KOF: Business Survey 2010

Keywords: Swiss Economy, KOF Business Survey

Reuters: UBS outshines Deutsche Bank, as wealth turnaround nears, July 27, 2010

"UBS's (UBS.N) strong second quarter investment banking results stood out against a weak performance at U.S. banking giants Goldman Sachs (GS.N) and Citigroup Inc (C.N), lifting shares 10 percent as investors believed Chief Executive Oswald Gruebel's tough restructuring strategy was producing results.

With a Tier 1 capital ratio of 16.4 percent, investors also saw UBS as a key winner from a decision by central bankers and regulators on Monday to soften planned new bank rules, known as Basel III.

UBS, which was hit by the credit crisis and a tax probe, was able to slow a bleeding of client money to its lowest level since it started to lose assets in early 2008.

"We have fared well through the euro crisis thanks to our good risk management approach," said Gruebel, a former Credit Suisse CEO who was pulled out of retirement in 2009 to lead UBS.

"I am confident we can stop the client outflows this year," the former bond trader said.

Net profit was 2 billion Swiss francs (1.2 billion pounds), UBS' third quarterly profit in a row after big losses in 2008 and 2009, and above forecasts of 1.34 billion francs."

It is not too long a ago when a substantial amount of journalists and alleged experts believed that UBS could only recover by getting rid of its investment banking activities. We have seen this more differentiated, as a website entry of April 2008 shows:

MarketObservation: Forderung nach einer differenzierten Betrachtung des Investment Bankings, April 26, 2008

Keywords: UBS, Swiss Banking, Investment Banking

Alleged Tax Competition: The Mysterious Death of Inheritance Taxes in Switzerland, by Marius Bruelhart and Raphael Parchet, University of Lausanne, June 8, 2010

The authors come to a surprising conclusion:

"We show that, in official political debates, tax competition provided the principal argument motivating a recent wave of cuts in inheritance tax burdens across Swiss cantons. However, we nd these cuts to have had no discernible impact on migration patterns of elderly taxpayers overall, possibly a small impact on residential choices by the wealthiest elderly, and unambiguously negative implications for inheritance tax revenues. The alleged forces of tax competition do not in fact seem to have been at work."

Source: Excerpt from Chapter 6, "Conclusion", of the paper linked to above

One of the authors, Marius Bruelhart, has a post about the paper on his weblog Batz:

Batz: "Imaginärer Steuerwettbewerb", by Marius Bruelhart

Ethosfund: Ethos study on 2009 executive remuneration: increased pay despite the crisis, July 2, 2010

Ethos published today its 2009 study on the executive remuneration at the 49 largest Swiss listed companies. Aggregate remuneration increased by 21%. The increase is particularly high in the financial sector (+73% on 2008). In addition, several companies run incentive plans whereby initial grants have substantial upward potential. As there is no obligation to disclose the amounts released at the end of the performance period, the overall transparency remains insufficient. A positive note is that 21 companies now put their remuneration report to the vote of the shareholders. Ethos will continue to engage with companies urging them to introduce an advisory vote of their remuneration report at the next proxy season. read more

The federal government announces progress is being made in its VAT reform package which would introduce a new flat 6.2 percent rate across Switzerland. A business lobby group welcomes the move, although consumers may feel a pinch when food consumption tax rises to meet the new flat rate. Nonetheless the Swiss continue to pay much less VAT than the UK where the government slaps a 20 percent tax on goods and services. read more

Swiss National Bank: Financial Stability Report 2009

The baseline scenario does not look that bad:

"The baseline scenario assumes a further gradual recovery in the economy. Under this scenario, credit risk abroad declines moderately from a high level. In Switzerland, by contrast, credit losses are assumed to increase slightly from a low level. The situation on financial markets remains stable. As a result, the exceptional government support measures are also phased out and this has a beneficial impact on state solvency. Despite further improvement, this scenario depicts an environment that remains difficult for banks. Financial market conditions will be less favourable for the big banks than they were in 2009. In the case of banks with a domestic business focus, it can be assumed that interest-related business, which is their most important source of income, will be negatively affected due to ongoing pressure on their interest margins. However, the greatest challenge in this scenario is the materialisation of credit risk. Losses on the banks’ foreign loans could be substantial, while losses on their Swiss loans are expected to be moderate. Both big banks and banks with a domestic business focus should be in a position to bear such losses."