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LLB Annual Report 2020 de

Letter to shareholders

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Gabriel Brenna (Group CEO) and Gabriela Nagel-Jungo (Vice Chairwoman of the Board of Directors)

Information checkedInformation geprüft Going forward sustainably

Dear shareholders

2020 – What a year! Now it is history, but it will remain with us for a long time to come: as a year that is forever linked to the corona pandemic and its repercussions for the countries of the world, the global economy, society and each and every one of us. As a year that also saw many of our plans destroyed and made many things, which we had previously taken for granted, suddenly become impossible. Furthermore, it showed us what was really important and what was feasible. For the LLB Group as well, 2020 was not a lost year but rather a year that, thanks to our solid foundation and our clear strategy, we skilfully utilised to take advantage of our strengths and further consolidate them.

Solid result despite the corona pandemic

In 2020, the business volume reached a new record level at CHF 92.9 billion. Loans to clients rose by 2.1 per cent to CHF 13.2 billion. Further high net new money inflows of CHF 3.3 billion, as well as the recovery of the financial markets following their lowest levels in March, led to an expansion in client assets under management. At CHF 79.7 billion, these climbed by 4.4 per cent above the previous year to reach a new record and thus confirm our sustainable growth. We are particularly proud that we again achieved net new money inflows in all three market divisions.

Following the LLB Group’s extraordinarily successful year in 2019, net profit in the year under report at CHF 109.8 million (minus 11 %) was indeed somewhat lower due to clearly identifiable causes, but our earnings situation remained stable and balanced. Earnings were 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 2019, performance-related fees helped us to achieve added revenues. At CHF 306.7 million (minus 1.5 %), operating expenses were below those in the previous year. This was largely attributable to a decline in personnel expenses.

In spite of the major challenges we faced due to the Covid-19 pandemic in 2020, we again achieved a solid result.

Resilient daily business

The LLB Group proved its reliability during the corona pandemic not just in safeguarding the development of business, but also in ensuring the smooth running of daily banking operations. To provide the most effective protection possible for our clients and our staff, we immediately implemented all the official measures and recommendations. If no personal meetings with our clients were possible, we strove to look after them 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. We made great efforts to increase the working mobility of our employees. Within a very short time, almost all our employees were able to work from home. Where working from home was not possible, we implemented other measures to protect our staff, such as splitting teams into shifts.

In summary, we can say that the bank’s operations were ensured at all times and that the major challenges we faced in operative daily business during the crisis were dealt with calmly and efficiently.

Reliable partner

During this challenging time, we were pleased to fulfil our economic responsibilities as the LLB Group. In Liechtenstein and Switzerland we were able to make available urgently required liquidity to many companies – quickly and unbureaucratically. In total, the LLB Group provided CHF 71 million in bridging liquidity. In addition, we were also able to support our corporate clients by deferring interest or amortisation payments.

Furthermore, we participated in various social projects in all three of our domestic markets – Liechtenstein, Austria and Switzerland – to mitigate the effects of the corona pandemic for people who were hit particularly hard. For example, in collaboration with the Liechtenstein Bankers Association, we were able to bring some joy to 5'100 children in the form of free holiday offers. Through the donations made by its Future Foundation, in 2020 as in previous years, LLB supported various social and charitable organisations.

We are proud that we were able once again to demonstrate that we can be depended on as a reliable partner for our clients and other stakeholders, in times of crisis as well.

Security and stability

With its almost 160-year history, LLB is the longest established financial institute in Liechtenstein. Tradition, security and stability are the values that define us. In the year under report, the rating agency Moody's again confirmed our Aa2 rating. 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.

All these values and qualities, once again came to the fore in 2020 during the corona crisis. Our clients, shareholders and other stakeholders appreciate the added value that this enables us to offer them.

Going forward sustainably

In 2020, we made rapid progress in formulating a strict sustainability strategy. As an important step, in summer the LLB Group signed the UN Principles for Responsible Investment initiative, thereby underlining our commitment to the core sustainability principles in the environmental, social and corporate governance fields. During the summer we also successfully launched a sustainable gold investment fund in Liechtenstein. Overall, within the scope of its sustainable investment concept at the beginning of 2021, the LLB Group has not only transformed all its bond funds but also all its asset management mandates into sustainable investment platforms. Its equity and strategy funds are to follow in spring.

It is particularly pleasing that both LLB AG and Bank Linth are also represented in the newly launched sustainability index of the SIX Swiss Stock Exchange. This confirms our positioning as a company committed to sustainability.

Attractive employer

How does the saying go? Employees are a company’s most valuable resource. That is also how we see it at the LLB Group. Our staff’s satisfaction is extremely important to us. Accordingly, we regularly hold extensive surveys of employee satisfaction. In the year under report we did so again and the results were very positive. In the area of commitment – the most important factor for corporate success – we have again improved in comparison with 2017 and now are among the highest rated companies in the comparison group. The "Swiss Employer Award" is awarded on the basis of the survey results. With their 6th place ranking, Bank Linth and Liechtensteinische Landesbank were again among the top 10 employers in Switzerland and Liechtenstein.

Moreover, LLB was the first bank in Liechtenstein to be awarded the "Friendly Work Space" label. This certifies that we fulfil the highest standards in the areas of health promotion, corporate governance and personnel management. The two awards again underline the LLB Group’s attractiveness as an employer and confirm that it is well positioned in the competitive struggle to attract the best employees.

