Banque Cantonale de Geneve : Le magazine clients 1er semestre 2023 de la BCGE est disponible

The Banque Cantonale de Genève's biannual magazine 1st Half 2023

Special edition

L'essentiel de la finance 2022

Tips for managing your personal finances

Corporate financing

BCGE's financing guidelines

Sustainable finance

Helping clients to manage climate risk

BCGE

An international reference partner

Economic study

Are economic conditions in Geneva still favourable?

Succession law

What's new in 2023

2022 Results

Record net profit and dividend

While very short-term fluctuations are not significant, cumulative performance over 3 or 5 years provides useful information on net stock market performance. All asset classes can experience strong short-term shocks, including the most defensive ones. However, over the long term, assets with robust underlying economic value are much more constructive.

Does portfolio performance really reflect the economic value of any underlying assets?

No. Not immediately, as performance is a snapshot in time. The stock market is influenced by various factors including the economic value and characteristics of the asset in question, investor sentiment (behavioural finance), rumours, and more or less long-term expectations.

The expression "stock market exaggerations", for example, translates these periods of overvaluation of certain assets, based on expectations or convictions, but not yet on accounting facts, or conversely, an undervaluation of a rather good economic record, but not yet accepted in the minds of trend setters.

Over longer periods, however, stock market valuations will tend to move closer to intrinsic economic value.

Should we shift our focus from stock market screens to a primary analysis of assets?

Yes. Investing in the economy, its companies, its institutions and its infrastructures allows us to put down roots in resilient assets. Of course, this segment of securities, representing the "real economy", will also experience fluctuations parallel to the entire market and its indices. But these fluctuations will often be smaller.

As a general rule, this type of portfolio improves its relative performance in periods of generalised downturns and subsequent upward corrections. It is constructed by selecting each stock individually on the basis of a thorough credit analysis, as banks or investment firms do.

This is a complex process, requiring a combination of economic, financial and sustainability skills.

It is true active management, the opposite of passive manage- ment, which simply replicates stock market indices without critical analysis.

Are the most resilient asset classes easily identifiable?

Yes. If one adopts a fundamentally critical and selective attitude. For instance, the zero-based portfolio, i.e. the idea of starting from scratch and picking only the quintessence of the most solid and performing assets.

"Investing in the economy, its companies, its institutions and its infrastructures allows us to put down roots in resilient assets."

Eliminated from the start are precious metals, such as gold (lack of income, irrationality of prices), commodities (for the same reasons), private crypto-currencies (risks of money laundering and fraud), long real estate holdings (inverse correlation with interest rates), private debt (insufficiently remunerated in relation to risk), hedge funds and other structured products (low resistance to changes in the direction of the economy).

Only very high quality bonds (in a normal interest rate situation) and, above all, shares of listed or unlisted companies (private equity) will remain.

1. selective and well-diversified choice of the best companies, with a global perspective, will ultimately ensure the most favour- able risk/return ratio.

1. An up-close look at the markets
   Taking the good with the bad. An end to negative interest rates
2. Economic outlook
   Economic situation and outlook
   GDP in French-speaking Switzerland Reaping the benefits of an open economy
3. In the spotlight Real estate
4. Cockpit
   Geneva's economy at a glance
5. • Interest rates
   • Consumption
   • Employment
   • The hotel business
6. The financial marketplace Lights, camera... BCGE, action!
7. An international reference partner
8. • Food for thought
   • Gathering insight
   • Broadening horizons
   • Being part of the change

1. Investors
   Nominated to the trading room
   2022 Annual Results
   Record net profit and dividend
2. Economic study(French only)

Are economic conditions in Geneva still favourable?

1. Wealth planning
   Changes in succession law:
   planning ahead is more important than ever
2. Private clients
   Tips for managing your personal finances

FINANCEMENT

DES ENTREPRISES

Doctrine d'engagement

8 principes fondamentaux au cœur de notre contribution à l'économie

14 Companies

Corporate financing and guidelines

(French only)

1. Financing
   Business vehicle leasing: flexible mobility management
2. Insight
   BCGE 2022 - L'essentiel de la finance
3. • The keys to tackling the increasing complexities of the corporate world

18 • How is robotisation transforming the construction industry?

1. Sustainable finance
   Helping clients to manage climate risk
2. Cantonal banks demonstrate their commitment
   Cantonal Banks named "Knights of the Children and the Young"
3. Banking services
   Debit Mastercard replaces the Maestro card At the heart of the economy
4. • BCGE's CEO brings years of experience and a deep knowledge of French-speaking Switzerland to ASCB
   • BCGE sees its CEO awarded by the Obermatt Institute
5. Partnerships
   BCGE sponsors Genevan artisans
   Sponsoring
   BCGE becomes title sponsor of the Tour du Léman à l'Aviron
6. Education
7. • BCGE awards its annual Prix de l'économie
   • How BCGE trains its interns and apprentices
   • ISFB and BCGE: partners for the long term

26 Geneva, a municipality in action

An intergenerational project in the heart of Athenaz

28 Geneva, a company in action

Spineart and its innovative work benefit spinal surgery technology

30 Geneva, culture and society

• "The Making of Money", a multifaceted exhibition
• Geneva and its banks: linked through time

1. Support
2. BCGE, around the corner, close to you!

Impressum

Editor, editor-in-chief: Corporate Affairs and Communications Department, in collaboration with the Marketing Department, Human Resources

and the Geneva, Corporate, International, Asset Management, Finance, Legal & Compliance and Operations divisions.

