We use our expertise and excellent network to develop tailored financial solutions for intermediaries and private clients, drawing on our many years of experience and our skill in fulfilling demanding client requirements.
1. Business model
Since its founding in 1956, VP Bank’s business model and DNA have been in the intermediaries business (trustees, external asset managers, family offices). We also make our knowledge available to wealthy private clients in the area of private banking. With the creation of the new business unit "Client Solutions", we are building a modular and open investment and structuring platform for our clients and partners. We offer systematic access to the asset class of private markets and corresponding structuring solutions such as private label funds, special purpose vehicles and tokenisation.In its home market of Liechtenstein, VP Bank is also active in retail and commercial banking.
VP Bank Group’s services are offered in six locations in major financial centres. Each location focuses on specific target markets, allowing the respective market opportunities to be served in a focussed manner and with offers tailored to local requirements. The defined target markets for Europe include Liechtenstein, Switzerland, Germany, Luxembourg, Russia, Ukraine and the Nordics markets (Denmark, Norway, Sweden). In Asia, the focus is on Singapore, Hong Kong, Indonesia, Malaysia and Thailand. Responsibility for market development lies with the respective locations, with coordination provided through the Group. The Nordics region and Germany are served from Luxembourg and Switzerland, with the two European locations functioning as centres of excellence on an alternating basis. The Zurich location is responsible for market development of Central and Eastern Europe.
The goal of VP Bank Group is to grow in its target markets on a profitable and sustainable basis while preserving its independence. Regional strategies that address local growth opportunities provide support for this. Future-oriented business opportunities are key to strategic development and will be developed through the newly created “Client Solutions” division. The associated and specific market know-how is consolidated in the Client Solutions division, including the structuring competence, VP Fund Solutions, Private Investment Partners and new expertise in the areas of private market solutions, digitisation of assets and adding value through data analysis.
Our locations and target markets
2. Strategy 2020
Strategy 2020 was defined for the period from 2015 to 2020 and included three pillars: profitable growth, bringing a tighter focus to business activities and strengthening the corporate culture.
To achieve the defined growth targets, VP Bank pursued a combined strategy of organic growth and acquisition of new clients. Thanks to Strategy 2020, it was possible to further increase client assets under management and generate profitable growth.
To promote focus, measures to increase efficiency and reduce the complexities and costs of internal processes were defined. This resulted in disciplined, ongoing cost management and a more consistent focus on the products and services on offer.
The third emphasis of Strategy 2020 was on culture and included the topics of sales and performance culture as well as corporate culture.
Quantitative targets to be achieved by the end of 2020:
- Client assets under management of CHF 50 billion
- Group net income of CHF 80 million
- Cost/income ratio below 70 per cent
Due to the difficult market environment and the extraordinary write-off due to a loan default in spring 2020, it was not possible to achieve the target for client assets under management, with CHF 47.4 billion actually achieved at year end, nor was it possible to achieve the target for Group net income, with CHF 41.6 million at year end. However, we were able to attain the defined cost/income ratio target, with 67.6 per cent achieved.
3. Transition year 2020
In 2021, VP Bank is marking the beginning of the new strategy cycle under the motto "Seize Opportunities", which will last until the end of 2026. With this cycle, VP Bank will be building on a successful phase of growth in recent years and focusing on stability, innovation and taking advantage of opportunities. 2020 was a transitional year that marked the conclusion of Strategy 2020 and the creation of important organisational and structural conditions for the new 2026 strategy cycle.
In 2018, VP Bank successfully entered the Scandinavian market with the acquisition of the Luxembourg-based investment funds of Swedish financial services group Carnegie as well as the Luxembourg-based private banking activities of Sweden-based Catella Bank. In order to further provide support for the growth targets, the Luxembourg location and thus the organisation’s position in the Nordics market was further reinforced in 2020 with the announcement of the acquisition of the private banking operations of Öhman Bank Luxembourg. This acquisition makes an important contribution to further expanding activities in Luxembourg for the Scandinavian markets of Sweden, Norway and Denmark. By the end of 2020, the acquisition and integration were successfully brought to a conclusion. In Asia, the partnership with Hywin Wealth, launched in 2019, was subjected to significant further development – more on this can be found in the following chapter. In addition, we were able to expand the range of services in the regional markets and support organic growth by adding additional client advisors.
