Statement of the Chairman of the Board of Directors and the Chief Executive Officer
Ladies and gentlemen,
Global economic growth slowed in the first half of 2019. Economic policy tensions between the United States and China coupled with the still unresolved Brexit process adversely affected the real economy. The impact on the export-oriented European economy was particularly significant. Thanks to solid domestic demand, the United States economy proved to be very robust. Financial markets, meanwhile, responded favourably to the prospect of monetary easing by the large central banks. In this environment, VP Bank Group again posted a very solid performance.
Very positive interim result
In the first half of 2019, VP Bank Group recorded consolidated net income of CHF 35.3 million, up from CHF 29.3 million the previous year.
Client assets under management increased from CHF 41.5 billion to CHF 45.6 billion thanks to substantial net new money inflows, the asset deal with Catella Bank in Luxembourg and a very favourable market performance. This most satisfactory 9.9 per cent increase confirms the success of our intensive market development efforts.
As part of our “Strategy 2020” business plan, we defined VP Bank Group’s medium-term goals as follows:
- CHF 50 billion in client assets under management
- CHF 80 million in consolidated net income
- Cost/income ratio below 70 per cent
At 30 June 2019, assets under management totalled CHF 45.6 billion (up 9.9 per cent, or CHF 4.1 billion, since 31 December 2018), first-half consolidated net income was CHF 35.3 million (first half 2018: CHF 29.3 million). At 30 June 2019 the cost/income ratio was 68.6 per cent (compared with 70.3 per cent one year earlier).
These current results as well as our solid financial position with a robust 19.7 per cent tier 1 ratio show that by taking advantage of targeted organic and external growth opportunities and maintaining strict cost controls we are on track.
Three strategic pillars
The 2020 strategy was defined in 2015 with a five-year horizon. It includes three pillars and runs until the end of next year.
As regards growth, the positive trend of 2018 carried over to the first half of 2019 with CHF 1.2 billion in net new money. Another CHF 1.0 billion was taken in through the acquisition of Catella’s private banking activities in Luxembourg. As part of our “Relationship Management Hiring” project, we remain slightly below budget after taking into account additional new client advisors, but we are nevertheless extremely satisfied with the net new money brought in through this programme.
In the focus pillar, we made further progress as regards cost management in the first half of 2019 and optimised our products and services. They include a new version of our client and employee portal.
We use the term culture to refer to the sales and performance culture as well as the corporate culture. In the first half, we continued our manager training programme, held a successful “VP Bank Journey” to Vienna for employees and promoted information sharing between managers and employees at frequent breakfast events. In June 2019, we held our first “International Welcome Event” in order to give our new colleagues from the international sites a personal view of VP Bank Group’s culture and strategy and thus provide them with active support as regards their integration.
With IT Strategy 2022, we created an IT development plan consisting of nine action areas focused on the three strategic pillars. The main topics include effectiveness, efficiency, growth initiatives, quality and security.
In July 2019, as part of our market strategy, we identified Denmark, Norway and Sweden (the “Nordics”) as additional target markets. These markets will be managed by the recently added Luxembourg-based Catella team, among others.
Key first-half events
After celebrating the 20-year anniversary of VP Fund Solutions at our Luxembourg site last year, in 2019 our Liechtenstein fund subsidiary marks its 20th anniversary. We have responded to the dynamic growth of our fund business by adding to the management of VP Fund Solutions with a Chief Operating Officer, a Chief Technology Officer and a Head of Private Equity & Real Estate, all under the management of Eduard von Kymmel.
In February, the government of the Principality of Liechtenstein approved a strategy aimed at strengthening the competitiveness of the financial centre and enhancing its positioning as an international and innovative centre. The strategy revolves around unrestricted and equal market access as well as the corresponding international collaboration.
As from 1 February 2019, we completed the acquisition of the Luxembourg private banking activities of Catella Bank by VP Bank (Luxembourg) SA. Under this deal, which took the form of an asset transfer, we brought over 11 employees and added client assets totalling CHF 1.0 billion. We positioned ourselves in Luxembourg with a new team for the German target market and were very successful in pursuing organic growth in Luxembourg through targeted market development efforts together with VP Fund Solutions.
A total of 487 shareholders attended VP Bank’s 56th Annual General Meeting on 26 April 2019. All resolutions were adopted. Markus Thomas Hilti, Ursula Lang and Dr Gabriela Maria Payer were re-elected to three-year terms on the Board of Directors, while Dr Christian Camenzind did not seek re-election and stepped down from the Board.
Personnel and organisational changes
The Board of Directors of VP Bank Group and CEO Alfred W. Moeckli decided to part ways. Alfred W. Moeckli relinquished all his functions at end-January 2019 and left the bank in order to pursue new opportunities. Dr Urs Monstein took over the position of CEO on an interim basis.
The Investment Solutions unit was reorganised as from 1 March 2019 in order to strengthen VP Bank’s investment business and thereby make a significant contribution toward achieving the strategic growth objectives.
Last year Dr Thomas R. Meier was newly elected to a three-year term on the Board of Directors. In February 2019 he was appointed as the second Vice Chairman of the Board. An experienced Asia expert, Thomas Meier will become even more involved in the continued development of VP Bank’s Asia strategy and our Singapore and Hong Kong sites.
