2015 annual results of VP Bank Group: substantially higher Group net income of CHF 64.1 million; net new money inflow of CHF 6.0 billion
For the 2015 financial year, VP Bank Group recorded a Group net income of CHF 64.1 million after having earned a profit of CHF 20.0 million in the previous year. The Group’s 2015 annual financial results were influenced by the merger of VP Bank with Centrum Bank and the associated increase in revenues and expenses.
Key figures at a glance
Group net income: CHF 64.1 million
Client assets under management: CHF 34.8 billion
Net inflow of client assets: CHF 6.0 billion
Cost/income ratio: 59.4 per cent
Tier 1 ratio (core capital ratio): 24.4 per cent
Substantially higher Group net income
For the 2015 financial year VP Bank Group recorded Group net income of CHF 64.1 million. Compared to the previous year, net operating income increased by 37.7 per cent, from CHF 222.7 million to CHF 306.6 million, largely due to VP Bank’s merger with Centrum Bank. Factoring out the effects of “purchase price allocation”, net operating income amounted to CHF 256.6 million. Total interest income rose by 28.9 per cent versus the previous year to a total of CHF 84.5 million, whilst total income from the commission business and services increased in 2015 by 6.7 per cent to CHF 126.4 million. Income from trading activities climbed by 81.6 per cent to CHF 46.1 million, whereas a loss of CHF 0.7 million was incurred on financial instruments (previous year: CHF 12.5 million gain).
The positive impact that the non-recurring effects from the merger with Centrum Bank have had on 2015 total net income will have no influence on VP Bank’s first-half 2016 financial results.
Higher operating expenses due to merger with Centrum Bank
Operating expenses increased for the year by CHF 16.8 million, from CHF 165.3 million to CHF 182.1 million (+10.2 per cent), reflecting VP Bank Group’s strategic orientation and the merger with Centrum Bank. General and administrative expenses totalling CHF 60.2 million were higher (+28.8 per cent) as a result of the Centrum Bank merger and the corresponding need to conduct parallel operations for a limited amount of time. The 2.9 per cent increase in personnel expenses to CHF 121.9 million is attributable to the consequentially larger workforce. Depreciation and amortisation was 30.3 per cent higher than the previous year and stood at CHF 38.3 million, and valuation allowances, provisions and losses increased by a total of CHF 18.6 million.
The cost/income ratio in 2015 decreased by 20.0 per cent to 59.4 per cent (previous year: 74.2 per cent). With a tier 1 ratio of 24.4 per cent (previous year: 20.5 per cent), VP Bank Group has a very solid equity base compared to its peers. Total assets on 31 December 2015 amounted to CHF 12.4 billion, a 10.3 per cent increase over the prior-year reading, largely due to the assumption of Centrum Bank’s balance-sheet assets.
Gratifying increase in client assets under management
On 31 December 2015, client assets under management at VP Bank Group amounted to CHF 34.8 billion, a 12.4 per cent increase over the prior-year reading of CHF 30.9 billion. Included in the latest figure is a performance-related CHF 2.2 billion decrease in value related to the unfavourable market developments, especially in terms of foreign currencies.
In 2015, VP Bank Group registered a net new money inflow of CHF 6.0 billion (previous year: net outflow of CHF 0.9 billion), of which a net CHF 6.3 billion relates to the merger with Centrum Bank (CHF 6.7 billion upon acquisition, less CHF 0.4 billion of outflows anticipated in the wake of the merger). In the operative business, net outflows of CHF 0.3 billion were recorded, although that amount needs to be viewed against the backdrop of a challenging regulatory environment and tax-related issues. Nonetheless, thanks to intensive market-development efforts especially in the Asia region, VP Bank attracted sizeable inflows of new money. Assets held in custody increased to CHF 8.2 billion (previous year: CHF 7.6 billion), thereby bringing total client assets to CHF 43.0 billion as at 31 December 2015 (previous year: CHF 38.6 billion).
In the summer of 2015, the Board of Directors adjusted the strategic orientation of VP Bank Group. “Growth, focus and culture are the three key areas of emphasis in our ‘Strategy 2020’”, stated Fredy Vogt, Chairman of the Board of VP Bank.
