Segment reporting

Structure

External segment reporting reflects the organisational structure of VP Bank Group and the internal reporting to Management. The latter form the basis for assessing financial performance of the segments and the allocation of resources to the segments.

VP Bank Group consists of the six organisational units “Chief Executive Officer”, “Client Business”, “Investment Solutions”, “General Counsel & Chief Risk Officer”, “Chief Financial Officer” and “Chief Operating Officer”.

For segment-reporting purposes, the organisational unit “Client Business” is divided into two business segments “Client Business Liechtenstein” and “Client Business International”. The unit “Investment Solutions” is managed, for segment-reporting purposes, in “Client Business Liechtenstein” and “Client Business International”. The four organisational units “Chief Executive Officer”, “Chief Financial Officer”, “Chief Operating Officer” and “General Counsel & Chief Risk Officer” are regrouped together, for segment reporting, under the business segment “Corporate Center”.

Revenues and expenditures as well as assets and liabilities are allocated to the business segments based on the responsibilities for the clients and the principle of origination. Insofar as a direct allocation is not possible, the positions in question are reported under the Corporate Center. Furthermore, the Corporate Center includes adjustments made on consolidation.

 

01.01.-30.06.2019

in CHF 1,000

Client
Business

Client
Business

Corporate
Center

Total
Group

 

Liechtenstein

International

 

 

Total net interest income1

33,484

26,081

–4,992

54,573

Total net income from commission 
business and services

43,037

27,017

–3,039

67,015

Income from trading activities

7,911

6,474

14,884

29,269

Income from financial instruments

0

132

11,257

11,389

Other income

204

1,540

–1,253

491

Total operating income

84,636

61,244

16,857

162,737

 

 

 

 

 

Personnel expenses

17,229

31,299

33,842

82,370

General and administrative expenses

1,868

12,801

14,619

29,288

Depreciation of property, equipment and intangible assets

2,472

3,819

8,035

14,326

Credit loss expenses

462

–3,960

–57

–3,555

Provisions and losses

118

127

 

245

Services to/from other segments1

20,438

0

–20,438

0

Operating expenses

42,587

44,086

36,001

122,674

 

 

 

 

 

Earnings before income tax

42,049

17,158

–19,144

40,063

 

 

 

 

 

Taxes on income

 

 

 

4,778

Group net income

 

 

 

35,285

 

 

 

 

 

Segment assets (in CHF million)

4,188

5,531

3,385

13,105

Segment liabilities (in CHF million)

6,757

4,884

479

12,120

Client assets under management (in CHF billion)2

26.0

19.6

0.0

45.6

Net new money (in CHF billion)

–0.2

1.4

0.0

1.2

Headcount (number of employees)

197

372

402

970

Headcount (expressed as full-time equivalents)

183.3

325.4

367.2

875.9

 

 

 

 

 

as of 31.12.2018

 

 

 

 

Segment assets (in CHF million)

4,112

4,761

3,556

12,428

Segment liabilities (in CHF million)

6,961

4,102

384

11,447

Client assets under management (in CHF billion)2

25.0

16.5

0.0

41.5

Net new money (in CHF billion)

–0.2

3.4

0.0

3.2

Headcount (number of employees)

197

330

407

933

Headcount (expressed as full-time equivalents)

183.3

313.3

371.9

868.4

  1. As of 1 January 2019, the new funds transfer pricing was introduced within the Group. With funds transfer pricing, the internal bank recharges between the Treasury department and Client Business segments are determined and computed. Funds transfer pricing is a central instrument to manage market-price and liquidity risks. With funds transfer pricing, refinancing and liquidity costs between Client Business segments and Treasury are recharged at market-oriented prices. This recharging is applied for new business and resubmissions as from 1 January 2019. The result of this change for the first six months of 2019 amounts to CHF -4.6 million for Client Business Liechtenstein, CHF -0.1 million for Client Business International and CHF 4.7 million for the Corporate Center. The prior-year comparatives were not restated as the change for prior periods was impracticable because of the passage of time as well as the lack of an appropriate data base and the cost of assembling this data retrospectively on an individual-transaction basis would be so high that it would bear no relationship to the benefit to be derived therefrom. The introduction of funds transfer pricing has no impact on the consolidated results of VP Bank Group. 
  2. Calculation in accordance with Table P of the Guidelines to the Liechtenstein Banking Ordinance issued by the Government of Liechtenstein (FL-BankO).

