Client Business International

in CHF 1,000	2019	2018	Variance absolute	Variance in %
Segment results
Total net interest income1	52,928	39,340	13,588	34.5
Total net income from commission business and services	57,443	39,015	18,428	47.2
Income from trading activities	13,947	8,968	4,979	55.5
Income from financial instruments	171	86	85	98.8
Other income	3,252	2,490	762	30.6
Total operating income	127,741	89,899	37,842	42.1
Personnel expenses	62,207	54,313	7,894	14.5
General and administrative expenses	24,695	30,555	–5,860	–19.2
Depreciation of property, equipment and intangible assets	7,918	3,311	4,607	139.1
Credit loss expenses	–6,150	–11,314	5,164	45.6
Provisions and losses	246	252	–6	–2.4
Services to/from other segments	0	0	0	0.0
Operating expenses	88,916	77,117	11,799	15.3
Segment income before income tax	38,825	12,782	26,043	203.7

Additional information
Operating expenses excluding depreciation and amortisation, valuation allowances, provisions and losses / total operating income (in %)	68.0	94.4
Operating expenses excluding valuation allowances, provisions and losses / total operating income (in %)	74.2	98.1
Client assets under management (in CHF billion)	20.7	16.5
Change in client assets under management compared to 31.12. prior year (in %)	25.7	20.7
Net new money (in CHF billion)	2.9	3.4
Total operating income / average client assets under management (bp)2	68.6	59.6
Segment result / average client assets under management (bp)2	20.9	8.5
Cost/income ratio operating income (in %)3	69.9	97.2	–27.3	–28.1
Headcount (number of employees)	345	330	15.5	4.7
Headcount (expressed as full-time equivalents)	326.2	313.3	12.9	4.1

As of 1 January 2019, the new funds transfer pricing was introduced within the Group. The impact of this change for the segment Client Business International amounted to CHF -0.1 million. The prior-year comparatives were not restated as the change for prior periods was impracticable because of the passage of time as well as the lack of an appropriate data base and the cost of assembling this data retrospectively on an individual-transaction basis would be so high that it would bear no relationship to the benefit to be derived therefrom.
Annualised, average values.
Operating expenses excluding depreciation and amortisation, valuation allowances, provisions and losses / gross income less other income and income from financial instruments.

Structure

The business segment “Client Business International” encompasses the business conducted in international locations. VP Bank (Switzerland) Ltd, VP Bank (Luxembourg) SA, VP Bank (BVI) Ltd, VP Bank Ltd Singapore Branch, VP Wealth Management (Hong Kong) Ltd and VP Fund Solutions (Luxembourg) SA are allocated to this business segment.

Segment result

The pre-tax segment result in 2019 rose by CHF 26.0 million over that of the prior year. Operating income year-on-year increased by CHF 37.8 million (42.1 per cent). This increase is attributable to higher interest income from client business (34.5 per cent) and higher commission and service income (47.2 per cent) as well as trading income (55.5 per cent). The recruiting drive continued to make a positive contribution to commission income. Operating expenses grew by CHF 11.8 million, or 15.3 per cent, to CHF 88.9 million. This increase is attributable to personnel expenses, mainly due to the recruitment drive for new senior relationship managers, as well as the acquisition of Catella Bank’s private-banking activities. General and administrative expense could be reduced by 19.2 per cent to CHF 24.7 million (prior year: CHF 30.6 million). This reduction is to be ascribed primarily to lower occupancy expense. As a result of the adoption of IFRS 16 (Leases), the income statement, from 2019 onwards, is now charged with depreciation and amortisation and interest expense instead of rental expense (see financial-statement reporting policies). In the business segment «Client Business International», the recharging of services is based on actual invoices and recorded under general and administrative expenses. The increase in depreciation and amortisation from CHF 3.3 million to CHF 7.9 million is a result of the adoption of IFRS 16 (Leases). The charges for valuation allowances, provisions and losses were minus CHF 5.9 million (prior year: minus CHF 11.1 million).

The gross margin increased to 68.6 basis points (prior year: 59.6 basis points). The cost/income ratio fell from 97.2 per cent to 69.9 per cent.

In 2019, net new client money developed positively with CHF 2.9 billion. The recruitment offensive in external locations continued to produce new client money inflows. Net new client money could again be achieved in 2019 in the investment-fund business as well as on European markets as a result of intensive market-development activities. As a result of the acquisition of the private-banking activities of Catella Bank, client assets totalling CHF 1.0 billion could be acquired. Assets under management at 31 December 2019 aggregated CHF 20.7 billion (31 December 2018: CHF 16.5 billion). The employee headcount rose from 313 individuals (31 December 2018) to 326, primarily because of the recruitment offensive for new senior client advisors and the acquisition of the employees arising from the Catella acquisition.