STATEMENT BY THE CHAIRMAN OF THE BOARD AND THE CHIEF EXECUTIVE OFFICER

COVID-19 had a major impact on the year 2021 as well. In view of the challenging environment, the economy proved to be resilient, and the financial markets trended in a positive direction overall. Nevertheless, uncertainty about the spread and danger of the virus led to increased volatility. Moreover, the markets responded forcefully to emerging uncertainties related to urgent questions of monetary policy. Battling inflation, as well as issues involving energy supply and trends in energy prices, will also be of great importance going forward. Overall, we are experiencing a time of rapid change in terms of geopolitics, technology and social issues. The year 2021 impressively confirmed the challenges that are facing business models, flows of goods, services, as well as forms of working and employment.

For us as a bank, we are witnessing considerable acceleration in digitisation, which at the same time raises key questions about sustainability and the imminent crossover to the first generation of digital natives as drivers of transformation. Examples include remote working, online video consultation and virtual client events, which have now become an integral part of our daily lives. The pandemic brought about new ways of thinking. Nearly the entire financial industry recognised the need for new service and income models that facilitate more flexible products and new value propositions. There is also no doubt about the important role played by automation and data analysis, as well as the required focus on costs and efficiency. These developments serve to confirm the path that we set out on at the start of 2021 with our Strategy 2026 “Seize opportunities”. As a leading Liechtenstein bank for intermediaries and private clients, we have since our founding in 1956 pursued the principle of constantly realigning our outlook toward the future, spotting trends and using change as an opportunity. We are certain that financial stability and innovative power coupled with decisive action create added value for our clients and shareholders. That’s why we launched the new strategy cycle with the goal of combining our key strength in the traditional banking business – providing professional yet personal client advice for all investment-related matters – with the advantages of a digital ecosystem and thus establish VP Bank as an Open Wealth Service pioneer. In the past year, we laid the foundation for this and achieved important initial results.

In 2021 VP Bank Group posted a solid result in light of the substantial investments that were made in connection with Strategy 2026. All locations made a positive contribution to earnings. Client assets under management by VP Bank Group rose to CHF 51.3 billion, corresponding to an increase of 8.1 per cent compared with the previous year. This rise was attributable to sustained positive net new money inflows, the acquisition of the client business from Öhman Bank S.A. and the positive market performance. With new money inflow of CHF 2.1 billion, or an increase of 4.3 per cent, in our core businesses, we met our growth target of at least 4.0 per cent for net new money per year, despite a persistently challenging environment. This positive trend was adversely affected by the previously announced strategic repositioning by an institutional fund client, which resulted in a change in net new money of CHF 0.3 billion.

Owing to the very good result from income from commission business and services, operating income rose by 3.4 per cent overall to CHF 329.9 million. Operating expenses increased by 1.0 per cent to CHF 272.1 million, which was attributable to targeted investments and development work in connection with the first phase of the implementation of Strategy 2026. For instance, the development of the Client Solutions business segment and the Asia region caused personnel expenses to rise by 7.3 per cent to CHF 174.0 million. General and administrative expenses increased by CHF 3.5 million to CHF 62.4 million, mainly as a result of investments in IT. Nevertheless, the cost/income ratio improved on the whole, from 84.5 per cent to 82.5 per cent.

All of this resulted in VP Bank Group posting a Group net income of CHF 50.6 million, corresponding to a rise of 21.7 per cent compared with the previous year. VP Bank is very healthy in terms of its capitalisation. With a Tier 1 ratio of 22.4 per cent, it continues to significantly exceed the minimum regulatory requirements, as well as the Bank’s own ambitious target of at least 20 per cent. This strong capital base is an expression of VP Bank’s resilient and successful business model and offers an ideal starting point for the ongoing development of VP Bank Group.

Last year saw us reach several milestones and enjoy notable successes. A comprehensive presentation of the strategy and the progress of implementation can be found in the strategy report.

