Additional investments of 30 million in the quality of the organisation and services
Structural annual cost savings of 60 million as from 2015;
workforce reduction of 10-15% (2012-2015)
Closer collaboration with subsidiary Kempen
Marginal net profit realised in H2 2011 in difficult market conditions
Financial targets maintained, but will not be achieved before 2015
Solvency (Core Tier I: 11.0 %) and liquidity position remains strong
CEO Floris Deckers to stand down in 2012; changing market environment and duration of the programme call for new leadership
Floris Deckers, Chairman of the Board of Managing Directors of Van Lanschot: "During the past few years, Van Lanschot has consciously opted to give priority to further strengthening the bank's solvency and liquidity position, which is consequently exceptionally strong. The market is not only turbulent, but has also permanently altered. The earnings model of the financial sector is under pressure. The continuing difficult market conditions have had an adverse impact on the bank's profitability. Van Lanschot realised a profit in the second half of 2011, however this was limited.
The economic outlook and sector developments are grounds for Van Lanschot to adapt its organisation in response to these changing circumstances: it must become more effective and efficient. We plan to invest in the quality of the organisation, while at the same time implement efficiency measures to bring down the cost base permanently. Unfortunately, the loss of job positions is unavoidable in this situation. We will do our utmost to support the employees concerned through this process.
I have come to realise that the changes affecting the sector and the start of this new programme call for new leadership. For this reason I am announcing today that I will step down as Chairman of the Board of Managing Directors in the course of 2012."
Investments in quality
Van Lanschot is initiating a reorganisation programme in response to the changing market conditions, increased competition and new client demands. This programme has two areas of focus. Firstly, the bank will invest in its services, building on its traditional focus on private banking and the client. In addition, Van Lanschot will heighten its efficiency and permanently lower its cost base.
Van Lanschot will invest an additional amount of 30 million in the next three years in the quality of the organisation, in particular in its employees and systems; this will further enhance the level of service it provides to its clients. The relationship model of the private bank will be extended and intensified. This will have consequences for the branch network. The lending business will be used more exclusively for director-owners and their businesses, which are an important feeder for the private bank. Additional efficiencies and synergies will be achieved by further intensifying the collaboration between Van Lanschot and its subsidiary Kempen.
Our ambitions in Belgium remain unchanged. In the other international activities Van Lanschot is looking into opportunities to realise additional efficiencies and synergies.
At the same time the bank plans to accelerate its investments in systems, including a new securities system and online platform. Furthermore, new systems in the mid and back offices will deliver substantial efficiency gains and quality improvements in the coming years.
Long-term cost savings
In response to the continuing volatile economic conditions and the changing earnings model in the financial sector, Van Lanschot plans to implement a programme that will permanently lower its cost base by 60 million per annum as from 2015 (basis 2012). These measures will mean a 10-15% reduction in the number of job positions in the same period. This will partly be achieved through natural attrition, but the bank cannot exclude the possibility of forced redundancies. Van Lanschot expects to incur reorganisation charges of 25 million in the coming years in connection with this programme.
A number of measures are in the form of proposals that still have to be submitted to the works council for advice. Discussions will be held with the trade unions on a new redundancy plan for Van Lanschot.
Chairman of the Board of Managing Directors
Floris Deckers has announced his intention to step down as Chairman of the Board of Managing Directors of Van Lanschot in 2012. The Supervisory Board will shortly begin the process of finding a successor. Floris Deckers has been Chairman of the Board of Managing Directors of Van Lanschot since 2 January 2004.
Results for H2 2011
The enduring uncertainty in the financial markets put severe pressure on the bank's results in the second half of the year. As a result, a marginal net profit was realised in the second half of 2011. This is in line with the trading update on the third quarter of the year.
The lower results were largely due to the deterioration of market conditions since summer 2011. Commission income remained under pressure in the second half of the year. This was caused on the one hand by clients carrying out fewer transactions and on the other by the falling equity markets worldwide which adversely impacted the volume of managed assets, despite the inflow of new money. The conscious decision to put solvency and liquidity before profitability and therefore to avoid excess risk-taking also had an impact; this put pressure on the bank's interest result in particular. The volatile markets, higher credit spreads and realised and unrealised value changes, among other things, led to negative 'results on financial transactions' and 'income from securities and associates' in the second half of the year.
The costs in the second half of 2011 were down slightly on the first half of the year. The addition to loan loss provision for 2011 was substantially down on 2010, despite showing a slight increase in the second half of 2011. A higher impairment was taken on the participations portfolio compared with the first half of 2011.
The position of the bank continues to be solid and strong. The Core Tier I ratio at year-end 2011 increased further to 11.0% from 9.6% at the end of 2010. The funding ratio (the extent to which the loan book is financed by customer deposits) was around 92% at 31 December 2011, one of the highest ratios among the Dutch banks. The bank's liquidity position also remains exceptionally strong, as evidenced by the fact that Van Lanschot already comfortably meets the proposed Basel III ratios.
The extent and pace of the economic recovery will determine in part the time it will take for Van Lanschot to return to normalised profit levels. In view of the uncertainty surrounding the current economic crisis, Van Lanschot expects that the financial targets will not be achieved before 2015.
Van Lanschot will present its 2011 annual results on 8 March 2012.
The presentation for analysts can be found on corporate.vanlanschot.nl/resultaten
N.B. the 2011 figures are preliminary; not audited