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LLB Annual Report 2024 de

33 Fair value measurement

Measurement guidelines and classification in the fair value hierarchy

The measurement of the fair value of financial and non-financial assets and liabilities is carried out using various standardised and recognised valuation methods and models. On the basis of their observable and non-observable input factors, the positions are assigned to one of the three levels of fair value hierarchy.

Level 1

Financial and non-financial assets and liabilities, whose prices are quoted for identical assets and liabilities on active markets and which were not calculated on the basis of valuation techniques or models for the determination of fair value.

Level 2

If no market price quotes are available, or if they cannot be extrapolated from active markets, the fair value is determined by means of valuation methods or models which are based on assumptions made on the basis of observable market prices and other market quotes.

Level 3

Input factors are considered in the valuation methods and models to determine the fair value, which are not observable because they are not based on market prices.

Valuation methods and models

The LLB Group employs the market-based approach to determine the fair value of investment funds and shares, which are not traded on an active market or which are not listed.

The income-based approach is used if payment streams or expenses and revenues with financial assets and liabilities form the basis for the fair value measurement. The present or cash value method is used to determine the fair value by discounting the payment streams to the present value on the reporting date. Interest rate curves appropriate for the term and / or foreign currency curves, as well as spot prices form the main basis for this purpose. Forward pricing models are used in the case of futures contracts.

To determine the fair value of financial and non-financial assets and liabilities, which are classified as Level 3 positions, the LLB Group takes over the fair value determined by third parties (estimates made by experts).

The following table shows the most important valuation methods and models together with the key input factors:

Valuation method / model

Inputs

Significant, non-observable inputs

Level 2

Derivative financial instruments

Income approach, present value calculation

Market price of congruent SARON interest rates, foreign currency curves, spot rates

Investment funds

Market approach

Market prices of underlying assets

Equities

Market approach

Market prices of underlying assets

Commercial Papers

Income approach, present value calculation

The underlying interest rate for the contract

SNB-Bills

Income approach, present value calculation

The underlying interest rate for the contract

Due from banks

Income approach, present value calculation

Market price of congruent SARON interest rates

Due to banks

Income approach, present value calculation

Market price of congruent SARON interest rates

Loans

Income approach, present value calculation

Market price of congruent SARON interest rates

Due to customers

Income approach, present value calculation

Market price of congruent SARON interest rates

Medium-term notes and shares in bond issues of the Swiss Regional or Cantonal Banks' Central Bond Institutions

Income approach, present value calculation

Market price of congruent SARON interest rates

Bonds

Income approach, present value calculation

Market price of congruent SARON interest rates

Level 3

Infrastructure title

Market approach

Audited financial statements

Illiquidity, special micro-economic conditions

Investment property

External expert opinions, present value calculation

Prices of comparable properties

Assessment of special property factors, expected expenses and earnings for the property

Measurement of assets and liabilities, classified as Level 3

Financial investments measured at fair value through other comprehensive income

These financial investments largely relate to non-listed shares in companies having an infrastructure nature, which offer the services necessary or advantageous for the operation of a bank. The largest proportion of the portfolio consists of shares in the SIX Swiss Exchange and in the Pfandbriefbank Schweizerischer Hypothekarinstitute (Swiss Mortgage Institutes). The financial investments are periodically revalued on the basis of current company data and reassessed by third parties using valuation models, respectively.

Investment property

These properties are periodically valued by external experts. The assessments take into consideration such circumstances as the location and condition of the property, as well as the costs and revenues expected in connection with it.

Measurement of fair values through active markets or valuation methods

Positions measured at fair value are recognised on a recurring basis in the balance sheet at fair value. As at 31 December 2024, the LLB Group had no assets which were measured at fair value on a non-recurring basis in the balance sheet; the same applies to liabilities.

Transfers of positions measured at fair value, or of positions for which a fair value exists, to or from a level are generally made at the end of a period. Within the scope of a new bond issue in October 2024, the criteria for the calculation of the fair value of financial investments not measured at fair value was refined. On the basis of this refined criteria, bonds issued by LLB Group are classified as Level 2 instruments. The previous year was adjusted, the fair value is shown as Level 2. No value adjustments were made.