Our business model is founded on our successful traditional business in the home market and at the five international locations. Our clearly defined regional strategies aim to achieve sustainable, profitable growth at all locations. In the past year, we were able to further expand our important Nordics target market, which comprises Denmark, Norway and Sweden, by acquiring the client business of the private bank Öhman Bank S.A. We are also continuing to see attractive growth potential in Asia. By signing the memorandum of understanding with Hywin Holding and acquiring an equity stake in it, as well as by forming a new management organisation, we created an ideal starting point that will enable us to benefit from the opportunities in this market, which is decisive for worldwide growth in wealth management.

By developing into a leading Open Wealth Service provider, we are ensuring that we will continue to be a reliable partner for our clients in the future. Our solutions and services are designed to be state of the art at all times in terms of financial expertise and technology, and we are growing in concert with the ambitions and needs of our clients. The opening of our core banking system, meaning open IT interfaces for products and services of complementary third-party providers, is the technological basis for this. In addition to investments in our own IT, we also entered into a strategic collaboration with Swisscom in the past year for the operation of the IT infrastructure. The innovation partnership we recently entered into with InvestCloud will enable us to provide personalised wealth management services through ecosystems.

We also ventured into new business areas in 2021, for example with the launch of ORBIT. This gives our professional clients curated access to private market investments – and an initial impression of the many advantages offered by the kinds of comprehensive Open Wealth Services that we strive to provide. Moreover, since last year, we have been able to register ownership claims over real assets digitally on the blockchain and to store them as tokens. We were the first bank in Liechtenstein to successfully tokenise a work of art.

The first year of the strategy implementation was marked by development work and the associated investments. After posting initial successes, and with a view toward the investments in this year, the focus is now shifting more strongly toward the operational basis. This is because in addition to growth, a supporting pillar of our Strategy 2026 is increased productivity and efficiency. Therefore, this next phase of the implementation will emphasise the examination of optimisation potentials and scalability options. In this way, we are laying the further groundwork for achieving our strategic objective with a view to 2026.

For 2022, the focus will be on developing business further in our home market of Liechtenstein and at the five international locations. In addition, we will systematically push forward with the activities on the private market that were started with ORBIT and further expand our existing fund business in Liechtenstein and Luxembourg. Our key intention continues to be combining the benefits of technology with tangible added value for our clients. Completing the outsourcing of the IT infrastructure to Swisscom and providing an open IT interface to our core banking system will be important milestones. In addition, we will continue to explore options and innovations in the area of digital assets on a targeted basis.

We are on track with the implementation of our Strategy 2026, and we confirm our financial targets. We aim to have achieved a Group net income of CHF 100 million by the end of the 2026 strategy cycle, and we are adhering to the additional quantitative targets: a profit margin of more than 15 basis points, a cost/income ratio of at most 70 per cent by the end of 2026, a Tier 1 ratio of more than 20 per cent and new money growth of 4 per cent per year over the strategy cycle. This financial strategy secures our ability to adequately position solutions and services for our clients on the market. In addition, it enables us to finance the investments and innovations that are needed to achieve these targets from our own resources and to generate an attractive risk-adjusted return for our shareholders.

The Board of Directors proposes that the VP Bank annual general meeting of 29 April 2022 approve a dividend pay-out of CHF 5.00 per registered share A and CHF 0.50 per registered share B. At 60 per cent of Group net income, the envisaged dividend pay-out ratio is within the long-term target range of 40 per cent to 60 per cent set by the Board of Directors. The proposed dividend underscores VP Bank’s profitability and stability, as well as the effort to provide a dividend yield that is attractive over the long term, which for this year is 5.2 per cent based on the exchange price on 31 December 2021.

We would like to extend our thanks to our clients and shareholders for the trust they have placed in us and their loyalty. They give us the foundation we need in order to be able not only to manage fundamental changes but also to strategically exploit them. Just as VP Bank has successfully demonstrated time and again since its founding.

A special thanks is owed to our outstanding employees in Liechtenstein and at the international locations. Their commitment, motivation and flexibility deserve our utmost respect. We are proud to work with such a skilled, talented group of people. This ensures that we are optimally equipped to achieve our strategic objectives together.