Segment reporting
The organisational structure of VP Bank Group remains unchanged for 2015. VP Bank Group consists of the three organisational units “Chief Executive Officer”, “Client Business” and “Chief Financial Officer & Banking Services”.
As previously, the organisational unit “Client Business” is divided into two business segments “Client Business Liechtenstein” and “Client Business International”. Both organisational units “Chief Executive Officer” and “Chief Financial Officer & Banking Services” are regrouped together under the business segment “Corporate Center”.
Centrum Bank, which was merged with VP Bank in 2015, is included in the segment reporting for 2015. The non-recurring positive effect of the “bargain purchase” (gain from the acquisition of Centrum Bank) as well as the charges for restructuring costs (including social plan) and project costs are reported in the Corporate Center. The client assets transferred as well the client-related revenues arising from this integration are reported in the business segment “Client Business Liechtenstein”. The amortisation of the capitalised value of client assets acquired are also allocated to this business segment. The employment contracts of the employees of Centrum Bank, Vaduz, were transferred to VP Bank and integrated into the existing structure of VP Bank Group. Based upon this allocation, related ongoing regular costs were charged to the respective business unit (“Client Business Liechtenstein” or “Corporate Center”). The prior-year comparative figures exclude Centrum Bank.
Client Business Liechtenstein
The business segment “Client Business Liechtenstein” encompasses the international private banking business and the business with intermediaries located in Liechtenstein as well as the local universal banking and credit-granting businesses. It includes the units of VP Bank Ltd, Vaduz, which are in direct client contact. In addition, Group Investment, Product & Market Management and VP Fund Solutions (Liechtenstein) AG are allocated to this business segment. From 2015 onwards, this segment includes the employees transferred and customer business of the above-mentioned units from the integration of Centrum Bank.
Client Business International
The business segment “Client Business International” encompasses the private-banking business in international locations. VP Bank (Switzerland) Ltd, VP Bank (Luxembourg) SA, VP Bank (BVI) Ltd, VP Bank (Singapore) Ltd, VP Wealth Management (Hong Kong) Ltd and VP Fund Solutions (Luxembourg) SA are allocated to this business segment.
Corporate Center
The business segment “Corporate Center” is responsible for banking operations and the processing of business transactions. It encompasses the areas Group Operations, Group Information Technology, Group Finance & Risk, Group Treasury & Execution, Group Legal, Compliance & Tax, Group Human Resources Management, Group Communications & Marketing and Group Business Development. In addition, those revenues and expenses of VP Bank Ltd having no direct relationship to the operating divisions, as well as consolidation adjustments, are reported under the Corporate Center. Revenue-generating business activities of the segment Corporate Center arise in connection with the Group Treasury Function. The results of the Group's own financial investments, the structural contribution and the changes in the value of interest-rate hedges are reported in this segment. The non-recurring positive effect of the “bargain purchase” arising from the merger with Centrum Bank (gain from the acquisition of Centrum Bank) as well as the charges for restructuring costs (including social plan) and project costs are reported in the Corporate Center business segment. From 2015 onwards, this segment includes the employees transferred from the above-mentioned units from the integration of Centrum Bank. The effect arising on the reduction of the rate on conversion (IAS 19) also flowed into this segment.
