st.galler kantonalbank half year results june 30, 2013 · 3 overview: successful operating...

1

St.Galler Kantonalbank

Half Year Results June 30, 2013

August 15, 2013

2

Agenda

Results June 30, 2013

Strategy adjustment

Growth in Private Banking

Outlook

3

Overview: Successful operating activities

Increase of operating income by 1.1% than the previous year

Commission income has compensated net interest income

Administrative expenses slightly reduced (-0.6%)

Gross profit 3.4% above the previous year

Special Effects:

Strategy adjustment 7.0 million

UK withholding tax 4.2 million

Net profit 11.2% below the previous year (Reason: special effects)

4

0.8

0.9

1.0

1.1

1.2

1.3

1.4

Jun12

Sep12

Dez12

Mrz13

Jun13

EUR

USD

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

Jun12

Sep12

Dez12

Mrz13

Jun13

CHF LIBOR 3M

CHF Swap 5Y

90

100

110

120

130

140

Jun12

Sep12

Dez12

Mrz13

Jun13

SMI

Euro Stoxx 50

Rise in interest rates at the long end

Market performance 2013 indexed June 30, 2012

Exchange rates 2013

Moderate positive economic outlook for the Swiss economy

GDP growth 1.4%

Unemployment rate 3.3%

Inflation -0.1%

Interest rates 2013

Estimation seco June 11, 2013

SMI

Euro Stoxx 50

CHF Libor 3M

CHF Swap 5 Y

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

5

Gross profit increased

CHF million 2011_HY r 2012_HY r 2013_HY

Operating income 242 1.4 % 246 1.1 % 248

Administrative expenses -141 -1.7 % -139 -0.6 % -138

Gross profit 101 5.9 % 107 3.4 % 110

Depreciation -14 8.8 % -16 -3.1 % -15

-1 -43.5 % -1 - -5

Operating profit 85 5.9 % 90 -0.7 % 90

Extraordinary amounts, net 4 -84.9 % 1 - -7

Profit before taxes 90 1.5 % 91 -9.1 % 83

Taxes -17 7.5 % -18 -0.9 % -18

Group net profit 73 0.1 % 73 -11.2 % 65

Valuation adjustments,

provisions and losses

6

143 155 153

78 70 72

18 18 21

Σ 242 Σ 246 Σ 248

3 3 3

+1.4% +1.1%

0

50

100

150

200

250

300

2011_HY 2012_HY 2013_HY

CH

F m

illio

n

Other income

Trading income

Net fee and commission income

Net interest income

Higher operating income

Operating income: +1.1%

Interest income: -1.0%

Higher volumes in the balance

sheet business

Yield curve situation presses

on interest margin

Lower costs for interest

hedging despite higher volume

Net fee and commission

income: +2.7%

Positive stock market

performance in the first half year

Investors slightly more active

Trading income: +13.1%

Recovery of currency trading

(esp. EUR / CHF)

7

Overview interest income

*based on average volumes

Material volume effects*

Due from

banks -670 million

Loans

to clients +1‘120 million

Due to

banks -480 million

Client

funds +845 million

Debts/

loans +470 million

Material price effects

Loans

to clients -0.22%

Financial

investments -0.19%

Due to

banks -0.26%

Client

funds +0.09%

Debts/

loans +0.41%

Assets: -24.7 million

Liabilities: +14.1 million

Total -10.6 million

Balance sheet

Interest income

compared to last year

Actual comparison (June 30, 2012 June 30, 2013)

-7.1 million

Assets: +9.2 million

Liabilities: -5.7 million

Total +3.5 million

Interest hedging

costs +5.5 million

-1.6 million

8

84 84 87

57 54 51

Σ 141 Σ 139 Σ 138

61.2%59.0%

57.9%

-1.7% -0.6%

0

20

40

60

80

100

120

140

160

2011_HY 2012_HY 2013_HY

CH

F m

illio

n

Personnel expenses

Other operating expenses

cost/income-ratio

Administrative expenses decreased by 0.6%

Personnel expenses due to growth

initiatives higher (+3.3%)