With the goal of enhancing the sales and performance culture in the company, Group-wide seminars and workshops were held in 2020 and the active exchange of experience between client advisors was promoted. This was largely done digitally due to the coronavirus situation. In addition, VP Bank has been recognised with the award for Best External Asset Manager Service Provider in Asia and Best Private Banking Regional Partnership in Singapore in 2020. In the area of our corporate culture, our employees had the opportunity over the past business year to actively engage in a dialogue with management and provide feedback on the shaping of the company through employee surveys, personal meetings with management, web conferences and internal roadshows.
Over the past business year, we also pushed ahead with measures to increase efficiency and reduce the complexities and costs of internal processes. Preparatory work for Strategy 2026 in the first half of the year saw VP Bank Group’s organisation transformed into something altogether more agile and resilient, existing processes optimised, and Group Executive Management (GEM) further strengthened with key management and specialist expertise. The Group Credit division was reorganised, and a clearer distinction was made in the credit organisation between front-office activities and Credit Risk Manage- ment (CRM). The Board of Directors of VP Bank approved the new IT strategy in December 2020, laying a significant cornerstone for Strategy 2026. To meet the rising demand for digital services, the first tangible steps in this direction were taken in 2020 with the rollout of video consulting, digital online client events, web conferences, webinars, live streams of annual results press conferences and the shareholder meeting.
With a view to the new 2026 strategy cycle, the management expertise in Group Executive Management was also enhanced over the past year. On 1 July 2020, Tobias Wehrli, an accomplished internal financial expert with long-standing experience in the asset management sector and intermediaries, joined Group Executive Management in the Intermediaries & Private Banking division of VP Bank. Furthermore, on 1 September 2020, Thomas von Hohenhau was appointed to Group Executive Management and as the Head of the newly established Client Solutions division. He will use his division to facilitate systematic access to new investment opportunities in the private markets sector and contribute important expertise in the areas of digital transformation and open banking platforms. The former head of the banks division at the Liechtenstein Financial Market Authority (FMA) Patrick Bont was welcomed to Group Executive Management as the Group Chief Risk Officer as of 1 November 2020.
The newly compiled Group Executive Management team has worked together to accelerate the important issues in the transition year 2020. The GEM and the Board of Directors are cooperating and engaged in discussion in a goal-oriented manner, with the work together characterised by mutual trust and the jointly defined Strategy 2026.
In preparation for the new Strategy 2026, VP Bank successfully launched a number of measures in the past financial year, some of which have already been completed. This was done in particular against the backdrop of the ongoing crisis management running in parallel, which worked to ensure stable operational readiness as well as to take health precautions to protect our employees and clients.
You will find explanations of the three focal points of Evolve – Scale – Move in the chapter that follows.
4. Strategy 2026 – Seize opportunities
With the 2021 financial year, a new strategy cycle is beginning under the motto "Seize opportunities". The defined key initiatives of Strategy 2026 are broken down into the three areas of Evolve, Scale and Move.
Evolve focuses on ongoing development of the existing business, Scale is about improving effectiveness, scale and cost discipline, and Move emphasises the development of new business opportunities to generate additional revenue. In parallel with the new strategy, a variety of measures are being used to cultivate the topic of culture throughout the Group and are further developed. The focus is on measures aimed at strengthening the capabilities of the employees in terms of teamwork, performance and innovation. Achieving sustainability and equality of opportunity are also considered key topics.
A variety of important trends are currently sweeping through the financial industry, including acceleration of digitisation, increasing emphasis on sustainability, growth of private markets and the changing needs of clients in their use of financial services. Strategy 2026 takes these social and economic developments into account and creates scope for the further development of VP Bank Group. In accordance with this reality, the tagline “Seize opportunities” was adopted for Strategy 2026. Strategy 2026 builds on the proven business segments of intermediaries and private banking, as well as on the universal banking service in Liechtenstein. A new addition is the Client Solutions division, which will tap into new business opportunities.
The key ideas of the new strategy were already outlined in the 2019 Annual Report. We are adhering to the targets we already communicated, along with the targeted Group net income of CHF 100 million, but are extending the duration of the cycle until the end of 2026 due to the current economic crisis and the coronavirus pandemic.
As part of its Strategy 2026, VP Bank Group will be further developed into a comprehensive wealth management service provider for intermediaries and wealthy private clients on the basis of its Liechtenstein roots, existing business segments, internationality, excellent networks and a pronounced focus on the topic of sustainability. Ecosystems and networks with an open wealth management approach are used to bring about consistent focus on the client and to consolidate proprietary and third-party services into tailored and innovative financial solutions. These are made accessible both through personal advisory contact as well as digital client interfaces. Thanks to its clear focus on intermediaries, VP Bank is bringing about a significant multiplier effect and, through targeted expansion of the ecosystem, is also making the market it can address significantly broader.