 

The recharging of costs and revenues between the business units takes place on the basis of internal transfer prices, actual recharges or prevailing market conditions. Recharged costs within the segments are subject to an annual review and are amended to reflect new economic conditions, where necessary.

 

01.01.–30.06.2018

in CHF 1,000

Client
Business

Client
Business

Corporate
Center

Total
Group

 

Liechtenstein

International

 

 

Total net interest income

39,429

17,472

–1,934

54,967

Total net income from commission 
business and services

46,597

21,252

–3,582

64,267

Income from trading activities

9,512

4,474

12,188

26,174

Income from financial instruments

0

–12

914

902

Other income

50

1,401

96

1,547

Total operating income

95,588

44,587

7,682

147,857

 

 

 

 

 

Personnel expenses

17,292

24,672

32,081

74,045

General and administrative expenses

2,059

14,312

13,548

29,919

Depreciation of property, equipment and intangible assets

2,399

1,594

7,744

11,737

Credit loss expenses

–1,597

–738

1,798

–537

Provisions and losses

247

73

0

320

Services to/from other segments

20,733

0

–20,733

0

Operating expenses

41,133

39,913

34,438

115,484

 

 

 

 

 

Earnings before income tax

54,455

4,674

–26,756

32,373

 

 

 

 

 

Taxes on income

 

 

 

3,087

Group net income

 

 

 

29,286

 

 

 

 

 

Segment assets (in CHF million)

4,176

4,094

4,334

12,604

Segment liabilities (in CHF million)

7,527

3,427

696

11,651

Client assets under management (in CHF billion)1

27.0

14.0

0.0

40.9

Net new money (in CHF billion)

0.3

0.3

0.0

0.6

Headcount (number of employees)

198

294

400

892

Headcount (expressed as full-time equivalents)

183.5

278.1

365.9

827.5

  1. Calculation in accordance with Table P of the Guidelines to the Liechtenstein Banking Ordinance issued by the Government of Liechtenstein (FL-BankO).

 

The recharging of costs and revenues between the business units takes place on the basis of internal transfer prices, actual recharges or prevailing market conditions. Recharged costs within the segments are subject to an annual review and are amended to reflect new economic conditions, where necessary.

 

Client Business Liechtenstein

Segment results

in CHF 1,000

01.01.–30.06.2019

01.01.–30.06.2018

Variance
absolute

Variance
in %

Total net interest income1

33,484

39,429

–5,945

–15.1

Total net income from commission 
business and services

43,037

46,597

–3,560

–7.6

Income from trading activities

7,911

9,512

–1,601

–16.8

Income from financial instruments

0

0

0

0.0

Other income

204

50

154

308.0

Total operating income

84,636

95,588

–10,952

–11.5

 

 

 

 

 

Personnel expenses

17,229

17,292

–63

–0.4

General and administrative expenses

1,868

2,059

–191

–9.3

Depreciation of property, equipment and intangible assets

2,472

2,399

73

3.0

Credit loss expenses

462

–1,597

2,059

128.9

Provisions and losses

118

247

–129

–52.2

Services to/from other segments

20,438

20,733

–295

–1.4

Operating expenses

42,587

41,133

1,454

3.5

 

 

 

 

 

Segment income before income tax

42,049

54,455

–12,406

–22.8

 

 

 

 

 

Additional information

 

 

 

 

Operating expenses excluding depreciation and amortisation, 
valuation allowances, provisions and 
losses / total operating income (in %)

46.7

41.9

 

 

Total operating expenses / total net operating income (in %)

50.3

43.0

 

 

Client assets under management (in CHF billion)

26.0

27.0

 

 

