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The Vontobel Group more than doubles its net profit in 2005
15.03.2006 -
The Vontobel Group today reported a net profit of CHF 183.2 mn for the 2005 financial year. It thus succeeded in more than doubling its result compared to 2004 (+126%) due to increased profit contributions from all business units. The result for the previous year was adjusted for the impact of changes in IFRS accounting principles, in accordance with regulations. Operating income rose by 37% to CHF 624.4 mn, while operating expense grew at a lower rate (+19%) to CHF 385.9 mn. The cost/income ratio including depreciation therefore decreased substantially to 65.2% and was thus at the lower end of the mid-term target range. Investment Banking also doubled its pre-tax profit (+98%) due, in particular, to its successful derivatives business. Pre-tax profits in Private Banking and Asset Management & Investment Funds rose by 44% and 54%, respectively. At the end of 2005, the Vontobel Group held assets totalling CHF 88.9 bn. Client assets increased by 18.5% to CHF 57.6 bn in the year under review. In addition, custody assets of CHF 31.3 bn were reported. The Group recorded CHF 1.4 bn of net new money in 2005, including inflows of CHF 1.2 bn in Asset Management & Investment Funds and CHF 0.4 bn in Private Banking. In view of the marked improvement in the Group's result, the Board of Directors will propose a 33% increase in the dividend to CHF 1.60 to the General Meeting of Shareholders of Vontobel Holding AG.
"The Vontobel Group has achieved a very pleasing result with the doubling of its net profit. All business units achieved substantial progress in 2005 and significantly increased their profits," commented Herbert J. Scheidt, CEO of the Vontobel Group. "Our earnings growth provides clear evidence that we have the right positioning to serve our clients individually and professionally in our role as an independent, well-capitalized and innovative private bank. Moreover, we offer a broad and integrated range of products on a scale that enables us to deliver personal service and added value for our individual clients."
Vontobel strengthens its positioning as an innovative asset manager and an independent family bank
The Vontobel Group succeeded in further strengthening its positioning as an active and innovative asset manager through the acquisition of a majority stake in Harcourt Investment Consulting AG, an internationally renowned hedge fund specialist, as announced in December 2005. As a result of this acquisition, Vontobel will substantially increase its innovative offering of alternative investment products − an area that is constantly growing in importance. This will provide Vontobel's institutional and private clients with access to a first-class range of funds of hedge funds products that are geared towards generating long-term client value. The majority stake in Harcourt will have a positive impact on Vontobel's asset base and result for the first time in 2006.
In 2005, another important milestone was reached in the strategic cooperation between Vontobel and the Raiffeisen Group. At the end of September 2005, the Vontobel Group assumed responsibility for all of the securities portfolios of the Raiffeisen Group in the form of global custody assets, as planned. The value of these assets totals approximately CHF 19 bn. In addition, Raiffeisen transferred its trading execution to Vontobel during the year under review. Very promising developments were also reported in the two partners' extended cooperation in the investment business. The investor-oriented product offering and the sales support provided to the Raiffeisen banks by Vontobel proved effective. In 2005, Raiffeisen clients invested a total of approximately CHF 1.6 bn in investment products, and there was particular interest in structured products offering capital protection and in absolute return funds.
Dr Urs Widmer, Chairman of the Board of Directors of Vontobel Holding AG, stated: "We are pursuing our strategy of achieving growth in all business units − in Switzerland and internationally − both organically and through partnerships and targeted acquisitions if a company is strategically and culturally compatible with the Group. We entered a new stage in the implementation of this strategy in 2005 with our longstanding partnership with the Raiffeisen Group and our new cooperation agreements with Deutsche Postbank and Phoenix in the US, as well as our majority stake in the hedge fund specialist Harcourt and our pleasing organic growth. We have thus further strengthened our unique positioning as a growth-oriented and innovative Swiss private bank that has a stable family shareholder base with a long-term perspective as well as a stock market listing."
Significant improvement in operational efficiency
The Vontobel Group reported a net profit of CHF 183.2 mn for the 2005 financial year, more than doubling its 2004 result of CHF 80.9 mn (+126%), adjusted in line with revised International Financial Reporting Standards. Operating income rose 37% to CHF 624.4 mn. This marked growth in operating income reflects the favourable market environment, the Vontobel Group's good positioning in the market and the systematic implementation of its growth initiatives, which are aimed at generating added value for its clients. Commission income accounted for 55% of the Group's operating income, a decline compared to the previous year. The contribution from net interest income − which now also includes income from the derivatives business in accordance with revised IFRS rules − increased markedly to 19% (previous year: 12%) in connection with the growing derivatives business. The contribution from trading income remained almost stable at 23%.
Operating expense grew at a lower rate than operating income, rising by 19% to CHF 385.9 mn. Personnel expense rose by 26% to CHF 260.4 mn due to higher bonus accruals − adjusted in line with the successful performance of the business − while general expense increased by only 6% to CHF 125.5 mn. Headcount remained virtually unchanged at 917 employees (full-time equivalents). The cost/income ratio including depreciation decreased substantially to 65.2% and was thus at the lower end of the mid-term target range. In this context, it should be noted that a very low level of depreciation was recorded in 2005 due to the Vontobel Group's capital expenditure cycle and that depreciation will increase as of 2006. In addition, the tax rate was only 14.4%.