Future VP Bank services will be characterised by the following:
Based on the existing business model, Strategy 2026 comprises four strategic business segments: Retail & Commercial Banking, Wealthy Individuals, Intermediaries and Client Solutions.
Retail & Commercial Banking
The previous business segments Retail Banking and Corporate Clients are now and will continue to be offered only in Liechtenstein. However, the business segment is an important component of our Group-wide earnings mix as well as the basis of our origin. It includes basic banking services and mortgage advice. Products and services are sold on a mix of digital channels as well as through personal consultation.
This business segment is geared towards high net worth private clients and families with service needs in the areas of asset protection and growth. The services include basic banking services, asset investment and holistic wealth planning. Key services are provided in all locations, and holistic advisory services are only provided at select locations. Sustainable products and services are integral to the segment.
We use the term intermediaries to refer to professional financial service providers such as trustees, external asset managers and family offices. VP Bank puts its focus on medium-sized and large partners and offers a comprehensive service platform for professional financial services clients. We plan to further expand VP Bank’s traditional service range in this area and, with the exception of BVI, are represented with this business segment in all locations.
With the creation of the new business unit "Client Solutions", we are building a modular and open investment and structuring platform for our clients and partners. The focus is on systematic access to the private markets asset class and corresponding structuring solutions. We see a clear trend towards private market investments and are convinced that this type of investment will become increasingly important in wealth management.
Existing clients, especially intermediaries, should benefit from this expanded offering and new target groups should be acquired. In addition, there are new competencies in the area of digitisation of assets and the creation of added value from data analysis.
With the development of the new service, Client Solutions is bolstering VP Bank’s attractiveness significantly as a wealth management service provider for existing client segments and attracting new target groups such as pension funds, insurance companies and private banks.
Strategic focus areas
To implement Strategy 2026, we defined the three strategic focus areas of Evolve, Scale and Move.
The Evolve measures centre around further development of the existing business.
For example, VP Bank will systematically cultivate the topic of sustainability on all levels. Under the tagline “Investing for Change”, we have launched a programme that focuses on opportunities in the area of sustainability, with the aim of repositioning the product range and accessing new solutions in areas such as impact investing. In future, clients of VP Bank will only receive investment products that meet clearly defined sustainability criteria. In 2020, the topic of sustainability was enshrined in the Bank’s investment philosophy, ESG criteria were rolled out for all products and the first of the Bank’s own risk-optimised, ESG-compliant equity funds were launched. As of 1 January 2021, we have also systematically integrated the ESG approach into our asset management mandates and advisory packages, creating transparency that allows clients to choose their own sustainability profile. In future, we will also offer targeted satellite products on sustainability topics, allowing investors to access new investment solutions and topics. Details can be found in the “Sustainability” chapter.
In 2020, VP Bank also developed market-oriented location strategies for all key regions, with the structure of the strategies guided by a regional approach, and the strategies also featuring greater proximity to the client and regional services with specific solutions. Our international locations will have a clearly defined orientation in future and will be further expanded in a targeted manner – by enhancing personnel and product potential, but also opportunistically through acquisitions and/or partnerships. One focus of the future location strategy is on the Asia region in particular, where new client segments and sources of income are to be developed through collaborations.
Our partnership with Hywin Wealth Management Co. Ltd. in Hong Kong is of particular importance. In July 2019, VP Bank signed a memorandum of understanding with Hywin in China with the aim of entering into a strategic collaboration to meet the international needs of Chinese clients. Work is currently underway to formalise the framework and flesh out the details of the partnership. The focus is on expanding the existing cooperation in the intermediaries area in order to be able to offer exclusive custody as well as investment and wealth management services through Hywin and to take advantage of joint synergies at the Singapore and Hong Kong locations. In the Scandinavian markets, VP Bank concentrates on its core competencies in the intermediaries business and private banking as well as on a limited set of services in the fund business.
In the area of front-office efficiency, the new RM Cockpit for client advisors was successfully launched and is currently being rolled out throughout the Group.
