In 2015, we set ourselves ambitious goals for the next five years with the StepUp2020 strategy. Now we are in the final straight. Today, the Group has grown and stands on a broader foundation. We have grown profitably and significantly strengthened our earning power through targeted acquisitions.
Record volume thanks to profitable growth
Persistently low interest rates, geopolitical risks, great volatility on the financial markets and additional regulatory requirements are continuing to create enormous challenges for banks. We have performed very well in this challenging environment. The 2019 business year was very pleasing for us. At CHF 123.4 million (2018: CHF 85.1 million), Group net profit was 44.9 per cent up on the previous year’s result (see “Consolidated management report”) and was therefore higher than for the last ten years. Operative progress, as well as market and one-off effects contributed to this positive business result. We succeeded in making substantial gains in income from fee and commission business. This has improved the quality of our earning power. We attained a stable performance in interest and trading income.
Net new money inflows posted an outstanding result: at CHF 4.1 billion (2018: CHF 1.3 billion) we achieved a record value. The business volume also attained a new record with CHF 89.3 billion (2018: CHF 80.1 billion). Client assets under management grew to CHF 76.3 billion (2018: CHF 67.3 billion). Loans to clients rose to CHF 13.0 billion (2018: CHF 12.9 billion), of which CHF 11.3 billion was attributable to mortgage lending business, which increased by 1.8 per cent.
With equity totalling CHF 2.1 billion, the LLB Group has a very strong capital basis. At the end of 2019, the tier 1 ratio stood at 19.6 per cent. Accordingly, we belong in the top range of banks in Liechtenstein and Switzerland, well above the average of European financial institutes. On the basis of its excellent Aa2 deposits rating, which was reconfirmed by Moody’s in December 2019, Liechtensteinische Landesbank is ranked among the highest rated banks in the world. This comfortable capital situation offers us broad scope for further acquisitions.
European champions in investment business
Over the years we have received many awards for our successful asset management. In 2019, we were the recipients of a particular honour: at the Refinitiv Lipper Fund Awards 2019, the LLB Group range of funds was named European Champions in the three main categories of bonds, equities and investment objective funds in Europe. This underlines the fact that our highly experienced Asset Management team ranks among Europe’s elite (see chapter “Institutional Clients”).
Excellent client advisory services
The quality of our advisory services is also excellent. For example, at the independent comparison test held by the Fuchsbriefe publishing house in the German-speaking region, Liechtensteinische Landesbank was awarded the rating “extremely good”. We achieved the best result of the institutes tested in Liechtenstein and Germany.
This excellent result underlines the competence of our client advisers. A decisive success factor for us, in which we continually invest. For example, with the certification of our client advisers we ensure the long-term outstanding advisory competence of the LLB Group according to standardised quality criteria. By the end of 2020, all our staff having client contact will have completed the training programme according to the standards of the Swiss Association for Quality (SAQ).
New IT era at LLB Österreich
It was a project involving a very high degree of complexity. Over 200 employees worked intensively in 2019 on the migration of LLB Österreich to the Avaloq core banking system. Our clients in Austria are now also able to benefit from our groundbreaking Online and Mobile Banking applications, as well as from the “LLB Invest” investment advisory and asset management system and the LLB portfolio analysis tool. The system migration in Austria means that the LLB Group has successfully inaugurated a new IT era. All three banks now operate the same IT platform. This enhances the efficiency of our internal processes and also helps us to further increase growth and profitability (see chapter “Corporate Center”).
LLB fund powerhouse – concentrated power
With four investment fund management companies in our three domestic markets, we have positioned ourselves as a competent investment fund powerhouse providing access to the European and Swiss economic areas. In 2019, we were able to substantially expand our investment fund volume. In the meantime, our 80 staff administer around 650 funds (2018: 612) having assets of CHF 36.6 billion (2018: CHF 30.5 billion). With their extensive experience and multifaceted range of services, the fund managers that we took over in 2018 in Austria and Switzerland are making a significant contribution to our fund powerhouse (see chapter “Institutional Clients”.
Exploiting new growth perspectives in the Middle East
In summer 2019, we moved into new offices in the Dubai International Financial Centre (DIFC). This relocation to the Financial Free Zone enables LLB to further expand its activities and services, thus exploiting new growth possibilities. LLB has operated in the United Arab Emirates since 2005 and by taking this step continues the story of its business success in this region.
