Statement by the Chairman of the Board and Chief Executive Officer
Ladies and Gentlemen
During the first half of 2017, the financial markets were mesmerised by the political developments. In the USA, hopes for rapidly adopted reforms were dashed as Donald Trump’s presidency got under way. On this side of the Atlantic, the election of Emmanuel Macron as France’s new president eliminated at least one major political risk – and the relief in the real economy and financial markets was indeed noticeable: both in the eurozone and Switzerland, companies started to take a more optimistic view of the future. VP Bank Group as well was able to profit from the stability in the financial markets during the first semester of 2017.
Very fine first-half results
For the first half of 2017, VP Bank Group recorded consolidated net income of CHF 31.5 million compared to CHF 24.4 million in the comparable prior-year period. This corresponds to a CHF 7.0 million or 28.8 per cent period-on-period gain in net profit.
All VP Bank Group locations contributed to our gratifying CHF 1.1 billion gain in net new money. This attests to the success of our intense market cultivation efforts and the growing significance of VP Bank’s investment fund business field.
Operating income for the first half increased versus the prior-year period by 16.4 per cent to CHF 151.1 million.
Operating expenses on the other hand rose from CHF 101.5 million in the first half-year of 2016 to CHF 117.2 million. However, this amount includes a provision for the settlement of a North Rhine-Westphalia claim relating to untaxed assets of German clients. This settlement also applies to all other German states.
VP Bank’s medium-term goals (i.e. through the end of 2020) have been clearly defined in our “Strategy 2020”:
- CHF 50 billion in client assets under management;
- CHF 80 million in consolidated net income;
- a cost/income ratio of less than 70 per cent.
VP Bank’s assets under management increased yet again to stand at CHF 37.4 billion as of the halfway point in 2017 (year-end 2016: CHF 35.8 billion; at 30 June 2016: CHF 34.0 billion); our consolidated net income for the first half of 2017 was CHF 31.5 Mio (versus CHF 24.4 million); and at 30 June 2017, the cost/income ratio was 64.6 per cent (as of 30 June 2016: 68.9 per cent).
So our latest key figures, combined with VP Bank’s solid capital base and unusually high tier 1 ratio of 25.9 per cent, show that the targeted exploitation of our growth potential and ongoing strict cost controls have put us on the right path towards achieving those goals for 2020.
Key first-half events
The demanding regulatory environment still poses a challenge for VP Bank. In February 2017, the Swiss Federal Council ratified the automatic exchange of information in tax matters (AIA) treaty between Switzerland and Liechtenstein; it will enter into force on 1 January 2018. The AIA creates legal certainty for financial intermediaries and private banking clients, alike.
In March 2017, VP Bank introduced new investment advisory packages that offer attractive solutions for our clients. The launch was accompanied by a German-language media campaign in our Liechtenstein, Switzerland and Luxembourg markets.
Also in March, Standard & Poor’s reaffirmed its excellent “A–“ rating of VP Bank and raised its outlook from “Stable” to “Positive” after having already revised it from “Negative” to “Stable” in July 2016. In doing so, S&P underscored the strong equity capital base of VP Bank Group and the consequential ability to absorb to the greatest extent any risks that may arise. The reaffirmed rating and improved outlook also take into account the operating progress we have made, as well as VP Bank’s low credit risks.
Under the banner of “New challenges – new business opportunities”, VP Bank in May 2017 invited participants from the financial, business, political and media world to Luxembourg for our “VP Bank Finance Dialogue 2017”. We had the pleasure of welcoming Adrian Hasler, Head of Government of the Principality of Liechtenstein, as the keynote speaker at the event. The “VP Bank Finance Dialogue 2017” was the third of its kind and once again contributed to our open and continuous two-way discussion of the latest developments in the financial world.
Emphasis on corporate culture
A key focal point for 2017 are the core cultural values of VP Bank, which we reinforced in late March through successful management training sessions. At this “Competent to lead” gathering, more than 30 leaders from VP Bank’s various locations and divisions took part in courses and used the occasion to network with each other across business segments and discuss their first-hand experiences. As of May 2017, “Lead to perform” workshops were then conducted in order to cement those corporate values and support the ongoing development of our management personnel.
As a way of fostering a dialogue between Group Executive Management and the Bank’s employees, we introduced “VP Bank Journeys” this past spring. Through visits to other companies, our people gather new insight that can help them to cope better with the challenges VP Bank is faced with. The first “journey” of this kind took 30 of our employees to Munich and was a great success.
