For the first half year of 2015, VP Bank Group generated consolidated net income of CHF 40.9 million in accordance with International Financial Reporting Standards (IFRS). This represents an increase of CHF 29.8 million over the net income of the prior-year period of CHF 11.1 million. 

This semi-annual result for 2015 is impacted by the merger of VP Bank with Centrum Bank and its accompanying additional revenues and expenses. To a large degree, the results are also impacted by the abandonment by the Swiss National Bank (SNB) on 15 January 2015 of the minimum exchange rate of the euro to the Swiss franc and of the shift of the target range for three months’ LIBOR. 

The revaluation of the Swiss franc meant that the countervalue of foreign-currency-denominated client positions shrank by up to 15 per cent within a few hours. These client assets form the basis for the revenues of VP Bank Group. Some three-quarters of all client assets are held in foreign currencies. On the other hand, only one quarter of expenses within VP Bank Group arise in foreign currencies. 

In the course of a review of medium-term goals, the Board of Directors of VP Bank Group has defined the following new target values in 2020: 

• Assets under management of CHF 50 billion;Group net income of CHF 80 million;
• Cost/income ratio under 70 per cent.VP Bank Group has markedly increased the client assets under its management through the merger with Centrum Bank. In spite of the negative foreign-currency impact of the abandonment by the Swiss National Bank of the minimum euro exchange rate mechanism to the Swiss franc, assets under management as of 30 June 2015 totalled CHF 34.6 billion. We shall achieve the sought-after objective in 2020 through organic growth and growth through acquisitions. With its business model and comparable core competencies, target markets and client structures, VP Bank considers Centrum Bank to be an ideal supplement for the successful future of VP Bank Group. Through this merger, the earnings base was strengthened in a sustainable manner. As of 30 June 2015, the cost/income ratio was 56.1 per cent (prior-year comparison: 76.4 per cent). After disregarding the effects of the merger with Centrum Bank, the cost/income ratio would have been 76.5 per cent. Through the targeted exploitation of the infrastructure on hand, the potential for synergies as well as a strict control over costs, VP Bank Group is convinced it will achieve the defined goals in 2020. 

The attainment of the goals is supported by the robust equity base of VP Bank Group. As of 30 June 2015, VP Bank Group possessed a tier 1 ratio of 21.9 per cent as well as a rating of A– by Standard & Poor’s. This level of equity resources forms a solid basis to enable it to take on an active role in the process of consolidation of banks. 

As of 30 June 2015, the assets under management of VP Bank Group aggregated CHF 34.6 billion. Compared with the value as of 31 December 2014 of CHF 30.9 billion, this represents an increase of 11.8 per cent. 

In the first six months of 2015, VP Bank Group achieved a net inflow of new client assets of CHF 6.2 billion. Of this amount, CHF 6.7 billion relates to the merger with Centrum Bank (position as of the beginning of 2015). As regards operating activities, net outflows of client assets of CHF 0.1 billion were recorded as opposed to a net inflow of new client assets of CHF 0.2 billion in the first six months of 2014. During the process of the merger with Centrum Bank, anticipated net out­flows of client assets totalling CHF 0.4 billion occurred. The net outflows of client assets must be seen against the backdrop of the regulatory environment and tax-related issues. On the other hand, thanks to intensive market-development activities, particularly in Asian markets, welcome inflows of new client assets were achieved. 

The performance-related decline in client assets in the first six months of 2015 amounted to CHF 2.5 billion (prior-year period: increase of CHF 0.6 billion). This reduction relates to the abandonment of the minimum euro exchange rate mechanism to the Swiss franc and the accom­panying devaluation of foreign-currency-denominated client assets. 

Custody assets remained at an unchanged level of CHF 7.6 billion compared with 31 Decem- ber 2014. As of 30 June 2015, client assets including custody assets totalled CHF 42.2 billion (31 December 2014: CHF 38.6 billion). 

