«Client focus, performance culture and innovative solutions for sustained success in the future»
A discussion with Hans-Werner Gassner and Roland Matt
Changing markets demand new strategies and structures. How is the LLB getting fit for the future?
Hans-Werner Gassner: We are taking a new direction with our Focus2015 strategy. The specific focus of our financial and human resources on clearly defined client segments and markets is the business model, with which we can achieve sustained success in a fiercer competitive environment. The realisation of our strategic initiatives is going according to plan. We have optimised our distribution network, closed LLB Switzerland and sold the Lugano bank branch and Jura Trust AG. These measures have enabled us to reduce complexity and cut costs, while at the same time ensuring the intensification of our activities in the growth markets. Our three divisions: Retail & Corporate Banking, Private Banking and Institutional Clients have sharpened their target client focus and increased their market activities. Moreover, we have massively strengthened our risk management in the last two years.
How satisfied are you with the 2013 business year?
Roland Matt: The development of our good operative performance continued in 2013. The LLB Group attained net profit per 31 December 2013 of CHF 53.8 million, which was therefore 43.3 percent below the previous year’s level. Adjusted for the one-off effects, the LLB Group would have reported net profit of CHF 112.4 million and thus exceeded that of 2012. Our business result contains provisions for the US taxation dispute as well as for the restructuring of the Group within the scope of the Focus2015 strategy. The growth of new money in our onshore and growth markets in 2013 reinforces my conviction that we are on the right course.
Roland Matt, Group CEO
How confident are you that the LLB Group will attain its three financial objectives by the end of 2015?
Roland Matt: We have taken clear decisions regarding the business focus and restructuring of the Group, and our Focus2015 strategy is taking effect. The one-off effects, which tarnished our business result, will not influence the strategic direction of the LLB Group. We are sticking to our ambitious goals, which we want to reach by the end of 2015. We have a solid equity basis consisting solely of hard core capital, and our Tier 1 ratio already stands at over 16 percent. We are therefore absolutely fit.
What strengths does the LLB Group have in order to continue to be well positioned in the banking industry?
Dr. Hans-Werner Gassner,
Chairman of the Board of Directors
Hans-Werner Gassner: The financial services industry is confronted with a rapidly changing environment. More than ever, security and reliability play a central role. Our main shareholder, the Principality of Liechtenstein, is one of only fourteen countries worldwide having an AAA sovereign rating. We are well positioned with this shareholder structure. As a universal bank, we are the market leaders in savings and lending business in Liechtenstein and an important player in eastern Switzerland – this in combination with a strong international asset management business and as a reliable partner for institutional clients. In Liechtenstein, we are the only bank with bank branches and a network of ATMs.
The LLB Group has already received numerous awards for its investment competence. For example, thanks to its consistent performance, the LLB Equities Regio Bodensee fund has been outstanding for years. At the beginning of 2014 – following 2007 and 2008 – it received the Lipper Fund Award for the third time for its absolute performance over three years. In November 2013, «GELD», the Austrian journal for financial professionals, selected two of our strategy funds to each receive an Umbrella Fund Award.
How have you invested in the future?
Roland Matt: From a plethora of measures let me mention just a couple of highlights that go to show how we convince our clients. In order to offer our intermediary clients structured, well-founded expertise and to intensify the cooperation with them, in November 2013, we launched the «LLB Xpert views» online platform. Among other things, this innovative portal provides access to information in the fields of investment, law and taxation, which previously was solely for internal use at the bank.
At the same time, we were expanding our digital channels for the benefit of clients. Since December 2013, we have been offering our clients an attractive application for LLB Mobile Banking on smartphones and tablets. Our mobile banking app has a simple and intuitive operation while at the same time fulfilling the highest security standards. In addition, in May 2013, we set up Customer Service Centers in Vaduz and Uznach and successfully created central service hubs for private and corporate clients. These services from one source ensure that client concerns are dealt with in a fast and uncomplicated manner. Bank Linth has been especially successful in convincing clients with innovative solutions for making banking transactions simple and convenient. In 2013, it introduced an attractive product called «AccountBox MyInterest» on the Swiss market, which offers monthly fixed pricing and individual interest rates.
In our Private Banking business, we continued to invest in the sustained expansion of our international growth markets. We further supplemented our product offer for our clients in Central and Eastern Europe, whom we take care of from Vienna, Geneva and Zurich-Erlenbach. And we now provide our clients in the Middle East with access to the stock markets in Dubai and Abu Dhabi.
You have introduced a new remuneration model. What do you expect from this?
Hans-Werner Gassner: We attach great importance to a responsible culture of performance, and we have introduced measures to be an attractive employer. These measures include our new remuneration model, which could serve as a showcase for the banking industry. Starting from 2014, the amount of variable remuneration will be based not only on the Group’s business result, but also on the individual performance of the employee. Our new remuneration model is appealing for employees who are prepared to work hard, while at the same time the bonus / penalty system contributes to enhancing the quality of self-management and personal responsibility.
Many banks are striving to overcome the US taxation dispute. How did you succeed in finding a solution for the LLB Vaduz?
Hans-Werner Gassner: We have indeed been able to definitely resolve the US taxation dispute for the LLB Vaduz. For the bank in Vaduz the issue has been settled since 30 July 2013. In doing so, we signed a non-prosecution agreement with the US Department of Justice and the District Attorney for the Southern District of New York. This agreement marks the end of the US investigation of the LLB Vaduz. In return, we made a payment of USD 23.8 million. The US authorities acknowledged our willingness to cooperate and the fact that, even before the investigation commenced, we had voluntarily implemented measures to terminate US client relationships that did not have the appropriate documentation. The settlement for the LLB Vaduz creates clarity and certainty for our clients, employees and shareholders.
How do you see the future of the financial center?
Roland Matt: Cross-border private banking will remain a cornerstone of the Liechtenstein financial center. Its further development depends, on the one hand, on the quality of the players, services and products in the institutional and private client segments. On the other, the authorities and politicians are charged with continuing to support the financial center with stable and reliable framework conditions, so that the banks can devote themselves to their core competences. Accordingly, Liechtenstein is adapting well in advance to the regulatory changes in the field of taxation.
Does this also apply under the provisions of Liechtenstein’s tax compliance strategy?
Hans-Werner Gassner: The Liechtenstein Declaration of 12 March 2009, which set the framework for a tax compliance strategy, was confirmed and continued in the government announcement of 14 November 2013. The Liechtensteinische Landesbank explicitly and actively supports the strategy of the financial center. The LLB Group has adopted a risk-based approach and made it standard procedure for clients to declare they are tax compliant.
What do you expect in 2014?
Roland Matt: The banks are still operating in a difficult economic and political environment, which is characterised by a high level of instability, low interest rates and heavy pressure from abroad. These factors plus sharply higher regulatory costs have and will continue to have a negative impact on margins.
The LLB Group is facing up to these challenges. 2013 was the first year of our Focus2015 strategy. We have placed the focus on selected client segments and markets. The realisation of our strategic initiatives is already showing results and we have further improved our operative performance. As a bank with great tradition, we have confirmed the trust placed in us, accepted our responsibility and convinced stakeholders with our performance. Our goal in 2014 is to create added value for our clients and shareholders, to become even more efficient and to intensify our focus even more on clients and markets. Our Focus2015 strategy is enabling us to further enhance our specific success factors.