Segment reporting
Structure
The external segment reporting reflects the organisational structure of VP Bank Group up until 30 June 2020 and the internal reporting to management. These form the basis for assessing the financial performance of the segments and the allocation of resources to the segments.
As of 30 June 2020, VP Bank Group consisted of the six organisational units “Client Business”, “Investment Solutions”, “Chief Executive Officer”, “Chief Financial Officer”, “Chief Operating Officer” and “Chief Risk Officer”.
For segment reporting purposes, the organisational unit “Client Business” is divided into two business segments: “Client Business Liechtenstein” and “Client Business International”. For segment reporting purposes, the unit “Investment Solutions” is managed in “Client Business Liechtenstein” and “Client Business International”. The four organisational units “Chief Executive Officer”, “Chief Financial Officer”, “Chief Operating Officer” and “Chief Risk Officer” are regrouped together under the business segment “Corporate Center” for segment reporting.
Revenues and expenditures as well as assets and liabilities are allocated to the business segments based on the responsibilities for the clients and the originator principle. Insofar as a direct allocation is not possible, the positions in question are reported under Corporate Center. Consolidation entries are also included under Corporate Center.
01.01.–30.06.2020
in CHF 1,000 | Client | Client | Corporate | Total |
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| Liechtenstein | International |
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Total net interest income | 30,065 | 23,408 | 3,903 | 57,376 |
Total net income from commission | 41,389 | 33,568 | –3,430 | 71,527 |
Income from trading activities | 9,090 | 8,734 | 14,688 | 32,512 |
Income from financial instruments | 0 | –80 | 4,930 | 4,850 |
Other income | 152 | 1,505 | –1,117 | 540 |
Total operating income | 80,696 | 67,135 | 18,974 | 166,805 |
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Personnel expenses | 16,548 | 29,685 | 35,085 | 81,318 |
General and administrative expenses | 1,784 | 12,457 | 14,750 | 28,991 |
Depreciation of property, equipment and intangible assets | 1,979 | 4,010 | 8,233 | 14,222 |
Credit loss expenses | –395 | 21,283 | –2 | 20,886 |
Provisions and losses | 769 | 49 | 0 | 818 |
Services to/from other segments | 21,914 | 0 | –21,914 | 0 |
Operating expenses | 42,599 | 67,484 | 36,152 | 146,235 |
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Earnings before income tax | 38,097 | –349 | –17,178 | 20,570 |
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Taxes on income |
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| 6,220 |
Group net income |
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| 14,350 |
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Segment assets (in CHF million) | 4,000 | 5,896 | 3,715 | 13,611 |
Segment liabilities (in CHF million) | 6,890 | 5,290 | 441 | 12,621 |
Client assets under management (in CHF billion)1 | 25.5 | 20.1 | 0.0 | 45.6 |
Net new money (in CHF billion) | –0.1 | 1.1 | 0.0 | 1.0 |
Headcount (number of employees) | 209 | 355 | 415 | 979 |
Headcount (expressed as full-time equivalents) | 193.1 | 335.8 | 379.1 | 908.0 |
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as of 31.12.2019 |
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Segment assets (in CHF million) | 4,275 | 5,689 | 3,436 | 13,400 |
Segment liabilities (in CHF million) | 6,742 | 5,046 | 580 | 12,368 |
Client assets under management (in CHF billion)1 | 26.9 | 20.7 | 0.0 | 47.6 |
Net new money (in CHF billion) | –0.6 | 2.9 | 0.0 | 2.3 |
Headcount (number of employees) | 195 | 345 | 403 | 943 |
Headcount (expressed as full-time equivalents) | 179.5 | 326.2 | 368.0 | 873.7 |
- 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.
The loss reported for the Client Business International segment is mainly due to the one-off impairment on a credit position of approximately CHF 20 million.