Compared with the first six months of 2014, total operating income increased by CHF 62.0 million to CHF 172.5 million (prior-year period: CHF 110.5 million). This represents an increase of 56.1 per cent. If the effects of the merger with Centrum Bank are ignored (incl. the effects of the “purchase price allocation”) and in spite of the negative impact arising from the abandonment of the minimum-exchange-rate policy versus the euro, total operating income of CHF 105.5 million was achieved. 

Interest income rose by 32.1 per cent from CHF 31.5 million in the first six months of 2014 to CHF 41.6 million in the first six months of the current year. As a result of changes to current market conditions, net interest income in the client-related and banking businesses increased by CHF 1.8 million. Interest income also contains changes in the value of interest-rate hedging transactions. During the first half year of 2015, unrealised losses of CHF 4.4 million arose (prior-year period: revaluation losses of CHF 8.4 million). Through the introduction of hedge accounting, revaluation losses were reduced by CHF 1.9 million. 

During the first half year of 2015, commission and service income increased by 9.8 per cent to CHF 65.9 million (prior-year period: CHF 60.1 million). The abandonment of the minimum euro exchange rate mechanism clearly left its mark on commission income. In spite of foreign-currency-related declines in volumes, encouraging sustainable increases (increase: CHF 6.7 million) were achieved in the case of portfolio-based revenues such as asset management and the investment business as well as custodian fees. Client-related secu­rities operations in the first half year of 2015, a period marked by uncertainty, were lower when com­pared with the previous year, which in turn led to lower brokerage fees. The decline of CHF 4.5 million, or 14 per cent, in investment-fund management fees to CHF 27.6 million arises in connection foreign-currency-related declines in volumes. More than three-quarters of the assets managed in investment funds are denominated in foreign currencies. For the same reason, commission- and service-fee-related expenses also declined by CHF 3.7 million to CHF 24.5 million. This decline arises principally in connection with investment-fund management fees which are passed on. 

Income from trading rose by 69.9 per cent to CHF 19.8 million (prior-year period: CHF 11.6 million). Income from trading on behalf of clients increased by 45.6 per cent to CHF 20.7 million (prior year period: CHF 14.2 million). This increase is to be ascribed to higher foreign-currency business volumes in the wake of the abandonment of the maintenance of a minimum exchange rate to the euro. Compared with the previous year, trading in securities improved by CHF 1.6 million, which is principally to be explained by gains on hedging operations for financial investments. 

A loss of CHF 5.7 million arose in the first half year of 2015 from financial investments (prior-year period: gain of CHF 6.9 million). As a result of higher investment volumes, interest and dividend income rose by 20.7 per cent to CHF 4.2 million (prior-year period: CHF 3.5 million). This additional income, however, was insufficient to offset the revaluation losses resulting from foreign-currency movements and price declines. The opposing gains and losses arising from the related hedging operations are recorded in income from trading activities. 

Other income includes the gain as determined by the “purchase price allocation” in connection with the acquisition of Centrum Bank (“bargain purchase”) in an amount of CHF 50.0 million. 

During the current reporting period of 2015, operating expenses rose period on period by CHF 12.3 million from CHF 84.5 million to CHF 96.8 million (an increase of 14.6 per cent). 

This increase is in line with the strategic direction of VP Bank Group and the merger with Centrum Bank. The integration of Centrum Bank was initiated in the first half year of 2015 with the goal of exploiting synergies and successively eliminating existing duplications. Expenditures in connection with the merger and integration of Centrum Bank amounted to CHF 16.1 million. After ignoring the effects relating to Centrum Bank, operating expenses were reduced by CHF 3.8 million, or 4.5 per cent, compared to the prior-year period. 

Compared to 30 June 2014, the employee headcount increased by 49.3 employees (increase of 7.1 per cent), which is to be explained by the merger with Centrum Bank. At the end of June 2015, VP Bank Group had 746 employees, expressed in terms of full-time equivalents. 

General and administrative expenses rose by 29.4 per cent to CHF 29.5 million (prior-year period: CHF 22.8 million). This increase is to be ascribed to the merger with Centrum Bank and the running of parallel operations for a limited period of time. With the integration into the existing infrastructure and process landscape, synergies were successively exploited and the accompanying future costs reduced. 

