1980-2000

1980-2000

1980-2000

Consolidated semi-annual report of VP Bank Group

Consolidated results

In a chal­leng­ing stock-mar­ket and in­ter­est-rate en­vi­ron­ment, VP Bank Group gen­er­ated good busi­ness re­sults for the first se­mes­ter of 2016. In ac­cor­dance with In­ter­na­tional Fi­nan­cial Re­port­ing Stan­dards (IFRS), VP Bank Group re­alised a con­sol­i­dated net in­come of CHF 24.4 mil­lion for the first half of 2016. In the com­par­a­tive prior-year pe­riod, a net in­come of CHF 40.9 mil­lion was re­alised due to a pos­i­tive one-time item aris­ing from the Cen­trum Bank merger. Ex­clud­ing the ef­fect of this one-time item (CHF 25 mil­lion), the 2016 half-year net in­come ex­ceeds that of the prior pe­riod by CHF 8.5 mil­lion or 53.2 per cent.

 

Medium-term goals 2020

The Board of Di­rec­tors of VP Bank Group has de­fined the fol­low­ing tar­get val­ues for 2020:

  • as­sets un­der man­age­ment of CHF 50 bil­lion
  • an­nual con­sol­i­dated net in­come of CHF 80 mil­lion
  • cost/​in­come ra­tio un­der 70 per cent 

Fol­low­ing the suc­cess­ful ac­qui­si­tion of the pri­vate bank­ing ac­tiv­i­ties of HSBC Trinkaus & Burkhardt (In­ter­na­tional) SA and that part of the in­vest­ment-fund busi­ness of HSBC Trinkaus In­vest­ment Man­agers SA re­lat­ing to pri­vate bank­ing in Lux­em­bourg in 2013 as well as the merger with Cen­trum Bank in the prior year, VP Bank Group markedly in­creased its client as­sets un­der man­age­ment and strength­ened its earn­ings per­for­mance. VP Bank plans fur­ther ac­qui­si­tions of banks or whole teams in its tar­get mar­kets, which, in line with its busi­ness model, ide­ally com­ple­ment VP Bank Group with com­pa­ra­ble core com­pe­ten­cies, tar­get mar­kets and client struc­tures. In or­der to pro­mote or­ganic growth, it is planned to hire an ad­di­tional 25 se­nior client re­la­tion­ship of­fi­cers per an­num dur­ing the next three years as part of a re­cruit­ment of­fen­sive. In ad­di­tion, VP Bank is work­ing at high pres­sure on de­vel­op­ing new in­no­v­a­tive ser­vices as part of a dig­i­tal­i­sa­tion strat­egy and makes tar­geted in­vest­ments in dig­i­tal tools.

The cost/​in­come ra­tio as of 30 June 2016 was 68.9 per cent. Through the se­lec­tive ex­ploita­tion of its growth and syn­ergy po­ten­tial as well as a strict cost con­trol, VP Bank Group is con­vinced that it will at­tain the de­fined tar­gets in 2020. The solid level of eq­uity of VP Bank Group sup­ports the achieve­ment of its tar­gets. 

As of 30 June 2016, VP Bank Group had a tier 1 ra­tio of 25.7 per cent and there­fore has suf­fi­cient cap­i­tal avail­able for an ac­qui­sition. On 25 July 2016, Stan­dard & Poor’s con­firmed the ex­el­lent rat­ing of A– and raised the out­look from “neg­a­tive” to “sta­ble”. The strong eq­uity base as well as the solid and suc­cess­ful busi­ness model of VP Bank forms an ex­cel­lent ba­sis to en­able it to as­sume an ac­tive role in the process of bank con­sol­i­da­tion.

 

Assets under management

At 30 June 2016, client as­sets un­der man­age­ment of VP Bank Group ag­gre­gated CHF 34.0 bil­lion. In com­par­i­son to the po­si­tion as of 31 De­cem­ber 2015 of CHF 34.8 bil­lion, this rep­re­sents a re­duc­tion of 2.1 per cent (CHF –0.7 bil­lion). ­CHF 0.5 bil­lion of this amount re­lates to the per­for­mance-re­lated de­cline in as­sets. 

In the first half-year of 2016, the de­vel­op­ment of net new money could be im­proved com­pared to prior-year pe­riod. In the prior year, net out­flows (ex­clud­ing ac­qui­si­tions) added up to CHF 0.5 bil­lion, in the first half-year of 2016 the net out­flow of client as­sets fell to CHF 0.2 bil­lion. As a re­sult of mar­ket de­vel­op­ment ac­tiv­i­ties, ap­pre­cia­ble in­flows of client money could be achieved, pri­mar­ily in Asia and in the area of in­vest­ment funds. In Eu­rope, against the back­drop of the reg­u­la­tory en­vi­ron­ment, out­flows of client money con­tin­ued un­abated. In ad­di­tion, VP Bank Group ac­tively man­aged on-bal­ance-sheet client monies which led to a de­cline in cus­tomer de­posits. This de­cline in part ad­versely im­pacted in­flows of net new money. 

