Statement by the Chairman of theBoard and the Chief Executive Officer

It was an exceptional year: war in Ukraine, energy crisis, inflation and rising interest rates. The year 2022 was anything but easy for the financial markets as well. High inflation rates and the sharp response to them by central banks led to unusually high losses on bonds. In Switzerland and the USA – which have an exchange rate history dating back nearly 100 years – fixed-income securities suffered setbacks never before witnessed over that period of time. As a result, in combination with slumping equities, even diversified, conservatively managed portfolios came under heavy pressure. In other words, 2022 was a more than turbulent year.

The political uncertainties and the upheavals on the capital markets were a challenge also for VP Bank. Nevertheless, our core business proved to be resilient. Our clients entrusted us with a total of CHF 1.1 billion in net new money, representing an increase of 2 per cent. It proved possible to offset declining revenues from investment business through increases in interest income and income from trading activities, resulting in a 2 per cent increase in operating income to CHF 336.4 million – the best income result in VP Bank's last fifteen years. All regions made a positive contribution to this, with the Liechtenstein home market remaining the key pillar in the revenue mix. Despite a challenging market environment, this positive development enabled us to invest further in Strategy 2026 and in our target organisation. In line with original plans, the investments peaked in 2022 at CHF 32 million and in 2021 at CHF 26 million. In the coming years, we are aiming for an investment level of CHF 15 to 20 million annually. Owing to the investments, as well as to one-off extraordinary costs – including for implementation of the restrictions and regulatory requirements in connection with business with Russia – operating expenses rose by 7 per cent to CHF 291.2 million. In the light of this, we view Group net income of CHF 40.2 million achieved by VP Bank Group as a very robust result. VP Bank is also healthy in terms of its capitalisation. With a Tier 1 ratio of 21.7 per cent, it continues to exceed the minimum regulatory requirements by a substantial margin.

VP Bank’s profitability is founded on its successful existing business in the home market and at the five international locations. Location-­specific development plans aim for further growth on the basis of the respective local strengths. In 2022, in order to accelerate growth, the organisation was aligned systematically to that goal. International management was strengthened and pooled in the regions Liechtenstein, Europe and Asia, which report directly to the Group CEO. All client activities were allocated to those regions. We created a new Group Products & Solutions division to create and enhance VP Bank Group’s range of services, and it will combine the corresponding competences. With these adjustments, the Client Solutions business unit was completely absorbed into the new organisation. Client Solutions had performed important developmental work on tokenisation services and private market investments, which were transferred to ordinary operations with this step. The Head of Client Solutions shepherded the transformation and then decided to resign from the Executive Board and leave VP Bank. The organisation is now rigorously focused on marketing and sales activities, and as a result, we are in a very good position to grow our core business yet further.

Ecosystems form the basis of a successful future for VP Bank. The technological basis for Open Wealth was laid in 2022. We now have a flexible, scalable IT infrastructure that enables us to develop new client services and integrate products and services of complementary third-party providers. Building on this, the first new services will be developed and integrated in 2023, such as complete digital onboarding for clients of intermediaries, automated Lombard lending, and the establishment of a digital payment transactions interface for trustees in Liechtenstein. We have a valuable unique selling proposition as an intermediary bank, which also forms the basis for successful private banking and for the universal bank in Liechtenstein. Open Wealth is a decisive development for securing and expanding this strength for the future.

In 2022, our clientèle was once again able to count on our innovative capability. Despite a challenging environment, we succeeded in venturing into new business areas with our tokenisation services. A service for tokenising paintings, watches and even sculptures, which was introduced in late 2021, met with strong client interest and opened the door to a new clientèle. This service was expanded to Asia in 2022. Private market investments are and will remain an important asset class. The private market platform (ORBIT) was realigned in the current financial year as a result of the changed market situation. From now onwards, direct investment options (ORBIT direct) will be chosen and structured through a platform partner with broad access to the asset class. The pilot phase is currently under way. Coupled with a further platform partner for collective private market investments (ORBIT collective), our clients will thus receive a broad service offering for this still important asset class.

We are convinced that Strategy 2026 is the right course even in a changed market environment. In the light of slowing economic growth, persistent geopolitical uncertainties and negative trends on the financial markets, VP Bank is continuing to focus on cost discipline, technological innovation, sustainability and the long-term development of core business. However, the changed market environment has prompted us to recalibrate the financial objectives that we set for ourselves in early 2020. With annual income growth of 4 to 6 per cent, annual growth in net new money of 4 per cent, a cost/income ratio of less than 75 per cent until 2026 and a Tier 1 ratio of over 20 per cent, we are continuing to focus on the three main pillars of a successful future: growth, profitability and stability.

The Board of Directors proposes that the VP Bank annual general meeting of 28 April 2023 approve an unchanged dividend payout of CHF 5.00 per registered share A and CHF 0.50 per registered share B. At 76 per cent of Group net income, the envisaged dividend payout ratio is above the long-term target range of 40 to 60 per cent set by the Board of Directors. VP Bank is extremely well capitalised and has completed most of the investment cycle. The Bank’s profitability and stability make it possible to aim for a dividend that is as stable as possible, despite the difficult market environment.

We would like to thank our shareholders and clients for their trust, as well as for the support they have provided us in this eventful year. We also owe a debt of gratitude to our employees for their commitment and flexibility during a time that was not always easy. Having skilled professionals on staff who show extraordinary dedication to their work is certainly not a matter of course in a challenging and rapidly changing environment. We greatly value their contribution.