“The dialogue with our clients, as partners, is of central importance to us”
A discussion with Hans-Werner Gassner and Roland Matt
The LLB Group has completed two thirds of the process involved with its strategic repositioning. How satisfied are you?
Hans-Werner Gassner: We are consistently and successfully implementing the measures we planned in our Focus2015 strategy. We already significantly reduced costs and complexity in the previous year. In 2014, we further increased profitability, while also making investments in the future and in innovation. Our three market divisions have sharpened their focus and pay very close attention to their clients and markets.
The client is at the heart of our activities. How is this apparent?
Roland Matt: In every single contact. The dialogue with our clients, as partners, is of central importance to us. They regularly provide us with impulses for new developments. One example is our innovative pricing model. In Liechtenstein we are the first bank, and in Switzerland we are one of the first, to relinquish retrocessions in both asset management and investment counselling. By doing so, we are fulfilling our clients’ requirement for more transparency, a clear fee structure and an attractive price / performance ratio.
And is the performance good?
Roland Matt, Group CEO
Roland Matt: Absolutely. With our Asset Management we have outstanding investment competence. At the same time, we make great efforts to offer excellent advisory services. Numerous awards clearly demonstrate how the LLB Group with its systematic investment process, expertise and experience creates substantial added value for its investors. At the “24th Lipper Fund Awards” in Switzerland, the LLB Equities Regio Bodensee (CHF) fund was honoured again in 2014 – after 2007 and 2008 – for its absolute performance over three years. The fund received the award in the category “Equity Switzerland Small and Mid Caps” for the third time. And just recently, the LLB Strategy Balanced (CHF) fund was awarded the “German Fund Prize” at the “14th Funds Professional CONGRESS” in Mannheim, Germany. In the “Mixed Fund Global Multi Asset” category, the fund was awarded the title “Outstanding”. For our clients, investment competence is a primary criterion when choosing their bank.
How important are stability and security?
Hans-Werner Gassner: Reliability and security are more important than ever in the financial services industry. Clients attach great importance to a financially stable bank. A sound equity capital base offers clients, shareholders and staff an important foundation. With equity capital of CHF 1.8 billion, the LLB Group stands for stability and security.
What message is the LLB’s new slogan: “Tradition meets innovation” meant to express?
Roland Matt: We combine values that appear to be in conflict. With this slogan we focus on a pair of values. To actively shape the future, we need both values: tradition and innovation. The brand Liechtensteinische Landesbank stands for both. Our repositioning stands on a stable foundation: our deep roots going back over 150 years in Liechtenstein. Security and stability are important. For us they are traditional values. They are complemented by innovative power. In the digital era in a knowledge-based economy this is decisive for achieving success.
How do you assess the 2014 business year?
Roland Matt: The consistent implementation of the Focus2015 strategy was the first priority for us in 2014. Our focus was on the market-related strategic initiatives, which all progressed according to plan. At the same time, the LLB Group was affected by the consequences of the persisting low level of interest rates and the restraint shown by investors – and this in spite of the good prices on the stock markets.
Despite this head wind, the LLB Group again achieved a solid operative result. It was able to substantially increase its net profit. Group net profit reached CHF 72.6 million and was therefore 35 percent above the previous year. Client assets under management rose by 2 percent to CHF 50.2 billion and loans to clients climbed by 4.7 percent to CHF 10.7 billion.
How realistic are the financial goals that you set with the Focus2015 strategy?
Roland Matt: One goal we have more than attained: with a tier 1 ratio 18.3 percent, the LLB Group stands for stability and security − as it has done for many years. At the same time, our high sensitivity to fluctuations in interest rates is an adverse factor. The decision of the Swiss National Bank in January 2015 to stop supporting the Euro minimum exchange rate and the negative market interest situation have drastically changed basic business conditions. In spite of our successful strategic repositioning, from today’s perspective, we shall probably not attain all the quantitative goals that we set for the period 2013 to 2015, especially not those in relation to the Cost-Income-Ratio and the cumulative Group net profit target.
At the end of 2015, Focus2015 will have been implemented, which strategy comes next?
Hans-Werner Gassner: The development of a follow-up strategy will be a key topic in 2015. The Focus2015 strategy was the LLB Group’s response to a changed business environment with volatile financial markets, historically low interest rates, fierce competition, intensive margin pressure and increasing regulation. The Swiss National Bank’s decision has exacerbated this situation. The market and interest rate environment is not likely to improve in the near future. All these aspects will be taken into consideration in formulating our strategy after 2015. However, it has to be borne in mind that we will be building on a position of strength.
What are the LLB Group’s strengths?