Cus­tody as­sets as at 30 June 2016 to­talled CHF 5.7 bil­lion. As of 30 June 2016, client as­sets in­clud­ing cus­tody as­sets ag­gre­gated CHF 39.8 bil­lion (31 De­cem­ber 2015: CHF 41.4 bil­lion). 

 

Profit and loss account

Total operating income

Com­pared to the first half-year re­sults of 2015, to­tal opera­ting in­come fell by CHF 42.7 mil­lion to CHF 129.8 mil­lion (prior-­year pe­riod: CHF 172.5 mil­lion). Ig­nor­ing the one-time prior-­year item (bar­gain pur­chase from the merger with Cen­trum Bank), to­tal op­er­at­ing in­come in­creased in the re­port­ing pe­riod by CHF 7.3 mil­lion.

In­ter­est in­come rose by CHF 7.1 mil­lion or 16.8 per cent to CHF 49.5 mil­lion in com­par­i­son to the prior-year pe­riod. This in­crease is to be as­cribed to the ac­tive man­age­ment of the bal­ance sheet, ad­just­ments to mar­gins and vol­ume in­creases. For­eign-cur­rency-de­nom­i­nated client de­posits in part were no longer in­vested in the in­ter-bank mar­ket based upon risk/​re­turn con­sid­er­a­tions. VP Bank swapped these monies into Swiss francs us­ing for­eign-cur­rency swaps and de­posited them with the Swiss Na­tional Bank (SNB). 

The in­come from the in­ter­est com­po­nent of the for­eign-cur­rency swap and the off­set­ting of neg­a­tive in­ter­est ex­ceeded the ex­pense of SNB neg­a­tive in­ter­est and lower bank in­ter­est in­come. The ap­pli­ca­tion of IFRS hedge ac­count­ing also pos­i­tively im­pacted in­ter­est in­come in com­par­i­son to the prior-year pe­riod. The in­crease in in­ter­est in­come on client-­re­lated ac­tiv­i­ties is due to mar­gin ad­just­ments and vol­ume in­creases. In­ter­est in­come from fi­nan­cial in­stru­ments also in­creased be­cause of higher vol­umes. 

As re­gards in­come from com­mis­sions and ser­vices, a fall of 8.0 per cent to CHF 60.7 mil­lion (prior-year pe­riod: CHF 65.9 mil­lion) was recorded in the first half-year of 2016. The volatile mar­ket en­vi­ron­ment in the first six months of 2016 re­duced the risk ap­petite of clients which in turn led to lower lev­els of client ac­tiv­i­ties in se­cu­ri­ties’ trad­ing. This is par­tic­u­larly ev­i­dent with bro­ker­age in­come of CHF 14.7 mil­lion, net (mi­nus 14.5 per cent). The re­treat in prices on eq­uity mar­kets oc­cur­ring in the first half-year of 2016 led to a re­duc­tion in port­fo­lio-based in­come such as in as­set man­age­ment and in­vest­ment ac­tiv­i­ties as well as custo­dian fee in­come of VP Bank Group by 10.5 per cent from CHF 33.5 mil­lion in the prior year to CHF 30.0 mil­lion in the cur­rent pe­riod. In­vest­ment-fund man­age­ment fees de­vel­oped pos­i­tively. These grew by 7.0 per cent to CHF 29.5 mil­lion (prior year: CHF 27.6 mil­lion). In line with this trend, other com­mis­sion and ser­vice ex­pense rose by CHF 1.4 mil­lion to CHF 23.2 mil­lion.

In­come from trad­ing ac­tiv­i­ties of CHF 17.7 mil­lion was CHF 1.3 mil­lion lower (mi­nus 7.0 per cent) than that of the com­par­a­tive half-year pe­riod of 2015. In­come from trad­ing for clients rose by 5.5 per cent to CHF 21.0 mil­lion. Re­alised and un­re­alised reval­u­a­tion dif­fer­ences from hedg­ing op­er­a­tions in re­spect of fi­nan­cial in­vest­ments are recorded un­der se­cu­ri­ties’ trad­ing. Be­cause of the neg­a­tive mar­ket en­vi­ron­ment, the re­sults were hit by a neg­a­tive re­sult of mi­nus CHF 3.4 mil­lion (prior year: mi­nus 0.9 mil­lion).

