Consolidated management report
LLB Group financial statement
The consolidated financial statement is prepared in accordance with the International Financial Reporting Standards (IFRS).
In the 2014 business year, the LLB Group earned a net profit of CHF 72.6 million (2013: CHF 53.8 million). Net profit in 2014 therefore rose significantly by 35.0 percent or CHF 18.8 million compared with the previous year.
In the previous year, the LLB Group had to recognise one-off effects in connection with the Group’s new strategic focus and the US taxation dispute totalling CHF 58.6 million (see the 2013 annual report in this respect). Furthermore, the 2013 financial statement also contained the operating income and operating expenses of the Jura Trust Group, which were sold in the second half of 2013, and of LLB (Switzerland) Ltd., which ceased its banking activities at the end of 2013. The previous year’s figures, adjusted to consider the one-off effects and the sold and discontinued Group companies, are provided as a comparison basis for the previous year.
In spite of significantly lower interest rates, income from interest business increased slightly on a comparable basis relative to the previous year. We posted a stable result with net fee and commission income on a comparable basis relative to the previous year. Regarded from the perspective of the reporting date, lower medium and long-term market interest rates prompted higher costs for interest rate hedges. These interest rate hedging costs were primarily responsible for the reduction in operating income relative to the comparable basis for the previous year. Operating expenses were again reduced relative to the comparable basis for the previous year, reflecting the consistent implementation of our Focus2015 strategy. The net profit attributable to the shareholders of LLB amounted to CHF 70.7 million (2013: CHF 49.8 million). Earnings per share stood at CHF 2.45 (2013: CHF 1.75).
Assets under management
Assets under management stood at CHF 50.2 billion at 31 December 2014 (31.12.2013: CHF 49.1 billion). We attained a performance-related increase in client assets of 2.3 percent. Assets in own-managed funds rose by 7.7 percent to CHF 4.5 billion (31.12.2013: CHF 4.2 billion). Assets with discretionary mandates amounted to CHF 8.6 billion (31.12.2013: CHF 8.3 billion). Other client assets under management climbed slightly to CHF 37.1 billion (31.12.2013: CHF 36.6 billion).
Net new money inflows of CHF 514 million were booked in the growth markets. As expected, money outflows were registered in the traditional cross-border markets. In the onshore markets, isolated large outflows in the first half year from custodian bank funds and public institutions tarnished the Group’s good acquisition performance. In total, the LLB Group’s net new money outflows amounted to CHF 350 million (2013: minus CHF 2’167 million, which was principally attributable to the closure of LLB Switzerland).
Assets under management
In the 2015 business year, the LLB Group will strive to further improve its operative performance. At the same time, the LLB Group sees risks and uncertainties as a consequence of the Swiss National Bank’s decisions regarding the introduction of negative interest rates and in withdrawing its support of the minimum exchange rate of the Swiss Franc to the Euro. The fall in medium and long-term interest rates had an adverse effect on the LLB Group’s 2014 business result. Accordingly, the development of market interest rates remains a factor of uncertainty in 2015, which could have a major effect on the business result. The LLB Group sees further latent risks in the development of the stock markets, which has a substantial influence on the valuation of financial investments and client assets under management. In spite of the Group’s successful strategic repositioning, from the present perspective regarding the current negative market interest rate situation, probably not all the quantitative 2013–2015 targets can be achieved. The LLB Group is continuing to consistently implement its Focus2015 strategy. On account of its focus on selected client segments and markets, the LLB Group expects a net new money outflow in the traditional cross-border and non-strategy-conforming markets, which probably cannot be fully compensated for by the expected growth in net new money in the onshore and strategic target markets.