Change in client assets under management
compared to 31.12. prior year (in %)

3.9

0.9

 

 

Net new money (in CHF billion)

–0.2

0.3

 

 

Total operating income / average client assets under management (bp)2

66.3

71.2

 

 

Segment result / average client assets under management (bp)2

32.9

40.6

 

 

Cost/income ratio operating income (in %)3

46.8

42.0

4.9

11.6

Headcount (number of employees)

197

198

–1.5

–0.8

Headcount (expressed as full-time equivalents)

183.3

183.5

–0.2

–0.1

  1. As of 1 January 2019, the new funds transfer pricing was introduced within the Group. The impact of this change for the segment Client Business Liechtenstein amounted to CHF -4.6 million. The prior-year comparatives were not restated as the change for prior periods was impracticable because of the passage of time as well as the lack of an appropriate data base and the cost of assembling this data retrospectively on an individual-transaction basis would be so high that it would bear no relationship to the benefit to be derived therefrom.
  2. Annualised, average values.
  3. Operating expenses excluding depreciation and amortisation, valuation allowances, provisions and losses / gross income less other income and income from financial instruments.

Structure

The business segment “Client Business Liechtenstein” encompasses the international private-banking business and the business with intermediaries conducted in Liechtenstein as well as the local universal banking and credit-granting businesses. It includes the units of VP Bank Ltd, Vaduz which are in direct client contact. In addition, the CIO Office, the Group Investment Management, Group Investment Advisory, Group Product Center and VP Fund Solutions (Liechtenstein) AG are allocated to this business segment.

 

Segment result

The pre-tax segment result fell from CHF 54.5 million to CHF 42.1 million (CHF -12.4 million). In the first half of 2019, operating income declined by CHF 11.0 million (11.5 per cent) over that of the comparable prior-year period. This decline results, on the one hand, from interest income from clients (-15.1 per cent) as well as commission and service income (-7.6 per cent). This negative movement in interest income was a result primarily of the introduction of funds transfer pricing as of 1 January 2019 which negatively impacted the result, period-on-period, by CHF 4.6 million. The lower asset basis and the related lower portfolio-based income, on the one hand, and declining stock-exchange trading volumes, on the other, negatively impacted commission and trading income. Operating expenses rose by CHF 1.5 million (3.5 per cent) to CHF 42.6 million (comparative prior-year period: CHF 41.1 million). This increase results primarily from the caption valuation allowances, provisions and losses. In the first half of 2019, charges for valuation allowances, provisions and losses, period-on-period, declined by CHF 1.9 million to CHF minus 0.6 million (prior-year period: plus CHF 1.4 million) due to the release of valuation allowances no longer required in the prior-year period. Intersegmental recharges in the business segment Client Business Liechtenstein are based upon fixed internal transfer prices. Indirect costs for internal services are reported in the business segment in the caption “services to/from other segment(s)”. The gross margin amounted to 66.3 basis points (prior year: 71.2 basis points). The cost/income ratio rose from 42.0 per cent to 46.8 per cent.

During the period, the segment reported a net outflow of client monies of CHF 0.2 billion, principally resulting from the loss of one large client. Assets under management at 30 June 2019 totalled CHF 26.0 billion (31 December 2018: CHF 27.0 billion). The employee headcount declined slightly from 184 (30 June 2018) to 183 employees.

 

Client Business International

Segment results

in CHF 1,000

01.01.–30.06.2019

01.01.–30.06.2018

Variance
absolute

Variance
in %

Total net interest income1

26,081

17,472

8,609

49.3

Total net income from commission 
business and services

27,017

21,252

5,765

27.1

Income from trading activities

6,474

4,474

2,000

44.7

Income from financial instruments

132

–12

144

n.a.

