Consolidated interim management report

Group financial statement

The consolidated interim financial statement is prepared in accordance with International Financial Reporting Standards (IFRS).

In the first half of 2017, the LLB Group earned a net profit of CHF 60.0 million (first half 2016: CHF 43.0 million). In comparison with the equivalent period in the previous year, the interim result improved by 39.4 percent or CHF 17.0 million.

In comparison with the first half of 2016, operating income rose by 22.3 percent and operating expenses by 6.9 percent. The profit attributable to the shareholders of Liechtensteinische Landesbank amounted to CHF 57.3 million (first half 2016: CHF 42.3 million). Earnings per share stood at CHF 1.98 (first half 2016: CHF 1.47).

Income statement

Operating income increased in the first half of 2017 by 22.3 percent to CHF 189.7 million (first half 2016: CHF 155.1 million).

Interest income before credit loss expense decreased due to the negative interest rate environment by 3.7 percent to CHF 65.8 million (first half 2016: CHF 68.3 million). Interest business with clients remained stable. The negative effects on interest income with clients caused by the extension of fixed interest loans at lower conditions were compensated for by targeted growth in mortgage lending business. In some cases, the LLB Group pays negative interest on interest rate hedging instruments and money that is invested in the interbank market and deposited with the Swiss National Bank. Consequently, interest business with banks declined in comparison with the previous year. During the first half of 2017, the LLB Group charged a net amount of CHF 3.1 million to the income statement for credit risks (first half 2016: CHF 0.1 million).

Net fee and commission income climbed by 4.3 percent to CHF 74.4 million (first half 2016: CHF 71.3 million). Thanks to the recovery on the financial markets in the first half of 2017, the LLB Group attained higher performance-linked revenues. Higher portfolio volumes led to larger earnings from securities administration. Net brokerage income rose substantially by 11.0 percent as a result of increased stock market transactions by clients in comparison with the previous year.

Net trading income stood at CHF 38.6 million in the first half of 2017 (first half 2016: minus CHF 0.7 million). Trading in foreign exchange, foreign notes and precious metals expanded in comparison with the previous year by 52.0 percent to CHF 26.9 million. This was attributable to intensified client trading activity and the treasury performance. Due to the rise in long-term market interest rates in the first half of 2017, the valuation gain on interest rate hedging instruments amounted to CHF 11.5 million on the reporting date (first half 2016: minus CHF 18.6 million).

Net income from financial investments at fair value through profit and loss totalled CHF 12.0 million (first half 2016: CHF 10.0 million). The increase was attributable to the positive development of the markets in the first half of 2017. Income from interest and dividend payments fell by 4.3 percent to CHF 7.3 million.

Other income amounted to CHF 2.0 million (first half 2016: CHF 6.3 million). The previous year’s figures contained proceeds from the sale of properties.

Operating income (in CHF millions)

Operating expenses increased in the first half of 2017 by 6.9 percent to CHF 116.0 million (first half 2016: CHF 108.5 million).

At CHF 76.9 million, personnel expenses were 17.8 percent or CHF 11.6 million up on the previous year (first half 2016: CHF 65.3 million). The previous year’s figure included a one-time reduction in the valuation of pension obligations. Without this effect, personnel expenses would have risen by 1.9 percent or CHF 1.4 million because of the strategic expansion of human resources.

General and administrative expenses decreased by 16.9 percent to CHF 25.1 million (first half 2016: CHF 30.3 million). The decrease was attributable to the writing back of provisions for legal and litigation risks. Without this effect, general and administrative expenses would have remained unchanged in comparison with the previous year.

Depreciation and amortisation increased by CHF 1.0 million to CHF 14.0 million (first half 2016: CHF 13.0 million).

The Cost-Income-Ratio fell to 62.8 percent (first half 2016: 69.8 %). Without the market effects, i.e. without income from interest rate swaps and price gains from financial investments, the Cost-Income-Ratio would have stood at 68.5 percent (first half 2016: 63.2 %).

Balance sheet

In comparison with 31 December 2016, the consolidated balance sheet total was up by 2.7 percent and amounted to CHF 20.5 billion as per 30 June 2017 (31.12.2016: CHF 20.0 billion). Loans to customers posted an increase of 1.3 percent in comparison with 31 December 2016. Mortgage loans rose by 2.9 percent to CHF 10.3 billion.

Equity attributable to the shareholders of LLB stood at CHF 1.7 billion as per 30 June 2017. The tier 1 ratio totalled 21.4 percent (31.12.2016: 21.0 %). The return on equity attributable to the shareholders of the LLB amounted to 6.7 percent (first half 2016: 5.2 %).

Assets under management

Thanks to gratifying net new money inflows and the positive performance on the financial markets, client assets under management increased to CHF 48.2 billion (31.12.2016: CHF 46.4 billion).

As a result of its intensive sales and marketing activities, the LLB Group achieved a turnaround in assets under management and grew in all its strategic markets. In the first half of 2017 net new money inflows totalled CHF 731 million (first half 2016: minus CHF 42 million).

Assets under management (in CHF billions)

Outlook

The demanding business environment that is characterised by negative interest rates, volatile financial markets, increasing regulatory requirements and major digitalisation and technology changes will continue to challenge the banking industry.

Thanks to its focused business model, diversified earnings structure and clear StepUp2020 strategy, the LLB Group views the future with confidence. It expects to make further operative progress in the second half of 2017 and to achieve a solid business result.