“Then came corona.” If a single sentence can encompass the key events of the first half year, then it has to be this one. There is now a pre-corona and a post-corona. And this applies to business, politics and society. In LLB’s case this means: the Group made a dynamic start to the new business year. We posted a good result for the first quarter up to the spread of the Covid-19 virus and the accompanying turbulence on the stock markets. The almost complete standstill caused by the corona pandemic has also made its mark on LLB’s business result.
However, taking into consideration this challenging business environment, we have attained a good result.
Stable result despite the corona pandemic
In spite of the present major challenges, the LLB Group achieved a net profit of CHF 60.2 million (–1.5 %), almost equalling the previous year’s level. The earnings situation remains stable and well balanced. In March, high volatility on the financial markets briefly led to an above-average turnover in commissions and trading business. In contrast, the sharp fall in US-dollar interest rates and the negative interest rate environment in Switzerland and Europe had an adverse impact on the business result. At CHF 143.1 million (–6.0 %), operating expenses were well down on the equivalent period in the previous year. This was largely attributable to two one-time effects. Firstly, personnel expenses were lower as a result of the adjustment of the pension fund conversion rate. Secondly, the reaching of a settlement in an ongoing legal case meant that we were able to write back provisions allocated for this purpose. Thanks to further operative cost savings, we were also able to again reduce general and administrative expenses.
At CHF 86.5 billion, the business volume is stable at a high level. Loans to clients rose by 0.2 per cent to CHF 13.0 billion. The downward price trend on the financial markets since the beginning of the year also had an impact on client assets under management by the LLB Group. On account of the negative market and currency performance, these fell by 3.7 per cent to CHF 73.5 billion. With a net new money inflow of CHF 1.0 billion, we reaffirmed our sustainable growth. We are particularly proud that we were again successful in achieving inflows in all three market divisions and booking centres.
Therefore, the LLB Group has clearly shown that it stands on a sound foundation and is well able to meet and master challenges on the market even in times of great crisis.
Emerging from the crisis even stronger
The corona pandemic not only left its mark on the development of business, it also had a profound impact on our daily banking operations. To provide the most effective protection possible for our clients and staff, we immediately implemented the official measures and recommendations. In place of personal meetings, we strove to look after our clients by making in-depth telephone calls. Furthermore, they were able to take advantage of our broad range of digital services to carry out their bank transactions. Great efforts were made to increase the mobility of our employees, so that within a very short time almost our entire staff were able to work from home. Where working from home was not possible, we split our teams and introduced staggered working times to ensure that here too, the necessary distancing was always provided.
We are proud of the fact that throughout the crisis our banking activities were fully operational and secure at all times. With the benefit of hindsight, we can now say that the major challenges we faced during the crisis in operative daily business were dealt with calmly and efficiently.
Continuity on the Board of Directors
On account of the necessary extensive protective measures, this year’s Annual General Meeting also had to be held under special conditions. It was not possible for shareholders to participate personally in the General Meeting. Nevertheless, voting participation was higher than in previous years. All the proposals put forward by the Board of Directors were approved by a large majority of shareholders. Accordingly, Board Chairman Georg Wohlwend was re-elected for a second term of office, while Board members Prof. Dr. Gabriela Nagel-Jungo and Urs Leinhäuser were both re-elected for a third and final term of office of three years.
Liquidity support for our clients
The effects of the global corona pandemic have confronted the business world with enormous problems. In particular, the difficult situation caused by the lockdown led to existential problems for many companies. Consequently, the Swiss and Liechtenstein governments put in place effective support packages, which also included bridging loans for the companies concerned. The Principality of Liechtenstein provided a loan loss guarantee for this purpose amounting to 35 million Swiss francs. Liechtensteinische Landesbank was commissioned to process these support measures. So far, over 300 applications for liquidity support have been submitted. A credit volume of around CHF 22 million has been approved, of which CHF 16 million had already been paid out by the end of June.
Bank Linth has also granted bridging loans amounting to CHF 54 million within the scope of the official guarantee programme set up by the Swiss authorities. The total volume of liquidity support provided by the LLB Group in Switzerland and Liechtenstein therefore amounts to around CHF 70 million.
We are proud to be able in this manner to make an important contribution to maintaining economic stability in our home markets and to demonstrate that we can be depended on as a reliable partner, in time of crisis as well.
Innovation and digitalisation
Innovation is one of the key points of our StepUp2020 strategy. In recent years, we have steadily expanded our digital services and developed new innovations. In the first half of this year, we launched our own contactless payment solution LiPay on the market. As a reaction to the corona crisis we decided to bring forward the introduction of LiPay and thereby were able to satisfy a genuine client requirement. Our payment innovation has enjoyed a very successful start.