01.01.–30.06.2019
in CHF 1,000 | Client | Client | Corporate | Total |
|---|---|---|---|---|
| Liechtenstein | International |
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Total net interest income | 33,484 | 26,081 | –4,992 | 54,573 |
Total net income from commission | 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 |
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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 | 0 | 245 |
Services to/from other segments | 20,438 | 0 | –20,438 | 0 |
Operating expenses | 42,587 | 44,086 | 36,001 | 122,674 |
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Earnings before income tax | 42,049 | 17,158 | –19,144 | 40,063 |
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Taxes on income |
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| 4,778 |
Group net income |
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| 35,285 |
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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)1 | 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 |
- 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.–30.06.2020 | 01.01.–30.06.2019 | Variance | Variance |
|---|---|---|---|---|
Total net interest income | 30,065 | 33,484 | –3,419 | –10.2 |
Total net income from commission | 41,389 | 43,037 | –1,648 | –3.8 |
Income from trading activities | 9,090 | 7,911 | 1,179 | 14.9 |
Income from financial instruments | 0 | 0 | 0 | 0.0 |
Other income | 152 | 204 | –52 | –25.5 |
Total operating income | 80,696 | 84,636 | –3,940 | –4.7 |
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Personnel expenses | 16,548 | 17,229 | –681 | –4.0 |
General and administrative expenses | 1,784 | 1,868 | –84 | –4.5 |
Depreciation of property, equipment and intangible assets | 1,979 | 2,472 | –493 | –19.9 |
Credit loss expenses | –395 | 462 | –857 | –185.5 |
Provisions and losses | 769 | 118 | 651 | n.a. |
Services to/from other segments | 21,914 | 20,438 | 1,476 | 7.2 |
Operating expenses | 42,599 | 42,587 | 12 | 0.0 |
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Segment income before income tax | 38,097 | 42,049 | –3,952 | –9.4 |
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Additional information |
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Operating expenses excluding depreciation and amortisation, | 49.9 | 46.7 |
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Total operating expenses / total net operating income (in %) | 52.8 | 50.3 |
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Client assets under management (in CHF billion) | 25.5 | 26.0 |
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Change in client assets under management | –5.2 | 3.9 |
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Net new money (in CHF billion) | –0.1 | –0.2 |
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Total operating income / average client assets under management (bp)1 | 61.6 | 66.3 |
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Segment result / average client assets under management (bp)1 | 29.1 | 32.9 |
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Cost/income ratio operating income (in %)2 | 50.0 | 46.8 | 3.1 | 6.7 |
Headcount (number of employees) | 209 | 197 | 12.5 | 6.4 |
Headcount (expressed as full-time equivalents) | 193.1 | 183.3 | 9.8 | 5.3 |
- Annualised, average values.
- 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 international private banking business and business with intermediaries conducted in Liechtenstein as well as local universal banking and credit-granting business. It includes the units of VP Bank Ltd in Vaduz which are in direct client contact. In addition, the CIO Office, Group Investment Management, Group Investment Advisory, Group Product Center, Group Sustainability, Private Investment Partners and VP Fund Solutions (Liechtenstein) AG are allocated to this business segment.
Segment result
The pre-tax segment result fell from CHF 42.1 million to CHF 38.1 million compared to the previous-year period (CHF –4 million). In the first half of 2020, operating income declined by CHF 4 million (–4.7 per cent) over that of the comparable previous-year period. This decline resulted from interest income from clients (–10.2 per cent), as well as commission and service income (–3.8 per cent). USD interest payments in client business contributed significantly to this negative movement in interest income. Both the lower asset basis resulting from COVID-19 and the associated lower recurring income affected commission income negatively. Transaction-related client revenue on the other hand increased on the previous-year level thanks to increased client activity. Likewise, income from trading activities developed favourably with an increase of CHF 1.2 million in comparison to the previous year. Operating expenses were kept on a par with those of the previous year at CHF 42.6 million. With the exception of charges from other segments, all positions in operating expenses were reduced in comparison to the first half of 2019. Charges from other segments increased due to the increase in client activity (7.2 per cent). Indirect costs for internal services are reported in the business segment under the position “Services to/from other segment(s)”. The gross margin amounted to 61.6 basis points (previous-year period: 66.3 basis points). The cost/income ratio increased from 46.8 per cent to 50.0 per cent.
The segment recorded a net outflow of new assets of CHF 0.1 billion in the reporting period, primarily as a result of the outflow of the assets of a major fund client. Client assets under management as of 30 June 2020 totalled CHF 25.5 billion (31 December 2019: CHF 26.9 billion). The employee headcount rose from 183 (30 June 2019) to 193 positions.
Client Business International
Segment results | ||||
in CHF 1,000 | 01.01.–30.06.2020 | 01.01.–30.06.2019 | Variance | Variance |
|---|---|---|---|---|
Total net interest income | 23,408 | 26,081 | –2,673 | –10.2 |
Total net income from commission | 33,568 | 27,017 | 6,551 | 24.2 |
Income from trading activities | 8,734 | 6,474 | 2,260 | 34.9 |
Income from financial instruments | –80 | 132 | –212 | –160.6 |
Other income | 1,505 | 1,540 | –35 | –2.3 |
Total operating income | 67,135 | 61,244 | 5,891 | 9.6 |
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Personnel expenses | 29,685 | 31,299 | –1,614 | –5.2 |
General and administrative expenses | 12,457 | 12,801 | –344 | –2.7 |
Depreciation of property, equipment and intangible assets | 4,010 | 3,819 | 191 | 5.0 |
Credit loss expenses | 21,283 | –3,960 | 25,243 | n.a. |
Provisions and losses | 49 | 127 | –78 | –61.4 |
Operating expenses | 67,484 | 44,086 | 23,398 | 53.1 |
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Segment income before income tax | –349 | 17,158 | –17,507 | –102.0 |
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Additional information |
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Operating expenses excluding depreciation and amortisation, | 62.8 | 72.0 |
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Total operating expenses / total net operating income (in %) | 100.5 | 72.0 |
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Client assets under management (in CHF billion) | 20.1 | 19.6 |
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Change in client assets under management | –3.0 | 18.9 |
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Net new money (in CHF billion) | 1.1 | 1.4 |
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Total operating income / average client assets under management (bp)1 | 65.8 | 67.9 |
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Segment result / average client assets under management (bp)1 | –0.3 | 19.0 |
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Cost/income ratio operating income (in %)2 | 64.1 | 74.0 | –9.9 | –13.4 |
Headcount (number of employees) | 355 | 372 | –16.5 | –4.4 |
Headcount (expressed as full-time equivalents) | 335.8 | 325.4 | 10.4 | 3.2 |
- Annualised, average values.