A gain of CHF 1.2 mil­lion was recog­nised on fi­nan­cial in­vest­ments in the first half-year of 2016 (prior-year pe­riod: mi­nus CHF 5.7 mil­lion). This pos­i­tive de­vel­op­ment com­pared with the prior-year pe­riod re­sulted pri­mar­ily from reval­u­a­tion losses on for­eign-cur­rency po­si­tions trig­gered by the de­ci­sion of the SNB on 15 Jan­u­ary 2015 to dis­con­tinue the pol­icy of main­tain­ing a min­i­mum ex­change rate of the euro to the Swiss Franc. The de­cline in other in­come is due to the one-time item in the prior pe­riod in con­nec­tion with the Cen­trum Bank merger. In this con­nec­tion, a gain (“bar­gain pur­chase”) of CHF 50.0 mil­lion was recog­nised re­sult­ing from the “pur­chase price al­lo­ca­tion”.

 

Operating expenses

In the first half of 2016, op­er­at­ing ex­penses could be re­duced by CHF 7.3 mil­lion from CHF 96.8 mil­lion to CHF 89.4 mil­lion (mi­nus 7.6 per cent). 

This re­duc­tion re­flects very much the ex­pec­ta­tions sur­round­ing the Cen­trum Bank merger and the re­lated one-off costs in the prior year. The in­te­gra­tion of Cen­trum Bank was con­sum­mated suc­cess­fully and re­alised syn­er­gies are al­ready vis­i­ble in lower op­er­at­ing ex­penses. 

Com­pared to 30 June 2015, the em­ployee head­count was re­duced by 11 em­ploy­ees (re­duc­tion of 1.5 per cent) due to the elim­i­na­tion of du­pli­ca­tions re­alised in the wake of the Cen­trum Bank merger. At the end of June 2016, VP Bank Group em­ployed 735 in­di­vid­u­als, ex­pressed in terms of full-time equiv­a­lents. Per­son­nel ex­penses could be re­duced by 3.3 per cent (mi­nus CHF 2.2 mil­lion) from CHF 67.2 mil­lion to CHF 65.0 mil­lion thanks to cost dis­ci­pline. 

Gen­eral and ad­min­is­tra­tive ex­penses fell by 17.3 per cent to CHF 24.4 mil­lion (prior-year pe­riod: CHF 29.5 mil­lion) which is also a re­sult of the Cen­trum Bank merger and the run­ning of par­al­lel op­er­a­tions in the prior year for a lim­ited time. Syn­er­gies were suc­ces­sively ex­ploited with the inte­gra­tion into the ex­ist­ing in­fra­struc­ture and process land­scape and ac­com­pa­ny­ing costs re­duced in 2016. In par­ticu­lar, ex­ter­nal ad­vi­sory costs in the in­come-state­ment cap­tion “pro­fes­sional fees” could be re­duced by CHF 2.8 mil­lion or 44.6 per cent to CHF 3.5 mil­lion dur­ing 2016.

 

Depreciation and amortisation, valuation allowances, provisions and losses

De­pre­ci­a­tion and amor­ti­sa­tion was CHF 7.7 mil­lion (40.6 per cent) lower than the prior year and amounted to CHF 11.3 mil­lion as of 30 June 2016. This de­cline is re­lated prin­ci­pally to the one-time amor­ti­sa­tion of in­tan­gi­ble as­sets in the prior year aris­ing in con­nec­tion with the Cen­trum Ban k merger. In ad­di­tion, no amor­ti­sa­tion for the ini­tial in­vest­ment costs of the Avaloq bank­ing plat­form is charged any longer as from 2016 on­wards as they are fully amor­tised. 

Charges for “val­u­a­tion al­lowances, pro­vi­sions and losses” in the first half-year of 2016 to­talled CHF 0.7 mil­lion (prior-year pe­riod: CHF 17.4 mil­lion). This de­crease of CHF 16.7 mil­lion is to be ex­plained by two one-time items in the prior year. Firstly, a val­u­a­tion al­lowance was es­tab­lished in the prior year on one client loan, and sec­ondly, re­struc­tur­ing pro­vi­sions of CHF 12.3 mil­lion were raised in con­nec­tion with the Cen­trum Bank merger.

 

Taxes on income

Taxes on in­come in the first half-year of 2016 to­talled CHF 3.9 mil­lion and were thus CHF 5.6 mil­lion higher than in the prior-year pe­riod in which a mi­nus ex­pense of CHF 1.7 mil­lion had been recorded. This lat­ter arises in con­nec­tion with move­ments in de­ferred taxes as well as tax-ex­empt gains aris­ing from the Cen­trum Bank merger. 

 

Consolidated net income

Con­sol­i­dated net in­come for the first six months of 2016 amounted to CHF 24.4 mil­lion (prior-year pe­riod: CHF 40.9 mil­lion, ex­clud­ing one-time items: CHF 15.9 mil­lion). Con­sol­i­dated net in­come per reg­is­tered share A was CHF 4.04 (30 June 2015: CHF 6.37). 

