Operating income decreased by 8.3 percent to CHF 313.2 million (2014: CHF 341.5 million). On a comparable basis operating income would have been 2.5 percent higher than in the previous year.
Interest income before credit loss expense was down in the 2015 business year by 3.0 percent to CHF 132.5 million (2014: CHF 136.6 million). Interest business with clients increased by 2.9 percent in comparison with the previous year. The negative effects on interest income caused by the extension of fixed interest loans at lower conditions were compensated for by targeted growth, an improved margin in mortgage lending business, and lower refinancing costs. On account of the SNB’s decision to charge negative interest on credit balances, market interest rates slipped into negative territory at the beginning of the year. Currently, the LLB Group is not directly affected by the negative interest rates because the LLB was always below the SNB’s exemption limit. However, in some cases it does pay negative interest on interest rate hedging instruments and money invested in the interbank market. Consequently, interest business with banks contracted. In the 2015 business year, a net charge of CHF 6.0 million (2014: CHF 1.8 Mio.) was made to the income statement for credit loss expense, and this was stabilised at a low level.
Net fee and commission income decreased by 21.5 percent to CHF 149.6 million (2014: CHF 190.6 million). On a comparable basis with the previous year, net fee and commission income would have fallen by 3.2 percent in the 2015 business year. For over a year, the LLB Group has stopped accepting retrocessions and consistently passes on all such payments on its own and external investment funds to clients. Accordingly, income from retrocessions has fallen. At the same time, the lifting of the SNB’s support for the minimum Euro exchange rate had an adverse impact on income from fee and commission income. Around 50 percent of client assets are invested in foreign currencies. The devaluation of these currencies led to a reduction in client assets under management, which in turn had a negative impact on volume-dependent earnings.
Net trading income amounted to CHF 33.1 million (2014: minus CHF 24.0 million). In the business year under report, on account of a further fall in market interest rates, an impairment of CHF 10.1 million was recognised on interest rate hedging instruments on the balance sheet date (2014: minus CHF 56.4 Mio.). In recent years, medium and long-term interest rates were subject to major fluctuations, which increased volatility in the income statement. The LLB Group took appropriate measures and in 2015 introduced hedge accounting (fair value hedges) for interest rate swaps. Consequently, reporting date-related valuation losses on interest rate swaps designated as fair value hedges in hedge accounting are to be recognised separately, without affecting the income statement. Client trading with foreign exchange, foreign notes and precious metals rose by 33.7 percent to CHF 43.0 million in comparison with the previous year. The increase was attributable to higher foreign exchange trading volumes as a result of the SNB’s lifting of the minimum Euro exchange rate.
Net income from financial investments at fair value through profit and loss amounted to minus CHF 0.7 million (2014: plus CHF 36.3 million). Market turbulence resulted in unrealised price losses of CHF 18.8 million (2014: CHF 20.6 million). To reduce the volatility arising from unrealised price gains, the LLB Group now enters newly purchased financial investments as available-for-sale financial assets in the balance sheet, whereby changes in value are recognised in other comprehensive income without affecting the income statement. Income from interest and dividends stood at CHF 18.0 million, exceeding the previous year’s level by 15.1 percent.
Other income totalled CHF 4.8 million (2014: CHF 3.7 million).
Operating income 2015 (in CHF millions)
Operating expenses stood at CHF 221.1 million and were therefore 18.4 percent or CHF 49.9 million below the previous year’s figure of CHF 271.0 million. On a comparable basis with the previous year, operating expenses in the 2014 business year would have amounted to CHF 243.5 million. This corresponds in 2015 to a reduction of CHF 22.4 million or 9.2 percent. The goal stipulated in the Focus2015 strategy of cutting operating expenses to CHF 240 million per year was achieved by the LLB Group at the end of 2015. The savings attained in recent years are a reflection of the consistent cost management and continuing cost discipline of the LLB Group.
At CHF 123.8 million, personnel expenses were 24.5 percent lower than in the previous year (2014: CHF 163.9 million). On a comparable basis with the previous year, personnel expenses were reduced by 12.0 percent. Contained in this amount is a one-time reduction in defined benefit obligations of CHF 7.9 million resulting from plan adjustments, as well as a one-time decrease in personnel expenses due to the termination of employee benefit obligations in connection with the closure of the former LLB (Switzerland) Ltd. Furthermore, lower variable salary compensation for the business year contributed to the reduction. At 31 December 2015, the LLB Group had 816 full-time equivalent positions (31.12.2014: 893). The decline in full-time positions was largely attributable to the sale of the swisspartners Group.
General and administrative expenses of the LLB Group in the 2015 business year stood at CHF 63.7 million (2014: CHF 74.8 million) and were therefore lower by CHF 11.1 million. General and administrative expenses were lower by 13.7 percent, or CHF 10.1 million, on a comparable basis with the previous year. The decrease was attributable to lower occupancy expense and lower expenses for IT systems, as well as reduced expenses for provisions for legal and litigation risks.
On account of a one-time impairment on immaterial assets, depreciation and amortisation rose by 4.1 percent, or CHF 1.4 million, to CHF 33.7 million (2014: CHF 32.3 million).
The Cost-Income-Ratio for 2015 stood at 69.5 percent (2014: 78.3 %). Without market effects, i. e. without income from interest rate swaps and price gains from financial investments, the Cost-Income-Ratio stood at 63.7 percent (2014: 70.9 %).