Aside on location strategy
Liechtenstein is the location of the VP Bank Group head office. Founded in 1956, the location in Vaduz offers services relating to private banking and the intermediaries business. In Liechtenstein and the adjacent region, these services are complemented by Retail & Commercial Banking. Institutional clients and regional corporate clients take advantage of VP Bank’s financing for investments and operational resources. All services of the key staff and the back office are located exclusively at the head office in Liechtenstein and are controlled by means of the formalised functional management in the Group companies. In addition to the Bank, VP Bank Group in Liechtenstein also operates VP Funds Solutions (Liechtenstein) AG, which, as a one-stop shop, has been offering a comprehensive range of fund-related services for more than 20 years.
VP Bank has been represented in Zurich by its subsidiary VP Bank (Switzerland) Ltd since 1988. VP Bank (Switzerland) Ltd offers intermediaries a state-of-the-art service platform and wealthy individuals holistic advice and investment solutions in private banking. The core competencies are asset management and investment advisory services for private and institutional investors, support for external asset managers and the lending business. The target markets of Germany and Central and Eastern Europe (especially Russia and Ukraine) are cultivated from Zurich. Germany has traditionally been a target market for VP Bank for many years. VP Bank takes advantage of the opportunities afforded by an EU passport in Switzerland: The European Union enables simplified, EEA-wide, cross-border distribution of specific financial products by banks that are domiciled in Switzerland. This exemption allows VP Bank (Switzerland) Ltd, with the Head Office in Liechtenstein acting as an intermediary, to actively acquire clients in Germany and to subsequently provide cross-border management services to these clients.
Luxembourg is a financial centre for international investors. With VP Bank (Luxembourg) SA Luxembourg, we offer cross-border wealth management services to wealthy individuals in Scandinavia (Denmark, Norway and Sweden) as well as a state-of-the-art e-banking platform, comprehensive fund solutions and ESG products and services to intermediaries. VP Bank is the preferred partner for Scandinavian asset managers and their clients. In addition to the Bank, we have been represented in Luxembourg by VP Funds Solutions (Luxembourg) SA since 1988. The Grand Duchy specialises in pan-European fund distribution and is the second-largest fund centre in the world after the United States.
The Asia-Pacific region (APAC) is a market with great growth opportunities for VP Bank. VP Bank has been represented in Hong Kong since 2006 and in Singapore since 2008. In Asia, VP Bank offers intermediaries a state-of-the-art service platform. Wealthy private clients are advised on wealth management, including structuring solutions and access to offshore investment opportunities. The growing number of intermediaries clients in Asia represents a particularly promising opportunity, as we have many years of experience in this segment. The partnership with recognised Chinese financial services provider Hywin Wealth International, which operates out of Hong Kong, provides us with the opportunity to further accelerate our business activities also in this attractive region.
VP Bank has been represented by a subsidiary in the British Virgin Islands (BVI) since 1995. VP Bank (BVI) Ltd offers credit financing and mortgages on local real estate in addition to traditional banking services. In the BVI, VP Bank acts as a top-notch real-estate financier and as a partner to global investors and family office networks.
With the initiatives under the label of Scale, VP Bank is striving to further increase effectiveness and efficiency within the Group. The key point in this area is to further increase the robustness and resilience of VP Bank and to position the Bank in such a way that it can respond quickly to changing market and economic conditions and be well equipped for the future. The focus is also on sustaining risk governance and shoring up processes, with the foundations for this created and implemented in 2020.
Furthermore, the focus is on productivity improvements through process optimisations as well as standardisation and automation of the operational platform and further digitisation of products and services, including considerations of scaling and sourcing of standard and other services. Development of a digital platform offering efficient, flexible and convenient asset management services is to be expedited in particular. A measure that is key to all of this is the development of a modular integrative system that facilitates cooperation with external wealth management service providers in the market, including providers from the fintech sector. The IT Strategy 2026, which was initiated as part of a holistic information management system and approved in 2020, serves as the foundation for this. It is based on a future IT architecture that is to make it possible for the Bank to provide clients with internal and external services in line with their needs and made available to them through their preferred channels. To this end, we will also invest in continued modernisation of our workstations in order to further improve virtual cooperation both with clients and within the Bank.
In conjunction with the new IT strategy, VP Bank decided to outsource the IT infrastructure tasks to an external service provider (with a declaration of intent signed with Swisscom Ltd). This step is consistent with the technological trends towards increasing standardisation and industrialisation, which are promoted by cloud services in particular. Outsourcing allows VP Bank to benefit from the high level of expertise of the technology specialist in this area. At the same time, synergies arise in the use of additional innovative technologies and in the improvement of cyber security measures. However, despite this outsourcing, we will continue to invest in the promotion of technological expertise within our Bank as the implementation of our strategy requires ever more internal technological competence.
