Repositioning well on course
The consistent implementation of the Focus2015 strategy was the first priority for the LLB Group in 2014. Our strategy has a clear goal: at a time of fundamental change in the banking industry, we want to create the essentials for sustainable success in and beyond 2015. Two thirds of the process to achieve our strategic repositioning has been completed, and we are well on the way to attaining our objectives. In 2014, we improved our operative performance once again. Group net profit rose by 35.0 percent to CHF 72.6 million.
For the LLB Group, 2014 was marked by the further development of strategic initiatives, following our success in substantially reducing costs and complexity in 2013. In 2014, we were again able to increase profitability while also investing in targeted innovations. The digital revolution is opening up new client service possibilities for us. We are taking advantage of these opportunities to achieve excellence in distribution. We are also on course with the development – in line with our strategy – of our international target markets in Central and Eastern Europe as well as the Middle East.
Added value for our clients
As a universal bank with a strong private banking and institutional business, we consistently focus on the needs of our clients. On 1 July 2014, the Liechtensteinische Landesbank and Bank Linth set themselves apart from the rest of the market by introducing an innovative pricing model, which offers clients services exempt from retrocessions. Our clients want more transparency, a clear fee structure and an attractive price / performance ratio. We fulfil these requirements with our performance promise to them. The combination of an innovative pricing model with prize-winning investment competence provides the LLB Group, as an investment and asset management bank, with a strong competitive edge.
Numerous awards received in this and in recent years clearly demonstrate how the LLB Group with its systematic investment process, expertise and experience creates substantial added value for its investors. In 2014, for example, at the “24th Lipper Fund Awards” in Switzerland, the LLB Equities Regio Bodensee (CHF) fund was honoured again – 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. In January 2015, 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”.
Thanks to its modern IT infrastructure, our Corporate Center is a source of innovation. Since December 2013, we have been offering our clients an attractive and innovative mobile banking app for iOS, and since June 2014, for Android smartphones and tablets.
By offering their “young Liechtenstein” and “young Linth”, “youli” for short, banking services, our Retail & Corporate Banking Division is enhancing the strong market position of the LLB and Bank Linth in the youth segment.
In 2014, our Private Banking Division enlarged its 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.
The partnerships we enjoy with our intermediary clients are extremely important to us. The Institutional Clients Market Division provides sound, structured, and contemporary knowledge in the areas of investment, legal issues and taxation via its innovative “LLB Xpert views” online platform.
Good operative performance
The business environment continued to be extremely challenging in 2014. The LLB Group again felt the effects of the persistently low interest rate levels. In spite of rising prices on the stock markets, many clients continued to exercise investment restraint.
Despite this head wind, the LLB Group again achieved a good operative performance in 2014. Net profit stood at CHF 72.6 million (2013: CHF 53.8 million) and was therefore 35.0 percent above the previous year.
Operating income fell by 29.8 percent to CHF 342.0 million. Adjusted to consider the successful sale of the Jura Trust Group, the closure of LLB (Switzerland) Ltd. and one-off effects, operating income decreased in comparison with the previous year (CHF 380.4 million) by 10.1 percent. Although operative performance improved, the lower valuations – caused by falling interest rates – of interest rate swaps employed for hedging purposes were largely responsible for this decrease.
On a comparable basis, operating expenses were reduced by 3.2 percent from CHF 280.0 million to CHF 271.0 million. The savings reflect the consistent implementation of our Focus2015 strategy and the continuation of our cost-saving and efficiency improvement programme.
