Banque Cantonale Vaudoise

The stable outlook on BCV reflects that on its majority owner, the canton of Vaud, and our view that the very high likelihood of extraordinary support from the canton won't change in the next two years. We could take a negative rating action on BCV if we took a similar rating action on Vaud. Furthermore, a weakening of BCV's role for and link with the canton could lead us to revise downward our assessment of the bank's status as a government-related entity. However, we do not envisage such a scenario in the next two years. A deterioration of the bank's stand-alone credit profile (SACP) would not immediately affect our rating because we expect the owner's support would offset the stand-alone

...Banque Cantonale Vaudoise (BCV) continues to display strong profitability despite declining interest rates. BCV has strong fundamentals and is the second-largest Swiss cantonal bank by assets, just behind Zurcher Kantonalbank. It achieved a net profit of Swiss Franc (CHF) 221 million (about 248 million) and a return on average common equity of 12% in the first six months of 2024, the highest among Swiss cantonal banks. The 2024 first-half results were mainly driven by broadly stable net interest income despite two Swiss National Bank (SNB) policy-rate cuts and increasing costs amid moderate inflation. We expect marginally higher provisioning expenses in the second half of 2024 and the coming years. Nevertheless, we forecast BCV's return on average common equity at about 11.4% over 2024-2026, materially above the pre-2023 levels....

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