Operating income rose in the 2017 financial year by 7.5 percent to CHF 399.4 million (2016: CHF 371.7 million).
Interest income before credit loss expense was affected by the negative interest rate environment, it fell by 4.3 percent to CHF 132.1 million (2016: CHF 138.1 million). Income from interest business with clients remained stable. The negative effects on interest income caused by the extension of fixed-interest loans at lower conditions were compensated for by targeted, risk-conscious growth in mortgage lending business. In some cases, the LLB Group pays negative interest on interest rate hedging instruments, money invested in the interbank market and on money deposited with the Swiss National Bank. In comparison with the previous year this led to a sharp fall in interest business with banks.
In the 2017 financial year, the LLB Group released allowances for credit losses amounting to net CHF 8.3 million to the credit of the income statement (2016: allocation of CHF 1.0 million). This was largely due to the successful completion of a recovery position.
Net fee and commission income increased by 6.2 percent to CHF 154.8 million (2016: CHF 145.7 million). This was attributable to successful marketing measures and the launching of new products and new pricing models. Net brokerage rose substantially in comparison with the previous year by 6.9 percent due to clients’ increased stock market transactions. The recovery of the financial markets in the 2017 financial year enabled the LLB Group to generate higher performance-linked earnings. In addition, higher custody account volumes led to increased earnings from securities administration.
Net trading income in the 2017 financial year stood at CHF 83.0 million (2016: CHF 55.9 million). Trading in foreign exchange, foreign notes and precious metals rose substantially in comparison with the previous year by 46.7 percent to CHF 61.3 million. Increased client trading activity and the treasury performance were the key factors in this rise. On account of the higher long-term market interest rates in the 2017 financial year, from the perspective of the reporting date, valuation gains on interest rate hedging instruments amounted to CHF 21.5 million (2016: CHF 14.1 million).
Net income from financial investments at fair value through profit and loss totalled CHF 16.3 million (2016: CHF 21.8 million). Income from interest and dividends remained almost unchanged in comparison with the previous year at CHF 14.8 million.
Other income amounted to CHF 4.8 million (2016: CHF 11.1 million). The previous year’s figure included the proceeds from the sale of property.
Operating expenses climbed in the 2017 financial year by 3.4 percent to CHF 267.0 million (2016: CHF 258.2 million).
At CHF 155.4 million, personnel expenses were up by 10.3 percent or CHF 14.6 million compared with the previous year (2016: CHF 140.8 million). The previous year’s figure contained one-time expense reductions totalling CHF 10.2 million from the valuation of staff pension obligations. In the year under report, one-time, additional expenses for staff pension obligations totalling CHF 1.1 million are included. Without these effects, personnel expenses would have increased by 2.2 percent or CHF 3.3 million on account of the strategic expansion of human resources.
General and administrative expenses decreased by 7.8 percent or CHF 7.1 million to CHF 82.8 million (2016: CHF 89.9 million). This position includes the release of provisions for legal and litigation risks as well as lawyers’ and legal representation expenses (see also Note 26). In the previous year, provisions amounting to CHF 24.4 million were allocated for legal and litigation risks. Without these effects, general and administrative expenses would have remained largely unchanged in comparison with the previous year.
Depreciation and amortisation increased marginally to CHF 28.8 million (2016: CHF 27.5 million).
The Cost-Income-Ratio rose to 69.6 percent (2016: 62.8%). Without market effects, i.e. without income from interest rate swaps and price gains from financial investments, the Cost-Income-Ratio stood at 73.9 percent (2016: 66.5%).