Income statement

Operating income rose by 18.7 percent to CHF 371.7 million (2015: CHF 313.2 million).

Interest income before credit loss expense was up in the 2016 business year by 4.2 percent to CHF 138.1 million (2015: CHF 132.5 million). Interest business with clients increased by 3.7 percent in comparison with the previous year. The negative effects on interest income caused by the extension of fixed-interest loans at lower conditions were compensated for by lower refinancing costs and targeted growth in mortgage lending business. In the current interest rate environment, the LLB Group in some cases pays negative interest on interest rate hedging instruments and money invested in the interbank market. In spite of this, thanks to higher interest rates on USD holdings, LLB was able to slightly improve interest business with banks by 3.2 percent or CHF 0.3 million. In the 2016 business year, a net charge of CHF 1.0 million (2015: CHF 6.0 million) was made to the income statement for credit loss expense. Net fee and commission income decreased slightly by 2.6 percent to CHF 145.7 million (2015: CHF 149.6 million). The persisting uncertainty on the financial markets led to restraint on the part of clients in making stock market transactions, which resulted in a reduction of net brokerage of 10.6 percent compared with the previous year. The recovery of the financial markets in the second half year generated higher performance-linked earnings.

Net trading income totalled CHF 55.9 million (2015: CHF 33.1 million). Client trading in foreign exchange, foreign notes and precious metals compared with the previous year fell by 2.7 percent to CHF 41.8 million. In the previous year, the trading volume in foreign exchange was unusually high in the first half year due to the SNB’s lifting of support for the minimum euro exchange rate in January 2015. On account of the higher long-term market interest rates in the second six months of 2016, from the perspective of the reporting date, valuation gains on interest rate hedging instruments for the 2016 business year amounted to CHF 14.1 million (2015: minus CHF 10.1 million).

Net income from financial investments at fair value through profit and loss totalled CHF 21.8 million (2015: minus CHF 0.7 million). Income from interest and dividends decreased to CHF 14.9 million, a fall of 17.4 percent compared with the previous year on account of persistently low interest rates and a lack of investment possibilities.

Other income amounted to CHF 11.1 million in comparison with CHF 4.8 million in the previous year. The change relative to the comparison period was attributable to the proceeds from the sale of property amounting to CHF 7.5 million. Operating expenses stood at CHF 258.2 million and were thus 16.8 percent or CHF 37.1 million higher than the previous year’s figure of CHF 221.1 million.

Operating income (in CHF millions)
Operating income (in CHF millions) (bar chart)

At CHF 140.8 million, personnel expenses were up by 13.8 percent or CHF 17.1 million compared with the previous year (2015: CHF 123.8 million). The increase is attributable to the strategic expansion of personnel to 858 full-time equivalent positions (31.12.2015: 816). In addition, higher accruals were made for variable salary compensation on account of the share-price-based compensation model. Personnel expenses also include one-time expense reductions from the valuation of staff pension obligations amounting to CHF 10.2 million. In the previous year a one-time reduction of pension obligations of CHF 11.3 million had also been booked.

General and administrative expenses increased by 41.2 percent to CHF 89.9 million (2015: CHF 63.7 million). This position includes the allocation of provisions for various legal and litigation risks amounting to CHF 24.4 million (2015: write back of CHF 1.0 million). Without this effect, general and administrative expenses would have been CHF 1.8 million or 2.8 percent higher than in the previous year.

Depreciation and amortisation fell by CHF 6.1 million to CHF 27.5 million (2015: CHF 33.7 million). This was largely attributable to the one-time impairment of assets in the previous year.

The Cost-Income-Ratio for the 2016 business year stood at 62.8 percent (2015: 69.5 %). Without market effects, i.e. without income from interest rate swaps and price gains from financial investments, the Cost-Income-Ratio stood at 66.5 percent (2015: 63.7 %).