Geographic segment reporting | ||||
in CHF 1,000 | Liechtenstein | Rest of Europe | Other countries | Total Group |
2015 |
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Total net operating income | 261,819 | 29,418 | 15,317 | 306,554 |
Assets (in CHF million) | 11,109 | 898 | 354 | 12,361 |
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2014 |
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Total net operating income | 173,184 | 36,990 | 12,483 | 222,657 |
Assets (in CHF million) | 9,478 | 1,495 | 231 | 11,205 |
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Segment reporting follows the principle of branch accounting. | ||||
Business segment reporting 2015 | ||||
in CHF 1,000 | Client | Client | Corporate | Total |
Total interest income 1 | 53,849 | 22,119 | 8,519 | 84,487 |
Total income from commission business and services | 91,847 | 38,853 | –4,330 | 126,370 |
Income from trading activities | 21,383 | 8,343 | 16,336 | 46,062 |
Income from financial investments | 16 | –897 | 139 | –742 |
Other income 2 | 0 | 983 | 49,394 | 50,377 |
Total net operating income | 167,095 | 69,401 | 70,058 | 306,554 |
Personnel expenses | 33,570 | 36,752 | 51,558 | 121,880 |
General and administrative expenses | 3,027 | 19,071 | 38,137 | 60,235 |
Services to/from other segments | 46,675 | 0 | –46,675 | 0 |
Operating expenses | 83,272 | 55,823 | 43,020 | 182,115 |
Gross income3 | 83,823 | 13,578 | 27,038 | 124,439 |
Depreciation and amortisation | 3,672 | 4,455 | 30,126 | 38,253 |
Valuation allowances, provisions and losses | 2,917 | 11,761 | 11,350 | 26,028 |
Income/loss before income tax | 77,234 | –2,638 | –14,438 | 60,158 |
Taxes on income |
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| –3,898 |
Net income |
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| 64,056 |
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Segment assets (in CHF million) | 4,467 | 3,247 | 4,647 | 12,361 |
Segment liabilities (in CHF million) | 7,792 | 2,928 | 723 | 11,443 |
24.3 | 10.5 | 0.0 | 34.8 | |
Net new money inflow (in CHF billion) 5 | 5.8 | 0.2 | 0.0 | 6.0 |
Headcount (employees) | 178 | 245 | 375 | 798 |
Headcount (full-time equivalents) | 168.5 | 233.4 | 332.5 | 734.4 |
1 Net interest income in Client Business Liechtenstein benefited from the reallocation of interest income from Corporate Center (CHF 10 million). 2 The non-recurring positive effect of the “bargain purchase” (badwill arising on acquisition) is disclosed in the Corporate Center. 3 Centralisation of the investment management operations of VP Bank (Switzerland) Ltd in Liechtenstein as of 01.07.2015 (net CHF 4.5 million). 4 Calculation in accordance with Table P of the Guidelines to the Liechtenstein Banking Ordinance issued by the Government of Liechtenstein (FL-BankO). 5 Included in this position are acquired client relationships (note 45) of CHF 6.7 billion. The recharging of costs and revenues between the business units takes place on the basis of internal transfer prices, actual recharges or on prevailing market conditions. Recharged costs within the segments are subject to an annual review and are amended to reflect new economic conditions, where necessary. | ||||
Business segment reporting 2014 | ||||
Total interest income | 35,897 | 20,510 | 9,144 | 65,551 |
Total income from commission business and services | 73,477 | 49,593 | –4,652 | 118,418 |
Income from trading activities | 14,290 | 6,649 | 4,424 | 25,363 |
Income from financial investments | 17 | 1,839 | 10,637 | 12,493 |
Other income | 11 | 1,165 | –344 | 832 |
Total net operating income | 123,692 | 79,756 | 19,209 | 222,657 |
Personnel expenses | 26,822 | 40,252 | 51,425 | 118,499 |
General and administrative expenses | 2,276 | 20,645 | 23,851 | 46,772 |
Services to/from other segments | 37,110 | 0 | –37,110 | 0 |
Operating expenses | 66,208 | 60,897 | 38,166 | 165,271 |
Gross income | 57,484 | 18,859 | –18,957 | 57,386 |
Depreciation and amortisation | 266 | 4,529 | 24,553 | 29,348 |
Valuation allowances, provisions and losses | 9,017 | –106 | –1,495 | 7,416 |
Income/loss before income tax | 48,201 | 14,436 | –42,015 | 20,622 |
Taxes on income |
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| 597 |
Net income |
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| 20,025 |
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Segment assets (in CHF million) | 3,448 | 3,243 | 4,514 | 11,205 |
Segment liabilities (in CHF million) | 6,656 | 2,951 | 729 | 10,336 |
Client assets under management (in CHF billion) 4 | 19.5 | 11.4 | 0.0 | 30.9 |
Net new money inflow (in CHF billion) | –0.2 | –0.6 | 0.0 | –0.8 |
Headcount (employees) | 157 | 259 | 339 | 755 |
Headcount (full-time equivalents) | 146.8 | 246.8 | 301.3 | 694.9 |
