Economic value creation

Information checkedInformation unaudited Information geprüft Information ungeprüft Economic value creation

LLB AG is firmly rooted in its three home markets of Liechtenstein, Switzerland and Austria: it is positioned as the most important universal bank in Liechtenstein, as a leading asset management bank in Austria and as the largest regional bank in eastern Switzerland. Through economic value creation, it creates stability and sustainable, profitable growth for itself as well as for the financial centres of Liechtenstein, Austria and eastern Switzerland.

Contribution to the State of Liechtenstein

The LLB Group makes a contribution through, among other things, dividends and direct taxes to the economic development of the country of Liechtenstein. Not only the State of Liechtenstein as the majority shareholder of LLB AG, the remaining shareholders and Bank Linth but, indirectly, other stakeholders – the employees and business partners as well as the local communities – also benefit from the distribution of profits and increase in value. In its investment strategy, the Liechtenstein Government sets out the expectation that the corporate value of LLB AG will increase over the long run. With this in mind, the latter must set medium-term targets for growth and cost and capital efficiency. Furthermore, the Liechtenstein Government expects that LLB consciously accepts the risks associated with the activities of a universal bank and manages them prudently. Against this background, it requires that the governing bodies of Liechtensteinische Landesbank AG also consider in particular the bank’s economic significance to the country and its reputation. Further, corporate governance must take adequate account of ethical and ecological aspects. Operating profit is monitored on a monthly basis using budget versus actual comparisons. Regular discussions are held with the Liechtenstein Government to provide an update on the level of dividends and tax.

Stability

Liechtenstein is one of only eleven countries worldwide with an AAA rating. As part of its half-yearly review of country ratings, the international rating agency Standard & Poor’s (S&P) reaffirmed its top AAA rating with a stable outlook for the country in its Research Update from 25 November 2022. In its report, it anticipates somewhat of a slowdown in the Liechtenstein economy due to the widening impact of the Russia-Ukraine conflict. Inflation is expected to be higher and foreign demand lower, as is likely to be the case in other European economies. Liechtenstein is nevertheless assumed to have the necessary flexibility to be able to respond appropriately. S&P notes in this connection its highly diversified economy, which allows Liechtenstein to stand out among other small nations and puts it into a position to rapidly adapt to changing conditions. The rating agency sees Liechtenstein’s stable outlook supported by its strong budgetary position as well as its high policy effectiveness and prudent regulatory framework. What’s more, being awarded the highest rating in the country ratings underlines Liechtenstein’s reliability in these uncertain times.

For the LLB Group, having a very solid capital base is part of its identity. We significantly exceed the core capital ratio of 13.7 per cent required by the Basel regulations in the Principality of Liechtenstein (see chapter “Finance and risk management”).

The LLB share

The LLB share is a worthwhile investment. Investors have continued to profit from a sustainably attractive dividend yield for years.

Market capitalisation

The LLB share has been listed on the Swiss stock market, SIX Swiss Exchange, since 1993 under the symbol LLBN (security number: 35514757) and assigned to the “International Reporting Standard” segment. In 2022, around 2.1 million LLB shares (2021: 2.7 million) were traded, corresponding to 6.8 per cent (2021: 8.7 %) of total shares issued. With 30.8 million registered shares issued, the market capitalisation of Liechtensteinische Landesbank AG stood at CHF 1.7 billion as at 31 December 2022 (2021: CHF 1.6 billion). The LLB share had been listed in the MSCI World Small Cap Index since 2018, but was delisted with effect from 31 May 2022.

Shareholder structure

The Principality of Liechtenstein held 17’336’215 LLB shares, or 56.3 per cent of the share capital, as at the end of the reporting year. On 27 January 2022, LLB published an advance notice announcing its public tender offer to acquire outstanding Bank Linth shares. The shareholders had a free choice between a partial exchange offer into LLB shares with a cash component and a full cash settlement. On 18 May 2022, LLB successfully settled the offer. As part of the partial exchange offer with a cash component, 363’785 LLB shares accrued to the former Bank Linth shareholders, corresponding to 1.2 per cent of all outstanding LLB shares. LLB had acquired these shares from its majority shareholder, the Principality of Liechtenstein, on 13 May 2022. This reduced the Principality of Liechtenstein’s stake in LLB from 57.5 per cent to 56.3 per cent. Under the ownership strategy (www.llb.li/en/investors/llb-share) it adopted in 2011, the Liechtenstein Government explicitly supports the stock exchange listing of LLB and retains a majority stake of at least 51 per cent.

5.9 per cent of the shares were owned by the Haselsteiner Familien-Privatstiftung and the grosso Holding Gesellschaft mbH, both of which are domiciled in Austria, as at 31 December 2022 (see chapter “Corporate governance”).

