Income statement

Operating income fell by 29.8 percent to CHF 342.0 million (2013: CHF 487.0 million). On a comparable basis with the previous year, operating income would have been 10.1 percent lower than in the previous year. Drastically lower medium and long-term interest rates in the 2014 business year were almost exclusively responsible for this reduction. Regarded from the perspective of the reporting date, the lower medium and long-term interest rates led to valuation losses and therefore to interest rate hedging costs of CHF 55.9 million (2013: plus CHF 30.3 million).

Interest income before credit loss expense was down in the 2014 business year by 6.2 percent to CHF 136.6 million (2013: CHF 145.7 million). On a comparable basis with the previous year, interest income increased by a total of 0.5 percent.

On a comparable basis with the previous year, interest business with clients increased by 4.5 percent. This was largely attributable to the lower interest paid to clients. As expected, interest income due from banks again declined due to historically low interest rates and the lack of alternative investments on the interbank market. In the 2014 business year, net credit risk recovery of CHF 1.8 million were charged to the income statement. This is a reflection of the measures implemented to strengthen the Group’s credit. In the previous year a charge of CHF 25.0 million was made to the income statement.

Net fee and commission income decreased by 9.4 percent to CHF 190.6 million (2013: CHF 210.4 million). On a comparable basis with the previous year, net fee and commission income in 2014 would have remained unchanged. Brokerage earnings declined on account of the marked restraint in investment activity by clients.

Net trading income fell substantially to minus CHF 23.4 million (2013: plus CHF 58.6 million). Whereas in the previous year income from interest rate swaps of CHF 30.3 million was posted, in the 2014 business year interest rate hedging costs of CHF 55.9 million were incurred. This was due to the drastic fall in medium and long-term interest rates, which led to a valuation loss on interest rate hedging instruments on the reporting date. Client trading with foreign exchange, foreign notes and precious metals rose by 14.4 percent to CHF 32.1 million compared with the previous year.

Net income from financial investments at fair value through profit and loss amounted to CHF 36.3 million (2013: CHF 15.6 million). As a result of the fall in medium and long-term interest rates, unrealised price gains were attained with interest-bearing investments. In addition, price gains were recorded on the back of the positive price development on the stock markets. In total, price gains amounted to CHF 20.6 million compared with CHF 3.3 million in the previous year. Income from interest and dividend payments at CHF 15.7 million exceeded the previous year’s figure by 26.9 percent.

Other income totalled CHF 3.7 million (2013: CHF 81.5 million). In the previous year a value adjustment of CHF 55.4 million from a purchase price obligation was recorded in other income.

Operating income 2014

Operating income 2014 (bar chart)

Operating expenses stood at CHF 271.0 million and were therefore 36.4 percent or CHF 155.1 million below the previous year’s figure of CHF 426.0 million. On a comparable basis with the previous year, operating expenses in the 2013 business year would have totalled CHF 280.0 million. The figure for 2014 therefore corresponds to a reduction of CHF 9.0 million or 3.2 percent. These savings are a firm reflection of the consistent implementation of our Focus2015 strategy and continuing effectiveness of our cost-cutting and efficiency improvement programme.

At CHF 163.9 million, personnel expenses were 5.4 percent lower than in the previous year (2013: CHF 173.2 million). On a comparable basis with the previous year, personnel expenses would have risen by 6.2 percent. The increase is attributable to the positive price development of the LLB share and the variable remuneration component calculated on the basis of the share’s performance. At 31 December 2014, the LLB Group had 893 full-time equivalent positions (31.12.2013: 925).

General and administrative expenses of the LLB Group in the 2014 business year stood at CHF 74.8 million (2013: CHF 194.1 million) and were therefore CHF 119.4 million lower than in the previous year. This was due to the one-off effects in the previous year. On a comparable basis with the previous year, general and administrative expenses in 2014 were reduced substantially by 10.9 percent or CHF 9.1 million.

Depreciation and amortisation decreased compared with the previous year by CHF 26.4 million to CHF 32.3 million (2013: CHF 58.7 million). One-off effects influenced this position in the previous year. On a comparable basis with the previous year, depreciation and amortisation fell by 22.7 percent.

The Cost-Income-Ratio for 2014 stood at 78.2 percent (2013: 67.7 %). The increase was largely attributable to the higher interest rate hedging costs caused by the drastic fall in medium and long-term market interest rates.

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