Head of Publication, editorial secretariat: Nathalie Vernaz

English translation (digital version only): Christine Duranza

French print run: 38,000 copies

Creation and graphic design: Alternative.ch

Printing: ATAR Roto Presse SA

Copyright: any full or partial reproduction of the texts is subject to the publisher's authorisation (dialogue@bcge.ch)

Photographs© and illustrations: Fred Merz I Lundi13, Magic Pencil, Loris Von Siebenthal, Alternative, Philip van Woerden, Christophe Weber, WEF, Fanny Destenay, Section Photographie GSL BCGE, David Wagnières, Nicolas Dupraz, apaar paysage et architecture, Musée d'Art et d'Histoire de Genève

The information contained in this document is based on reliable sources. However, Banque Cantonale de Genève cannot be held liable for its content.

The opinions expressed in this magazine are not necessarily those of the publisher.

Disclaimer: Only the French version of this document is deemed authentic.

Valérie Lemaigre

Chief Economist, BCGE

According to Bloomberg, there is a 70% chance of a hard landing1 over a soft one2. Let us remember, however, that a recession most often comes as a surprise, resulting from a shock or crisis (rather than a logical consequence of fragilities) to correct past excesses. Economists rarely predict them, whereas financial markets too often anticipate them.

In this anxiety-provoking context, all resilience factors are assimilated to recession markers; debt servicing at its lowest, personal savings and liquidity at their highest, unemployment rates at their historic minimum, the health of corporate balance sheets and a solid capitalisation of the banks, the residential property market in deficit, all worry more than they reassure. According to past references, they would fuel inflation through demand and call for a

the delayed effects of the drastic rise in interest rates? In any case, real estate transactions in Switzerland and elsewhere continue to grow, as do productive business investments (technological equipment, innovation and intellectual property). While the rise in interest rates is bad news for investment financing con- ditions, it restores income to debt and a return to investment.

The exit from negative interest rates and their normalisation, which is the basis for the adjustment of financial asset valuations in 2022, restores an economic equilibrium that has been forgotten for almost a decade, one in which entrepreneurs and investors, labour and capital, are remunerated for taking a risk, and lenders are hedged against inflation.

So let us replace the long list of risks with a list of opportunities, which are focused on the unprecedented economic structural challenges that quality compa-

nies will address without interruption in 2023 through their long-term productive investments, the only answer to persisting challenges.

This context therefore does not systematically call for anticipating a recession in Switzerland or Geneva. Their strengthened position since 2020 in international trade, particularly with the United States, in the pharmaceutical sector (medicines, vaccines and medical equipment), adds a distinctive Swiss resilience factor. It should be noted that this industry has been ranked as "strategic" by most governments since 2020, alongside activities linked to the energy and demographic transitions, which include semiconductors and technology.

Prudence and moderation will certainly be the watchwords of the current financial year, which should show Swiss growth and inflation without ambition and loss.

drastic reaction (rapid and large) in interest rates, which would bring activity to a halt. Moreover, in 2022, the official rates of the central banks went through a tightening cycle.

Too accustomed to a demand shock that is kept in check by more or less restrictive financing conditions, we forget the main sources of inflation inherited from the pandemic crisis and extended by the energy crisis: the supply shock, stock management, delivery problems, and the local deployment of strategic stocks (health, semiconductors, alternative energy). There is talk of recession and de- globalisation when international trade in these sectors is at an all-time high, when business investment in innovation and technology is growing rapidly, and when public and private partnerships to support major transitions are intensifying.

Could the signals coming from the construction sector, which has been in retreat for several quarters now, herald

World GDP growth (IMF)

Annual variation in %

6

-2

-4

Source: Refinitiv Datastream

1. Hard landing: An economy is said to suffer a hard landing when it falls into a recession at the same time authorities are attempting to moderate overheated activity (inflation etc.). Such a circumstance reflects the failure of the monetary authorities to manage interest rates by, for example, raising them too sharply. (Source (in French): Boursereflex.com / lexique AOF).
2. Soft landing: this occurs when monetary authorities succeed in moderating the growth rate of the economy sufficiently to avoid overheating and excessive inflation, while maintaining growth at a level sufficient to avoid recession. In order to achieve such a feat, interest rates must be managed in the best possible way, i.e. they must not be raised too suddenly or too much.
   (Source (in French): Boursereflex.com / lexique AOF).