17 Goodwill and other intangible assets
in CHF thousands | Goodwill | Client rela- tionships | Software | Other intangible assets | Total |
Year ended December 2023 | |||||
Cost as at 1 January | 154’828 | 145’345 | 150’318 | 1’140 | 451’630 |
Additions | 0 | 0 | 15’193 | 0 | 15’193 |
Disposals | 0 | 0 | – 2’506 | 0 | – 2’506 |
Currency effects | – 5’211 | – 4’419 | – 335 | – 2 | – 9’968 |
Cost as at 31 December | 149’617 | 140’926 | 162’669 | 1’138 | 454’349 |
Accumulated depreciation / impairments as at 1 January | 0 | – 80’983 | – 99’900 | – 985 | – 181’868 |
Depreciation | 0 | – 5’803 | – 10’848 | – 130 | – 16’782 |
Impairments | 0 | 0 | – 15 | 0 | – 15 |
Disposals / (Additions) from accumulated amortisation | 0 | 0 | 2’506 | 0 | 2’506 |
Currency effects | 0 | 1’369 | 124 | 0 | 1’494 |
Accumulated depreciation / impairments as at 31 December | 0 | – 85’416 | – 108’133 | – 1’116 | – 194’665 |
Carrying amount as at 31 December 2023 | 149’617 | 55’509 | 54’535 | 22 | 259’684 |
Year ended December 2024 | |||||
Cost as at 1 January | 149’617 | 140’926 | 162’669 | 1’138 | 454’349 |
Additions | 0 | 0 | 20’516 | 0 | 20’516 |
Disposals | 0 | 0 | – 1’820 | 0 | – 1’820 |
Currency effects | 1’349 | 1’144 | 100 | 0 | 2’593 |
Cost as at 31 December | 150’966 | 142’070 | 181’464 | 1’138 | 475’638 |
Accumulated depreciation / impairments as at 1 January | 0 | – 85’416 | – 108’133 | – 1’116 | – 194’665 |
Reclassifications | 0 | 0 | 22 | – 22 | 0 |
Depreciation | 0 | – 5’705 | – 11’823 | 0 | – 17’529 |
Disposals / (Additions) from accumulated amortisation | 0 | 0 | 1’820 | 0 | 1’820 |
Currency effects | 0 | – 313 | – 29 | 0 | – 343 |
Accumulated depreciation / impairments as at 31 December | 0 | – 91’435 | – 118’143 | – 1’138 | – 210’716 |
Carrying amount as at 31 December 2024 | 150’966 | 50’635 | 63’321 | 0 | 264’922 |
Goodwill
The LLB Group reported goodwill for the following cash generating units:
in CHF thousands | 31.12.2024 | 31.12.2023 |
Segment Retail & Corporate Banking | 55’620 | 55’620 |
Segment International Wealth Management 1 | 95’346 | 93’997 |
Total | 150’966 | 149’617 |
1Fluctuations in goodwill are attributable to conversion of the functional currency into the reporting currency.
Goodwill impairment testing
Goodwill is tested for impairment annually in the third quarter as a basis for the annual financial reporting, and also as required. The test to determine a possible impairment compares the recoverable amount of each cash generating unit, which carries goodwill, with its balance sheet value.
On the basis of the impairment testing carried out, management reached the conclusion that for the year ended 31 December 2024, the total goodwill of CHF 151.0 million assigned to the cash generating units remains recoverable.
Recoverable amount
For determining the value in use, which corresponds to the recoverable amount of the respective cash generating units, the LLB Group employs a discounted cash flow (DCF) valuation model. It takes into consideration the special characteristics of the banking business and the financial services sector, as well as the regulatory environment. With the aid of the model, and on the basis of the financial planning approved by management, the cash value of estimated free cash flow is calculated. If regulatory capital requirements exist for the cash generating unit, these capital requirements are deducted from the estimated free cash flows for the respective period. This amount, adjusted for regulatory capital requirements, then corresponds to the theoretical sum that could be paid out to the shareholders. For the assessment of the forecasted earnings, management employs approved financial plans covering a period of five years. The results for all periods after the fifth year are extrapolated from the forecasted result and the free cash flows of the fifth year with a long-term growth rate, which corresponds to the long-term inflation rate. These are the inflation rates of Switzerland and Liechtenstein. Under certain circumstances, the growth rates may vary for the individual cash generating units because the probable developments and conditions in the respective markets are taken into account.
Assumptions
As far as possible, and when available, the parameters on which the valuation model is based are coordinated with external market information. In this context, the value in use of a cash generating unit reacts in the most sensitive manner to changes in the forecasted earnings, changes to the discount rate and changes in the long-term growth rate. The forecasted earnings are based on an economic scenario, whose input factors are the projected interest rate, currency and stock market developments, as well as the sales planning of the individual market divisions. The discount rate is determined on the basis of the capital asset pricing model (CAPM), which contains a risk-free interest rate, a market risk premium, a small cap premium, as well as factor for the systematic market risk, i.e. the beta factor.
The long-term growth rate outside the five-year planning period (terminal value), on which the impairment tests for the annual report as at 31 December 2024 were based and which were used for extrapolation purposes, as well as the discount rate for the cash generating units are shown in the table below.
Growth rate | Discount rate | |||
in per cent | 2024 | 2023 | 2024 | 2023 |
Segment Retail & Corporate Banking | 1.5 | 1.5 | 5.5 | 5.5 |
Segment International Wealth Management | 1.5 | 1.5 | 7.5 | 8.0 |
Sensitivities
All the parameters and assumptions, on which the testing of the individual cash generating units are based, are reviewed and, if necessary, adjusted during the periodic preparation and conducting of impairment tests. In order to check the effects of parameter adjustments on the value in use of the individual cash generating units, the parameters and assumptions used with the valuation model are subjected to an individual sensitivity analysis. For this purpose, the forecasted free cash flow is changed by 10 per cent, the discount rate by 10 per cent and the long-term growth rates also by 10 per cent. According to the results of the impairment tests performed, and based on the assumptions described, an amount of between CHF 106 million and CHF 590 million in excess of the balance sheet value is obtained for all cash generating units. A reduction of the free cash flow by 10 per cent, or an increase in the discount rate of 10 per cent, or a reduction in the long-term growth rate of 10 per cent would not result in any impairment of the goodwill.
Over the last five years, the parameters have remained very constant. Since a constant development of the parameters is also expected in the future, the sensitivities of 10 per cent for each of the three parameters are regarded as reasonable.
Client relationships
Client relationships are assets, which are acquired and capitalised within the scope of an acquisition. These are amortised over a period of 15 years on a straight-line basis. Estimated aggregated amortisation amounts to:
in CHF thousands | |
2025 | 5’705 |
2026 | 5’705 |
2027 | 5’705 |
2028 | 5’705 |
2029 | 5’705 |
2030 and thereafter | 22’109 |
Total | 50’635 |