Van Lanschot Kempen today released its 2017 half-year results. Karl Guha, Chairman, said: “Our wealth management strategy generated robust results in the first six months of the year. Our focus on preserving and creating wealth for our private and institutional clients has increased assets under management (AuM) and sparked a 13% advance in commission income. We’re delighted with our takeover of UBS’s wealth management activities in the Netherlands – completed only last week – as it significantly strengthens our position in the market for ultra-high net worth private individuals, family offices and foundations & charities.
“At €62.3 million, our net profit was the strongest half-year performance in many years, while our underlying net result rose to €69.6 million. This was driven in part by the proceeds from the sale of a stake in our portfolio of participating interests and from sales of stakes in our investment funds.
“Combined with our very strong capital base, these results enable us to propose a capital return payment of €1 per share. This represents the next step in realising our ambition to return at least €250 million in capital to our shareholders before the end of 2020.
“Client assets rose to €72.0 billion from €69.4 billion, with Private Banking, Evi and Asset Management all contributing to the increase in AuM from €57.5 billion to €60.1 billion. AuM growth reflects a total €1.6 billion in net inflows and €0.9 billion in positive market performance. Net inflows break down into €1.3 billion at Asset Management and €0.3 billion at Private Banking.
“Evi continues to invest in optimising its service and is seeing its clients increasingly opting to invest rather than save. Merchant Banking enjoyed improved results on last year thanks to a number of successful transactions in the second quarter, while Corporate Banking ran down its portfolio as intended, by nearly €250 million. This has helped to boost our CET I ratioi to 19.6% (year-end 2016: 18.6%).
“Our operating expenses were comparable to last year’s level, despite additional costs related to the Staalbankiers acquisition. The quality of our loan portfolio benefited from the positive economic climate, prompting a net release from loan loss provisions of €1.9 million.”
The upbeat sentiment at Private Banking, combined with improved economic conditions resulted in an increase in the number of client transactions. Commission income added 21%, thanks to the Staalbankiers acquisition, enhanced transaction activity and net inflows in the Netherlands, Belgium and Switzerland.
Net Private Banking inflows worked out at €0.3 billion, excluding a minor outflow of former Staalbankiers clients. Van Lanschot Kempen is pleased to report that over 95% of the Staalbankiers assets under management have been retained. Private Banking saw its total AuM go up to €19.6 billion in the first half (year-end 2016: €19.0 billion) and its aim is to accelerate this growth. The acquisition of UBS’s wealth management activities in the Netherlands is expected to add up to €2.6 billion to assets under management.
Private Banking’s AuM growth and commission income helped to lift its underlying net result to €20.5 million from €17.7 million in the comparable period. The Staalbankiers acquisition was among the factors that led to a €2.7 million increase in staff costs. Reflecting its stated aims, Private Banking’s loan portfolio remained virtually stable at €8.0 billion (year-end 2016: €7.9 billion).
In keeping with trends elsewhere, Private Banking´s clients display a growing interest in responsible investing, and are rating the social impact of their investments as well as their financial returns. Launched at the beginning of the year, its Duurzaam+ (sustainable) investment proposition has recorded fine growth. Over the past months, a great deal of work has gone into the omnichannel service model, as evidenced in the launch of a range of apps for investor clients. Van Lanschot Kempen has teamed up with Germany’s FinTech Fidor to improve its payments offering, the outcome of which will be presented to clients in the course of 2018. The outsourcing of the mortgage administration to Stater is proceeding as planned and is expected to be completed in September.
Evi continues to improve its service and build a scalable platform, with client responses showing that these improvements are greatly appreciated. Evi’s client assets were unchanged at €1.5 billion. Invested assets rose by over 11% on the back of nearly €70 million in net AuM inflows. As expected, Evi’s investments resulted in a negative underlying net result of -€4.4 million (H1 2016: -€4.4 million).