LLB held 0.6 per cent (2021: 0.8 %) of its own shares as at the end of the reporting year. The remaining registered shares were in free float, whereby none of the other shareholders held more than 3 per cent of the share capital.

Overall 89.0 per cent of the 30.8 million total registered shares were entered in LLB AG’s share register at the end of 2022. 11.0 per cent, or 3’374’273 shares, were not registered.

Share price performance

2022 will be remembered for a long time. Record-high inflation prompted central banks to quickly tighten monetary policy. This led to big losses in the financial markets, for both bonds and equities. Measured by the Swiss Performance Index (SPI), shares listed on the Swiss stock exchange lost 16.5 per cent. In contrast to the SPI, shares in the Swiss SWX Banks Index rose. After ending in negative territory in 2021, it registered a gain of 10.4 per cent in 2022. The LLB share produced a total return of 10.8 per cent for the reporting year. It traded as high as CHF 58.90 and as low as CHF 49.55.

Dividend policy

Liechtensteinische Landesbank pursues an attractive, long-term-oriented dividend policy for the benefit of its shareholders. Furthermore, the LLB Group is committed to safeguarding its financial security and stability (see chapter “Strategy and organisation”). Under the ACT-26 strategy, it intends to keep risk-bearing capital at a tier 1 ratio of over 16 per cent in accordance with Basel III. LLB will maintain a sustainable and attractive dividend policy. The payout ratio should be more than 50 per cent. Continuous dividend development is also being strived for (see chapter “Strategy and organisation”).

The Board of Directors will propose an increase in the dividend to CHF 2.50 (2021: CHF 2.30) per share at the 31st Ordinary General Meeting of Shareholders on 5 May 2023. Based on the share price as at the end of 2022, this corresponds to a dividend yield of 4.5 per cent. Total dividends to be paid out amount to CHF 76.6 million (2021: CHF 70.3 million). This represents a payout ratio of 51.2 per cent for 2022 (2021: 51.0 %).

¹The Board of Directors will propose a dividend increase to CHF 2.50 for the year 2022 at the Annual General Meeting on 5 May 2023.

Analysts’ recommendations

In August 2022, Michael Klien, the Zürcher Kantonalbank analyst responsible for monitoring the LLB share, wrote: “The bank continues to enjoy good growth and to exercise cost discipline. The new strategy is still in its infancy but has got off to a good start.” The LLB share continues to be rated “overweight”.

Research Partners AG has been covering the LLB share since mid-2016. In his latest report, analyst Rainer Skierka confirmed his buy recommendation. He above all emphasised the positive position it is in. At the Group level, LLB has a diversified income structure made up of three pillars: net interest, investment and trading. The Cost Income Ratio is already within the range set out in the ACT-26 strategy, attesting to the steady gains in efficiency and high cost awareness at the LLB Group. The twelve-month price target was adjusted to CHF 69.00 (2021: CHF 77.00) and is based, according to Skierka, on the Gordon Growth Model (dividend growth model).

Communication with the capital market

The LLB Group publishes its annual and interim financial results (see chapter “Responsibilities for the economy, society and environment”). Normally, we hold a media and analyst conference on the annual results in Zurich. As in the previous year, it could not take place physically in 2022 due to the coronavirus pandemic. Instead there was a conference call for analysts, investors and the media – like we have for the interim financial results. Most importantly, the annual and interim reports are prepared in accordance with legal requirements. For several years now, the LLB Group has ranked among the companies with the best results in the overall rating category of the Swiss Annual Report Rating, underscoring the high quality of our information policy.

Also at the General Meetings of Shareholders, the Board of Directors and the Board of Management inform transparently about the course of business. Both in 2020 and 2021, these had to be held without shareholders being physically present due to COVID-19. Because the pandemic made planning difficult for so long, the Annual General Meeting took place again in 2022 without the personal participation of shareholders. In order to preserve their rights, shareholders were able to exercise their voting rights by post or electronically.

We also hold regular discussions with investors, provide information at roadshows and are represented at specialist conferences for financial analysts and investors. During the reporting year, we took part in three virtual roadshows and in the Investora event in Zurich.

All publicly accessible information about the LLB Group can be obtained from our website at www.llb.li. Anyone interested is welcome to register at www.llb.li/registration to receive price-relevant information about the LLB Group electronically. Additionally, we publish our information via our social media channels such as Facebook and Twitter. We publish the annual and interim financial reports in a comprehensive online version. The Annual Report 2022 in German can be accessed online at gb2022.llb.li and in English at ar2022.llb.li.

The LLB share: facts and figures