A massive leap in trading income powered strong first-half results from Swiss Bank Corporation, which yesterday reported an 18.5 per cent rise in operating income to Sfr4bn (pounds 2.2bn).
SBC, one of Switzerland's big three commercial banks which earlier this year bought SG Warburg, the City's premier investment bank, said its consolidated net interim profit rose 23.3 per cent to Sfr540m.
The positive trend in operating income was mainly ascribed to the 128 per cent increase in net trading income to Sfr1.2bn, and revenues from first-time business consolidations. These included Brinson Partners asset management and the O'Connor Associates derivatives business in the US.
Georges Blum, SBC's chief executive, expressed confidence in achieving "satisfying results over the whole year", and said the bank was on course for its goal of a 10 per cent return on equity over the next two to three years.
Marcel Ospel, who has taken over as the chief executive of SBC-Warburg, said the recently acquired British investment bank had neither lost market share nor any key personnel since the takeover. He said there had been no important departures since four senior executives and a number of other Warburg staff moved to investment banking rival, Deutsche Morgan Grenfell, in February.
Sarah Manton, analyst with Smith New Court, said: "The trading figures, even when based on the poor first half of 1994, are spectacularly good, especially when you consider that the interest margin does not appear to have suffered." The interest margin stayed around 1.3 per cent.
SBC said conditions for trading were helped by the continued decline in interest rates and by the relative calm in the foreign exchange markets. Securities trading turned in an interim profit of Sfr423m, compared with a loss of Sfr186m in the first half of 1994.
The takeover of SG Warburg was formally completed last month, and the financial results of the merged investment banking operation will not show up until the second half of 1995. SBC said "for all practical purposed the combination of the two businesses is already largely complete".
SBC said a 3.4 per cent increase in net interest income to Sfr1.4bn reflected more favourable refinancing conditions and lower interest provisions. "This result was seen as all the more encouraging in view of the substantial equity resources that were no longer earning interest because they were applied to the acquisition of strategic participations."
Net commission income, at pounds 1.3bn, was above the level of the second half of last year, but just below the record established in the first half of 1994.