Other operating expenses further

reduced (-6.8%)

Cost / income ratio parent company

49.5%

9

22'360

325

235

5 22

22'947

1.6%

18.4% 0.4% 0.1%

22'000

22'200

22'400

22'600

22'800

23'000

Dec 31, 2012

Loans tocustomers

Retail and

CommercialBanking

PB parent

company

Hyposwiss /

SGKBDeutschland

FX-Influence,

Charges,Interest Rates

Jun 30, 2013

Loans tocustomers

CH

F m

illio

n

Net New Loans: Moderate growth in retail clients

Retail clients +192 million +1.7%

Commercial clients +185 million +2.9%

Others -52 million -2.5%

NNL Group CHF +565 million / +5.1%

All %-numbers relate to the change in the corresponding prior year market segment amounts

10

673675 660

503 494 497

170 181 163149 144 14448 56 50

0.70%

0.65%0.63%

0.5%

0.6%

0.7%

0.8%

0

100

200

300

400

500

600

700

800

2011_YE 2012_YE 2013_HY

CH

F m

illio

n

Impaired loans

Estimated proceeds from liquidation

Impaired loans, net

Provisions for credit risk (Individual provisions)

Non performing loans

Provisions for credit risk in % of total loans to clients (right scale)

Individual provisions for credit risk in % of impaired loans, net*

88.7% *79.6% *87.6% *

Quality of credit: Indicators remain very positive

11

38'158

-62 -119

-140 285

38'122

-0.4%-0.8%

-1.5%

36'500

37'000

37'500

38'000

38'500

Dec 31, 2012Managed Assets

Retail andCommercial

Banking

PB parentcompany

Hyposwiss /SGKB

Deutschland

Marketperformanceincl. interestsand dividends(incl. consolid.)

Jun 30, 2013Managed Assets

CH

F m

illio

n

NNM: Market performance compensating outflows

Institutional clients -178 million -2.8%

Individuals +59 million +0.7%

Retail clients +190 million +1.9%

Commercial clients -267 million -7.3%

Other +15 million +4.6%

NNM Group CHF -237 million / -1.2% = ∑ RCB+ PB SGKB + Hyposwiss + SGKB Deutschland + consolidation effect (+84 Mio.)

All %-numbers relate to the change in the corresponding prior year market segment amounts

12

14%

16%

2%

14%30%

3%

21%

Obligationen - bonds Aktien - shares

Strukturierte Produkte - structured products Fondsanteile (inkl. Fondskonti) - funds

Spargelder - saving deposits Treuhandanlagen - fiduciary deposits

Übrige Assets - other assets

23.0 21.0 20.0 20.0

68 66 6872

50

60

70

80

90

100

0

5

10

15

20

25

2010 2011 2012 2013

HY

bp

CH

F b

illio

n

AuM AuM margin

15%

16%

3%

12%29%

3%

22%

Obligationen - bonds Aktien - shares

Strukturierte Produkte - structured products Fondsanteile (inkl. Fondskonti) - funds

Spargelder - saving deposits Treuhandanlagen - fiduciary deposits

Übrige Assets - other assets

Asset Allocation:

AuM at the previous year's

level

Continued high liquidity

holding

AuM Margin*:

72bp higher

(+4 Bppa)

Positive stock markets

Slightly decreased investor

caution

Increased trading activity

Fee and commission income: AuM margin increased

Asset allocation of managed assets Total 38.1 billion

AuM-margin*

Bonds

Shares

Structured products

Funds

(incl. funds accounts)

Saving deposits

Fiduciary deposits

Other due to clients on sight

and term deposits, third

party assets with other

banks

*AuM margin = Net fee and commission income / Ø AuM

as of June 30, 2013

13

2'002 2'100 2'101

1'110 1'144 1'087

555 (150%)

572 (150%)

543 (150%)

