Statement by the Chairman of the Board and the Chief Executive Officer
Dear Shareholders, Ladies and Gentlemen
In 2023, the turnaround in interest rates led to significant changes to banks’ earnings. VP Bank was among those to benefit from increased interest rates in 2023 and unveiled a solid result. However, as our clients’ assets have increasingly shifted from current accounts to higher-interest-bearing time deposits and securities, we have been generating lower interest income – or higher interest expenses – since early 2024. A reduction in net interest income led to business income shrinking by 13.6 per cent, compared to the previous year, to CHF 162.6 million. The commission and services business and trading income remained stable.
Operating expenses fell in the first six months, albeit not to the same extent. Costs dropped by 6.0 per cent on the previous year to CHF 148.8 million, due to reduced staff costs and lower depreciation and amortisation. Overall, this resulted in a semi-annual profit of CHF 11.5 million, which represents a decrease of 54.8 per cent compared to the previous semester.
In the second half of the year, we are endeavouring to take substantial efficiency-focused measures and steps to accelerate growth with the aim of bolstering our profitability long-term once again. We want to apply a highly disciplined approach to costs and a consistent focus on creating value for our clients, so we are more independent of interest rate fluctuations and have scope to grow profitably. Our aim is to enhance profitability across all regions.
Improving operational efficiency
We will markedly improve our efficiency over the coming months. Our efficiency goal of at least CHF 20 million is to be achieved by the end of 2026 through redundancies and simplifying the organisation. In addition, we are consistently aligning our processes to focus on our clients. Client services that cannot be successfully positioned on the market – such as our in-house offering of private market investments – will be discontinued. We believe that these steps will enable us to sustainably improve our cost/income ratio.
This goes hand-in-hand with organisational adjustments and a reduction in the size of our workforce. The restrictive hiring policy in place since the start of this year has meant that much of this downsizing can be undertaken via staff turnover, but some terminations will nevertheless occur. Any employees affected will be given support with their career transition. The costs of the restructuring and, in a broader sense, other expenses associated with it amount to approx. CHF 10 to 12 million. They will be incurred in the second half of 2024.
Growth in core markets and focus on our strengths
We want to further accelerate our growth by means of initiatives and actions targeted at clearly defined client groups and markets. As a full-service bank in Liechtenstein and an internationally active bank for intermediaries and private clients, VP Bank has a diversified business model in markets with good growth prospects. In the future, the aim is to lean into the bank’s strengths in a more targeted way and tap into the resulting opportunities for growth more consistently.
In Liechtenstein, we already have a strong private client and commercial business with stable growth. In fiduciary transactions, we are striving to ensure that we can consolidate our market leadership via sophisticated, personal client service.
In Europe, our sites in Zurich and Luxembourg give us a presence in key international financial hubs, where our comprehensive wealth management services make us stand out to a demanding international clientele. We will be expanding this offer by tightening up our value proposition; our clients will receive optimum service with an offering tailored to their needs. Personal advice and service are at the heart of this. We are a professional partner for intermediaries, offering a mature client platform, a high degree of investment competence and extensive expertise in the various client and investment domiciles.
VP Bank wants to maintain its presence in growth markets in Asia. However, we have decided to close the Hong Kong office. The Asia region remains important for the Group. VP Bank will continue to grow and strengthen the Intermediaries and Private Banking presence in Asia and explore new opportunities from the Singapore location. Overall, this focus on the Bank's strengths should increase the profitability of the Asia region.
We have been able to successfully find a foothold for ourselves on the British Virgin Islands in the prime real estate financing niche, where we are seeing steady, sustainable growth.
We also want to tap into synergies with asset servicing going forward. Our comprehensive offering as a one-stop shop in the funds space enabled us to put ourselves on a good footing in this respect, recording double-digit growth.
Net new money inflows and financial stability
The Group’s net new money inflow was pleasing: this amounted to CHF 0.5 billion at the end of June 2024, corresponding to annualised growth of 2.2 per cent. The net new money inflow without taking into account further forced outflows due to adjustments to the client portfolio was CHF 0.8 billion; this corresponds to 3.6 per cent on an annualised level. Client assets under management grew by 8.8 per cent to reach CHF 50.4 billion. We believe that the steps taken will further accelerate growth.
VP Bank has a strong capitalisation and high liquidity. The tier 1 ratio was 26.1 per cent, and the liquidity coverage ratio was 309.5 per cent.
Changes to the Board of Directors and the Executive Board
In April 2024, the annual general meeting elected Dr Dirk Klee as a new member of the Board of Directors and re-elected Philipp Elkuch for a term of office of three years. Furthermore, the Board of Directors elected Stephan Zimmermann as its new Chairman following the annual general meeting. After a total of six years in office and two terms as Chairman of the Board of Directors, Dr Thomas Meier decided not to stand for re-election.
There was a change on the Group’s Executive Board too. In May 2024, after five years, Paul Arni handed over his role as Group Chief Executive Officer to Dr Urs Monstein by mutual consent. Urs Monstein has been Chief Operating Officer at VP Bank since May 2018 and took over the role of Chief Executive Officer on an interim basis. The recruitment process for a successor is ongoing.
Thank you
We would like to thank our clients and shareholders for the loyalty they continue to show to VP Bank. We will approach the tasks ahead with optimism and respect, backed by a strong team. As a result, our employees deserve our special gratitude for their exceptional commitment.
Stephan Zimmermann
Chairman of the Board of Directors
Dr Urs Monstein
Chief Executive Officer a.i. and Chief Operating Officer of VP Bank Group
