SCHWEIZ - Banco Mercantil

Board of Directors’ Report
During 2008, the global economy experienced a rapid downturn and financial
institutions around the world felt its considerable impact. Although
conditions were challenging, Mercantil Bank (Schweiz) AG faced this market
situation proactively. Key initiatives were aimed at offsetting reduced
interest margins and underwriting risks. While the financial results were
somewhat affected, these assertive practices allowed the Bank to maintain
a good asset quality in its credit and investment portfolio and continue to
serve the credit needs of its customers.
Private Banking business showed a positive trend due to increased volume
in foreign exchange transactions and higher fee income. The Bank implemented
a long-term strategy to increase the share of wallet of existing customers,
to broaden the client base and to take advantage of opportunities
that will emerge in an uncertain and changing market.
Corporate Banking and Treasury activities were managed in response to
the credit risk quality concerns by an unfavorable trend in interest margins.
Loan loss reserves are adequate to cover potential deterioration of assets
in an unpredictable market. The Bank increased the number of corporate
and commercial clients, mainly for clearing services.
Total consolidated assets decreased by CHF 26 million or approximately 7
percent to CHF 356 million, in comparison with CHF 382 million in 2007.
Capital at the Bank’s consolidated level is CHF 56.6 million or a leverage
ratio of 15.9%, while for the parent company only, the ratio is 38%. The conservative
financing approach of the Bank is the foundation that supports
its solid reputation in the industry and its capacity to respond quickly to
business opportunities.