Group financial statement
In the first half of 2018, the LLB Group earned a net profit of CHF 45.8 million (first half of 2017: CHF 60.0 million). The net profit was therefore 23.7 percent or CHF 14.2 million lower than in the equivalent period in the previous year.
In comparison with the first half of 2017, operating income fell by 3.2 percent and operating expenses increased by 10.6 percent. The profit attributable to the shareholders of Liechtensteinische Landesbank amounted to CHF 42.1 million (first half of 2017: CHF 57.3 million). Earnings per share stood at CHF 1.46 (first half of 2017: CHF 1.98).
Operating income decreased in the first half of 2018 by 3.2 percent to CHF 183.5 million (first half of 2017: CHF 189.7 million).
Interest income before credit loss expense rose by 5.7 percent or CHF 4.1 million in comparison with the previous year to CHF 76.8 million (first half of 2017: CHF 72.6 million). Interest business with clients remained stable. Risk-conscious growth in mortgage lending business and lower refinancing costs compensated for the expected decline in earnings due to the extension of fixed interest loans at lower conditions. Thanks to lower interest rate hedging costs, income from interest business with banks was significantly higher than in the previous year.
Allowances totalling net CHF 3.2 million for credit loss expense were released by the LLB Group in favour of the income statement in the first half of 2018 (first half of 2017: allocation of CHF 3.1 million).
Net fee and commission income increased by 4.3 percent or CHF 3.2 million to CHF 77.6 million (first half of 2017: CHF 74.4 million). Intensive sales and marketing measures, for example, as undertaken with our recently launched LLB Invest products, contributed to this success. The takeover of LLB Swiss Investment AG also generated higher earnings from investment fund administration. Net brokerage income declined by 7.4 percent in comparison with the previous year, due to lower stock market activity by clients.
Net trading income stood at CHF 34.4 million in the first half of 2018 (first half of 2017: CHF 38.6 million). Trading in foreign exchange, foreign notes and precious metals expanded substantially in comparison with the previous year by 7.4 percent to CHF 28.9 million. This was attributable to the LLB’s treasury performance. The reporting date valuation of interest rate hedging instruments totalled CHF 5.5 million in the first half of 2018 (first half of 2017: CHF 11.5 million). The fall in valuation was attributable to the development of CHF interest rates, which rose more strongly in the first half of 2017 than in the first half of 2018.
A negative market development as well as higher USD interest rates caused book losses of CHF 10.4 million on the reporting date with financial investments measured at fair value through profit and loss compared with a gain of CHF 5.2 million in the first half of 2017. Income from dividends remained unchanged compared with the previous year.
At CHF 1.9 million, other income remained the same in comparison with the previous year.
Operating expenses increased in the first half of 2018 by 10.6 percent to CHF 128.3 million (first half of 2017: CHF 116.0 million).
At CHF 81.5 million, personnel expenses were 6.0 percent or CHF 4.6 million up on the previous year (first half of 2017: CHF 76.9 million). The increase was attributable to the strategic expansion of human resources as well as the takeover of LLB Swiss Investment AG.
General and administrative expenses rose by 27.8 percent or CHF 7.0 million to CHF 32.1 million (first half of 2017: CHF 25.1 million). The previous year’s result was attributable to the writing back of provisions for legal and litigation risks amounting to CHF 5.0 million. Without this effect, general and administrative expenses would have risen by CHF 2.0 million in comparison with the previous year, largely as a result of integration costs.
Depreciation and amortisation increased slightly to CHF 14.7 million (first half of 2017: CHF 14.0 million).
The Cost-Income-Ratio stood at 71.2 percent (first half of 2017: 62.8 %). Without the market effects, i.e. without income from interest rate swaps and price gains from financial investments, the Cost-Income-Ratio stood at 69.2 percent (first half of 2017: 68.5 %).
In comparison with 31 December 2017, the consolidated balance sheet total increased by 5.3 percent and amounted to CHF 21.1 billion as at 30 June 2018 (31.12.2017: CHF 20.0 billion). Loans to customers rose in total by 2.6 percent in comparison with 31 December 2017. Mortgage loans alone increased by 2.1 percent to CHF 10.8 billion.
Equity attributable to the shareholders of LLB stood at CHF 1.8 billion as at 30 June 2018. The tier 1 ratio amounted to 21.6 percent (31.12.2017: 22.2 %). The return on equity attributable to the shareholders of LLB was 4.8 percent (first half of 2017: 6.7 %).
Assets under management
The LLB Group is continuing its robust growth. Thanks to intensive sales and marketing efforts in all three market segments and all booking centres, it achieved a net new money inflow of CHF 1’119 million in the first half of 2018 (first half of 2017: CHF 731 million).
Due to gratifying net money inflows, which more than compensated for the negative performance on the financial markets, client assets under management reached CHF 50.5 billion (31.12.2017: CHF 50.3 billion).
In the second half of 2018, the LLB Group will continue to drive ahead with the consistent implementation of its StepUp2020 strategy. Its main priority will be the integration of the acquisitions. In addition, a primary focus will be placed on profitability and cost management. The Group will continue to invest in innovative products and services, drive forward with the digitalisation of banking business, and generate new growth impulses with its lean management culture.
Thanks to our focused business model, diversified earnings structure and clear StepUp2020 strategy, we are well prepared to meet and master the forthcoming opportunities and challenges. On the earnings side, we expect to make further operative progress, especially in fee and commissions business. In addition to making a contribution to the Group’s business result, the integration of Semper Constantia will also involve integration costs, resulting in an effect of around minus CHF 5 million on the Group net profit. We are confident that we can again achieve a solid business result for the 2018 business year.