At the end of 2014, the LLB Group posted a business volume of CHF 60.9 billion. As per 31 December 2014, client assets under management rose by 2.3 percent to CHF 50.2 billion (31.12.2013: CHF 49.1 billion). The positive performance on the financial markets enabled outflows of clients’ assets to be more than compensated for. In the growth markets, the LLB Group achieved solid net new money inflows amounting to CHF 514 million. As expected, money outflows were recorded in the traditional, cross-border markets. Although isolated, large outflows tarnished the Group’s acquisition performance in the first six months in the onshore markets, in the second half of the year a net new money inflow of CHF 301 million was recorded. In total, the LLB Group’s net new money outflows amounted to CHF 350 million. Loans to clients rose by 4.7 percent to CHF 10.7 billion (2013: CHF 10.2 billion). Mortgage loans climbed by 4.5 percent to CHF 9.3 billion (2013: CHF 8.9 billion). This shows that we remain committed to our well-proven lending policy. In the current market situation, we are growing selectively in a risk-conscious manner.
Strong capital base
For us it is self-evident that we must have an adequate, high-quality capital base. The LLB Group’s equity capital covers the capital requirements in our target markets. At 31 December 2014, the tier 1 ratio stood at 18.3 percent (31.12. 2013: 18.8 %). With equity capital of CHF 1.8 billion (2013: CHF 1.8 billion), the LLB Group stands for financial stability and security.
Upward trend of LLB-share
In 2014, the LLB share made further gains. It closed on 31 December 2014 at CHF 40.–. Its overall return amounted to 12 percent, meaning that it significantly exceeded the European banking sector. The Stoxx Europe 600 Banks Index in CHF lost 1.4 percent up to the end of 2014. In accordance with our long-term distribution policy, the Board of Directors will propose an unchanged, stable dividend of CHF 1.50 (2013: CHF 1.50) to the General Meeting of Shareholders on 8 May 2015.
Election of Board of Directors
The Board of Directors of Liechtensteinische Landesbank AG proposes to the General Meeting on 8 May 2015, that the Chairman, Dr. Hans-Werner Gassner, as well as the members Markus Büchel, Markus Foser and Roland Oehri be re-elected to the Board of Directors. Furthermore, the Board of Directors proposes a general amendment of the bank’s statutes with the aim of specifically strengthening shareholders’ rights and generally modernising the statutes.
Innovatively going forward
At a time of dramatic change in the banking industry, our competitiveness is of vital importance. In 2015, we shall consistently push ahead with our Focus2015 strategy and our repositioning on the market. This includes dealing with taxation issues. The LLB Group supports the tax compliance strategy of the Liechtenstein financial center, and actively embraces the transformation process.
Liechtenstein was one of the 52 countries, which signed the agreement on the automatic exchange of information on 29 October 2014. Liechtenstein is regarded as a reliable partner and its financial center is seen as a service-oriented asset management center dedicated to providing holistic adivsory services.
In an innovative partnership with Avaloq, the leading provider of integrated solutions for wealth management, universal and retail banks, as well as swissQuant Group, a company specialised in risk and earnings analysis, the LLB is developing an innovative investment advisory application. This will enable us to set ourselves apart from our competitors and help us to create new possibilities of providing advice to clients.
The banks are still operating in a difficult economic and political environment, characterised by volatile financial markets, historically low interest rates, fierce competition, mounting pressure on margins and increasing regulation. The situation has been exacerbated by the Swiss National Bank’s decision to stop supporting the minimum exchange rate of the Swiss Franc to the Euro, and by the negative market interest situation. The LLB Group will strive to further improve its operative performance. At the same time, we expect to achieve a lower level of net profit in the 2015 business year. Against this background, from today’s perspective, we shall not attain all the defined quantitative goals for the period 2013 to 2015, especially not those in relation to the Cost-Income-Ratio and the cumulative Group net profit target.
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 is well advanced and is reflected in our higher profitability. At the same time, we are delivering a solid business result for our stakeholders. In view of the harsher conditions, we shall implement further measures to strengthen our earning power and keep costs firmly under control. In addition we shall continue to invest in the future and actively promote innovation.
The LLB Group has in place all the essentials to strengthen and expand its competitive position: loyal clients, dedicated and competent employees as well as financial soundness.
We would like to express our sincere thanks to you, our shareholders, for the trust you place in us. What the LLB has achieved was made possible by the loyalty of our shareholders and clients, as well as our staff, who give their best every day.
Dr. Hans-Werner Gassner