The merger with Centrum Bank AG in Liechtenstein represented a significant growth driver; the integration was successfully completed at the start of 2016. VP Bank also strengthened its strategically important intermediaries business by restructuring those operations and expanding the specialist responsibility for the related activities to encompass the entire Group. The activities associated with a sharpened focus include far-reaching measures aimed at reducing internal complexities as well as adapting and enhancing VP Bank’s range of services. During the course of the past year, the Luxembourg facilities were fully integrated into the existing, proven Group-wide processes. This now enables the exploitation of even more synergies and the avoidance of redundancies within VP Bank Group. Another measure for leveraging synergy effects was to be seen in the consolidation of the Group’s entire fund know-how under one roof: VP Fund Solutions.
Adjustment of medium-term goals for 2020
In the summer of 2015, the Board of Directors of VP Bank set new medium-term targets for the period ending 31 December 2020, namely:
CHF 50 billion in client assets under management;
CHF 80 million in consolidated net income; and
a cost/income ratio of less than 70 per cent.
Growth initiatives as well as the targeted deployment of available resources, exploitation of synergy opportunities and strict cost controls will help the Bank to achieve the aforementioned goals for 2020.
Annual general meeting of shareholders
At the annual general meeting on 29 April 2016, the Board of Directors will propose a dividend of CHF 4.00 per bearer share (previous year: CHF 3.00) and CHF 0.40 per registered share (previous year: CHF 0.30). These proposed dividends reflect the dividend policy adopted by the Board of Directors: VP Bank strives to maintain a consistent approach to dividend distributions. The Board of Directors justifies the proposed dividend increase based on the Bank’s higher net income of CHF 64.1 million.
In light of VP Bank’s declared strategic goals and the changing circumstances in the banking world, the Board of Directors has resolved to propose at the annual general meeting on 29 April 2016 that Dr Christian Camenzind, lic. iur. Ursula Lang and Dr Gabriela Maria Payer be elected to the Board of Directors. This is aimed at reinforcing the Board’s existing skillset, even as it lays the foundations for far-sighted succession planning.
Dr Guido Meier, Vice Chairman of the Board of Directors since 2001, will not stand for re-election and intends to step down from the Board at the annual general meeting on 29 April 2016. He was first elected to the Board in 1989 as a representative of VP Bank’s largest anchor shareholder, Stiftung Fürstl. Kommerzienrat Guido Feger. Dr Guido Meier was formerly a member of the Committee of the Board of Directors and is currently a member of the Nomination & Compensation Committee. During his 27-year affiliation with VP Bank, he saw to the well-being of the Bank in keeping with the desire of the foundation’s benefactor, Guido Feger, was an active functionary on the Board of Directors and its committees, and in particular, fostered the successful and sustainable development of VP Bank. He stood out especially for his resolute client orientation and profound knowledge of the intermediaries and private banking business. Of equal importance to him were the employee leadership and corporate culture at VP Bank. The Board of Directors thanks Dr Guido Meier sincerely for his tremendous commitment to VP Bank and wishes him all the best for the future.
Conversion of bearer shares into registered shares
Developments at the international level make it necessary to provide more transparency on the ownership structure of legal entities. The Board of Directors of VP Bank shall therefore propose at the annual general meeting on 29 April 2016 that the Bank’s bearer shares be converted into registered shares. The listed bearer shares of VP Bank (par value CHF 10.00) would then be exchanged for “A”-class registered shares with the same par value. The existing unlisted registered shares (par value CHF 1.00) are to remain unchanged but be referred to as “B”-class shares. Also going forward, the latter will not be listed on the stock exchange. Completion of the conversion is scheduled for early May 2016.
Apart from the integration of Centrum Bank AG into VP Bank Group, 2015 was a year devoted to the topics of efficiency enhancement and cost management. The related projects were all successfully completed by year’s end so that VP Bank now has a lean and efficient organisation. In 2016, the task is to exploit these new advantages and synergies in the most profitable way.
Special focus in 2016 will be placed on the further development of VP Bank’s fund activities as well as on strengthening its position in the intermediaries business, pressing ahead with the expansion of international business activities and the continued development of new digital banking services. Moreover, VP Bank has identified various areas where the complexities and hence the costs of rendering the related services can be reduced.
“Growth of course remains a key topic for VP Bank in 2016: it will come from the continuing effort to enhance the quality of our client service and the augmentation of highly experienced teams, especially in Asia. We will also take advantage of market opportunities as they open up in order to invest in growth through acquisition. In this regard, we will keep a watchful eye mainly on our target markets of Liechtenstein, Switzerland and Luxembourg,” concluded Alfred W. Moeckli, Chief Executive Officer of VP Bank Group.