1 Net interest income in Client Business Liechtenstein benefited from the reallocation of interest income from Corporate Center (CHF 10 million). 2 The non-recurring positive effect of the “bargain purchase” (badwill arising on acquisition) is disclosed in the Corporate Center. 3 Centralisation of the investment management operations of VP Bank (Switzerland) Ltd in Liechtenstein as of 01.07.2015 (net CHF 4.5 million). 4 Calculation in accordance with Table P of the Guidelines to the Liechtenstein Banking Ordinance issued by the Government of Liechtenstein (FL-BankO). 5 Included in this position are acquired client relationships (note 45) of CHF 6.7 billion. The recharging of costs and revenues between the business units takes place on the basis of internal transfer prices, actual recharges or on prevailing market conditions. Recharged costs within the segments are subject to an annual review and are amended to reflect new economic conditions, where necessary. | ||||
Segment results Client Business Liechtenstein |
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in CHF 1,000 | 2015 | 2014 | Variance absolute | Variance in % |
Total interest income | 53,849 | 35,897 | 17,952 | 50.0 |
Total income from commission business and services | 91,847 | 73,477 | 18,370 | 25.0 |
Income from trading activities | 21,383 | 14,290 | 7,093 | 49.6 |
Income from financial investments | 16 | 17 | –1 | –5.9 |
Other income | 0 | 11 | –11 | –100.0 |
Total net operating income | 167,095 | 123,692 | 43,403 | 35.1 |
Personnel expenses | 33,570 | 26,822 | 6,748 | 25.2 |
General and administrative expenses | 3,027 | 2,276 | 751 | 33.0 |
Services to/from other segments | 46,675 | 37,110 | 9,565 | 25.8 |
Operating expenses | 83,272 | 66,208 | 17,064 | 25.8 |
Gross income | 83,823 | 57,484 | 26,339 | 45.8 |
Depreciation and amortisation | 3,672 | 266 | 3,406 | n.a. |
Valuation allowances, provisions and losses | 2,917 | 9,017 | –6,100 | –67.6 |
Segment results before income taxes | 77,234 | 48,201 | 29,033 | 60.2 |
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Additional information |
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Operating expenses excl. depreciation and amortisation / | 49.8 | 53.5 |
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Operating expenses incl. depreciation and amortisation / | 52.0 | 53.7 |
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Client assets under management (in CHF billion) | 24.3 | 19.5 |
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Change in client assets under management compared to previous year (in %) | 24.4 | 3.3 |
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Net new money inflow (in CHF billion) | 5.8 | –0.2 |
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Gross income / average client assets under management (Bp) 1 | 76.3 | 64.4 |
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Segment result / average client assets under management (Bp) 1 | 35.3 | 25.1 |
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Cost/income ratio operating income (in %) 2 | 49.8 | 53.5 | –3.7 | –6.9 |
Headcount (employees) | 178 | 157 | 21 | 13.4 |
Headcount (full-time equivalents) | 168.5 | 146.8 | 21.7 | 14.8 |
1 Annualised, average values. 2 Operating expenses / gross income minus other income and income from financial investments. |
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The 2015 segment results before income taxes increased year-on-year by CHF 29.0 million (60.2 per cent), resulting primarily from the integration of Centrum Bank. In 2015, total operating income could be increased year-on-year by CHF 43.4 million (35.1 per cent). This growth is attributable, inter alia, to the higher business volume resulting from the transfer of client assets in connection with the merger with Centrum Bank which positively impacted client-related interest income (+50.0 per cent), income from commission business and services (+25.0 per cent) and income from trading activities (+49.6 per cent). The existing client base in the business segment “Client Business Liechtenstein” also contributed to this positive result. In addition, the business segment “Client Business Liechtenstein” benefited from reallocations of interest revenues from the Corporate Center as well as the centralisation of the investment management operations in Liechtenstein.
Operating expenses grew by CHF 17.1 million (25.8 per cent) to CHF 83.3 million (prior year: CHF 66.2 million). This increase in operating expenses results from the merger with Centrum Bank and the related transfer of employees. Intersegmental recharges in "Client Business Liechtenstein" are based upon fixed internal transfer prices. Indirect costs for internal services are reported in the caption “services to/from other segments”. The higher level of recharges from other segments results from the merger with Centrum Bank. The increase in depreciation and amortisation results from scheduled amortisation of intangible assets related to the client assets transferred during the merger.