Depreciation and amortisation was CHF 4.3 million (29.6 per cent) higher than in the prior-year period and amounts to CHF 19.1 million. This increase is to be explained principally by the amort­isation of intangibles arising in connection with the merger with Centrum Bank. 

In the first half year of 2015, the charges for valuation allowances, provisions and losses amounted to CHF 17.4 million (prior-year period: CHF 0.3 million). Valuation allowances, provisions and losses for credit risks in the current half year aggregated CHF 4.2 million (prior-year period: CHF 1.0 mil­lion). The increase of CHF 3.2 million is to be explained by a valuation allowance raised in re­spect of one client credit. 

Restructuring provisions were established in connection with the merger with Centrum Bank amounting to CHF 12.3 million. Included therein are provisions for administrative expenses of CHF 8.2 million as well as personnel expense of CHF 4.1 million (including social plan). 

As regards taxes on income, there resulted a charge of CHF 1.7 million, which arises in connection with changes to deferred income taxes as well as tax-exempted income from the merger with Centrum Bank. 

Consolidated net income for the first six months of 2015 amounted to CHF 40.9 million (prior-year period: CHF 11.1 million). Consolidated net income per bearer share was CHF 6.37 (30 June 2014: CHF 1.92). 

Compared with 31 December 2014, total assets increased by CHF 1.4 billion to CHF 12.6 billion. The balance-sheet assets transferred from Centrum Bank amounted to some CHF 2.0 billion. After disregarding this effect, the decline in total assets of CHF 0.6 billion is to be ascribed to foreign-currency effects. 

VP Bank Group has cash and cash equivalents of CHF 1.9 billion, which is unchanged from 31 December 2014, and continues to possess a very comfortable level of liquidity. In addition to the assumption of financial instruments of Centrum Bank aggregating CHF 294.9 million, financial instruments reducing amounts due from banks were increased by a further CHF 111.0 million. 

Since the beginning of the year, client loans have risen by CHF 657.6 million (15.4 per cent) to CHF 4.9 billion as of 30 June 2015. Of this amount, CHF 602.2 million relates to client loans taken over from Centrum Bank. The increase of CHF 55.4 million is based principally on mortgage loans. In this respect, VP Bank continues unchanged with its focus on a high level of discipline and control in credit-granting activities, which takes on added importance given the current situation on the real-estate market. 

On the liabilities‘ side, client deposits and medium-term notes have increased since the beginning of the year by CHF 1.1 billion (11.8 per cent) to CHF 10.8 billion in spite of currency influences. The client deposits transferred from Centrum Bank at the beginning of 2015 amounted to CHF 1.8 billion. As a result of two debenture bond issues, this balance-sheet caption increased by CHF 187.6 million. 

As part of the capital increase approved on the occasion of the extraordinary meeting of share­holders, Marxer Stiftung für Bank- und Unternehmenswerte participated in the increase as a further anchor shareholder in VP Bank. The equity of VP Bank Group was thereby strengthened in a sustainable manner. The public fixed-price offer announced on 18 June 2015 was fully reflected as a liability and deducted from equity. As of the end of June 2015, the equity aggregated CHF 922 million (31 December 2014: CHF 868 million). 

As of 30 June 2015, the tier 1 ratio, computed in accordance with the new Basel III rules, amounted to 21.9 per cent (31 December 2014: 20.5 per cent, computed in accordance with Basel II rules). 

We anticipate ongoing volatility in the market environment for the second half year of 2015 which will impact business operations and the results of VP Bank Group. The already initiated and well-advanced integration of Centrum Bank into VP Bank will be completed with the transfer of client data to the VP Bank IT platform as of the beginning of 2016. Developments regarding tax trans­parency and the exchange of information continue to make progress and have a direct impact on the clients and the business areas of VP Bank Group as well as on the Liechtenstein financial marketplace. VP Bank is optimally equipped to take on these challenges and continues to pursue its sustainable growth strategy. The high level of equity resources forms a sound basis for a successful future for VP Bank Group.