The following tables show the classification of financial and non-financial assets and liabilities of the LLB Group within the fair value hierarchy and their fair value.

in CHF thousands

31.12.2024

31.12.2023

+/– %

Assets

Level 1

Financial investments measured at fair value through profit and loss

2’753

24’120

– 88.6

Financial investments, measured at fair value through other comprehensive income

1’612’118

1’863’056

– 13.5

Precious metal receivables

99’850

66’600

49.9

Total financial instruments measured at fair value

1’714’722

1’953’775

– 12.2

Precious metals holdings

73’759

68’335

7.9

Total other assets measured at fair value

73’759

68’335

7.9

Cash and balances with central banks

5’936’085

6’389’870

– 7.1

Financial investments measured at amortised cost

1’337’696

814’427

64.3

Total financial instruments not measured at fair value

7’273’781

7’204’297

1.0

Total Level 1

9’062’261

9’226’407

– 1.8

Level 2

Derivative financial instruments

466’637

286’374

62.9

of which for hedging purpose

65’511

65’800

– 0.4

Financial investments measured at fair value through profit and loss 1

27’020

32’589

– 17.1

Total financial instruments measured at fair value

493’656

318’963

54.8

Due from banks

1’076’823

249’471

331.6

Loans

16’932’458

15’437’166

9.7

Financial investments measured at amortised cost 2

0

20’498

– 100.0

Total financial instruments not measured at fair value

18’009’281

15’707’135

14.7

Total Level 2

18’502’938

16’026’098

15.5

Level 3

Financial investments, measured at fair value through other comprehensive income 3

36’420

33’116

10.0

Total financial instruments measured at fair value

36’420

33’116

10.0

Investment property

19’311

19’241

0.4

Total other assets measured at fair value

19’311

19’241

0.4

Total Level 3

55’731

52’357

6.4

Total assets

27’620’930

25’304’863

9.2

1Investment funds and equities

2Commercial Papers and / or SNB-Bills

3Infrastructure titles

in CHF thousands

31.12.2024

31.12.2023

+/– %

Liabilities

Level 1

Precious metal liabilities

172’857

134’550

28.5

Total financial instruments measured at fair value

172’857

134’550

28.5

Total Level 1

172’857

134’550

28.5

Level 2

Derivative financial instruments

346’376

337’165

2.7

of which for hedging purpose

9’107

13’491

– 32.5

Total financial instruments measured at fair value

346’376

337’165

2.7

Due to banks

1’104’374

949’470

16.3

Due to customers

20’462’854

19’132’520

7.0

Medium-term notes and shares in bond issues of the Swiss Regional or Cantonal Banks' Central Bond Institutions

2’373’711

2’014’082

17.9

Bonds

760’647

528’701

43.9

Total financial instruments not measured at fair value

24’701’585

22’624’773

9.2

Total Level 2

25’047’961

22’961’938

9.1

Level 3

Total Level 3

0

0

Total liabilities

25’220’818

23’096’488

9.2

Financial investments not measured at fair value

The fair value hierarchy also includes details of financial assets and liabilities which are not measured on a fair value basis, but for which a fair value does exist. In addition to their inclusion in the fair value hierarchy, basically a comparison between the fair value and the carrying amount of the individual categories of financial assets and liabilities is to be disclosed.

The following table shows this comparison only for positions which are not measured at fair value, since for positions measured at fair value the carrying amount corresponds to the fair value. On account of the maturity being more than one year, for specific positions a present value was calculated taking as a basis SARON interest rates appropriate for the duration of the term. In the case of all other positions, the carrying amount represents a reasonable approximation of the fair value.

31.12.2024

31.12.2023

in CHF thousands

Carrying Amount

Fair value

Carrying Amount

Fair value

Assets

Cash and balances with central banks

5’936’085

5’936’085

6’389’870

6’389’870

Due from banks 1

1’077’871

1’076’823

250’415

249’471

Loans

16’488’886

16’932’458

15’286’758

15’437’166

Financial investments measured at amortised cost

1’324’216

1’337’696

834’106

834’924

Liabilities

Due to banks

1’103’678

1’104’374

950’541

949’470

Due to customers 1

20’471’650

20’462’854

19’233’782

19’132’520

Medium-term notes and shares in bond issues of the Swiss Regional or Cantonal Banks' Central Bond Institutions

2’310’300

2’373’711

2’030’887

2’014’082

Bonds

751’855

760’647

551’090

528’701

1Adjusted to consider the claims or liabilities from precious metals accounts due to the separate disclosure in the fair value hierarchy