The 2015 business year marks a decisive turning point for the LLB Group. Following the completion of the Focus2015 strategy, we have reached a position of strength and can look back at a successful year. We have improved our operating performance still further, providing us with room for manoeuvre. With the StepUp2020 strategy, we are setting ourselves new targets and entering a phase of sustainable profitable growth in 2016.
Sharp rise in profit
Despite the many and diverse challenges faced, the business results for 2015 were gratifying. Banks are still operating in a demanding economic environment with volatile financial markets, historically low interest rates and growing regulation. The Swiss National Bank’s (SNB) decision in the middle of January 2015 to abandon the minimum exchange rate of the Swiss franc to the euro and to introduce negative interest rates compounded the situation. We reacted quickly and introduced measures to remain on course.
We increased our net profit by as much as 19.7 percent to CHF 86.3 million in 2015 (2014 restated: CHF 72.1 million, see point No. 2.1 of the accounting principles). We reduced our operating expenses by 18.4 percent to CHF 221.1 million (2014: CHF 271.0 million) and more than met our target of CHF 240 million. We achieved good business results not only through strict cost management, but also through the profitability of our services. On a comparable basis to last year, adjusted to consider the sale of the swisspartners Group, increased by 2.5 percent to CHF 313.2 million (2014: CHF 305.4 million).
At the end of 2015, the LLB Group posted a business volume of CHF 56.6 billion (2014: CHF 60.9 billion). Due to the sale of swisspartners (CHF 3.3 billion) and the appreciation of the Swiss franc (CHF 1.0 billion), assets under management decreased to CHF 45.6 billion (2014: CHF 50.2 billion). Net new money outflows amounted to CHF 206 million (2014: minus CHF 350 million). Loans to clients rose by 2.5 percent to CHF 11.0 billion (2014: CHF 10.7 billion). Mortgage loans increased by 2.6 percent to CHF 9.6 billion (2014: CHF 9.3 billion). With our prudent lending policy, we are growing in the current market situation in a risk-conscious manner.
Position of strength
Between 2013 and 2015, under Focus2015, we created stable foundations for a sustainable and successful future. We have refocused and restructured rigorously, and reduced costs and complexity substantially. We managed to increase our efficiency and profitability significantly due to the disposal of non-core Group companies, a focus on selected markets, the implementation of our tax compliance and cross-border strategies, and tight cost management.
Strict client orientation
In 2015, in what was a dynamic market environment, the LLB Group targeted strategic innovations to meet clients’ needs.
As business banks, the LLB and Bank Linth focus on small and medium-sized enterprises (SMEs). Since July 2015, corporate clients have benefited from a comprehensive advice and support concept as well as attractive SME box packages with transparent services and conditions. In 2015, we also created an omnichannel banking concept, which connects our bank branches with online and mobile banking seamlessly across channels. Since June 2015, Bank Linth has provided clients with a particularly positive experience at its new branch office in Sargans. In a multimedia client zone, the advisory service is made into an experience, while self-service for banking and financial transactions is made the norm.
We continually invest in promoting dialogue with our institutional clients and we provide them with access to proven know-how via our innovative “LLB Xpert Views” online platform and in exclusive round-table discussions. In 2015, we enhanced our range of funds and our quantitative-value-based analysis model. Two of our newly launched funds have already produced an above-average performance after the first six months: LLB Strategy Conservative, a strategy fund offering an attractive risk-return ratio, and LLB Alternative Strategy Global, an alternative assets fund. One of our great strengths is the investment competence of our Asset Management unit, as demonstrated by the number of renowned international awards we have received. In January 2016, the LLB Strategy Balanced (CHF) fund, for example, was named “outstanding” by the “German Fund Award” for the second time.
LLB share – attractive dividend
Our shareholders participate in our good results. In accordance with our long-term-oriented dividend policy of paying out between 40 and 60 percent of the net profit, the Board of Directors will propose a dividend per share of CHF 1.60 (2014: CHF 1.50) to the General Meeting of Shareholders on 4 May 2016. This represents an increase of 6.7 percent and an attractive dividend yield of 4.5 percent.
Election of Board of Directors and changes to Group Executive Board
The Board of Directors of Liechtensteinische Landesbank AG will propose the re-election of Patrizia Holenstein to the General Meeting of Shareholders on 4 May 2016. Changes to the Group Executive Board and the Board of Management will become effective on 1 July 2016. Heinz Knecht, Head of Retail & Corporate Banking Division, will enter retirement. His position will be taken over by Urs Müller, who is currently Head of Institutional Clients Division. The Board of Directors has appointed Natalie Epp, currently Head of the business area Fund Services, to the Group Executive Board and the Board of Management. She will succeed Urs Müller as Head of Institutional Clients Division. Through this change, we were able to fill the position internally. Moreover, she is the first woman to be appointed to the most senior executive committee in the history of the company.
The LLB Group considers sustainability or corporate social responsibility (CSR) to be an integral part of its business success. Sustainability to us means balancing economic activity with social and environmental responsibility. We are concerned with five main topics: market performance, compliance, society and the environment as well as employees. The importance we accord these topics is underlined by the fact that we are preparing the Annual Report 2015 using the guidelines of the “Global Reporting Initiative” (GRI) and, in particular, the GRI / G4 Sustainability Guidelines – “Core Option” for the first time. Through this, we disclose as described in chapter “GRI Content Index” – the ways in which we fulfil our corporate and social responsibilities.
Scope to make investments
Stability and security have never been more important than now for the financial industry. It is tradition and part of our identity to have a sufficiently high-quality equity base at our disposal. The LLB Group’s capital base covers the capital required to meet its objectives. Its equity consists solely of hard core capital totalling CHF 1.8 billion. The Tier 1 ratio stood at 20.6 percent as at 31 December 2015. These ratios are well above the legal requirements and underscore our solid capital base in international comparison. This gives us scope to make investments.
In 2016, the LLB Group will enter a new phase of strategic repositioning from a position of strength. Under the StepUp2020 strategy, the main focus up to 2020 will be on four core elements: growth, profitability, innovation and excellence.
Growth is to be achieved in two ways: Firstly, we want to grow organically by building on our own strengths. Secondly, we will target acquisitions in our home markets of Liechtenstein, Switzerland and Austria. To further improve our profitability, we intend to increase our margins by offering outstanding products and services. Also as part of StepUp2020, we will maintain strict cost management.
At the same time, we will invest substantial financial resources in the order of CHF 100 million over the next five years, on the one hand, to develop pioneering digital solutions and, on the other, to provide our clients with the best personalised service. To achieve excellence, we will optimise processes throughout the organisation using so-called lean management principles. Furthermore, exacting standards of compliance and an outstanding level of expertise are important to the LLB Group.
Outlook for 2016
We expect that the economic environment will remain challenging throughout 2016. The strength of the Swiss franc, negative interest rates, volatile financial markets and growing regulation will continue to put pressure on banks. With the StepUp2020 strategy, we are targeting sustainable profitable growth. We are confident that thanks to our stable foundations, focused business model and clear strategy we will make further progress on the operational front and generate a solid net profit in the 2016 business year.
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.
Chairman of the Board of Directors