High quality of advisory services

Our very high standard of advisory services has again been confirmed by external parties. In the independent comparison test held by the Fuchsbriefe publishing house in the German-speaking region, Liechtensteinische Landesbank was rated very highly. On the permanent list of best vendors, we come in third place and are therefore among the leading private banking providers in the German-speaking region. LLB was awarded the rating "extremely good". In addition, our expertise in sustainability was assessed as very high. These excellent results reinforce us in our commitment to continually provide further training and business education for our client advisers. For example, in spite of the difficult circumstances due to the corona pandemic, we continued the certification process of our advisers according to the standards of the Swiss Association for Quality (SAQ). For the major proportion of employees having client contact this programme has now been completed. In order to meet our stricter standards in relation to sustainability in our advisory services as well, since October 2020, we are offering our staff a corresponding multi-level training programme.

The satisfaction of our clients is of vital importance to us. Accordingly, we carried out an extensive client survey at our Liechtenstein booking location in 2020. We were very pleased at the especially positive results obtained in the areas of referrals and overall satisfaction.

Innovation and digitalisation

The trend towards the digitalisation of banking business was boosted in 2020 as a result of the corona pandemic. At the LLB Group, the continual expansion of digital channels and services has been a core strategy project for several years already. In 2020, we streamlined our online and mobile banking programmes for clients by adding new functions while making them even more user-friendly. Since the beginning of this year, in addition to clients in Liechtenstein and Switzerland, those also in Austria and Germany can now open an account using video identification. The increased functionality brought even more added value, especially during the lockdown when physical client contact was no longer possible. Thanks to its successful migration to Avaloq, the groupwide core banking software system, LLB Österreich can now also benefit from many common offers and services. This will now enable synergies to be exploited throughout the Group.

We are particularly proud of LiPay, a digital innovation from our own internal innovation team. This contactless payment services enables payments to be requested or transferred simply and quickly using the LLB Mobile Banking app. LiPay was launched in spring earlier than planned during the first corona wave in order to satisfy an increased client requirement for a contactless payment possibility.

In the institutional clients segment we introduced a new digital feature during the year under report: the so-called intermediary cockpit. This includes a virtual workplace with extensive analysis possibilities and a form centre. Thanks to the intuitive user navigation and the clear structure of the cockpit, we have reduced the time and effort required by our business partners significantly.

Attractive dividend policy

As shareholders, you have been able to benefit from our long-term dividend policy for many years. This has produced a dividend yield that is very attractive for investors. The Board of Directors will propose to the General Meeting of Shareholders on 7 May 2021 a stable dividend of CHF 2.20. This corresponds to a pleasing dividend yield of over 4 per cent.

Elections at the General Meeting

We deeply regret that, due to the corona situation, once again the physical participation of our shareholders at the 2021 General Meeting will not be possible. As was the case last year, voting will therefore be carried out by post or electronically. In addition to voting on the dividend, the General Meeting must also decide on the composition of the Board of Directors. Georg Wohlwend will again be nominated as Chairman. The Board members Thomas Russenberger and Richard Senti are also standing for re-election.

Furthermore, the Board of Directors proposes to the General Meeting that KPMG (Liechtenstein) AG be appointed as the new statutory auditors. For the past 22 years, this function has been exercised by PricewaterhouseCoopers. In accordance with the best practice rules of corporate governance, a change is now indicated after this long period. We would like to express our thanks to PwC for their valuable support over these many years.

Change in operative management

In January, Group CEO Roland Matt decided to leave the LLB Group. He joined Liechtensteinische Landesbank AG in 2002 and made a decisive contribution to the development of the LLB Group. The Board of Directors would like to thank Roland Matt for his valuable services to the company. The Board of Directors has named Gabriel Brenna as his successor from 1 March 2021. Since 2012, he has been the Head of the Private Banking Division and a member of the Executive Boards of the bank and the LLB Group. He is also Chairman of the Supervisory Board of Liechtensteinische Landesbank (Österreich) AG and a member of the Boards of Directors of LLB Asset Management AG and Bank Linth LLB AG. During two strategy phases, Gabriel Brenna has driven forward the expansion of the private banking business and contributed greatly to the growth of the LLB Group. Up to the nomination of the new CEO, Urs Müller, Vice Group Chief Executive Officer and Head of the Retail and Corporate Banking Division took over the function of Group CEO temporarily. The Board of Directors would like to express its sincere thanks to Urs Müller for taking over this task and thus ensuring a smooth transition.

Strategic priorities for 2021

The repercussions 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. The formulation of our follow-up strategy has already commenced and we shall present this in autumn.

Accordingly, in 2021, growth, profitability, innovation and excellence will again form the core strategic elements of our corporate development. We shall continue to pursue strict cost discipline and the achievement of earnings objectives in order to improve the Cost Income Ratio. The foundation for further profitable growth has been laid. We shall endeavour to achieve a solid business result again in order to offer our shareholders a sustainable, attractive dividend.

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 goes 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.

Yours sincerely

Gabriel Brenna
Group CEO
Gabriela Nagel-Jungo
Vice Chairwoman of the Board of Directors