Term renewal elections for Board members were held at the 54th annual general meeting of VP Bank. Dr Daniel H. Sigg opted not to stand for re-election and stepped down from the Board of Directors. He joined the Board in 2008 and was chair of the Risk Committee as well as member of the Audit Committee of the Board of Directors. The Board wishes to thank Dr Daniel H. Sigg for his outstanding commitment to VP Bank and wish him all the best in his future endeavours.
Prof. Dr Teodoro D. Cocca, Dr Beat Graf and Michael Riesen were re-elected to the Board for a further three-year term of office.
Chief Operating Officer Martin C. Beinhoff decided to leave VP Bank Group at the end of June 2017. He was responsible for the Group Credit, Group Operations and Group Information Technology units as well as for the Bank’s digitalisation offensive. Since 1 July 2017, Chief Executive Officer Alfred W. Moeckli and Chief Financial Officer Siegbert Näscher have been co-heading the Chief Operating Officer business unit on an ad interim basis.
There were also important personnel changes at our international offices. As of 1 February 2017, Nicholas A. Clark took over as Chief Executive Officer of VP Bank (BVI), and, since 13 March 2017, Bruno Morel has held the post of Chief Executive Officer at VP Bank (Singapore) Ltd. On 1 July 2017, Executive Management at VP Bank (Switzerland) Ltd was reinforced by Maximilian Barth, who took over the function of Head of Private Banking Germany and Switzerland.
Effective as of 1 January 2017, VP Bank realigned its organisational and management structure: at the Group Executive Management level, the “General Counsel & Chief Risk Officer” organisational unit was established. Monika Vicandi, who was previously in charge of Group Legal, Compliance & Tax, in January 2017 was named head of the “General Counsel & Chief Risk Officer” unit and member of Group Executive Management at VP Bank. The Group Legal, Compliance & Tax and Group Risk units were combined to create a new organisational unit that also has a seat in Group Executive Management. This upgrading is a reflection of today’s constantly increasing market regulation and hence the ever-stricter requirements for internationally oriented financial service providers.
Also established at the outset of 2017 was the new organisational unit “Investment Solutions”, with the aim of bolstering our Group-wide investment competence. We have already initiated the recruiting process to identify the future head of Investment Solutions. Christoph Mauchle, Head of Client Business and member of Group Executive Management, is currently fulfilling that post on an ad interim basis.
It order to resolutely pursue and further refine our “Strategy 2020” within the Group as well as to underscore its importance, VP Bank on 1 April 2017 consolidated various tasks associated with strategic leadership into the newly created “Group Strategy” unit. Through the establishment of this organisational unit, we are ensuring that the strategy process is consistently applied, and this with an intensified focus on the holistic development of VP Bank Group.
VP Bank shares
The shares of VP Bank yet again performed very well in the first half of 2017. After starting the year at a price of CHF 108.00, they closed out the first semester at a pleasing CHF 118.70 after having hit a March interim high of CHF 124.90. With that gain of almost 9 per cent, VP Bank’s shares proved once again to be a solid investment compared to the first-half performance of other banking stocks.
Shareholders at the annual general meeting approved the distribution of an increased dividend CHF 4.50 per registered share A and CHF 0.45 per registered share B. The payment date for the dividend was 5 May 2017.
Our share buyback programme via the ordinary trading line was concluded at the end of May 2017. On 6 June 2016, VP Bank Ltd announced at the time that it would buy up to 120,000 of its own registered shares A with a par value of CHF 10. In the period from 7 June 2016 through 31 May 2017, a total of 88,835 registered shares A were repurchased, representing 1.34 per cent of the equity capital recorded in the Commercial Register or, as it were, 0.74 per cent of the voting rights. Thus as of 31 May 2017, VP Bank Ltd held directly or indirectly 560,135 of its own registered shares A and 127,812 registered shares B (for a total of 8.66 per cent of the equity capital and 5.72 per cent of the total voting rights). The repurchased shares A are to be used for future acquisitions or otherwise for treasury management purposes.
In our annual report for the 2016 financial year, we provided extensive information on VP Bank’s digitalisation strategy. The strategy initially covers a three-year time frame and involves both the modernisation of communication channels between our clients and the Bank as well as the expansion of our online service offering. In the first phase, which is being conducted in 2017 and 2018, we are focusing on the technical modernisation of our existing services. This includes projects in the areas of e-banking, the client portal, marketing/communication/product management/processes and CRM (customer relationship management).
In a programme named “Next”, we are carrying out several far-reaching digitalisation projects. More than 100 employees of VP Bank are involved in this programme. During the first half of 2017, we pressed ahead with our digitalisation strategy according to plan by means of these various projects. The related activities centre on creating a wide array of new features and functionalities for our e-banking routine, making WIFI available to all employees, turning each workplace into a virtual meeting room, and ensuring the consistent compilation of contracts with the help of a new contract management tool. And at the last annual general meeting, we were able for the first time to offer shareholders the possibility to submit their votes online.