Asset Management had an excellent first half, with net inflows of €1.3 billion and a positive €0.4 billion market performance adding up to €39.5 billion in assets under management. Inflows mostly reflect new fiduciary mandates, with the UK activities acquired in 2015 having landed a mandate from the Mencap Pension Plan. The division’s AuM are set to grow further in the months ahead, driven by substantial mandates from a number of large Dutch pension funds, including the previously announced €7.3 billion fiduciary mandate from Stichting Pensioenfonds UWV and by the collaboration with the general pension fund het nederlands pensioenfonds, by way of which it will welcome a number of new clients in the next few months, including Arcadis. Meanwhile, the Donatus mandate has helped to further enhance Asset Management’s position with insurers.
Asset Management’s investment strategies have expanded on their solid track record, with its Global Small Cap Fund and Kempen Oranje Participaties in particular attracting a fresh inflow of clients. The division also launched its Diversified Structured Credit Pool and Long Term Value Creation strategy. A successful first six months for Asset Management were corroborated by enhanced approval ratings from existing clients, as underlined by a higher Net Promotor Score of 44 (2015: 32).
Commission income at Asset Management rose to €44.9 million (H1 2016: €43.4 million). Average margins have been coming down due to AuM composition and minor margin pressure. Its underlying net result rose to €5.8 million (H1 2016: €5.5 million).
Benefiting from a strong second quarter, Merchant Banking’s underlying net result increased to €3.4 million (H1 2016: €2.1 million), with commission income working out at €22.3 million (H1 2016: €19.3 million). Kempen Corporate Finance advised on capital market transactions by various clients, including VolkerWessels and Vesteda. Its FI & Fintech team acted as advisers to BlackFin Capital Partners in the takeover of Buckaroo announced in July. Merchant Banking enjoys a full pipeline.
The persistently low interest rate environment saw a great deal of demand for Kempen Securities’ structured products, with enhanced activity on the part of Private Banking clients also visible. Kempen Securities is on track to implement MIFID II and preparatory work will continue in the second half of the year.
Underlying net result at Other activities rose to €36.0 million (H1 2016: €7.0 million). The sale of a minority stake in TechAccess chipped in a significant €11.1 million to the result, while the sale of stakes in investment funds also contributed. The higher result on financial transactions was driven by improved market conditions compared with last year.
Van Lanschot Kempen’s capital base continues to improve and the fully loaded CET I ratioi rose to 19.6% (year-end 2016: 18.6%). A key contributor to this capital base enhancement is the fall in risk-weighted assets due to a further run-off of the Corporate Banking portfolio by nearly €250 million. This loan portfolio has now been reduced to €1.1 billion in real estate and SME loans, with risk-weighted assets of €0.9 billion. Underlying net result at Corporate Banking came down to €8.2 million from €9.8 million in the first half of 2016, driven by the fall in interest income to €17.1 million (H1 2016: €24.6 million) as a result of the steady run-off. The total result received a boost from the €3.0 million release of loan loss provisions. Costs were virtually unchanged.
The proposed return of capital of €1 per share – adding up to a total of over €41 million – represents the next step in the implementation of Van Lanschot Kempen´s capital strategy. Van Lanschot Kempen is very pleased to be able to propose this capital return. The aim is to return at least €250 million to shareholders in the period up to and including 2020, subject to the approval of the regulators.
The proposal will be put to a vote at the Extraordinary General Meeting of Shareholders on 11 October 2017. The return of capital will be charged to the proportion of the share premium reserve available for distribution and will therefore be exempt from dividend tax. Total share capital in issue will be unchanged and the CET I ratio will remain well ahead of Van Lanschot Kempen’s capital objective of 15–17% even after the return of capital.
FINANCIAL REPORT / PRESENTATION / WEBCAST
For a detailed discussion of Van Lanschot Kempen’s results and balance sheet, please refer to our financial report and presentation on the 2017 interim results. In a conference call for analysts on 29 August at 9.00 am CET, we will discuss our 2017 half-year figures in greater detail. This may be viewed live and played back at any later date. Please see Financial results 2017.
[i] Fully loaded, excluding retained earnings. Year-end 2016 including retained earnings.