The measures in the Move area serve to tap into new and pioneering business opportunities. The focus here is on complementing the wealth management service platform with private market solutions, new expertise in the area of asset digitisation and creation of added value from data analysis. The market is now increasingly seeking out investments in alternative assets and investment themes. Clients are demanding private market solutions in particular to an ever-greater extent.
With the creation of the new business unit "Client Solutions", we are building a modular and open investment and structuring platform for our clients and partners as described above. The focus here is on systematic access to the private markets asset class and the corresponding structuring solutions.
In 2020, we started the relevant preparatory work and began building the new Client Solutions division.
We also rolled out new digitised banking services for clients, and the first client mandates for private market investments, particularly in the area of sustainable infrastructure investments, were concluded. The launch of an initial prototype in the area of data analytics for clients has also been in the testing phase since the beginning of 2021. In addition to the technological transformation to support our partnership-based business model, it is also vital to respond to and satisfy the needs of our clients in an even more tailored manner using modern data analytics methods. These analytical methods will also help to increase efficiency in operations and risk detection on a lasting basis.
Financial Strategy 2026
The financial targets for the strategy cycle lasting until the end of 2026 have been defined as follows: VP Bank is striving to achieve Group net income after taxes of CHF 100 million by 2026. Excluding market effects, VP Bank will thus achieve a sustainable market capitalisation of more than CHF 1 billion, further establishing itself as a provider of wealth management services with greater visibility. With a net new money growth target of >4% p.a. over the cycle, clients are underscoring their trust in VP Bank and client advisors are demonstrating their quality and effectiveness in attracting new clients.
The targeted cost/income ratio of a maximum of 70% reflects stringent cost management, and the profit margin of > 15 bps on assets under management underscores VP Bank’s ability to adequately position services in the market. VP Bank is thus also in a position to use its own resources to finance the investments and innovations required to achieve its targets.
With our Strategy 2026 – Seize opportunities, we have created a clear and comprehensible plan for the further sustainable growth and international success of VP Bank Group.
5. Outlook for 2021
Although the pandemic makes it difficult to forecast the numbers for 2021, we will continue to successfully advance our business in 2021, even under the new conditions stemming from the coronavirus crisis.
The growing importance of the business in Asia will significantly shape our location development in 2021. We are providing VP Bank Group with access to the Chinese offshore market through the aforementioned partnership and see significant potential for additional growth together with the development of the intermediaries market in Asia. We are accelerating this growth through increased integration of the strengths and opportunities of the market access of our locations.
In general, we see entering into partnerships as a suitable manner in which to enable additional growth and/or market access while increasing value for the client. In addition, we remain prepared to take advantage of market opportunities that present themselves to us in terms of acquisitions, provided that the strategic and cultural specifics of the opportunity are a good fit for VP Bank Group and the terms of the transaction are also right.
For the implementation of our IT strategy, we will work in two dimensions. On the one hand, we will finalise the outsourcing of infrastructure services contractually in the first quarter and then launch the implementation. A memorandum of understanding was signed with Swisscom Ltd in February 2021.
On the other hand, we will be working on the future modular IT architecture for integration of fintech solutions, client advice that is customised with the support of data and further optimisation of internal processes.
The focus will be on the technological transformation to support our partnership-based business model, with the launch of the transformation programme planned for the second quarter. In the area of digital assets, we are forging ahead with the implementation of the initial expansion stage of a functional product in tokenisation that can be offered to clients. As a first step, we would like to deal with tokenisation of art by mid-2021.
As part of the Investing for Change initiative, our ESG portfolio offering is to be completed by mid-2021, with the objective of VP Bank Group no longer offering any of its own investment solutions that do not meet our ESG standard.
The new Client Solutions division will complete its preparations for market entry in the first half of the year and begin active market development in the third quarter. Parallel to this, we will also press ahead with the activities of the Funds Solutions units and Private Investment Partners.
In addition, we will conclude the transformation of our risk and credit organisation in order to increase the Group’s resilience. Last but not least, we plan to significantly shorten the amount of time it takes for the client onboarding process by the end of 2021.
By launching the new strategy cycle, the foundation was laid for successful further development of VP Bank Group. In 2021, we will systematically “Seize opportunities” that present themselves to us in order to establish VP Bank as a wealth management service provider.