The ratings on Banque Cantonale Vaudoise (BCV) reflect the capital increase effected in 2003, which provides the bank with the additional capital resources necessary to pursue its activities on a sound basis. In this respect, the Canton of Vaud's (A/Stable/--) ongoing commitment to provide capital support to BCV continues to be a key factor supporting the ratings on the bank. The ratings also reflect the improvement in the bank's overall asset quality following substantial provisioning efforts undertaken in 2001 and 2002. These efforts are expected to reduce the impact of provision charges on the bank's bottom-line profitability, thus enhancing net income. However, BCV's operating performance has been comparatively weak, mainly due to the effects of a challenging operating environment on
