Consolidated management report
Information checkedInformation geprüft Consolidated management report
The LLB Group earned a solid net profit after taxes in the 2020 business year of CHF 109.8 million, which was 11.0 per cent lower than in the previous year (2019: CHF 123.4 million). The considerably higher turnover from net brokerage and foreign exchange business made a positive contribution to the business result. Operating expenses fell year on year due to lower personnel expenses. Operating income was adversely affected by increased risk provisions for credits, the collapse of USD interest rates, and the negative interest rate environment in Switzerland and Europe. In the previous year, LLB had benefitted from high performance-related fees.
The net profit attributable to the shareholders of Liechtensteinische Landesbank AG amounted to CHF 103.5 million (2019: CHF 115.3 million). Basic earnings per share stood at CHF 3.39 (2019: CHF 3.77).
Operating income in the 2020 business year was lower by 5.0 per cent to CHF 430.3 million (2019: CHF 452.7 million).
Interest income increased in comparison with the previous year by 1.9 per cent, or CHF 2.8 million, to CHF 154.1 million. Income from interest business with clients benefitted from targeted growth with mortgage lending business and from lower refinancing costs. This enabled the persisting pressure on margins, as well as the extension of fixed interest loans at lower conditions, to be compensated for. The LLB Group posted a decline in other interest business due to the plunge in USD interest rates, especially in on demand due from banks. In contrast, the higher allowance stipulated by the Swiss National Bank had a favourable effect.
On account of the corona pandemic, the LLB Group carried out a systematic, risk-based analysis of its credit positions. This revealed, overall, that the Group’s credit portfolio was in a robust condition. Nevertheless, risk provisions were increased slightly. Allowances for expected credit losses totally net CHF 11.6 million were allocated in the income statement (2019: release of CHF 1.0 million).
At CHF 199.1 million, net fee and commission income was down year on year (2019: CHF 209.2 million). Higher transaction-related earnings – net brokerage rose compared to the previous year by 21.0 per cent to CHF 42.1 million (2019: CHF 34.8 million) – compensated for the lower portfolio-dependent revenues. Furthermore, performance-related fees were lower.
Net trading income in the 2020 business year stood at CHF 84.3 million (2019: CHF 78.9 million). Trading in foreign exchange, foreign notes and precious metals rose year on year by 4.4 per cent to CHF 70.8 million. The increase was attributable to higher trading volumes in the first half year. The valuation gains on interest rate hedging instruments, measured on the reporting date, amounted to CHF 13.5 million (2019: CHF 11.1 million).
Income from financial investments totalled minus CHF 0.6 million (2019: CHF 4.0 million). Turbulence on the markets led to book losses, measured on the reporting date, of minus CHF 2.9 million. This position had posted a gain of CHF 1.3 million in the previous year. On the other hand, earnings from dividends recorded a positive development reaching CHF 2.4 million (2019: CHF 1.5 million).
Other income fell year on year by CHF 3.4 million to CHF 5.0 million. This was caused mainly by changes in the value of purchase price obligations in relation to acquisitions made in the 2019 business year.
Operating income (in CHF millions)
Operating expenses in the 2020 business year stood at CHF 306.7 million, 1.5 per cent lower than in the previous year (2019: CHF 311.3 million).
Personnel expenses fell by 6.1 per cent, or CHF 11.8 million, to CHF 181.0 million (2019: CHF 192.9 million). A major reason for the decrease was the adjustment of the conversion rate of the LLB’s pension fund in the 2020 year, which in accordance with IAS 19 led to a credit in favour of the income statement. In addition, the headcount fell in comparison with the previous year.
General and administrative expenses at CHF 83.4 million were higher than in the previous year (2019: CHF 76.5 million). Savings were made in marketing costs and occupancy expenses. Additional costs were incurred especially with IT because of the expansion of infrastructure to permit working from home due to the corona pandemic. Moreover, investments continued to be made in projects for the future. A net total of CHF 2.0 million in provisions for legal and litigation risks was written back (2019: release of CHF 4.7 million).
Depreciation and amortisation remained stable at CHF 42.3 million (2019: CHF 41.9 million).
The Cost Income Ratio improved to 69.8 per cent (2019: 70.0 %). Without market effects, i.e. without income from interest rate swaps and price gains from financial investments, the Cost Income Ratio would have stood at 71.5 per cent (2019: 72.1 %).
In comparison with 31 December 2019, the consolidated balance sheet total expanded by 4.0 per cent and stood at CHF 23.6 billion on 31 December 2020 (31.12.2019: CHF 22.7 billion).
Loans to clients climbed by 2.1 per cent to CHF 13.2 billion in comparison with December 31, 2019. Mortgage loans expanded by 3.6 per cent to CHF 11.7 billion. In contrast, the volume of loans secured by collateral decreased slightly.
Equity attributable to the shareholders of LLB amounted to CHF 2.0 billion on 31 December 2020 (31.12.2019: CHF 1.9 billion.). The tier 1 ratio stood at 21.6 per cent (31.12.2019: 19.6 %). The return on equity attributable to the shareholders of LLB amounted to 5.3 per cent (2019: 6.0 %).
Assets under management / Business volume
The LLB Group achieved a new record business volume of CHF 92.9 billion as per 31 December 2020 (31.12.2019: CHF 89.3 billion).
In the 2020 business year, the LLB Group registered a net new money inflow of CHF 3'274 million (2019: CHF 4'142 million). Thanks to intensive efforts and sales in the markets, positive inflows were achieved in all three market segments.
Client assets under management grew by 4.4 per cent to CHF 79.7 billion in comparison to the end of the previous year (31.12.2019: CHF 76.3 billion) thanks to the net new money inflows.
Assets under Management (in CHF billion)
In 2021 as well, the strategic core elements of growth, profitability, innovation and excellence continue to be of central importance for the LLB Group. In order to improve the Cost Income Ratio, the Group continues to count on strict cost discipline and the achievement of earnings objectives. LLB will stay on the path to growth. To offer shareholders a sustainable, attractive dividend, it will strive to attain a solid business result again in 2021.