VP Bank shares
After a relatively weak second half of 2018, VP Bank Group’s shares delivered a total return of 15.5 per cent (in Swiss francs and including the dividend) in the first half of 2019. They significantly outperformed the SIX’s banking index (+6.8 per cent). They nevertheless fell short of the overall market index (SPI), which rose by approximately 21.8 per cent. The underperformance relative to the overall market was mainly due to the trend in the first quarter and June, as the share price significantly outperformed the SPI in April and May in particular. The shares traded in a range between CHF 130.2 (8 March) and CHF 165.4 (28 May). VP Bank shares rose by 11.6 per cent (excluding dividend) over a six-month comparison period, by 75.3 per cent over a three-year period and by 98.5 per cent over a five-year period.
Based on 2018 net income, a dividend of CHF 5.50 per registered share A was paid out on 5 May 2019, corresponding to a dividend yield of approximately 3.9 per cent. Overall, given the challenging market environment for banks, VP Bank’s share performance can be viewed favourably and again demonstrates that the shares are a sound investment.
Under the authorisation granted to it by the 24 April 2015 Annual General Meeting, VP Bank Ltd announced a share buy-back programme on 26 June 2018 involving up to 180,000 listed registered shares A, each with a par value of CHF 10 per share. In all, a total of 169,950 registered shares A were repurchased in the period from 27 June 2018 to 28 June 2019, corresponding to 2.57 per cent of the registered share capital in the commercial register, or 1.41 per cent of the voting rights.
At 30 June 2019, VP Bank Ltd directly or indirectly owns 600,847 registered treasury shares A and 325,969 registered treasury shares B (9.58 per cent of the share capital and 7.71 per cent of the voting rights). Since no shares were cancelled, the share capital and voting rights ratios were left unchanged. Registered shares A are held to be used in future acquisitions or for treasury management purposes.
VP Bank Group is committed to the principle of sustainable business practices and strives to continuously develop its sustainability policy. This approach increasingly includes measures in the investment area. In the first half of 2019, we implemented initiatives to promote mobility and environmentally friendly transportation, employee health and workplace ecology. One particularly noteworthy initiative is “Think before you print”, which enabled us to reduce paper consumption by 10 per cent at our Liechtenstein head office. In May 2019, for the third time we sponsored a workshop by Liechtenstein University on the topic of “Sustainable Finance” and gave out the “VP Bank Best Paper Award” for a paper on the topic of sustainability in the European bond market.
As a bank group with deep regional roots, we also demonstrate our corporate commitment in the form of sports and cultural sponsorship. In the first half of 2019, we sponsored three prestigious events – the VP Bank Classic Festival, the VP Bank Ladies Open golf tournament and the VP Bank Rally – and thereby affirmed our close ties to the region.
In July 2019, the Board of Directors appointed Paul H. Arni as the new CEO of VP Bank Group. He has extensive banking and management experience in both the front and back office areas. The decisive factor in choosing Paul Arni was his distinguished and longstanding front office experience combined with his vast knowledge of a broad range of banking activities. He is also a great fit for our bank from a cultural standpoint, and his technical background contributes to our well-balanced Group Executive Management. Paul Arni will begin his duties on 1 October 2019.
We have also laid the groundwork for profitable growth in the second half. Building on our success to date, we continue to push our international growth efforts. To that end, we are actively looking to add new client advisors and managers at the Singapore, Luxembourg, Zurich and Vaduz sites. We will complete our “Relationship Manager Hiring” programme at end-2019 as planned and ensure that we can achieve our objectives from both a qualitative and quantitative standpoint. In addition to these growth initiatives, we continue to focus on strict cost controls.
We are focusing in particular on our Singapore site. The memorandum of understanding signed in July for strategic cooperation with Hywin Wealth Management Co. in China underscores the growing importance of our Asia business.
Another focal point for the second half of 2019 will be the expansion of our Scandinavian business, which will increasingly be managed from Luxembourg.
In autumn 2019 we will conduct a Group-wide client survey on product and service quality. We are also launching “VP Bank Connect” in the second half of 2019. This new, secure and independent login procedure for our e-banking service runs on a smartphone app and is a simple alternative to the security token.
At the end of next year, we will replace “Strategy 2020” with a new strategic plan. We therefore initiated comprehensive workshops examining the “future of banking” in order to lay the groundwork for VP Bank’s own future in a timely fashion. These efforts include trend analyses and the identification of action areas to be pursued by the Group over the next five years. The results of this process will be presented in March 2020 as part of the presentation of our 2019 annual results.
Our outstanding “A/A-1” rating and stable outlook from the Standard & Poor’s ratings agency attest to our Group’s solid and successful business model.
We have successfully completed a demanding first half marked by weaker economic growth and significant organisational and personnel changes within the bank. The substantial increase in consolidated net income as well as the favourable net new money trend demonstrate VP Bank’s innovative capabilities. We would therefore like to extend our thanks to our employees for their commitment.
We would also like to thank our clients and shareholders for their renewed trust in VP Bank.