- Gross result for the first half of 2009 38.9 million
- Vigorous recovery of revenues in second quarter
- Due to accelerated amortisation of IT costs ( 34.5 million before tax) and higher addition to loan loss provision ( 50.6 million before tax), net loss stands at 46.3 million
- Assets under management for private clients up 4%
Floris Deckers, Chairman of the Board of Managing Directors: "Van Lanschot weathered the banking crisis well. The bank's liquidity has remained at a high level and, with a BIS Tier I ratio of 9.2%, the capital position continues to be strong. The crisis has now evolved into a severe economic recession, whose impact is reflected in higher loan loss provisions. Thanks to the high quality of our loans portfolio, Van Lanschot is only affected to a relatively limited extent. In the first half of 2009, the addition to the loan loss provision was 35 basis points of the risk-weighted assets. The fact that Van Lanschot did not and does not need any government support allows us to determine and implement our own strategy."
The credit crunch has in general cast serious doubt on the solidity of the banking industry. The government intervention at several banks only partially dispelled this doubt. Due to their risk-averse behaviour, private individuals tend not to be very willing to switch banks. Spreading liquidities across several banks continues to be common practice in the current environment. The number of target group clients rose by 0.5% in the first half of 2009. These new clients mainly concern very high net-worth individuals, directors-owners and business professionals. Total client assets (assets under management plus savings accounts and deposits) of private clients at 30 June 2009 remained flat compared with 31 December 2008 figure at 26.6 billion. Savings accounts and deposits were down by 5% to 11.0 billion in the first half of the year. Van Lanschot only partially went along with the war in the savings accounts and deposits arena in terms of its rates, considering its above-average liquidity position. Assets under management for private clients rose 4% to 15.6 billion.
Total assets under management rose from 24.6 billion as at year-end 2008 to 25.2 billion as at 30 June 2009. In the first half of the year, Kempen Capital Management was awarded new mandates involving assets available for investment of 930 million. In the first half of 2009, Kempen Capital Management received 130 million in investible assets from FRR. In the course of the second half of the year, a total of around 800 million will be placed under Kempen's fiduciairy management by parties such as the Boskalis pension fund and ZLTO.
In the first six months of 2009, loans and advances to corporate clients rose 7% to 7.1 billion. Van Lanschot continues to grant loans to its target group clients. Improved margins are being earned on new loans. The number of corporate target group clients was up 0.4%.
Corporate Finance and Securities
The low risk profile of Kempen and the limited trading for own account helped to support the bank's risk profile during the banking crisis. However, this means that the bank profits from the potential upswing in revenues in the current market conditions only to a limited extent. The Securities department still faces lower trading volumes of institutional investors and thus lower commission income compared with the first half of 2008. The number of securities transactions by institutional investors seems to have stabilised however since the second half of 2008.
Second quarter marked by vigorous recovery of gross result
The first half of 2009 was characterised by the distorted savings market, where government-supported banks offered deposit and savings rates which far exceeded the Euribor rates. As a result, the margins on new deposits deteriorated further in the first half of 2009. A private bank such as Van Lanschot is relatively hard hit because its clients hold a large part of their assets in the form of cash. The interest margin decreased from 1.35% in the first half of 2008 to 1.22% in the first half of 2009. Although margins are expected to improve in the second half of the year, the interest margin is expected to recover only gradually. Interest income was 13% down on the first half of 2008 to 127.3 million. Under normal savings market conditions, a considerably healthier interest income would have been generated.
In the first half of 2009, 4% more securities transactions were executed than in the first half of 2008. The revival of the financial markets and the share prices in the second quarter positively impacted the portfolio values and thus also the management fees. Total securities commission and management fees amounted to 80.4 million in the first half of the year; this was 7% down on the level in the first half of 2008, but a stabilisation compared with the second half of 2008.
Income from operating activities, which mainly comprises interest and commission income, totalled 258.9 million in the first half of 2009, i.e. a 9% decline on the first half of 2008. The income level shows a clear upward trend from the low point in February 2009. The operating expenses came to 220.0 million, 8% up on the first half of 2008. This includes the announced provision for the restructuring operation of 3.6 million.
The gross result totalled 38.9 million. The net loss for the first half of 2009 of 46.3 million was driven by a number of one-off impairments. As announced in the trading update of May 2009, an amount of 34.5 million (before tax) was written off on the IT project. Van Lanschot also invests in its own in-house funds. These funds have also suffered in the current investment climate, resulting in an unrealised impairment of 13.6 million (before tax) for these investments and several shareholdings. In addition, 50.6 million was added to the loan loss provision.
Strong loans portfolio, but not immune to the recession
Van Lanschot's loans portfolio totalled 17.5 billion at 30 June 2009, i.e. a 2% growth compared with year-end 2008. This growth was achieved mainly in the corporate sector.
Of the total loans portfolio, 8.0 billion concerns mortgage loans to high net-worth individuals (year-end 2008: 8.0 billion). For the mortgages, only 4 basis points of the risk-weighted assets had to be added to the provision for loan losses. There are no payment arrears on the balances of the bank's credit card holders.