Net new money totals CHF 1.4 bn
At the end of 2005, the Vontobel Group held assets totalling CHF 88.9 bn. Client assets increased by 18.5% to CHF 57.6 bn in the year under review. In addition, custody assets of CHF 31.3 bn were reported (+ CHF 20.2 bn). The Group recorded CHF 1.4 bn of net new money (previous year: CHF 0.6 bn). Pleasing progress was achieved in both Private Banking and Asset Management & Investment Funds, with net inflows of CHF 0.4 bn and CHF 1.2 bn, respectively, while Investment Banking reported a slight decline. Changes in market value accounted for CHF 7.6 bn or 15.6 percentage points of the total growth in assets, with the performance of client portfolios being positively impacted by the systematic implementation of appropriate investment policy decisions.
Systematic approach to Private Banking activities in core and growth markets
In the Private Banking business unit, pre-tax profit increased by almost half to CHF 65.8 mn (+44%) compared to the previous year. Operating income rose 17% to CHF 200.3 mn compared to 2004. This increase in income was driven by the successes in Private Banking's systematic approach to its activities in core and growth markets, as well as the favourable market environment and the positive performance in client portfolios. Operating expense grew at a lower rate (+11%) than operating income to stand at CHF 130.6 mn. This increase was primarily due to the further strengthening of front office units, higher performance-related bonus accruals and the optimized allocation of central costs to the business units.
The Vontobel Group successfully grew its asset base in German-speaking Europe and Central and Eastern Europe and will also strengthen its teams in these regions through the appoint-ment of further experienced relationship managers in the future. A slight improvement was reported in Switzerland. The gross margin rose to 97 basis points, up 6 basis points from the previous year.
Investment Banking doubles its profit
In 2005, the Investment Banking business unit almost doubled its pre-tax profit, which rose by 98% to CHF 116.1 mn within one year. Operating income grew by 58% to CHF 255.7 mn, while operating expense increased at a lower rate (+36%) to CHF 137.7 mn. In addition to higher performance-related bonus accruals, this growth in costs reflected measures to expand the infrastructure of the business − including steps relating to the transaction and custody part of the cooperation with Raiffeisen − as well as the volume-driven increase in securities settlement costs. In this connection, the number of trans-actions doubled in December 2005 compared to the corresponding period of the previous year due to the transfer of trading execution from Raiffeisen to Vontobel and the increased level of sales in Institutional Sales, as well as a general increase in client activity due to the positive market environment.
The Vontobel Group further expanded its leading position in the derivatives business in Switzerland, and the issuing unit in Frankfurt achieved a successful performance during its first nine months. After only a brief period of time, Vontobel is now producing certificates for notable banks in the largest derivatives market in Europe. In 2005, it received several awards in both the derivatives business and in research. In addition, Institutional Sales continued its upward trend in the second half of 2005, confirming the benefits of its realignment in 2004.
Strong demand for speciality funds in Asset Management & Investment Funds
In the year under review, the Asset Management & Investment Funds business unit reported a pleasing 54% increase in pre-tax profit to CHF 57.2 mn compared to 2004. Operating income grew by 31% to CHF 157.5 mn, driven primarily by strong demand for special products in the field of investment funds. The Vontobel Group succeeded in further expanding its market share in the Swiss investment fund business. It reported high growth rates in Europe in particular, where its efforts to expand its presence in Frankfurt, Vienna and Milan over recent years have proved effective. The Vontobel Group has been working together with Postbank Vermögensberatung in Germany in the field of investment fund asset management since October 2005. Vontobel has thus gained access to a new and attractive sales market in Germany, which represents a key strategic growth market. In addition, it has been cooperating with its new distribution partner in the US − Phoenix Investment Partner, Ltd. − since June 2005.
Operating expense in Asset Management & Investment Funds also rose at a lower rate than operating income to CHF 98.4 mn (+21%). This increase was attributable to higher performance-related bonus accruals as well as the Group-wide optimization of the allocation of central expenses. The further development of successful special products and the implement-tation of the growth strategy also gave rise to additional expenses. The increase in the gross margin to 58 basis points (previous year: 50 basis points) reflected growing sales of special products in the higher-priced segment.
Significantly higher return on equity
In spite of a further increase in shareholders' equity, which grew 11% to CHF 1.2 bn, the Vontobel Group succeeded in significantly improving its return on equity from 8.5% in the 2004 financial year to 16.2% in 2005. The BIS tier 1 ratio, which is defined as the ratio of shareholders' equity to risk-weighted assets, amounted to 24.4% at the end of 2005 and was thus once again several times higher than the regulatory requirements. With its strong equity position, the Vontobel Group remains very well capitalized and offers its clients and business partners a high level of security.
The Board of Directors will propose a 33% increase in the dividend to CHF 1.60 to the General Meeting of Shareholders of Vontobel Holding AG on 25 April 2006. This corresponds to a payout ratio of 56% (dividend payment as a percentage of net profit) and represents a high dividend yield by industry standards. With this proposal, the Board of Directors is confirming the Vontobel Group's policy of enabling its shareholders to participate in the good performance of the business while, at the same time, ensuring the greatest possible continuity.
Further investments in growth initiatives
2005 was an excellent year in the stock markets. The Vontobel Group expects that the market environment will remain essentially positive in the first few months of 2006 and that volatility will increase in the second half of the year. The Vontobel Group will continue to invest in growth initiatives in all of its business units as well as in the modernization of its infra-structure in future, as announced. As a result, a rise in general expense and significantly higher depreciation requirements are to be expected as of 2006. The Group is convinced that the systematic implementation of its growth initiatives will have a positive impact on its result in the medium term and that it will be able to further strengthen its unique positioning as a listed independent family bank. |
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