Economic value creation

Information unaudited Information ungeprüft Economic value creation

The LLB Group has a special role to play in its three home markets. Our continually positive business results contribute to the economic growth and to the stability of the Liechtenstein financial centre. We are also a key employer in the region. We share our financial success with those around us.

Economic role and regional employer

The LLB Group plays an important role in Liechtenstein’s economy, contributing to the economic development of the country through dividends and direct taxes. This contribution of dividends and direct taxes amounted to CHF 45.2 million in 2023 (2022: CHF 52.8 million). In addition to the state, other stakeholders also benefit indirectly from the profit distribution and tax payments, including our employees and business partners as well as local communities.

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, we must set out medium-term targets for growth as well as cost and capital efficiency. The government trusts that we are aware of the risks associated with the activities of a universal bank and that we manage them accordingly. Against this background, our governing bodies must also consider in particular the bank’s economic significance to the country and its reputation. 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. We receive no financial support for our banks or Group companies in Liechtenstein, Switzerland and Austria from any government.

Stability

Liechtenstein is one of only eleven countries worldwide with an AAA rating. In November 2023, the rating agency Standard & Poor’s (S&P) reaffirmed the country’s top credit rating. In its report, it emphasises in particular the financial situation of public finances, which is a balancing factor in difficult times. It also commends the broadly diversified economy and access to two economic areas. Liechtenstein is nevertheless assumed to have the necessary flexibility to be able to respond appropriately. The robust financial and banking centre with strong international connections contributes substantially to this very positive situation. Almost a quarter of Liechtenstein’s gross domestic product is generated by the financial sector.

As a bank of systemic importance, we are subject to particularly strict financial market regulation and high capital adequacy requirements. With the implementation of the EU’s Capital Requirements Directive (CRD V) and the establishment of the Deposit Guarantee and Investor Compensation Foundation (EAS), Liechtenstein has a modern guarantee system, which guarantees an adequate equity base and protection of client deposits (see chapter Values and corporate management).

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).

Major employer in the region

It is important to us that our managers understand the mindset and concerns of our clients. And for this reason, almost all of the managers and the majority of employees in the main business locations have their roots in their respective region. As a result, they are highly dedicated to the company and have a high level of integrity. They also take a longer-term view, which is appreciated by our clients.

As at 31 December 2023, the LLB Group had 1,423 employees (31.12.2022: 1ʼ318), who together filled 1ʼ213 full-time positions (31.12.2022: 1ʼ116). This makes LLB one of the largest employers in Liechtenstein (see chapter Employees).

To meet the demand for skilled employees, we rely on people commuting to Liechtenstein every day from eastern Switzerland and the Austrian state of Vorarlberg. This makes the LLB Group a major regional employer in the Rhine Valley. LLB Schweiz recruits almost all of its professionals from the Swiss regions of Lake Zurich, Sarganserland and Winterthur.

Donations and sponsorships

We strive to pass on some of our economic success to others. Our not-for-profit Future Foundation supports projects and institutions that make a positive contribution to social and ecological development in our market areas. Since its establishment in 2011, the Foundation has paid out dividends of more than CHF 1.8 million, of which around CHF 153ʼ000 was attributable to the reporting year (see chapter Industry initiatives and corporate citizenship).

As part of our sponsorship activities, we primarily support institutions in the fields of sports, culture and competence. This includes our long-standing partnership with FC Vaduz’s youth team. We are also the main sponsor of the LLB Night of Sports and a partner of the Liechtenstein Olympic Committee (see chapter Industry initiatives and corporate citizenship).

Digitalisation and innovation

The topics of digitalisation and innovation are of crucial importance to our future economic success. The banking business has been undergoing digital transformation for decades. Apart from cash, there is no other financial service that is used exclusively in today’s physical world. With the growing penetration of technology into everyday life, interpersonal interaction such as in advisory meetings is being increasingly supported digitally.

To ensure our continued success, we are intent on using the opportunities that digitalisation brings to our processes and to the development of new products and services. Our innovative strength allows us to capitalise on competitive advantages that we reap from digitalisation. Our products reflect changing needs and, with that, we create customer experiences. Lower development costs and better scalability of products and services have a positive effect on the LLB Group’s profitability, which ultimately also benefits our stakeholders.

At the same time, we are keen to actively counter any negative effects of digitalisation for our clients, employees and society. Such negative effects would play out if, for example, we were affected by a cyber attack. Customers who use our online banking or other digital products could become victims of data theft. Our advanced security architecture to defend against cyber risks provides the best possible protection against such threats (see section Data protection and cyber security).

Digitalisation can lead to a change in internal job specifications at LLB. Other possible consequences are a reduction of service levels and anonymous services or even manipulative techniques in online distribution. We are aware of the negative effects and want to counteract them with our solutions. For example, we continue to maintain a physical channel with our omni-channel advisory service, set high standards for data protection and promote honest and transparent communication.

LLB.ONE

With our LLB.ONE programme, we aim to optimise and digitalise our core processes end-to-end – from the initial contact to the termination of the client relationship – by 2026 It has earmarked a budget of CHF 100 million for this programme. With LLB.ONE we are committed to a zero-based design approach, whereby existing structures are revisited and, if necessary, redesigned. Core components that have already been redesigned include measuring the success of projects and initiatives, involving clients and external stakeholders in ongoing development, and continuously reviewing its own internal work.