Other income

1,540

1,401

139

9.9

Total operating income

61,244

44,587

16,657

37.4

 

 

 

 

 

Personnel expenses

31,299

24,672

6,627

26.9

General and administrative expenses

12,801

14,312

–1,511

–10.6

Depreciation of property, equipment and intangible assets

3,819

1,594

2,225

139.6

Credit loss expenses

–3,960

–738

–3,222

–436.6

Provisions and losses

127

73

54

74.0

Services to/from other segments

0

0

0

0.0

Operating expenses

44,086

39,913

4,173

10.5

 

 

 

 

 

Segment income before income tax

17,158

4,674

12,484

267.1

 

 

 

 

 

Additional information

 

 

 

 

Operating expenses excluding depreciation and amortisation, 
valuation allowances, provisions and 
losses / total operating income (in %)

72.0

87.4

 

 

Total operating expenses / total net operating income (in %)

72.0

89.5

 

 

Client assets under management (in CHF billion)

19.6

14.0

 

 

Change in client assets under management
compared to 31.12. prior year (in %)

18.9

2.2

 

 

Net new money (in CHF billion)

1.4

0.3

 

 

Total operating income / average client assets under management (bp)2

67.9

64.6

 

 

Segment result / average client assets under management (bp)2

19.0

6.8

 

 

Cost/income ratio operating income (in %)3

74.0

90.2

–16.2

–18.0

Headcount (number of employees)

372

294

77.5

26.4

Headcount (expressed as full-time equivalents)

325.4

278.1

47.4

17.0

  1. As of 1 January 2019, the new funds transfer pricing was introduced within the Group. The impact of this change for the segment Client Business International amounted to CHF -0.1 million. The prior-year comparatives were not restated as the change for prior periods was impracticable because of the passage of time as well as the lack of an appropriate data base and the cost of assembling this data retrospectively on an individual-transaction basis would be so high that it would bear no relationship to the benefit to be derived therefrom.
  2. Annualised, average values.
  3. Operating expenses excluding depreciation and amortisation, valuation allowances, provisions and losses / gross income less other income and income from financial instruments.

Structure

The business segment “Client Business International” encompasses the business conducted in international locations. VP Bank (Switzerland) Ltd, VP Bank (Luxembourg) SA, VP Bank (BVI) Ltd, VP Bank Ltd Singapore Branch, VP Wealth Management (Hong Kong) Ltd and VP Fund Solutions (Luxembourg) SA are allocated to this business segment.

 

Segment result

The pre-tax segment result for the first half of 2019 rose, period-on-period, by CHF 12.5 million. Operating income could be increased by CHF 16.7 million (37.4 per cent) over the comparable prior-year period. This increase is attributable mainly to higher interest income from clients (49.3 per cent), as well as higher commission and service income (27.1 per cent) as well as trading income (44.7 per cent). The recruitment offensive continued to positively impact commission and service income. Operating expenses rose by CHF 4.2 million, or 10.5 per cent, to CHF 44.1 million. This increase results from personnel and general and administrative expense reflecting principally the recruitment offensive for new senior client advisors as well as the acquisition of the private-banking activities of Catella Bank. In the business segment “Client Business International”, the recharging of services is based on actual invoices and recorded under general and administrative expenses. Charges for valuation allowances, provisions and losses were minus CHF 3.8 million (prior-year comparable period: minus CHF 0.7 million).

The gross margin rose to 67.9 basis points (prior-year period: 64.6 basis points). The cost/income ratio declined from 90.2 per cent to 74.0 per cent. 

Net new money from clients developed positively in the first half of 2019 with CHF 1.4 billion. The recruitment offensive continued to produce net new money inflows in the first half of 2019 in the locations. Net new money from clients could again be achieved in the investment-fund business as well as on European markets as a result of intensive market-development activities. New client monies aggregating CHF 1.0 billion could be acquired through the acquisition of the private banking activities of Catella Bank. Assets under management at 30 June 2019 aggregated CHF 19.6 billion (31 December 2018: CHF 14.0 billion). The employee headcount rose from 278 individuals (30 June 2018) to 325, primarily as a result of the recruitment offensive for new senior client advisors and the transfer of employees from the Catella acquisition.