Two successful bond issues
In May, LLB carried out a very successful fixed interest bond issue amounting to CHF 150 million. The issue was very popular with investors and was substantially oversubscribed after only a few minutes. In September, LLB followed up with a second bond issue totalling over CHF 100 million, which was also very well received. These successful bond offerings confirmed that LLB enjoys an excellent reputation on the market. This was the first bond issue LLB has made since 2006.
We completed the share repurchase programme initiated in the previous year ahead of schedule in November 2019. A total of 400'000 listed registered shares, corresponding to 1.30 per cent of the share capital, were repurchased. The registered shares held by LLB are to be employed for future acquisitions or treasury management purposes.
US tax dispute resolved
At the beginning of August, we were able to announce that LLB Verwaltung (Switzerland) AG had reached a settlement with the US authorities for a total of USD 10.7 million, therefore bringing to a close the case of the former LLB (Switzerland) AG. The payment to the US authorities was fully covered by provisions.
Analogue and digital client contact points
We are continually investing in the further development and latest technology of our digital channels. In autumn 2019, we added new important functions to our Mobile Banking application while also simplifying its design and user navigation. Our Online Banking programme has also been upgraded for our institutional clients by providing them with improved user interfaces and many personalisation options (see chapter “Corporate Center”). In 2020, we want to implement specific measures to achieve a more direct configuration of our digital processes to minimise the time requirement for our intermediary clients.
At the same time, we are adapting the physical contact points to suit our clients’ requirements. Following the successful reopening of the redesigned Balzers branch, we are now remodelling the branch in Eschen. The redesign of the client zone in Vaduz will follow in 2021. By that time, Bank Linth will also have remodelled all its twenty branches in line with the new branch concept. Currently, renovation work is being carried out in the Ausserschwyz and Lake Zurich regions.
Innovation management: laboratory for new ideas
Driven by technological advances, our world is subject to rapid and fundamental change. We are challenged to constantly question and analyse our business model, as well as our processes and client offers. Our Innovation Management Department continually monitors market trends and developments, and ensures that innovative ideas are expedited internally. If a suggestion convinces the jury, a budget for its further development as a project is allocated. Since the introduction of the scheme in 2018, employees have submitted more than 70 ideas, five of these are currently being developed or are already in a pilot testing phase.
Best practice in the Board of Directors
At the General Meeting of Shareholders on 3 May 2019, shareholders elected Dr. Karl Sevelda, a highly experienced banker and profound expert on the European financial market and the Austrian financial centre, to the Board of Directors. Dr. Patrizia Holenstein was re-elected for a third term of office of three years. At the forthcoming General Meeting on 8 May 2020, Board Chairman Georg Wohlwend, Vice Chairwoman Dr. Gabriela Nagel-Jungo and Urs Leinhäuser are up for re-election to safeguard continuity on the Board of Directors. The LLB Group’s Board of Directors holds the “Best Board Practice” label of the Swiss Association for Quality and Management Systems (SQS) as well as the Liechtenstein Association for Quality Assurance Certificates (LQS).
Higher dividend once again
We pursue a long-term dividend policy with a very attractive dividend yield for investors. In recent years, we have continually increased the dividend. The Board of Directors will propose to the General Meeting of Shareholders on 8 May 2020 another increase of 4.8 per cent in the dividend to CHF 2.20. This represents a dividend yield of 3.5 per cent.
StepUp2020 in the final straight
We started this new decade and also the last year of our StepUp2020 strategy period full of élan and confidence. Our three banks have all reached a competitive size. Thanks to our uniform core banking software, we operate efficiently and can take full advantage of the synergies within our three banking institutes. We have increased our weight in investment fund business thanks to our position as a fund powerhouse, as well as expanding our range of products and services and our expertise. All our business areas are supported by our outstanding Asset Management team.
Thanks to our stable foundation, broadly diversified earnings structure and focused business model, we have put in place a good basis for the further development of our corporate group. We expect to make further operative progress and achieve a solid business result in 2020.
Thank you for your confidence
To enable us to continue our almost 160 years of business success, we rely on the confidence of our clients, the commitment and competence of our employees and, of course, esteemed shareholders, your trust. Thank you for your great dedication to our company.
Chairman of the Board of Directors