Historically low interest rates and declining margins characterised the business environment in 2013. Operating income increased by 19.1 percent to CHF 487.0 million (2012: CHF 408.9 million). Of this total, CHF 79.4 million was attributable to the previously mentioned one-off effects, which were recognised in the income statement under the item «Other income». Adjusted for these one-off effects, operating income stood at the same level as in the previous year.
Interest income before credit loss expense fell in 2013 by 19.6 percent to CHF 145.7 million (2012: CHF 181.2 million). In interest business with clients we posted a slight decline of 0.4 percent to CHF 141.8 million (2012: CHF 142.4 million). Interest income in client business fell by CHF 17.7 million to CHF 194.9 million, interest paid to clients decreased by CHF 17.1 million to CHF 53.1 million. Credit loss expense decreased significantly by CHF 21.5 million to CHF 25.0 million (2012: CHF 46.5 million). As expected, due to historically low interest rates and a lack of investment alternatives on the interbank market, interest income from banks fell sharply by 60.5 percent to CHF 22.5 million (2012: CHF 56.9 million). On account of higher interest rate hedging costs, interest paid to banks climbed by 2.9 percent to CHF 18.6 million (2012: CHF 18.1 million). At CHF 3.9 million, net interest income from banks was 89.9 percent under the previous year’s total of CHF 38.9 million.
Net fee and commission income increased by 3.4 percent to CHF 210.4 million (2012: CHF 203.5 million). The pleasing market development had a positive effect on the activities of our clients. Brokerage fees climbed by 8.0 percent. In addition, advisory and management fees were 5.3 percent higher and investment fund fees rose by 9.0 percent.
Net trading income increased substantially to CHF 58.6 million (2012: CHF 18.6 million). Whereas interest rate hedging costs of CHF 10.7 million were incurred in 2012, on account of higher medium and long-term market interest rates, in 2013 income from interest rate swaps amounted to CHF 30.3 million. Revenue from client trading with foreign exchange, notes and precious metals decreased by 1.8 percent to CHF 28.1 million.
Net income from financial investments at fair value through profit and loss stood at CHF 15.6 million, 64.5 percent lower year on year (2012: CHF 44.1 million). As a result of the increase in medium and long-term market interest rates, investments in interest-bearing instruments posted unrealised price losses. At the same time, positive price developments on the stock markets led to unrealised price gains. Net price gains totalled CHF 3.3 million compared with CHF 31.6 million in the previous year. Earnings from interest and dividend income amounted to CHF 12.4 million, practically the same level as in the previous year.
Other income stood at CHF 81.5 million (2012: CHF 8.0 million). The one-off effects mentioned above in operating income of CHF 79.4 million are included fully in this income statement position. This consists largely of CHF 55.4 million of the adjustment to purchase price obligations from acquisitions and CHF 22.0 million from the closure of LLB (Switzerland) Ltd. The definitive profit from the sale of the Lugano bank branch depend on various parameters. As a result of this, the profit from the sale could change, leading to earnings or expenses in the 2014 and 2015 business years. Without the one-off effects, other income in 2013 would have stood at CHF 2.1 million.
Operating income 2013
CHF 487.0 million
Operating expenses stood at CHF 426.0 million, CHF 125.1 million higher than in the previous year of CHF 300.9 million. Whereas in 2012 a one-time reduction in personnel expenses due to the change in pension plans made by the Personnel Pension Foundation of Liechtensteinische Landesbank AG of CHF 19.8 million led to a decrease in operating expenses, in 2013 one-time expenses in relation to one-off effects of CHF 138.0 million increased operating expenses. Without these one-off effects, operating expenses would have declined by CHF 32.7 million or 10.2 percent.
At CHF 173.2 million, personnel expenses were 5.9 percent higher than in the previous year (2012: CHF 163.6 million). Adjusted for the reduction in expenses of CHF 19.8 million caused by the pension plan change over in 2012 and one-off effects in 2013 of CHF 7.2 million, personnel expenses would have been CHF 17.4 million, or 9.5 percent, lower than in the previous year. The one-off effects consisted of provisions for restructuring measures and costs in connection with the sale of LLB (Switzerland) Ltd. totalling CHF 8.7 million, as well as CHF 1.5 million lower pension plan obligation in connection with the sale of Jura Trust AG. The number of full-time equivalent positions in the LLB Group decreased by 15.1 percent to 925 (31.12.2012: 1'090).
General and administrative expenses of the LLB Group in 2013 stood at CHF 194.1 million (2012: CHF 102.7 million), corresponding to a rise of CHF 91.4 million or 89.0 percent compared with the previous year. This is attributable to one-off effects amounting to CHF 115.9 million; these include an impairment of goodwill of CHF 81.7 million, provisions for US risks of CHF 33.2 million and restructuring costs of CHF 1.0 million. Without these one-off effects, general and administrative expenses would have totalled CHF 78.2 million, representing a decrease of CHF 24.5 million, or 23.8 percent, compared with the previous year. Cost savings were realised above all in the fields of marketing and public relations, machinery and equipment, as well as consulting fees.
The cost savings achieved in personnel and general expenses are a consequence of the rigorous implementation of the LLB’s cost-cutting and efficiency improvement programme.
Depreciation and amortisation increased year on year by CHF 24.1 million to CHF 58.7 million (2012: CHF 34.6 million). One-off effects amounting to CHF 14.9 million weighed on this item. These arose in connection with impairments for real estate and intangible assets associated with the closure of LLB (Switzerland) Ltd., as well as extraordinary write-downs as a result of the restructuring of the bank branch network. Year on year, ordinary write-downs rose by CHF 9.2 million. This additional expense was largely due to the first time depreciation of investments in the data processing center in Eschen as well as subsequent write-downs for the swisspartners group, which was again fully consolidated in 2013.
The Cost-Income-Ratio for 2013 stood at 67.7 percent (2012: 62.3 %). This reference figure was calculated as follows: operating expenses (excluding provisions for legal and litigation risks, allowances for non-current assets held for sale and impairment for goodwill) in relation to operating income (excluding credit loss expense and adjustments on purchase price obligations from acquisitions). One-off effects are therefore eliminated and the Cost-Income-Ratio reflects the operative business activity.
IAS 19 (revised) regulates the benefits to employees and stipulates a retrospective application of the standard. The values for the comparison periods in the income statement, the statement of comprehensive income, the balance sheet and the statement of changes in equity were restated accordingly. Consequently, the pension plan obligation, adjusted to take into account deferred taxes, decreased by CHF 9.8 million to CHF 109.5 million per 1 January 2012. As per 31 December 2012, the pension plan obligation stood at CHF 80.8 million, whereby in addition to IAS 19 (revised) the positive one-time effect from a defined benefit to a defined contribution plan contributed to the reduction. As per 1 January 2012, other reserves decreased by CHF 9.4 million and equity attributable to minorities increased by CHF 0.4 million. The equity of the LLB Group rose from CHF 1'641.7 million to CHF 1'651.5 million per 1 January 2012. IAS 19 (revised) had no significant influence on the income statement. Expenses for pension plans in 2012 rose by CHF 2.8 million. Comprehensive income for the period ending on 31 December 2012 climbed from CHF 100.1 million to CHF 102.1 million. In this respect, see of the accounting principles.
On 1 January 2014, the LLB Group introduced a new compensation model, this led to a one-time pension plan expense per 31 December 2013 of CHF 4.0 million (in this respect, see of the accounting principles).