 

Corporate Center

Segment results

in CHF 1,000

01.01.–30.06.2019

01.01.–30.06.2018

Variance
absolute

Variance
in %

Total net interest income1

–4,992

–1,934

–3,058

–158.1

Total net income from commission 
business and services

–3,039

–3,582

543

15.2

Income from trading activities

14,884

12,188

2,696

22.1

Income from financial instruments

11,257

914

10,343

n.a.

Other income

–1,253

96

–1,349

n.a.

Total operating income

16,857

7,682

9,175

119.4

 

 

 

 

 

Personnel expenses

33,842

32,081

1,761

5.5

General and administrative expenses

14,619

13,548

1,071

7.9

Depreciation of property, equipment and intangible assets

8,035

7,744

291

3.8

Credit loss expenses

–57

1,798

–1,855

–103.2

Provisions and losses

0

0

0

0.0

Services to/from other segments

–20,438

–20,733

295

1.4

Operating expenses

36,001

34,438

1,563

4.5

 

 

 

 

 

Segment income before income tax

–19,144

–26,756

7,612

28.4

 

 

 

 

 

Additional information

 

 

 

 

Headcount (number of employees)

402

400

2.0

0.5

Headcount (expressed as full-time equivalents)

367.2

365.9

1.3

0.4

  1. As of 1 January 2019, the new funds transfer pricing was introduced within the Group. The impact of this change for the segment Corporate Center amounted to CHF 4.7 million. The prior-year comparatives were not restated as the change for prior periods was impracticable because of the passage of time as well as the lack of an appropriate data base and the cost of assembling this data retrospectively on an individual-transaction basis would be so high that it would bear no relationship to the benefit to be derived therefrom

Structure

The business segment “Corporate Center” is of great importance for banking operations and the processing of business transactions. It encompasses the areas Group Operations, Group Information Technology, Group Projects & Processes, Group Credit, Group Treasury & Execution, Group Finance, Group Risk, Group Legal Services, Group Compliance, Group Tax Center, Group Human Resources Management, Group Communications & Marketing, and Group Strategy. In addition, those revenues and expenses of VP Bank Ltd having no direct relationship to client-oriented business segments, as well as consolidation adjustments are reported under the Corporate Center. Revenue-generating business activities of the segment Corporate Center arise in connection with the Group Treasury function. The results of the Group‘s own financial investments, the structural contribution and the changes in the value of hedges are reported in this segment. 

 

Segment result

The pre-tax segment result in the first half of 2019 amounted to minus CHF 19.1 million as opposed to minus CHF 26.8 million in the comparable prior-year period.

In the first half of 2019, operating income grew, period-on-period, by CHF 9.2 million. Responsible for this increase is income from financial investments, for the most part. 

Interest income fell by CHF 3.1 million over the comparable prior-year period. This is attributable, in part, to the on-going negative interest level and, consequently, to the decline in interest revenues from maturity transformation (SNB negative interest). In addition, income from SNB swaps turned negative in comparison to the prior-year period (CHF –9.1 million). The introduction of funds transfer pricing as of 1 January 2019 and the movement in financial instruments contributed positively to interest income. Commission and service income reports a decline in income. This caption comprises third-party bank commissions which were invoiced to front business units by the service units through internal recharging. Income received by Group Treasury & Execution is reported under trading income. This relates to income generated from the execution of foreign-exchange trades. The caption also includes the results of derivatives employed to minimize risks as well as gains/losses from balance-sheet management activities. Income from financial investments in the first half of 2019 amounted to CHF 11.3 million. In the comparative prior-year period, this position had reported an income of CHF 0.9 million, the increase of which arose primarily from revaluation gains on financial instruments. 

Operating expenses in the period rose by CHF 1.6 million from CHF 34.4 million to CHF 36.0 million. Charges for valuation allowances, provisions and losses in the period reported a decrease of CHF 1.9 million. Personnel and general and administrative expense rose by CHF 1.8 million and CHF 1.1 million, respectively. Depreciation and amortisation increased marginally from CHF 7.7 million to CHF 8.0 million.

The employee headcount rose slightly from 366 (30 June 2018) to 367 positions.