58 (155%)

338384 414

capital surplus 1'015 million

2011 2012 2013 HY

12.3% 12.6%13.4%

14.4% 14.7% 15.5%

0

500

1'000

1'500

2'000

2'500

CH

F m

illio

n

eligible capital required capital

minimal FINMA-requirement plus 1.00% anti-cyclical buffer onresidential properties

surplus over minimal FINMA-requirement /anti-cyclical buffer

core capital ratio (tier 1)

total capital ratio (tier 2)

Quality of balance sheet: Strong equity base

* Calculations according to Basel III

14

Agenda


Strategy adjustment


Outlook

15

Financial industry in transition

Costs

Margins

Volumes

Regulation

Interest rates

Currencies Cross border

wealth management

Economic cycle

16

Focusing, simplifying and reducing risk

Private Banking

Focus on the domestic market Eastern Switzerland, and the additional growth

markets of Germany and German-speaking Switzerland

Corporate Center and Service Center

Bundling of tasks in St. Gallen and elimination of duplicate functions

Group structure

Simplifying by reducing three subsidiary banks to one subsidiary bank

17

Focus on a few business segments and markets

Domestic market

Pri

vate

Ba

nk

ing

Pri

vate

an

d

bu

sin

es

s

cu

sto

me

rs

Nachhaltige

Wertsteigerung

Complementary growth

Eastern

Switzerland

German-speaking

Switzerland

Germany

- EAM

Continuous expansion

of market share through

superior market performance

Geographic

growth close to

the core

1. Growth:

primary organic

2. Productivity:

operational

excellence as a

strategic task

3. Risk:

Quality over

quantity

- Corporate clients

- Wealthy private

clients

- Institutional

investors

- Business clients

- Private clients

18

Estimation of financial impact

CHF million r 2013 r 2014

Managed assets CHF billion -4.3 -4.3

Group net profit CHF million -7.0 +19.0

Core capital ratio (Tier1) 13.9% (+0.2%) 14.2% (+0.4%)

19

Timetable of implementation

Hyposwiss Geneva, Team CEE und LATAM

Remaining Hyposwiss Zurich

Signing Closing

Signing

Business

transfer

to SGKB

Client approach

Permission

Migration project

Clients are transferred

into the system of the buyer

and are leaving the bank

26.06.2013 End Q3 2013 Time

26.06.2013 Target:

31.12.2013

Time Timing

open Private Banking;

Investment Center and

various teams will be

transferred to SGKB

Liquidation of

Hyposwiss

Zurich Integration project

20

Conclusion: Strengthening of core competencies

The overall objective

Value drivers

Core competencies

Sustainable

value increase

Growth Produc-

tivity

Risk

Customer

advice

and service

Investment

management

Risk

management

Operational

Excellence

Simplification of group structure

Reducing complexity of the business model

Elimination of duplicate functions

Clear client focus Clear market focus Bundling human

and financial resources

Concentration on a few core markets

Optimizing risk profile

21

SGKB Group: Mid-term financial targets

• Managed assets = AuM, client funds and fund assets minus double counting

Net New Money in % managed assets*

Cost/Income-Ratio

Return on Equity (RoE) before taxes

Net New Loans in % total loans to client 3%

4% (previously 5%)

50% (previously 55%)

10%

22

Agenda


Strategy adjustment


Outlook

23


Clients choose the

appropriate type of

support

Active support with

focus on individual

risk management

Client advisors meet

our own high

ambitions

Private Banking License Investment Advisory

Process Services

24

Licensing client advisors

Private Banking Licence

We have increased the standards to our client advisors.

Today

Risk Management

Asset Management

Provisions

Inheritance

etc.

