Van Lanschot: profit in 2008; traditionally sound balance sheet

  • Substantial inflow of private banking clients (+5%) and savings accounts of private clients (+15%)
  • Sound balance sheet; no risky positions; strong capital position reflected in Tier I ratio of 10.0% and BIS total capital ratio of 12.5%; Single A (stable outlook) credit ratings reconfirmed in December
  • Net profit for 2008:  30.1 million after deduction of  76.4 million (before tax) for one-off items; earnings per share of  0.55
Floris Deckers, chairman of the Board of Managing Directors: "Van Lanschot's balance sheet remained solid in 2008. The bank has a strong capital position and more than sufficient liquidity. Relatively speaking therefore, the bank has survived a tumultuous year in good shape. Van Lanschot's business model is relatively simple and transparent, and the interests of clients are always at the forefront of everything Van Lanschot does. As a result, a number of choices were made which have had positive outcomes in the current circumstances. Of course this doesn't alter the fact I cannot be satisfied with Van Lanschot's profit for 2008."
 
Strong inflow of new clients
Clients choose Van Lanschot because of the high-quality services and personal advice it provides. The first nine months of the year saw a strong inflow of new private clients. In October 2008, the government's acquisition of a number of major banks created a new playing field, leading to an abrupt halt in the inflow of new clients from these banks and even a slight reversal in the trend. For the year as a whole, the number of private clients rose by over 5% and the number of corporate clients by over 8%. Savings accounts and deposits of private clients increased in 2008 by 15%, or  1.5 billion to  11.6 billion.
 
During 2008, Van Lanschot expanded its private banking segment with the acquisition of Buttonwood in Belgium and ING private banking CuraƧao.
 
Sound balance sheet
Van Lanschot's services focus on high net-worth individuals, as well as entrepreneurs and their businesses. Our balance sheet is for our clients. The use of the balance sheet for the bank's own account is, and will continue to be, extremely limited. The result of this is a low risk profile. In line with this, the bank has not invested in the subprime sector or any other high-risk investments such as CDOs or SIVs. The bank's investment portfolio ( 0.9 billion) consists primarily of bonds and government securities with a Triple A rating. A small portion of the portfolio consisted of positions in equities, which were liquidated in late 2008, resulting in a loss on sale of  51.7 million.
 
Prudent lending policy
The quality of the loans portfolio is excellent. The losses on the bank's loans portfolio have traditionally been among the lowest in the Netherlands. However, in the course of the 2008 the impact of the economic recession was visible in the form of mounting credit losses. As a result, the addition to the provision for loan losses in 2008 amounted to 15 basis points of risk-weighted assets, compared with 1 basis point in 2007.
 
Loans and advances to corporate clients increased 13% in 2008 to  6.6 billion. In line with the policy of putting less focus on mortgages as introduced in 2006, the mortgage portfolio remained more or less stable at  8.0 billion. Overall, the loans portfolio grew 7% to  17.1 billion at year-end 2008, which represents 83% of total assets.
 
Capital market accessible for Van Lanschot
In 2008, Van Lanschot succeeded in raising fresh capital in the capital market on two occasions. In August, it raised a total of  100 million in long-term Lower Tier II capital from institutional investors, and in December  150 million in preference shares were issued to both new and existing institutional and private shareholders. Van Lanschot's capital ratios have always been among the best in the market, as befits a private bank. Issuing new capital puts the bank in a position to ensure its ratios are once again among the highest new levels on the market. The capital ratios are expected to be substantially improved by the application of the F-IRB approach under Basel II, which Van Lanschot hopes to introduce ahead of schedule in January 2010.
 
Capital ratios at 31 December 2008 (%)
See attached PDF
 
Funding ratio (%)
See attached PDF
             
Strong liquidity position
The bank's cash position is one of the best in the industry. In 2008, the bank did not have to make use of the lending facilities from the ECB. The activities of the bank are financed mainly by savings and deposits of clients. This is reflected in the bank's funding ratio (the ratio of funds entrusted by clients to total loans and advances) of 90%, which is among the highest among the Dutch banks. Thanks to its comfortable liquidity position, in 2008 the bank was able to make early and scheduled repayments of  1.25 billion on Floating Rate Notes. The bank's sound position was backed up by two rating agencies, Standard & Poor's and Fitch Ratings, which confirmed the bank's Single A (stable outlook) credit ratings in July and December.
Competition for savings
As the international capital markets have been more or less closed to many financial institutions in the past year, and as these financial institutions have had to take back certain previously securitised assets onto their balance sheets, their need for funding has increased enormously. The traditional savings market was the only market still open. These banks are therefore making more intensive use of this market than previously. This has led to deposit and savings rates being offered that are substantially higher than Euribor rates. Normal interest rate relationships are therefore completely distorted. Of course, Van Lanschot matches these interest rates for its own clients.
 
