Switzerland. After completing a banking apprenticeship, Christoph Ammann worked in various areas of the Credit Suisse Group from 1969 until the end of 2000. He was the head of Accounting/Controlling and had overall responsibility for a number of major integration projects implemented by Credit Suisse. In 1996 he was appointed Chief Information Officer of the Credit Suisse Group and in the autumn of 1997 he became a member of the management of Credit Suisse Private Banking. Christoph Ammann has been an independent consultant since the end of 2000. He was a member of the Swiss Federal Banking Commission from mid-2001 to mid-2007. He is also a member of the board of the VIA MAT group of companies and ifb International AG in Pfaeffikon.

Peter Derendinger Born in 1959; Swiss citizen; lives in Wilen, Switzerland Doctorate in law from the University of Fribourg, Switzerland, and LL.M. from the Northwestern School of Law, Chicago, USABorn 1959; Swiss citizen; lives in Wilen, Switzerland; PhD in law from the University of Fribourg, Switzerland, and LL.M. from the Northwestern University School of Law, Chicago, USA. After starting his career working in the courts and various law firms, Peter Derendinger joined Credit Suisse Group in 1989, where he held a number of management functions such as Head of Legal Services, CFO and Member of the Executive Board of the Private Banking Division. Since 2002 he has been an independent financial and legal consultant. Peter Derendinger is member of the board of directors of EGL and various other companies in the financial services industry. Since 2004 he has also been Chairman of the Board and CEO of Alpha Associates AG.