- Operating expenses excluding depreciation and amortisation, valuation allowances, provisions and losses / gross income less other income and income from financial instruments.
The loss reported for the Client Business International segment is mainly due to the one-off impairment on a credit position of approximately CHF 20 million.
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 first half of 2020 saw the pre-tax segment result fall by CHF 17.5 million over the previous-year period. Operating income increased by CHF 5.9 million (9.6 per cent) over the previous-year period. This increase is attributable to higher income from commission business and services (24.2 per cent) and income from trading activities (34.9 per cent). Increased client trading activity and the targeted recruitment of client advisors continued to contribute positively to commission income. The decline in interest income resulted largely from the sharp drop in USD yields in 2020. Operating expenses increased by CHF 23.4 million to CHF 67.5 million. This increase resulted primarily from a roughly CHF 20 million valuation adjustment on an individual credit position (CHF –4 million on the previous-year period). The rest of the positions in operating expenses were reduced on the previous-year period (personnel expenses: –5.2 per cent, general and administrative expenses: –2.7 per cent) or maintained at roughly the same level as the previous year. Internal transfer prices are included in general and administrative expenses in the business segment “Client Business International”.
The gross margin was reduced slightly to 65.8 basis points (previous-year period: 67.9 basis points). The cost/income ratio improved from 74.0 per cent to 64.1 per cent.
At CHF 1.1 billion, net new money continued to develop positively in the first half of 2020 despite the challenges posed by COVID-19. The targeted recruitment of client advisors at locations continued to generate net new money inflow in the first half of 2020. Net new money inflow was achieved in fund business and on the European markets thanks to intensive market development. Client assets under management as of 30 June 2020 totalled CHF 20.1 billion (31 December 2019: CHF 20.7 billion). The employee headcount rose from 325 (30 June 2019) to 336 positions.
Corporate Center
Segment results | ||||
in CHF 1,000 | 01.01.–30.06.2020 | 01.01.–30.06.2019 | Variance | Variance |
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Total net interest income | 3,903 | –4,992 | 8,895 | 178.2 |
Total net income from commission | –3,430 | –3,039 | –391 | –12.9 |
Income from trading activities | 14,688 | 14,884 | –196 | –1.3 |
Income from financial instruments | 4,930 | 11,257 | –6,327 | –56.2 |
Other income | –1,117 | –1,253 | 136 | 10.9 |
Total operating income | 18,974 | 16,857 | 2,117 | 12.6 |
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Personnel expenses | 35,085 | 33,842 | 1,243 | 3.7 |
General and administrative expenses | 14,750 | 14,619 | 131 | 0.9 |
Depreciation of property, equipment and intangible assets | 8,233 | 8,035 | 198 | 2.5 |
Credit loss expenses | –2 | –57 | 55 | 96.5 |
Provisions and losses | 0 | 0 | 0 | 0.0 |
Services to/from other segments | –21,914 | –20,438 | –1,476 | –7.2 |
Operating expenses | 36,152 | 36,001 | 151 | 0.4 |
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Segment income before income tax | –17,178 | –19,144 | 1,966 | 10.3 |
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Additional information |
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Headcount (number of employees) | 415 | 402 | 13.0 | 3.2 |
Headcount (expressed as full-time equivalents) | 379.1 | 367.2 | 11.9 | 3.2 |
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 Services, Corporate Excellence & Transformation, Corporate Services, Group Credit, Group Treasury & Execution, Group Finance, Group Financial Management & Reporting, Group Risk, Group Legal Services, Group Compliance, Group Human Resources and the CEO Office. In addition, those revenues and expenses of VP Bank Ltd that have no direct relationship to client-oriented business segments, as well as consolidation adjustments, are reported under the Corporate Center. The revenue-generating business activities of the segment “Corporate Center” are associated with the exercise of 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 2020 amounted to CHF –17.2 million as opposed to CHF –19.1 million in the previous-year period.
In the first half of 2020, operating income increased by CHF 2.1 million on that of the previous-year period.
Net interest income increased by CHF 8.9 million compared with the previous-year period.
This is partially due to higher earnings from SNB swaps and the optimisation of liquid fund investments.
Commission and service income saw a fall in revenues. This includes 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. Income from derivatives for risk minimisation and income from balance sheet management are disclosed under this position too.
Income from financial investments totalled CHF 4.9 million in the first half of 2020 due to market performance. This position recorded a result of CHF 11.3 million in the previous-year period.
Operating expenses were kept on a par with those of the previous year at CHF 36.2 million (0.4 per cent). Personnel, general and administrative expenses increased by CHF 1.2 million and CHF 0.1 million respectively. Depreciation and amortisation increased slightly from CHF 8.0 million to CHF 8.2 million.
The employee headcount rose from 367 (30 June 2019) to 379 positions.