Corporate strategy – strategic orientation of VP Bank
The business model of VP Bank is based on two pillars: private banking and the intermediaries business. The home market activities in Liechtenstein are supplemented by retail banking and the commercial business. From the various locations of VP Bank Group – namely Vaduz, Zurich, Luxembourg, Tortola, Singapore, Hong Kong and Moscow – clearly defined target markets are actively cultivated. Those local offices bear responsibility for developing their own markets and receive coordinative assistance from the Group level. For Europe, the Board of Directors has designated Liechtenstein, Switzerland, Germany, Luxembourg, Belgium, Italy and Russia as target markets. In Asia, they are Singapore and Hong Kong.
The primary strategic goal of VP Bank is to grow profitably as a Group via its activities in those target markets and segments while preserving its own independence. Strategic partnerships and cooperative undertakings are a key component of the business model.
The central tasks in this regard are to fulfil all regulatory cross-border requirements and offer a comprehensive array of services that correspond to VP Bank Group’s business model. Within the given target markets, clients are grouped according to their needs.
VP Bank has launched the following strategic initiatives:
Market-oriented management structure
The goal here is to establish a client- and marketing-oriented management structure. VP Bank prefers that its local offices enjoy a high degree of autonomy.
As a result, VP Bank has a lean management structure that is focused on the specific needs of its various target markets. And that structure must be flexible enough to respond as quickly as possible to changing market conditions and support implementation of the Group’s strategy. Since 1 January 2013, the various tasks of Group Executive Management as well as those of the Executive Board at the Head Office in Vaduz have been more clearly regulated and, in certain instances, allocated differently than before.
In early 2012, Rolf Jermann, Head of Commercial Banking, became a new member of the Executive Board at the Head Office, and Martin Engler, Head of Private Banking, and Günther Kaufmann, Head of Intermediaries & Transaction Banking, were added to that body at the beginning of 2013.
The Head Office in Vaduz is the home of VP Bank and the formative factor behind its corporate culture. With local senior management, local responsibilities and an agenda tailored specifically to the region, the Vaduz location also formally acquires the status that it always has implicitly had in terms of the corporate identity and business activities of the entire Group.
Growth initiatives
For VP Bank, growth means attracting new clients and pressing ahead with the qualitative growth of client assets under management. In this connection, markets, client segments as well as products and services are continuously subjected to a precise analysis.
In the private banking area, VP Bank focuses on the medium-sized wealth segment, where the range of offerings for existing clients is to be expanded successively. Included in this are new advisory concepts, a wider array of products, as well as innovative forms of communication such as e-channelling. VP Bank’s decades of investment competence will also be keyed on more intently.
The business with intermediaries offers growth opportunities. VP Bank wants to increase the number of its partnerships with this target group and offer new models for cooperation, amongst them expanded platforms for banking services, training, research, the cross-border exchange of know-how, risk control and investment controlling. All of these services and competencies are already in-house and should be offered more extensively.
Geographically, VP Bank continues to see great opportunities for new client acquisition in the Asia/Pacific region. Accordingly, the offices in Hong Kong and Singapore are being used for local Asian transactions. Here, VP Bank is placing great weight on the growth of its intermediaries business.
Central and Eastern Europe is also a region where growth can be generated. VP Bank is concentrating in particular on Russia, where VP Bank Group is present with a representative office in Moscow.
Opportunities are also to be had in Luxembourg, a financial hub for international investors. The Grand Duchy has become specialised in the pan-European investment fund business and is the world’s second-largest fund centre behind the USA. VP Bank is the only Liechtenstein-based bank to be present in both the Luxembourg and Liechtenstein fund centres and it wants to exploit that advantage further.
The new legal requirements for alternative investment fund managers (AIFMs) are something that VP Bank views as a chance to win new clients. The Bank is prepared for such an opportunity and expects that 2013 will see new business in this regard.
VP Bank will make no further investment in markets which have no promise for profitable growth in the foreseeable future. For that reason, VP Bank Group decommissioned its Munich-based asset management company in mid-2012. Germany remains an important target market but it will be cultivated efficiently from the Bank’s other locations. In this regard, VP Bank is taking advantage of the possibilities afforded by the EU passport: after fulfilment of a modicum of formalities, the European Union has allowed the simplified, EEA-wide distribution of certain financial products.
Efficiency
Localising the potential for cost savings was successfully initiated in 2012 with the “Fit for the Future” project. The related measures, which have been defined and already partially implemented, are aimed at reducing the Bank’s cost base to CHF 160 million by the end of 2013. The findings from this cost-reduction programme are being integrated into a disciplined cost management approach and progressively translated into reality.
Even more so than before, VP Bank will think and act as a whole. Efficiency enhancement possibilities within VP Bank Group are being identified on an ongoing basis to ensure success for the entire Group.
One focal point of the measures for increasing efficiency in recent years has been the IT area. With the “Avaloq” banking application, all of the Group’s booking locations now have the most modern IT infrastructure that serves all client needs. And major savings have also been achieved through targeted measures in the area of IT processes.
Efficiency gains have an additional positive effect: the centralisation of routine work and automation of certain processes result in heightened quality and the ability to analyse all commercial activities.
Group-wide efficiency gains are also being sought via partnerships. Especially in the Liechtenstein financial centre, cooperative undertakings make it possible to counter increasing costs. With this approach, new alliance-based business models can be developed. To that purpose, VP Bank is permanently engaged with other banks in an exchange of experiences in a joint effort to exploit and optimise the available resources. In the age of globalisation, reciprocal knowledge transfer is advantageous for all parties concerned.
VP Bank cooperates with the Liechtensteinische Landesbank (LLB) in the area of printing and shipment, as well as via a joint procurement company. VP Bank will also lease a floor of the new LLB data processing centre, where it will take up occupancy in the first half of 2013. In this collaboration, making use of the latest IT solutions and efficient data management are the main drivers.
In the second half of 2012, VP Bank examined the possibility of outsourcing its IT competence centre to an external partner company. However, it was determined that the conditions for realising such a project are not suitable at present.
In the years ahead, VP Bank will also continue to examine the viability of partnerships and joint undertakings.
Advisors and teams
The rendering of financial advice is different today than it was just a few years ago. Clients are better informed, more mobile and more demanding. And with those demands, the requirements profile for client advisors has also changed. Excellent, comprehensive client care is indispensable, yet it must include amongst other things specialist insight into tax law and finance. Asset management know-how alone is no longer sufficient.
VP Bank continues to search for highly qualified advisors and advisory teams that come up to those expectations. Staff revitalisation, broader skill sets and discussions with private banking specialists are key elements in this regard.
New strategic circumstances
An international banking group such as VP Bank must be agile and dynamic. Since the start of its transformation process, VP Bank Group has accomplished a lot. However, factors beyond its influence have led to a change of course in terms of implementation. For one, the general economic conditions have not improved, e.g. the situation in the interest-rate area and economic trends in Europe, and also consumer confidence, have both continued to deteriorate. And that puts further pressure on margins. In addition, heightened regulation and the global taxation issue have gained tremendous momentum.
For those reasons, the transformation process has yet to be concluded. VP Bank is still pursuing it resolutely but, depending on the further developments, may opt to alter the priorities.
For example, the topic of tax transparency carries greater weight today than was the case at the beginning of the transformation process.