1-year deposit rate offered by the major banks compared with
12-month Euribor and the ECB refinancing rate (%)
See attached PDF
 
Asset management
Total assets under management fell in 2008 to  24.6 billion due to a negative market performance. Assets under management for institutional clients, however, rose as the bank took on a number of major new clients.
 
Assets under management at 31 December 2008 (x  billion)             
See attached PDF
 
Developments in assets under management (x  billion)
See attached PDF
 
Net profit
The profit for 2008 was adversely impacted by several one-off items for an amount of  76.4 million. These were the above-mentioned loss of  51.7 million on the sale of the equity portfolio, a write-off of  20.5 million relating to capitalised investments for the IT project, and a provision of  4.2 million for the bank's obligations under the deposit guarantee scheme. On the other hand, a number of provisions were released within staff costs: a pension provision for  8.2 million and a healthcare costs provision for  5.2 million.
 
The interest margin was essentially stable during 2008 at 1.39%. On balance, the higher volumes were good for a 6% increase in interest income.
 
The turmoil on the financial markets made investors very cautious, and faced with collapsing share prices they sought refuge in deposits. As a result, the volume of securities transactions in 2008 was down 32% on 2007. In addition, falling share prices resulted in lower management fees. Overall, in 2008 securities commission decreased by 33% compared with 2007.
 
On balance, the net profit for 2008 was  30.1 million.
 
Outlook for 2009
Despite the high quality of the loans portfolio, we expect to have to increase the addition to the provision for loan losses in 2009. This increase may be offset to some extent by granting new loans with better margins, particularly in the corporate sector. During the first few months of 2009 the mood on the equity markets remained bearish, and as a consequence investors are staying away from the markets. We therefore do not expect to return to former levels of profitability this year.
 
Van Lanschot's relatively simple and transparent business model means that the specific risks for the bank are well identified, which increases predictability. Nevertheless, Van Lanschot can still be affected by the sector-wide risks during 2009. Although the credit crisis is unlikely to lead to more of the exceptional write-downs seen in 2008, it would be wrong to presume that income will improve significantly. In view of the predicted lower levels of income, Van Lanschot is taking steps to cut costs, including centralising a number of mid-office activities and merging two small offices with larger branches. These efficiency measures will affect the jobs of approximately 150 FTEs, whereby it is expected that several dozen employees will be made redundant. In addition, the fixed salaries of the Managing Directors and the remuneration of the members of the Supervisory Board have been cut by 10%, while senior management salaries have been reduced by 7%. No general staff bonus was paid in relation to 2008.
 
As part of its cost-cutting measures, the bank is conducting a comprehensive review of all planned investments. As part of this review, the phasing down of the project to upgrade the IT environment is being examined. The consequences of this are currently being reviewed together with the parties concerned.
 
Van Lanschot's funding position continues to be strong. The bank is a net lender on the interbank money market, and it also has more than  2 billion available to use as collateral for loans from the ECB if necessary. In view of our robust funding position, we do not expect to have to make any calls on the capital market in 2009.
 
The current financial crisis has put the stability and soundness of financial institutions under the spotlight. Banks are now expected to maintain higher capital ratios and to pay more attention to risk management. The required future profitability of banks will also need to be reconsidered in the light of the current crisis. In connection with this, Van Lanschot will conduct a critical review of its financial targets in the next few months.
 

Key Dates 2009/2010
 
 
 
 
's-Hertogenbosch, the Netherlands, 20 March 2009
 
 
Van Lanschot press contacts: Etienne te Brake, Corporate Communication spokesperson.
Telephone +31 (0)73 548 3026; Mobile phone +31 (0)6 12 505 110; E-mail e.tebrake@vanlanschot.com
 
Van Lanschot Investor Relations: Geraldine Bakker-Grier, Investor Relations Manager.
Telephone +31 (0)73 548 3350; Mobile phone +31 (0)6 13 976 401; E-mail g.a.m.bakker@vanlanschot.com
 
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.
 
 
Click the link below to read the complete press release including all tables and annexes:
Stock Van Lanschot (AEX): LANS More stock exchange information

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