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Swiss bank Lombard Odier reveals profits

Swiss private bank Lombard Odier has published its first results since its foundation over two centuries ago, as the ultra-discreet sector puts its books in the spotlight.

Swiss bank Lombard Odier reveals profits
Lombard Odier is the second Swiss private bank in a week to publish its profits. Photo: Fabrice Coffrini/AFP

The Geneva-based bank said on Thursday that its first-half net profit was 62.5 million francs ( $68.2 million), while assets under management came to 156 billion francs.
   
"These results are in line with our expectations and reflect both the investments we make towards our strategic objectives as well as the conservative use of our balance sheet," said senior managing partner Patrick Odier in a statement.
   
"Our group is increasingly diversified, more international and more balanced between private and asset management clients and we are expanding our partnerships with financial services providers," he added.
   
Lombard Odier, founded in 1797, is the second Swiss private bank in a week to publish its figures.
   
On Tuesday, Geneva rival Pictet broke with its 209-year-old tradition by announcing a six-month profit of 203 million francs and assets under management of 404 billion francs.
   
Lombard Odier said its tier one capital ratio – a benchmark of stability, which measures a bank's own top-notch funds – was 23.8 percent.
   
In comparison, Pictet's was 21.7 percent.
   
Under global rules, banks must have a ratio of at least 4.5 percent, while Switzerland's regulator requires 7.8 percent.

Sector shake-up
   
Swiss private banks have changed shape amid a tougher regulatory environment since the global financial crisis and scandals such as the Madoff fraud case in the US which rippled across the world's banking sector.
   
Traditional Swiss banking secrecy has meanwhile been under fire as governments – notably the US and EU – crack down on tax cheats who stash cash abroad.
   
The private banking sector caters for the super-wealthy, an increasingly globalized client group.
   
The complex nature of international finance has meanwhile made it difficult for private bankers to feel safe with their tradition of putting their personal assets on the line.

The shake up in the sector began in January when Pictet and Lombard Odier ditched their old statutes, followed by fellow private banks Mirabaud and LaRoche, which are also scheduled to publish their results.
   
The old rules made their handful of wealthy managing partners – bankers for generations – personally responsible for clients' money.
   
If the bank got into trouble, the partners could lose all their assets, not just those they had invested in the operation.
   
The banks are now a "corporate partnership", a hybrid status making comparison easier with fully-listed players such as Credit Suisse and UBS.
   
It is similar to the "limited company" structure in the UK, with its well-known "Ltd." label.
   
The partners now risk only the funds they have invested in the bank, rather than putting all their personal assets on the line.
   
Not being listed on the stock exchange, the banks do not have to publish as detailed results as mainstream banks.
   
Seven lower-profile private banks have opted to stick to their traditional operating model.

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Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?

When it comes to borrowing money from a Swiss bank, nationality may play a role in some cases, but not in others. This is what you should know about this process.

Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?
Getting a losn in Switzerland is subject to many conditions. Photo by Claudio Schwarz/Unsplash

Like almost everything in Switzerland, consumer loans are regulated by legislation, in this case the Consumer Credit Act.

It defines a loan as between 550 and 80,000 francs, “offered by commercial providers of financial services”. Lower or higher amounts are not subject to the Consumer Credit Act.

As is the case in many other countries, Swiss banks have strict criteria about who they lend money to. After all, no financial institution wants to deal with people who are not creditworthy.

Whether or not a foreign national can borrow money from a bank depends on their permanent place of residence and permit status.

As a rule, Swiss lenders don’t give loans to non-residents. So if you reside abroad, there is practically no chance that a bank in Switzerland will lend you money.

However, some financial institutions make exceptions for cross-border workers. If you fall under this category, you can use this interactive tool, select “ Permit G” under “Residence Permit” and see what, if any, options, there are.

READ MORE: EXPLAINED: What cross-border workers should know about taxation in Switzerland

If you are a foreign national but have a permanent residence status (Permit C), your chances of getting a loan are practically the same as those of Swiss citizens — provided, of course, that you meet all the requirements set by lenders (see below).

What about other permit holders?

If you have a B Permit, you might be approved for a loan, depending on how long you have had this permit — obviously, the longer the better.

However, “you may be offered a higher interest rate or a limited loan amount. This is because of the statistically higher probability that you will return to your home country. Some lenders require the loan to be repaid by the time the B permit expires”, according to consumer comparison site comparis.ch 

Holders of other, temporary or conditional permits are not accepted.

READ MORE: ‘A feeling of belonging’: What it’s like to become Swiss

What conditions — other than residence permit — should you fill to be considered for a loan?

You must be at least 18 years of age, though additional restrictions may apply to applicants under 25 — for instance, a higher interest rate or a limited loan amount. That’s because “lenders are generally more cautious with young applicants as their financial circumstances are usually less settled and the risk of default is deemed to be higher,” Comparis noted.

The same cautious approach applies to pensioners, especially those who have no regular income. The social security payments (AHV/AVS) do not count as income for the purpose of the loan.

There is also other eligibility criteria, based on employment status and salary. People with a regular income have a higher chance of obtaining a loan than those who are self-employed, temporarily employed, work on hourly basis or, logically, unemployed.

Other factors, including your existing debts, are also taken into account in the decision process.

Basically, lenders favour applicants with a stable income and good financial standing, in much the same way as supplemental health insurance carriers prefer young and healthy people.

Keep in mind that if your loan application is rejected, this will be recorded in the database of the  Central Office for Credit Information, making it more difficult, though not impossible, to get a loan in the future.

The same rules do not apply to American citizens

That’s because Swiss and European banks are subjected to US demands to disclose the assets of Americans overseas in order to prevent tax evasion.

As adherence to these requirements is a major headache for the banks and in some cases also violates their country’s privacy laws, financial institutions prefer not to deal with Americans at all, even those who are permanent residents.

If you are a US citizen who also has Swiss nationality, you may have an easier time of it, but could still face hurdles in obtaining loans and other banking services.

There is no immediate relief in sight, although many organisations representing Americans abroad are lobbying in Washington to change the existing legislation.

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