 

Balance sheet

Com­pared to 31 De­cem­ber 2015, to­tal as­sets fell by CHF 0.8 bil­lion to CHF 11.5 bil­lion as of 30 June 2016. This re­duc­tion in to­tal as­sets is the re­sult of the ac­tive man­age­ment of client de­posits un­der “other li­a­bil­i­ties due to cus­tomers”. 

With CHF 3.0 bil­lion of cash and cash equiv­a­lents, VP Bank Group pos­sesses a very com­fort­able liq­uid­ity sit­u­a­tion. As in­di­cated un­der in­ter­est in­come and as a re­sult of the ac­tive man­age­ment of risks and re­turns, in­creased amounts of client monies were de­posited with the SNB in or­der to op­ti­mise in­ter­est-bear­ing ac­tiv­i­ties with the con­se­quence that amounts due from banks and thus their coun­ter­party risks could be re­duced from CHF 2.1 bil­lion to CHF 1.2 bil­lion since 1 Jan­u­ary 2016. 

Since the be­gin­ning of the year, client loans have in­creased mar­gin­ally by CHF 73.6 mil­lion (1.5 per cent) to CHF 5.1 bil­lion as at 30 June 2016. This in­crease re­sults pri­mar­ily from lom­bard loans. In this re­spect, VP Bank con­tin­ues to main­tain a high level of dis­ci­pline and con­trol in credit-grant­ing ac­tiv­i­ties which is in line with the cur­rent sit­u­a­tion on the real es­tate mar­ket and on fi­nan­cial mar­kets. 

On the li­a­bil­i­ties’ side, client de­posits and medium-term notes fell since the be­gin­ning of 2016 by CHF 1.0 bil­lion (9.6 per cent) to CHF 9.0 bil­lion at 30 June 2016. As a re­sult of the re­pay­ment of a ma­tur­ing deben­ture bond, the bal­ance-sheet cap­tion “Bonds” de­clined since 31 De­cem­ber 2015 by CHF 149.2 mil­lion to CHF 200.8 mil­lion as of 30 June 2016. 

Within the scope of the au­tho­ri­sa­tion granted at the share­hold­ers’ meet­ing of 24 April 2015, VP Bank Ltd has launched a fur­ther eq­uity-share buy­back pro­gramme, thus con­tin­u­ing the two suc­cess­ful pro­grammes from 2015. Re­pur­chases of reg­is­tered shares A will be made dur­ing the pe­riod from 7 June 2016 through 31 May 2017, at the lat­est, and will take place over the reg­u­lar trad­ing line of the SIX Swiss Ex­change. Within the frame­work of the pub­lic eq­uity-share buy­back pro­gramme, VP Bank Ltd is ready to re­pur­chase up to 120,000 reg­is­tered shares A. This mat­ter was recog­nised by es­tab­lish­ing a cor­re­spond­ing li­a­bil­ity in the full amount which is de­ducted from eq­uity. The reg­is­tered shares A so re­pur­chased are de­signed to be used for fu­ture ac­qui­si­tions or for trea­sury-man­age­ment pur­poses. 

As of the end of June 2016, the bal­ance-sheet eq­uity to­talled CHF 890 mil­lion (31 De­cem­ber 2015: CHF 918.1 mil­lion). 

The tier 1 ra­tio, com­puted in ac­cor­dance with the new Basel III rules, amounted to 25.7 per cent at 30 June 2016 which, com­pared to other banks, may be de­scribed as out­stand­ing (31 De­cem­ber 2015: 24.4 per cent). This rep­re­sents a solid eq­uity base and con­sti­tutes an ex­cel­lent strate­gic start­ing point in or­der to be able to as­sume an ac­tive fu­ture role in the process of bank con­sol­i­da­tion.

 

Outlook

We an­tic­i­pate a con­tin­u­ing volatile mar­ket en­vi­ron­ment in the sec­ond half of the year which may im­pact the busi­ness op­er­a­tions and re­sults of VP Bank Group. De­vel­op­ments in the field of tax trans­parency and ex­change of in­for­ma­tion will con­tinue to forge ahead and will di­rectly im­pact clients and the busi­ness ar­eas of VP Bank Group as well as the Liecht­en­stein fi­nan­cial mar­ket­place. With dig­i­tal­i­sa­tion, the fi­nan­cial sec­tor is con­fronted with great chal­lenges but also with promis­ing op­por­tu­ni­ties. VP Bank is well equipped to take on these chal­lenges, has launched pro­jects in re­ac­tion thereto and con­tin­ues to pur­sue its sus­tain­able growth strat­egy. VP Bank Group’s high level of eq­uity re­sources con­sti­tutes a healthy ba­sis for a suc­cess­ful fu­ture.

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