For VP Bank, the fund business is an especially attractive growth segment and represents an important addition to our palette of offerings. The Bank’s fund business is managed out of Luxembourg and Liechtenstein under the “VP Fund Solutions” brand.
In the first half of 2017, we made further headway with our fund strategy. Our “One-stop Shop”, which functions as a single source for our entire range of fund-related services, has been particularly successful. By the halfway mark in 2017, we had already recorded a 10 per cent gain in the number of fund mandates and a 20 per cent increase in managed fund assets. The new Luxembourg fund vehicle known as a RAIF (Reserved Alternative Investment Fund) has played a key role in this growth; however, the increased presence of VP Fund Solutions in the Asian markets has been of equal importance.
The top European fund managers once again achieved superior results for this past semester, and VP Bank’s proprietary European umbrella fund was a major beneficiary: it rose in value by almost 9 per cent. Also pleasing are the top ratings of VP Bank’s Best Manager equity funds, which were accorded outstanding grades for their sustainability.
VP Bank Group’s commitment to the principle of sustainable business dealings (CSR – Corporate Social Responsibility) is evident in many areas of our activity.
By signing the “Global Compact” of the United Nations in 2016, VP Bank pledged to uphold the ten principles set forth in that concord. In January 2017, we published our first annual Communication on Progress report, which can be inspected at the UN Global Compact website.
VP Bank encourages the sustainable use of tap water and supports the “Drink & Donate” association, which finances drinking-water projects in developing nations. As further evidence of this patronage, shareholders at our 2017 annual general meeting as well as all employees of VP Bank in Vaduz and Zurich received as a gift a “Drink & Donate” water bottle especially designed for VP Bank.
The VP Bank “Volunteering Day” introduced in 2016 enables our employees in Liechtenstein and Switzerland to spend a day doing pro bono work for social institutions, education programmes or environmental organisations of a charitable nature. The programme is enjoying ever-greater popularity: by mid-2017, already some 50 of our employees have taken part.
We also foster the targeted use of bicycles, a means of transport that offers an environmentally friendly alternative to motorised commuting. Since 2016, VP Bank has made available cost-free e-bikes for the use of employees at its Vaduz and Triesen facilities. Apart from employee participation in the recent Liechtenstein “Biking to Work” challenge, VP Bank’s Mobility Management team organised a spring campaign that offered cost-free servicing of our employees’ bicycles. In June, the VP Bank Sport Club conducted a bike weekend.
A CSR workgroup and the newly established CSR Board are promoting the topic of sustainability within VP Bank Group by offering sustainable products, in-house awareness campaigns, memberships in relevant organisations and increased networking.
All of our tracks are set for further growth in the second half of the year. With the “Relationship Manager Hiring” project which we already described in last year’s annual report, we are resolutely expanding our financial advisory teams. By having already hired 17 new advisors alone in the first half of the year, we are right on course: our three-year goal is to onboard a total of 75 client advisors in the Intermediaries and Private Banking segments, roughly half of which in Asia. In addition to organic growth, we will also use our solid equity capital base for investing in growth through acquisitions.
The further development of digital services is on our agenda as well. Within the scope of our digitalisation strategy, we are combining the time-tested personalised advice of VP Bank with the latest technologies and thereby creating tangible added value for our clients and employees alike.
The second half will see special emphasis placed on our public appearance and image. In recent months, we have worked intensively on the VP Bank brand and our self-perception. The Board of Directors has drawn up a Mission Statement that clearly expresses how we define and position VP Bank as a company. At the same time, we have freshened our design and optimised our visual impact to reflect the Digital Age. As the months proceed, you will notice the results of this dynamic process in many ways – from the new look-and-feel of our website to our redesigned advertisements and numerous publications.
VP Bank’s Internet presence is our most important digital calling card. Apart from its optical makeover, we have equipped the website with new portal technology that allows the integration of a multitude of modular building blocks. And it will also “fit” optimally on mobile devices such as tablets and smartphones. And new, clearly arranged navigation features will make it easier to locate the topics that interest you most. We look forward to introducing this new website in conjunction with the presentation of our first-half results.
A word of gratitude
We have successfully completed a first half full of exciting projects and far-reaching organisational changes. We would like to take this opportunity to express our special thanks to VP Bank’s employees for their staunch commitment. Here’s to a successful and personally fulfilling second half of 2017 for all of us together!
And of course our sincere thanks also goes to our clients and shareholders for the abiding trust they place in VP Bank.