During 2015, the charges for valuation allowances, provisions and losses, year-on-year, fell by CHF 6.1 million to CHF 2.9 million (prior year: CHF 9.0 million). The gross margin could be improved to 76.3 basis points (prior year: 64.4 basis points) principally as a result of the client assets transferred in connection with the merger. The cost/income ratio was 49.8 per cent and was thus lower than the prior-year’s comparative value of 53.5 per cent.
The segment reported a net inflow of new client assets totalling CHF 5.8 billion. Of this amount, CHF 6.3 billion (net) relates to the merger with Centrum Bank (CHF 6.7 billion upon acquisition less CHF 0.4 billion of outflows anticipated in the wake of the merger). The outflows in the operating business must be viewed principally against the backdrop of the regulatory environment and tax-related issues. Client assets under management at 31 December 2015 totalled CHF 24.3 billion (31 December 2014: CHF 19.5 billion). The employee headcount increased from 147 positions (31 December 2014) to 169 positions primarily within the framework of the merger with Centrum Bank.
Segment results Client Business International |
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in CHF 1,000 | 2015 | 2014 | Variance | Variance |
Total interest income | 22,119 | 20,510 | 1,609 | 7.8 |
Total income from commission business and services | 38,853 | 49,593 | –10,740 | –21.7 |
Income from trading activities | 8,343 | 6,649 | 1,694 | 25.5 |
Income from financial investments | –897 | 1,839 | –2,736 | –148.8 |
Other income | 983 | 1,165 | –182 | –15.6 |
Total net operating income | 69,401 | 79,756 | –10,355 | –13.0 |
Personnel expenses | 36,752 | 40,252 | –3,500 | –8.7 |
General and administrative expenses | 19,071 | 20,645 | –1,574 | –7.6 |
Services to/from other segments | 0 | 0 | 0 | 0.0 |
Operating expenses | 55,823 | 60,897 | –5,074 | –8.3 |
Gross income | 13,578 | 18,859 | –5,281 | –28.0 |
Depreciation and amortisation | 4,455 | 4,529 | –74 | –1.6 |
Valuation allowances, provisions and losses | 11,761 | –106 | 11,867 | n.a. |
Segment results before income taxes | –2,638 | 14,436 | –17,074 | –118.3 |
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Additional information |
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Operating expenses excl. depreciation and amortisation / | 80.4 | 76.4 |
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Operating expenses incl. depreciation and amortisation / | 86.9 | 82.0 |
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Client assets under management (in CHF billion) | 10.5 | 11.4 |
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Change in client assets under management compared to previous year (in %) | –8.2 | –0.6 |
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Net new money inflow (in CHF billion) | 0.2 | –0.6 |
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Gross income / average client assets under management (Bp) 1 | 63.4 | 69.6 |
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Segment result / average client assets under management (Bp) 1 | –2.4 | 12.6 |
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Cost/income ratio operating income (in %) 2 | 80.5 | 79.3 | 1.2 | 1.5 |
Headcount (employees) | 245 | 259 | –14 | –5.4 |
Headcount (full-time equivalents) | 233.4 | 246.8 | –13.4 | –5.4 |
1 Annualised, average values. 2 Operating expenses / gross income minus other income and income from financial investments. |
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The segment results before income taxes in 2015 fell by CHF 17.1 million year-on-year. This decline is attributable to the effects of the strong Swiss franc and market uncertainties as well as a higher level of valuation allowances. Particularly as a result of the downward trend in the income from commission business and services as well as income from financial investments, total net operating income dropped by 13.0 per cent from CHF 79.8 million to CHF 69.4 million. This is a result, inter alia, of the centralisation of investment management activities of VP Bank (Switzerland) Ltd in Liechtenstein (net effect on gross income CHF 4.5 million). Interest and trading income developed positively and year-on-year grew by CHF 1.6 million and CHF 1.7 million, respectively.
Operating expenses could be reduced by CHF 5.1 million, or 8.3 per cent, to CHF 55.8 million. This decline occurred in the area of personnel expenses which fell by CHF 3.5 million to CHF 36.8 million as a result of organisational streamlining in the business segment “Client Business International”. General and administrative costs could by lowered by CHF 1.6 million to CHF 19.1 million. In the business segment “Client Business International”, the recharging of services is based on actual invoices and recorded under general and administrative expenses. During 2015, the charges for valuation allowances, provisions and losses amounted to CHF 11.8 million (prior year: CHF –0.1 million). This increase was caused by a higher level of valuation allowances for credit risks as well as restructuring provisions in connection with the operational integration of activities conducted in Luxembourg. The gross margin declined to 63.4 basis points (prior year: 69.6 basis points). The cost/income ratio rose marginally from 79.3 per cent to 80.5 per cent.