In a recession, the largest losses are typically incurred early in the cycle. In the first half of 2009, a total amount of 50.6 million was added to the loan loss provision, representing 35 basis points of the total risk-weighted assets. For the entire year 2008, the total addition to the provision was 15 basis points. Thanks to the bank's prudent lending policy, the losses on the portfolio are relatively limited. Van Lanschot assumes that the addition to the loans provision will amount to 15 basis points of the risk-weighted assets through the cycle.
Capital and funding position
With a BIS Tier 1 ratio of 9.2% and a BIS total capital ratio of 11.2%, the bank continues to be comfortably capitalised. Van Lanschot's robust capital position was one of the reasons why the rating agency Standard & Poor's reconfirmed the bank's Single-A credit rating in June. In line with the rating trends in the banking sector as a whole, the outlook was revised downwards from stable to negative. In addition, the bank has a Single-A credit rating (stable outlook) from Fitch.
As is typical for a private bank, Van Lanschot traditionally has a high funding ratio: 84% as at 30 June 2009 (31 December 2008: 90%). The high rates that had to be paid on deposits and savings accounts makes this form of funding relatively expensive. The comfortable funding position has allowed the bank to make the strategic choice for alternative (cheaper) funding sources. In June, the bank therefore took out 1-year loans at a rate of 1% offered within the scope of the ECB's credit easing operation. Thanks to the bank's robust liquidity position, 600 million of Floating Rate Notes were repaid in May 2009 (for the third time).
Events after the balance sheet date
On 10 August 2009, Van Lanschot reached an agreement with the shareholder of Robein Leven NV on the acquisition of all shares in Robein Leven. Van Lanschot's investment in Robein Leven is not of a strategic nature. These shares had been pledged to Van Lanschot as collateral for a loan. Robein Leven will continue to operate fully independently and separately from the group. Van Lanschot intends to dispose of the shares in Robein Leven in due course.
Outlook for 2009
The current recession was triggered by the banking crisis. Only once the worst of the recession has passed will the government be able to formulate the exit strategy for its interests in the financial sector. The restructuring of the financial sector can only take place once there is more clarity on this exit and its implementation. Since Van Lanschot does not depend on the government in any way whatsoever, it will be able to play a positive role in this restructuring process.
The negative margins on deposits and savings accounts are putting pressure on the improved margins on new loans and advances. A return to 'normal' interest margins requires proper correlations on the savings market, with a further fall in savings rates. The revival of the stock markets in the second quarter led to increased investor trading levels, resulting in a recovery of commission income.
In these turbulent times, Van Lanschot focuses on three priorities. The first priority is keeping the capital position intact. The F-IRB method under Basel II whose implementation at the bank is expected for 1 January 2010 could lead to a further increase in the bank's high capital ratios. The second priority focuses on cost control. Finally, as a third priority, unabated attention will be devoted to risk management and the quality of the loans portfolio. A further weakening of the economy cannot be ruled out; the duration and depth of the recession will partly determine the development of the bank's loan losses. Van Lanschot's conservative lending policy however ensures that the loans portfolio is relatively well resistant to the recession.
In view of the uncertainty surrounding the developments in the second half of 2009, Van Lanschot does not make a pronouncement about the expected results for the full year 2009.
In response to the recommendations of the Maas Committee and the planned Code for Banks, Van Lanschot will come up with concrete proposals in the course of 2009. An adjusted remuneration policy will be drafted for the Annual General Meeting of Shareholders in 2010.
2009 INTERIM FINANCIAL STATEMENTS OF F. VAN LANSCHOT BANKIERS NV
The 2009 interim financial statements of F. van Lanschot Bankiers NV are available online at the corporate website (www.vanlanschot.nl/aboutvanlanschot
) from Tuesday 11 August 2009.
KEY DATES 2009/2010
Trading update Q3 2009
6 November 2009
Publication of 2009 annual results
12 March 2010
Annual General Meeting of Shareholders
6 May 2010
Trading update Q1 2010
6 May 2010
Publication of 2010 half-year results
10 August 2010
's-Hertogenbosch, the Netherlands, 11 August 2009
Van Lanschot Media Relations: Etienne te Brake, Corporate Communication spokesperson
Van Lanschot Investor Relations: Geraldine Bakker-Grier, Investor Relations Manager
Van Lanschot NV is the holding company of F. van Lanschot Bankiers NV, the oldest independent bank in the Netherlands with a history dating back to 1737. The bank focuses on three target groups: high net-worth individuals, medium-sized businesses (including family businesses) and institutional investors. Van Lanschot stands for high-quality services founded on integrated advice, personal service and customised solutions. Van Lanschot NV is listed on the Euronext Amsterdam Stock Market.
Forward looking statements
This press release contains forward looking statements concerning future events. Those forward looking statements are based on the current information and assumptions of the Van Lanschot management concerning known and unknown risks and uncertainties.
Forward looking statements do not relate to definite facts and are subject to risks and uncertainty. The actual results may differ considerably as a result of risks and uncertainties relating to Van Lanschot's expectations regarding such matters as the assessment of market risk or possible acquisitions, or business expansion and premium growth and investment income or cash flow predictions or, more generally, the economic climate and changes in the law and taxation.
Van Lanschot cautions that expectations are only valid on the specific dates, and accepts no responsibility for the revision or updating of any information following changes in policy, developments, expectations or the like.
The financial data included in this press release have not been audited.
Click the link below to read the complete press release including all tables and annexes: