Consolidated interim management report

Income statement

In the first half of 2020, the LLB Group earned a net profit of CHF 60.2 million (first half of 2019: CHF 61.1 million). While the collapse of USD interest rates, the lower volume of client assets and the allocation of specific allowances had an adverse effect on the interim business result, the considerably higher turnover attained with net brokerage and in foreign exchange business made a positive contribution. A further positive effect occurred as a result of the adjustment of the conversion rate of the LLB’s pension fund.

The profit attributable to LLB shareholders amounted to CHF 57.1 million (first half of 2019: CHF 57.5 million). Earnings per share stood at CHF 1.87 (first half of 2019: CHF 1.88).

Operating income decreased in the first half of 2020 by 5.9 per cent to CHF 210.4 million (first half of 2019: CHF 223.7 million).

Interest income before expected credit losses fell by 4.6 per cent or CHF 3.8 million in comparison with the previous year to CHF 78.8 million (first half of 2019: CHF 82.6 million). Interest from interest business with clients rose marginally. In contrast, interest from business with banks fell, largely as a result of lower USD interest rates.

The LLB Group increased its risk provisioning in the first half of 2020. Allowances for expected credit losses totalling net CHF 13.8 million were allocated in the income statement (first half of 2019: release of CHF 3.7 million).

At CHF 99.4 million, net fee and commission income remained constant in comparison with the previous year (first half of 2019: CHF 99.0 million). The portion of income dependent on transactions rose on account of the volatility on the financial markets; net brokerage income climbed in comparison with the previous year by 30.7 per cent to CHF 23.5 million (first half of 2019: CHF 18.0 million). In contrast, portfolio-dependent income was lower due to the downturns on the financial markets and the resulting lower volume of client assets.

Net trading income stood at CHF 46.5 million in the first half of 2020 (first half of 2019: CHF 26.8 million). Trading in foreign exchange, foreign notes and precious metals rose substantially in comparison with the previous year by 43.7 per cent to CHF 38.3 million. This was largely attributable to foreign exchange business, which was up by CHF 11.2 million or 42.7 per cent relative to the previous year. The reporting date valuation gains on interest rate hedging instruments totalled CHF 8.2 million (first half of 2019: CHF 0.1 million).

Income from financial investments amounted to minus CHF 1.9 million (first half of 2019: CHF 6.0 million). The downturn on the financial markets led to non-realised book losses of minus CHF 4.1 million. In the previous year, this position posted a gain of CHF 4.5 million. Earnings from dividends recorded a positive development amounting to CHF 2.2 million (first half of 2019: CHF 1.5 million).

Other income was down by CHF 4.2 million to CHF 1.4 million compared with the previous year. This was primarily attributable to changes in the value of purchase price obligations in relation to acquisitions made in the first half of 2019.

Operating income (in CHF millions)
Operating income (bar chart)

At CHF 143.1 million, operating expenses in the first half of 2020 were 6.0 per cent lower than in the previous year (first half of 2019: CHF 152.2 million).

Personnel expenses fell by 6.1 per cent or CHF 5.8 million to CHF 89.2 million (first half of 2019: CHF 95.0 million). This was mainly the result of the adjustment of the conversion rate of the LLB’s pension fund in the first half of 2020, which in accordance with IAS 19 led to a credit in favour of the income statement.

At CHF 32.9 million, general and administrative expenses were 10.5 per cent lower than in the previous year (first half of 2019: CHF 36.8 million). This interim result includes the release of provisions for legal and litigation risks of CHF 3.8 million, while in the equivalent period last year provisions of net CHF 1.1 million were written back.

Depreciation and amortisation increased to CHF 21.1 million (first half of 2019: CHF 20.4 million).

The Cost-Income-Ratio improved to 65.5 per cent (first half of 2019: 69.7 %). Without the market effects, i. e. without income from interest rate swaps and price gains from financial investments, the Cost-Income-Ratio stood at 66.7 per cent (first half of 2019: 71.2 %).

Balance sheet

In comparison with 31 December 2019, the consolidated balance sheet total rose by 6.0 per cent and amounted to CHF 24.0 billion as at 30 June 2020 (31.12.2019: CHF 22.7 billion).

Loans to customers remained unchanged at CHF 13.0 billion in comparison with 31 December 2019. Mortgage loans increased by 1.9 per cent to CHF 11.5 billion. In comparison, the volume of loans secured by collateral decreased.

Equity attributable to the shareholders of LLB stood at CHF 1.9 billion as at 30 June 2020. The tier 1 ratio amounted to 20.4 per cent (31.12.2019: 19.6 %). The return on equity attributable to the shareholders of LLB was 5.9 per cent (first half of 2019: 6.1 %).

Assets under management

In the first half of 2020, the LLB Group registered a net new money inflow of CHF 1’028 million (first half of 2019: CHF 2’004 million). Thanks to intensive sales and marketing efforts, positive new money inflows were achieved in all three market segments and all booking centres.

In comparison with 31 December 2019, the business volume declined by 3.2 per cent or CHF 2.8 billion to CHF 86.5 billion.

On account of the negative market and currency performance, client assets under management were down 3.7 per cent in comparison to the end of the previous year and stood at CHF 73.5 billion (31.12.2019: CHF 76.3 billion).

Assets under management (in CHF billions)
Assets under management (bar chart)

Outlook

In spite of the challenging environment, the LLB Group views the future with cautious optimism. For the full 2020 business year, the LLB Group expects to achieve a solid business result. Thanks to its stable foundation, broadly diversified earnings structure and clearly focused business model, the LLB Group has in place the essentials to enable the Group to go forward successfully.