Great progress has also been made with the online account opening process. Thanks to the possibility of confirming identification by video call, clients can now open an account conveniently from their own home. Whereas previously only our clients in Switzerland and Liechtenstein were able to benefit from this digital solution, it has now been extended to our clientele in Austria and Germany. We are also increasingly using video technology as a means of providing financial advice to clients. This proved to be an invaluable and extremely efficient instrument enabling us to stay in contact with our clients, especially during the height of the corona crisis.
Within the context of daily banking operations, we are consistently working on making procedures and processes more efficient and straightforward for our staff by utilising digital applications. In this connection we have already made rapid progress in introducing a uniform communications platform, which brings together various channels such as video and telephone calls, as well as chat functions.
Ground-breaking bank branch model
The new possibilities of simply and efficiently carrying out bank transactions digitally are having a major impact on traditional bank counter business. For quite some time we have already been deploying a new bank branch concept to meet this challenge. In these redesigned bank branches we are focusing on the provision of advice and high functionality. The design and the materials employed at the branches, as well as a versatile mix of products and services, support this innovative approach. Following the redesign of the LLB branch in Balzers in line with the new concept last year, in June this year we reopened the bank branch in Eschen for our clients after its successful remodelling. The branch at the bank’s headquarters in Vaduz will be remodelled according to the new, innovative concept next year.
Excellent investment competence
The investment competence of our Asset Management team is one of the great strengths of the LLB Group. This is confirmed by the numerous awards presented for our products in recent years. For example, this year again, our LLB Equities Dividend Pearls Global (CHF) fund was honoured at the prestigious Refinitiv Lipper Awards.
In contacts with our clients we can also call on the highest quality and competence. For many years, the LLB Group has been investing in the SAQ certification of its client advisers. In spring this year, a further fifty client advisers successfully completed the certification training process.
Investment fund business remains a promising growth market. In this business, we continue to rely on our fund powerhouse concept. Our four fund management companies and three business locations (in Vaduz, Vienna and Zurich), as well as access to two distinct markets (the European and Swiss economic areas) enable us to offer our clients flexible, tailor-made fund solutions. This makes us one of the most versatile investment fund providers in the FL / A / CH region. Accordingly, the LLB Group’s fund business has grown substantially in recent years and is now regarded as one of the Group’s core competences. Currently, we administer around 670 investment funds having assets of about 34 billion Swiss francs. In the next few months, we want to further strengthen our market presence to optimally exploit the growth potential in our target markets.
Stability and excellence provide added value for clients
For almost 160 years, the LLB Group has stood for stability and security. Especially at times of great uncertainty, these attributes come to the fore and offer our clients, shareholders and stakeholders significant added value. The rating agency Moody’s again confirmed our Aa2 rating this year. The Liechtensteinische Landesbank therefore ranks among the top tier of Liechtenstein and Swiss banks and is one of the highest rated financial institutes in the world.
Going forward sustainably
Sustainability is one of the core elements of our business activity. The long history of Liechtensteinische Landesbank is a testimony to this fundamental principle. Sustainability is also an integral part of our products. During advisory discussions, we inform our clients in an open and transparent manner about our product and service offers. In our Human Resources activities, we are constantly formulating and developing new basic and advanced training opportunities, diversity, as well as the reconciling of work and family life. Our operating procedures and processes take into consideration energy efficiency and sustainable mobility management. As a member of the UN financial initiative “Principles for Responsible Investment (PRI)”, we support the goal of the responsible management of securities and market instruments. To underline the increasing importance of sustainability not only in the area of investments, we are creating a Sustainability Council and the post of a Sustainability Officer.
Confirmation of our strategy
The effects of the Covid-19 pandemic have clearly shown the validity of our strategic course: the LLB Group’s business model is broadly based and geared towards our traditional strengths of stability, innovation and sustainability. Our solid equity capital base promotes trust and confidence. We shall therefore continue to adhere to our StepUp2020 strategy and extend it for one year. By then it should be clear what effects the corona pandemic has had on the global economy in general, and on the LLB Group in particular.
Strategic priorities until the end of 2020
In order to successfully operate in this challenging environment, we shall focus above all on profitability in the second half year. Within the LLB Group further initiatives to improve earnings are planned. However, on account of the intense pressure on margins, the key issue will be identifying and exploiting potential for further cost savings. This will include re-establishing the priorities for projects and investments.
In spite of the challenging environment, we view the future with cautious optimism. We expect to achieve a solid business result for the full 2020 business year. Thanks to our stable foundation, broadly diversified earnings structure and clearly focused business model, we have in place the essentials for our corporate Group to go forward successfully.
Thank you for your trust
We would like to thank you, our esteemed shareholders and clients, for your trust and loyalty. A sincere note of thanks also to our staff. During the last few months, thanks to their great dedication and hard work, they have met and successfully mastered the challenges posed by the corona pandemic.
Chairmann of the Board of Directors