Statement by the Chief Executive Officer

Dear Shareholders,

Valued Clients and Employees

 

I am delighted to report that 2013 was a generally encouraging financial year for our institution.

In what continued to be a challenging business environment, VP Bank Group achieved consolidated net income of CHF 38.7 million, a solid result given the circumstances. We recorded gains, for example in net operating income (plus 1.8 per cent), total assets (plus 5.3 per cent) as well as client assets under management (plus 7.4 per cent).

Our tier 1 core capital ratio in 2013 remained at a very high level of 20.4 per cent (previous year: 21.5 per cent). Thus, we once again far exceeded our medium-term minimum goal of a 16 per cent core capital ratio. 

The second medium-term goal of VP Bank is to achieve and maintain a cost/income ratio of 65 per cent. In 2013, that ratio increased from 62.8 per cent in the previous year to 70.2 per cent. However, the 2012 figure must be viewed in the light of one-time effects; adjusted for these effects, the 2013 cost/income ratio was in fact 2.3 per cent lower than the prior-year level. Thus, VP Bank is well on track towards reaching its defined goal.

Our third medium-term goal is to achieve an average annual increase in net new money of 5 per cent. Despite stiff competition and unfavourable market conditions, we managed to record a net inflow of 3.4 per cent in terms of new client assets. 

A cost-cutting programme initiated in 2012 was aimed at reducing our cost base to CHF 160 million by the end of 2013. Thanks to strict cost discipline, operating expenses in 2013 declined versus the adjusted prior-year level by 1.5 per cent to CHF 168.0 million. Decreases of 1.5 per cent each in adjusted personnel expenses and general and administrative expenses contrasted with several extraordinary cost factors. In addition to acquisition-related outlays, Group-wide reorganisation and recruiting expenses were also incurred in 2013. Also pressuring costs were the higher internal and external expenses involved in the tax transparency process, as well as further successfully implemented growth initiatives. During the course of 2014, we will press ahead with our efforts to leverage Group-wide synergies and thereby achieve additional cost savings.

 

Key strategic approaches

“We are the most recommended private bank because we generate enthusiasm through unique client experiences.” This claim stands at the pinnacle of VP Bank’s action pyramid. It is not only our vision; it is also a mandate for me personally. I assumed the role of CEO of VP Bank Group in May 2013, and it is my respons­ibility to lead our Bank to that goal.

A number of significant redirection measures have been necessary in this regard. Upon taking up my position, I set three major objectives: 

  • Focus on the core business: efficiency gains and reduced complexity are just as important here as is heightened cost consciousness. In 2013, through strong focus on our target markets, the divestment of our participation in trust companies, and an adjustment of the fee schedule for our services, we took important steps in this direction.
  • Exploitation of growth opportunities: not only with our successfully integrated asset deal in Luxembourg, but also through the utilisation of new technologies, we have demonstrated our asset gathering capabilities.
  • Reorganisation measures: new, simplified and more efficient organisational structure strengthened the position of VP Bank Group.

The following provides more insight into these key strategic approaches:

 

Focus

Focusing on our core business represented a key themein the past financial year. We are resolutely pursuing ourstrategy of concentrating on two business fields – intermediaries and private banking – as well as reducing the number of our geographic target markets to nine.

In our home market of Liechtenstein, we offer an additional range of services to retail and commercial clients. These local activities bring increased diversi­fication to VP Bank’s business model and make a gratifying contribution to our bottom line.

We have also examined our range of products and services, and accordingly aligned the fee structure with market conditions. It is also of great importance to us that we make optimum use of the Bank’s existing infrastructure. For that reason, we will continue to invest in our client service units in 2014 in an effort to boost growth, while never losing sight of the import­ance of profitability. 

VP Bank Group has attained an outstanding level of competence in the area of investment funds. With our “Fund Solutions” unit, we are a leading provider of complex, private label fund solutions. Especially for the Liechtenstein and Luxembourg markets, we have a well-engineered, client-friendly model in place. A further bundling of our internal fund expertise is envisaged for 2014.

 

Growth

The 2013 takeover of the private banking activities of HSBC Trinkaus & Burkhardt and its private banking related fund business in Luxembourg represented a milestone in the implementation of our growth strategy. This asset deal involved the acquisition of tax-compliant holdings to the value of roughly CHF 2.0 billion.

So as you can see, we are taking advantage of attract­ive market opportunities in effort to achieve both qualitative and quantitative growth in our targeted client segments. In addition, we want to retain our existing base of client assets under management in conformity with the new tax law regulations.

 

Reorganisation

By changing the orientation of our organisation and creating the new “Client Business” division, we placed even sharper focus on our clients in 2013. 

VP Bank’s leaner organisational structure – which took effect on 1 January 2014 – simplifies Group-wide processes and responsibilities. Redundancies have been drama­tically reduced and our client orientation is now squarely in the spotlight thanks to increased collaboration between the Group companies and the bundling of competencies. We have clearly optimised our structure through these steps. Also a part of this is the greater involvement of VP Bank Group’s second-level management members.

 

Outlook

At the Group level, we effectively concluded the major reorganisation measures in 2013 and are now ideally positioned for the future. 

We will continue to closely monitor the consolidation process within the financial services industry. 

The reorientation of the Liechtenstein financial centre, tax transparency and the exchange of tax-related information are developments that will continue to occupy us in the years ahead. As an internationally active private bank, we must be able to succeed in the market and confront challenges with an open mind each and every day. On the path to tax transparency, we are accompanying clients with extreme diligence and allowing no room for compromise.

The market price of VP Bank shares is another focal point for us. Our targeted investor relations activity in recent months is one of the factors behind the share price increase in the second half of 2013. This is a great incentive for us to maintain our close dialogue with our shareholders and other stakeholders. 

The subject of sustainability is rapidly gaining in sig­nificance. VP Bank Group has always championed the principles of sustainable business management. In our strategy report, we discuss a number of VP Bank’s related measures and initiatives. 

“Safely ahead” is the new marketing slogan for VP Bank – and rightfully so: we are well positioned to face strong competition and to rise to the challenges ahead with specific measures for overcoming them. Our solid capital base provides the ideal basis for accomplishing this. Going forward, closeness to our clients, reliability and first class service will continue to be of central importance to VP Bank and its ongoing business success.

 

A word of gratitude

We extend our sincere thanks to you – our clients, partners and employees, as well as their families – for the support extended to us in the past year. VP Bank needs the continued trust of its shareholders and stakeholders in order to meet the challeges posed by its reorientation. 

We thank you for continuing to accompany us on our promising path. 

 

Alfred W. Moeckli

CEO of VP Bank Group