The segment reported a net inflow of new client assets during the year of CHF 0.2 billion. The welcome net inflow of new client assets in Asian markets exceeded net asset outflows in other locations, triggered by the regulatory environment and tax-related issues. Client assets under management at 31 December 2015 amounted to CHF 10.5 billion (31 December 2014: CHF 11.4 billion). The employee headcount could be reduced from 247 (31 December 2014) to 233 positions.
Segment results Corporate Center |
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in CHF 1,000 | 2015 | 2014 | Variance | Variance |
Total interest income | 8,519 | 9,144 | –625 | –6.8 |
Total income from commission business and services | –4,330 | –4,652 | 322 | 6.9 |
Income from trading activities | 16,336 | 4,424 | 11,912 | 269.3 |
Income from financial investments | 139 | 10,637 | –10,498 | –98.7 |
Other income | 49,394 | –344 | 49,738 | n.a. |
Total net operating income | 70,058 | 19,209 | 50,849 | 264.7 |
Personnel expenses | 51,558 | 51,425 | 133 | 0.3 |
General and administrative expenses | 38,137 | 23,851 | 14,286 | 59.9 |
Services to/from other segments | –46,675 | –37,110 | –9,565 | –25.8 |
Operating expenses | 43,020 | 38,166 | 4,854 | 12.7 |
Gross income | 27,038 | –18,957 | 45,995 | 242.6 |
Depreciation and amortisation | 30,126 | 24,553 | 5,573 | 22.7 |
Valuation allowances, provisions and losses | 11,350 | –1,495 | 12,845 | n.a. |
Segment results before income taxes | –14,438 | –42,015 | 27,577 | 65.6 |
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Additional information |
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Client assets under management (in CHF billion) | 0.0 | 0.0 |
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Headcount (employees) | 375 | 339 | 36 | 10.6 |
Headcount (full-time equivalents) | 332.5 | 301.3 | 31.2 | 10.4 |
In 2015, segment results before income taxes were minus CHF 14.4 million as against minus CHF 42.0 million in the prior year. Total net operating income in 2015 increased by CHF 50.8 million, mainly because of other income, which itself increased by CHF 49.7 million to CHF 49.4 million, primarily because of the “bargain purchase” arising on the merger with Centrum Bank. Total interest income fell by CHF 0.6 million to CHF 8.5 million. Total income from commission business and services reflects a drop in income. It encompassed third-party bank commissions which were invoiced to front business units by the service units through internal recharging. Income form trading activities includes the revenues of Group Treasury & Execution, inter alia. This relates to income generated from the execution of client trades. This caption also includes the results of derivatives employed to minimise risks as well as gains/losses from asset and liability management activities. The decision by the Swiss National Bank on 15 January 2015 to discontinue the minimum exchange-rate support policy against the euro impacted financial instruments. Income from financial investments in 2015 amounted to CHF 0.1 million (prior year: CHF 10.6 million). Interest and dividend income could be increased as a result of higher investment volumes. These additional revenues were not able to compensate for revaluation losses as a result of changes in exchange rates and price reductions.
Operating expenses grew during the reporting period by CHF 4.9 million from CHF 38.2 million to CHF 43.0 million, as a result of charges for the integration of Centrum Bank, on the one hand, and the transfer of employees from the merger, on the other. As a result of the pension-fund- related change in the rate of conversion (IAS 19), personnel expense was discharged with an amount of CHF 8.5 million. Also, internal recharges of CHF 46.7 million increased over in the prior year (CHF 37.1 million) in line with the growth in business volumes.
Depreciation and amortisation increased by CHF 5.6 million to CHF 30.1 million as a result of the merger. The charges for valuation allowances, provisions and losses showed an increase during the reporting period of CHF 12.8 million to reach CHF 11.4 million. Included therein are restructuring costs in connection with the merger with Centrum Bank. Employee headcount grew from 301 (31 December 2014) to 333 positions mostly as a result of the merger.