Dr. Hans-Werner Gassner,
Chairman of the Board of Directors
Hans-Werner Gassner: Implementing our Focus2015 strategy has meant that we have acted decisively and adapted ourselves to the new competitive environment. This encompasses our focus on clients in selected markets, improved profitability, consistent process optimisation and the realisation of innovative solutions. Our corporate vision and our mission statement reinforce the bank’s positioning in genuinely living up to its values. In addition, the combination of an innovative pricing model with prize-winning investment competence firmly places the LLB Group in a strong position. With our solid equity capital base comprising solely hard core capital, we continue to possess high financial stability and security. And finally, we must not forget our ownership structure. Our majority shareholder, the Principality of Liechtenstein, is one of the fourteen countries in the world with an AAA rating.
Which strategic initiatives have you used to invest in the future in 2014?
Roland Matt: Let me mention just a few highlights of the many measures we have taken: with our innovative, retrocession-exempt pricing model we lead the way on the market. Our online and mobile banking platforms are also a success story. Since December 2013, we have been offering our clients an attractive and innovative mobile banking app for iOS, and since June 2014, also for Android smartphones and tablets.
For us, customer closeness and financial culture already begin in the school room. By offering their “young Liechtenstein” and “young Linth”, “youli” for short, banking services, our Retail & Corporate Banking Division is strengthening the strong market position of the LLB and Bank Linth in the youth segment.
With its investments, the Private Banking Division is also intensifying the LLB Group’s closeness to clients. In 2014, we enlarged our team of advisers for the growth markets in Central and Eastern Europe as well as the Middle East. In addition, we expanded our market-specific product offer and also provided our clients with access to the stock markets in Dubai and Abu Dhabi.
Moreover, our partnership with intermediary clients is of great importance to us. Our Institutional Clients Market Division provides sound, structured and up-to-date knowledge in the areas of investment, legal issues and taxation via the innovative «LLB Xpert views» online platform.
What key priorities have you specified for 2015?
Roland Matt: The key priorities are projects which offer genuine added value for our clients. For example, from the end of 2015 they will benefit from an innovative kind of investment advice. This will enable us to distinguish ourselves from our competitors while creating a new advisory experience for our clients with the aim of constructing tailor-made portfolios.
At the same time, we are planning to take full advantage of omni- channel banking and in 2015 we shall formulate a strategy to link up our bank branches with online and mobile banking. At the moment, a new bank branch is being built in Sargans, Switzerland. Our subsidiary, Bank Linth will set new standards there with its future-oriented customer zone, its inspirational advisory concept and its self-service for banking and financial transactions.
As a business bank, from the middle of 2015, we shall introduce a groupwide comprehensive advisory and care concept for small and medium-sized enterprises. For this purpose, we are developing a bespoke product structure for corporate clients, whereby we want to fulfil client requirements via various distribution channels. Moreover, on the basis of lean management principles, we want to accelerate and perfect lending approval and account opening processes.
A key topic in 2015 will be the automatic exchange of information.
Hans-Werner Gassner: Liechtenstein was one of the 52 countries, which signed an agreement regarding the automatic exchange of information on 29 October 2014. This means that in 2017, we are obliged to exchange data from 2016. Since 2012, the LLB Group has actively embraced the transformation process and is therefore leading the way in implementing the tax compliance strategy of the Principality of Liechtenstein. On 1 October 2012, it adopted a standard risk-based approach for new clients with tax self-declaration. This was extended to existing clients in 2014.
Furthermore, within the scope of our focus on clients in our target markets, we decided in a first step from 1 August 2014 only to accept new clients who domiciled in clearly defined countries. We shall concentrate here on gaining new clients in our onshore markets of Liechtenstein, Switzerland and Austria, on selected markets in Western Europe, as well as on the growth markets in Central and Eastern Europe and the Middle East.
How do you see the future development of the Liechtenstein financial center?
Hans-Werner Gassner: The financial center’s competitive advantages are its tradition in asset management, the quality of advice and service, as well as the high level of political stability and security. Cross-border private banking will continue to be an important pillar of business in the future. To be attractive for private clients, companies and institutional clients, Liechtenstein must assure the high quality of its financial players, services and product offers.
With the increasing density of the regulatory framework, politicians and officials must strive to support the financial center by creating stable and reliable basic business conditions. The Liechtenstein financial center and the LLB Group are already far advanced in adapting to the new regulatory environment.
What do you expect in 2015?
Roland Matt: The banks are still operating in a difficult economic environment, characterised by high volatility and historically low interest rates. The Swiss National Bank’s decision to withdraw its support for a minimum exchange rate of the Swiss Franc to the Euro, and the negative market interest situation, have exacerbated the situation. On the whole, the LLB Group is in a strong position. In the last two years, we have achieved a great deal, and actively met and mastered many challenges. Our strategic focusing process is well advanced and is reflected in our higher profitability. At the same time, we are delivering a solid business result. In 2015, we shall strive to achieve a further improvement in our operative performance. We shall consistently push ahead with our Focus2015 strategy and our repositioning in order to again enhance our strengths.