In 2023, we made decisive progress with our digital business model wiLLBe, which was launched in 2022. In addition to our investment mandate with a focus on sustainability, we have created an attractive money market account with simplified digital onboarding. As a result, we have succeeded in acquiring significantly more customers for wiLLBe, building a promising basis for further growth.

We have also digitised a large number of documents as part of our core processes in order to save paper in the long term – such as with e-tax statements (Switzerland) or the digital renewal of mortgages.

The greatest challenge for the LLB Group over the next few years, and indeed for the industry as a whole, is to overcome complexities in the regulatory banking environment and integrate efficient and scalable digital solutions, while at the same time providing maximum benefits to clients.

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 2023, around 1.5 million LLB shares (2022: 2.1 million) were traded, corresponding to 4.9 per cent (2022: 6.8 %) of total shares issued. With 30.8 million registered shares issued, the market capitalisation of Liechtensteinische Landesbank AG stood at CHF 2.0 billion as at 31 December 2023 (31.12.2022: CHF 1.7 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 17ʼ336ʼ215 LLB shares, or 56.3 per cent of the share capital, as at the end of the reporting year. As a result of LLB AG’s purchase of outstanding shares in the former Bank Linth (LLB Schweiz since 14.09.2023) in May 2022, 363ʼ785 LLB shares were accrued to Bank Linth shareholders. This corresponded to 1.2 per cent of all LLB’s outstanding shares, which it had previously acquired from the State of Liechtenstein. As a result, the country’s participation fell from 57.5 per cent to 56.3 per cent. As at the reporting date, the country’s equity stake remained unchanged at 56.3 per cent.

Under the Participation Strategy 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. The new Participation Strategy came into force on 30 January 2024. This sees the State of Liechtenstein renewing its commitment to a minimum stake in LLB of 51 per cent. At the same time, it accepts entrepreneurial autonomy as well as the rights and obligations arising from the stock exchange listing.

As at 31 December 2023, 5.9 per cent of the shares were owned by Haselsteiner Familien-Privatstiftung and grosso Holding Gesellschaft mbH, both of which are domiciled in Austria, (see chapter Corporate governance).

LLB held 0.7 per cent of its own shares at the end of the reporting year (31.12.2022: 0.6 %). 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 89.8 per cent of the 30.8 million total registered shares were entered in LLB AG’s share register at the end of 2023. 10.2 per cent, or 3ʼ133ʼ122 shares, were not registered.

Share price performance

After financial markets were busy forecasting the rise in key interest rates in the first half of 2023, the following months were dominated by the question of how long they would remain high. Following clarity on the peak of interest rates, speculation about imminent rate cuts has buoyed the markets. As measured by the Swiss Performance Index (SPI), shares listed on the Swiss Stock Exchange rose by 6.1 per cent. The values in the Swiss Banking Index (SWX) grew in the same range. After an increase of 10.4 per cent in 2022, this registered a rise of 5.8 per cent for 2023. The LLB share significantly exceeded these figures and achieved a pleasing total return of 23.4 per cent in the reporting year. The highest price for the year was CHF 66.10 and the lowest price for the year was CHF 55.70.

Dividend policy

The LLB Group pursues an attractive, long-term-oriented dividend policy for the benefit of its shareholders. We are also committed to safeguarding our financial security and stability. Under the ACT-26 strategy, we intend to keep risk-bearing capital at a Tier 1 ratio of over 16 per cent in accordance with Basel III. We will continue our sustainable and attractive dividend policy. The payout ratio should be more than 50 per cent. We are also striving for a continuous increase in the dividend (see Strategy and organisation).

At the 32^nd Ordinary General Meeting of Shareholders to be held on 19 April 2024, the Board of Directors will propose an increase in the dividend to CHF 2.70 (2022: CHF 2.50) per share. Based on the share price as at the end of 2023, this corresponds to a dividend yield of 4.1 per cent. Total dividends to be paid out amount to CHF 82.6 million (2022: CHF 76.6 million). This represents a payout ratio of 50.1 per cent for 2023 (2022: 51.2 %).

¹The Board of Directors will propose a dividend increase to CHF 2.70 for the year 2023 at the Annual General Meeting on 19 April 2024.

Analysts’ recommendations

In August 2023, Michael Klien, the Zürcher Kantonalbank analyst responsible for monitoring the LLB share, wrote: “The results for H1 23 were slightly better than we had expected and, according to LLB, the best half-year result in more than ten years.” The implementation of the ACT-26 strategy is going to plan for all three strategic core elements (growth, efficiency and sustainability). 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. “For the 2023 business year, we expect results to be characterised by continued yield and ongoing cost discipline. We do not currently see any negative influences, which suggests a solid income growth. In addition, there is a solid equity base of more than CHF 2 billion, which is conducive to further business development and corresponds to a total capital ratio of over 20 per cent. The current share price does not adequately reflect this positive momentum as yet.” The 12-month price target of CHF 80.00 was confirmed.

Communication with the capital market

The LLB Group publishes its annual and interim financial results (see chapter Our understanding of sustainability). We usually hold a media and analyst conference on the annual results in Zurich. 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. 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. We also publish results via our social media channels such as Facebook and LinkedIn. We publish the annual and interim financial reports in a comprehensive online version. The Annual Report 2023 can be accessed online in German at gb2023.llb.li and in English at ar2023.llb.li.

The LLB share: facts and figures