2015 semi-annual results of VP Bank Group: significantly higher consolidated net income of CHF 40.9 million; client assets at CHF 42.2 billion
For the first semester of 2015, VP Bank Group earned a consolidated net income of CHF 40.9 million: a CHF 29.8 million increase over the comparable prior-year period (CHF 11.1 million). This 2015 semi-annual result was influenced by VP Bank’s merger with Centrum Bank and the related boost in revenues, but also by the added expenditures incurred in connection with the transaction. A very significant negative factor was the Swiss National Bank’s (SNB) abandonment of the EUR exchange-rate floor versus the Swiss franc on 15 January 2015, as well as the shift of the central bank’s three-month LIBOR target range.
Overview of key figures
Consolidated net income: CHF 40.9 million
Total client assets: CHF 42.2 billion
Net new money inflow: CHF 6.2 billion
Cost/income ratio: 56.1 per cent
Tier 1 ratio (core capital ratio): 21.9 per cent (under Basel III)
Higher net operating income
In comparison to the first half of 2014, VP Bank recorded a CHF 62.0 million increase in net operating income to a total of CHF 172.5 million (prior-year period: CHF 110.5 million), which is equivalent to a 56.1 per cent gain. Factoring out the effects of the merger with Centrum Bank (including the effects of the purchase price allocation), in “Other income”, net operating income amounted to CHF 105.5 million – this despite the negative impact of the eliminated EUR/CHF floor. Interest income rose versus the prior-year period by 32.1 per cent to CHF 41.6 million, while income from the commission business and services increased by 9.8 per cent to CHF 65.9 million (prior-year period: CHF 60.1 million). Income from trading activities improved by 69.9 per cent to CHF 19.8 million (prior-year period: CHF 11.6 million). The Bank’s holdings of financial instruments declined in value by CHF 5.7 million in the first semester of 2015 (prior-year period: a CHF 6.9 million gain).
Higher operating expenses due to merger with Centrum Bank
Operating expenses for the first half of 2015 rose versus the prior-year period by CHF 12.3 million from CHF 84.5 million to CHF 96.8 million (+14.6 per cent). Excluding the effects of the Centrum Bank merger, operating expenses declined by CHF 3.8 million, or 4.5 per cent, compared to the first half of 2014. Since 31 December 2014, the headcount at VP Bank had increased by 51 individuals as of the 30 June 2015 balance sheet date. General and administrative expenses increased by 29.4 per cent to CHF 29.5 million (prior-year period: CHF 22.8 million). This higher amount is also attributable to the merger with Centrum Bank and the simultaneous running of parallel operations for a limited amount of time. Depreciation and amortisation was 29.6 per cent higher than in the first half of 2014 and amounted to CHF 19.1 million. Valuation allowances, provisions and losses of CHF 17.4 million were recorded for the first semester of 2015 (prior-year period: CHF 0.3 million). In connection with the Centrum Bank merger, restructuring provisions in the amount of CHF 12.3 million were established.
The cost/income ratio stood at 56.1 per cent on 30 June 2015 (prior-year period: 76.4 per cent). VP Bank’s tier 1 ratio as calculated according to the new Basel III rules amounted to 21.9 per cent as at 30 June 2015 (at 31 December 2014, under Basel II: 20.5 per cent). With this distinguished tier 1 ratio, VP Bank Group has a very solid equity capital base compared to its peers in the banking industry. Total assets increased since 31 December 2014 by CHF 1.4 billion to the current level of CHF 12.6 billion, mainly due to merger-related effects.
Increase in client assets under management
Client assets under management at VP Bank Group on 30 June 2015 totalled CHF 34.6 billion, an 11.8 per cent increase compared to the CHF 30.9 billion reported at year-end 2014. The performance-related decline in asset values amounted to CHF 2.5 billion in the first half of 2015 (prior-year period: an increase of CHF 0.6 billion). This decrease is primarily attributable to the abandonment of the EUR minimum exchange rate versus the Swiss franc and the resulting decreased value of managed client assets invested in foreign currencies.
In the first semester of 2015, VP Bank Group achieved a net new money inflow of CHF 6.2 billion, whereas CHF 6.7 billion relates to the merger with Centrum Bank. In the operative business, a net outflow of CHF 0.1 billion was recorded, compared to the net new money inflow of CHF 0.2 billion in the first half of 2014. In connection with the Centrum Bank merger, anticipated net outflows were incurred in the amount of CHF 0.4 billion, whereas that outflow must be judged of course in consideration of the general regulatory environment and the present-day tax issues. On the other hand, intensive market cultivation efforts, especially in the Asian markets, led to gratifying net new money inflows.
The amount of assets held in custody remained unchanged from the 31 December 2014 level of CHF 7.6 billion. Total client assets, i.e. including those custody assets, stood at CHF 42.2 billion on 30 June 2015 (31 December 2014: CHF 38.6 billion).
Emphasis on the fund business
VP Bank Group is tremendously adept in the investment fund business. The related activities span the entire range of services in the fund realm – from the planning, to the founding and ultimate operative administration of investments funds – and have been successfully rendered for decades now at the Bank’s Liechtenstein and Luxembourg locations.
“To benefit from synergies within VP Bank Group, we consolidated the company’s entire fund know-how under one roof as of August 2015. Under the label ‘VP Fund Solutions’, we have created a uniform face to the public for our international fund business and are now positioned in the market with a clearly defined structure”, explains Alfred W. Moeckli, Chief Executive Officer of VP Bank Group. Effective as of the beginning of August, VPB Finance S.A. – which was founded in 1998 as a subsidiary of VP Bank (Luxembourg) SA – has been renamed VP Fund Solutions (Luxembourg) SA. Moreover, IFOS Internationale Fonds Service Aktiengesellschaft in Vaduz, which has been based at VP Bank’s Liechtenstein location since 1999, will now be known as VP Fund Solutions (Liechtenstein) AG.
Re-examination of medium-term goals
Until mid-2015, the defined medium-term goals of VP Bank were a tier 1 ratio of at least 16 per cent, a cost/income ratio of 65 per cent, and an average annual increase in net new money of 5 per cent. A re-examination of these goals revealed the necessity for adjustments.
Consequently, the Board of Directors of VP Bank Group has revised the medium-term goals and established the following new targets for the end of 2020:
Assets under management of CHF 50 billion
Consolidated net income of CHF 80 million
Cost/income ratio of less than 70 per cent
VP Bank Group is well equipped to meet the challenges of the future. Among others, this is also attested to by Standard & Poor’s, which in August 2015 confirmed its excellent “A–“ rating for VP Bank (A–/Negative/A–2). A substantial equity capital base enables VP Bank to invest in growth by means of targeted acquisitions. VP Bank’s repurchase of its own bearer and registered shares made in connection with a fixed-price public tender offer was successfully concluded on 3 July 2015. The shares repurchased in connection with this buyback are to be used for future acquisitions or treasury management purposes.
In the remaining months of 2015, VP Bank will continue its resolute pursuit of Group-wide cost containment. Moreover, the integration of Centrum Bank into VP Bank Group is scheduled to be concluded by the end of the year. “With all of these relevant measures, as well as the qualitative and quantitative expansion of our client advisory capabilities, we will cement a sustainable foundation for the successful future of VP Bank Group”, says a convinced Fredy Vogt, Chairman of the Board of Directors of VP Bank Group.