Yesterday

Investment advice

25


PB

Licence

exte

rnal

inte

rnal

Basis Extension Professional

Apprentice-

ship

Bachelor CAS

Personality and social skills

Ex: Assistant - Bachelor of Business Administration, Senior Client Advisor - MAS Financial Consulting

Employee development

Education Licensing

Every 3 years

Advice and sales

Expertise

Eidg. Diplom

DAS

MAS

26


PB Licence

Independent observers

External and internal experts

Actor in clients role

Requirements depending on

profession

Individual preparation and

development plan

Integrated training concept

Interview I

Needs

Case study

Investment

proposal

Interview II

Advice

Exam Presentation

27

Structured investment advisory process


Today

Volatile markets

Asset allocation determines

investment performance

Systematic monitoring of risks

required

Yesterday

Positive long-term market

development

"Buy-and-hold" investment style

No systematic risk monitoring

We determine with our clients their personal investment strategy and

accompany them actively and aware of the risks.

28


Reporting

SMS alert for strategy breaches,

bulk risks and depositions title

Research with title

recommendations

FINFOX-

investment

proposal

Customized

investment strategy

FIDLEG conform

determination of

the investor profile

Backtesting

Stresstests

Service packages

COMFORT

CONSULT

COMPACT

29

New portfolio of services

CONSULT offers all benefits of active investment advice

We let the customer choose the type of support and

professionalize its depot management.

Today

Digitalization of society

Fast pace of information

Flood of information requires

filtering relevant findings

Yesterday

Limited availability of information

30

New portfolio of services

Basic services

personal advice

investment profile

standard strategy

investment proposal

Monitoring strategy

and bulks Basic services Basic services

Active asset management

Individual strategy

Monitoring

recommendations & title

Statement of assets +

Tax statement

Transparency report Active asset management

Comprehensive

asset management

Asset management

Performance report

COMPACT

CONSULT

COMFORT

Advice Asset management

Active

portfolio management

31


Clients choose the

appropriate type of

support

Active support with

focus on individual

risk management

Client advisors meet

our own high

ambitions

Private Banking License Investment Advisory

Process Services

32

Agenda


Strategy adjustment


Outlook

33

Half year results: on the operational side, SGKB is doing well

Given unchanged economic environment: Operating result at the previous

year's level

Special factors strategy adjustment and share in compensation due to

CH-UK tax treaty to the extent of 11.2 million lead to a lower net profit in

2013

Outlook 2013

34

Share SGKB: Development of share price

as of August 12, 2013

SGKB

SPI

SPI Banks

0

50

100

150

200

250

300

350

400

450

500

550

600

650

700

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

+52.5%

-40.9%

+123.1%

Par value reduction

Jul 23, 2007

CHF 30.00

0

5

10

15

20

25

30

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Volumen SGKN (in 1000)Trading volume (in 1000)

Vol

35

Disclaimer

Caution regarding forward-looking statements

– This communication contains statements that constitute «forward-looking statements»,

including, but not limited to, statements relating to the implementation of strategic

initiatives, such as the expansion in Private Banking, and other statements relating to our

future business development and economic performance.

– While these forward-looking statements represent our judgments and future expectations

concerning the development of our business, a number of risks, uncertainties and other

important factors could cause actual developments and results to differ materially from

our expectations.

– These factors include, but are not limited to, (1) general market, macro-economic,

governmental and regulatory trends, (2) movements in local and international securities

markets, currency exchange rates and interest rates, (3) competitive pressures, (4)

technological developments, (5) changes in the financial position or creditworthiness of

our customers, obligors and counterparties and developments in the markets in which

they operate, (6) federal and local legislative developments, (7) management changes

and changes to our Business Group structure.

– St.Galler Kantonalbank is not under any obligation to (and expressly disclaims any such

obligations to) update or alter its forward-looking statements whether as a result of new

information, future events, or otherwise.

36

Contact

St.Galler Kantonalbank

St. Leonhardstrasse 25

9001 St. Gallen

www.sgkb.ch

Investor Relations:

Dr. Cornelia Gut-Villa

[email protected]

Tel. +41 (0)71 231 36 92

st.galler kantonalbank half year results june 30, 2013 · 3 overview: successful operating...

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