Historically low interest rates and declining margins characterized the business environment in 2012. Nevertheless, the LLB Group succeeded in increasing operating income from CHF 339.3 million in the previous year to CHF 408.9 million. The rise of CHF 69.6 million corresponds to 20.5 percent. As in the previous years, the two revenue streams net interest income and fee and commission income made the main contribution to operating income.
On account of the low level of interest rates, interest income before credit loss expense fell by 4.5 percent to CHF 181.2 million (2011: CHF 189.8 million). The decline was mainly attributable to interest income from banks, which fell by 33.8 percent to CHF 38.9 million. In interest business with clients, however, interest income rose by 8.9 percent to CHF 142.4 million. The substantial fall in interest paid to clients of CHF 18.0 million to CHF 67.8 million had a favourable impact on this position. Credit loss expense, which in order to provide a better overview of income from interest business are now recognised as expense in net interest income, declined by CHF 19.2 million to CHF 46.5 million (2011: CHF 65.7 million). This involves several unrelated client loans and a claim against a bank arising from documentary credit business, the value of which has already been partially adjusted since 2009 and which has now been completely written off. In total, net interest income after credit loss expense rose by 8.5 percent to CHF 134.7 million (2011: CHF 124.1 million).
Net fee and commission income declined by 2.6 percent from CHF 208.9 million in 2011 to CHF 203.5 million. Even though the stock markets recovered in the second half year, clients were still very restrained in making investments. This was reflected in the substantially lower average trading volumes for 2012 on the SIX Swiss Exchange. Brokerage earnings and income from securities administration fell by CHF 13.0 million, or 11.8 percent, to CHF 97.8 million. In contrast, earnings from asset management and investment business were up by CHF 6.3 million, or 10.5 percent, to CHF 66.6 million. Other positions in fee and commission income resulted in earnings of CHF 79.4 million, corresponding to a slight decrease of 1.4 percent or CHF 1.1 million compared with the previous year. Lower earnings were matched by reduced expenses for fee and commission business. These stood at CHF 40.4 million, corresponding to a minus of 5.6 percent.
Following a loss of CHF 6.2 million in the previous year, net trading income rose sharply in 2012 to CHF 18.6 million. A major contributing factor in this development were hedging costs for interest rate swaps which fell to minus CHF 10.7 million, whereas in 2011 they stood at minus CHF 33.8 million. Trading with foreign exchange, notes and precious metals with clients increased by 6.2 percent to CHF 28.6 million (2011: CHF 26.9 million).
Net income from financial investments at fair value through profit and loss stood at CHF 44.1 million (2011: CHF 0.4 million). Unrealised and realised price gains totalling CHF 31.6 million were posted thanks to the positive development on the stock markets in 2012. Earnings from interest and dividend payments amounted to CHF 12.5 million, practically the same level as in the previous year.
Other income totalled CHF 8.0 million (2011: CHF 11.8 million). This was largely attributable to the sale of subscription rights, profit from the sale of equipment and earnings from various services.
Operating expenses fell in 2012 by 7.3 percent to CHF 298.1 million (2011: CHF 321.5 million). The decrease was mainly attributable to the 11.2 percent fall in personnel expenses, which stood at CHF 160.8 million (2011: CHF 181.1 million). The decrease in personnel expenses was largely due to the change over from a defined benefit to a defined contribution plan by the Personnel Pension Fund Foundation of Liechtensteinische Landesbank AG, and the resulting reduction in the cash value of the pension plan obligations of CHF 19.8 million. In accordance with IAS 19, this actuarial one-time effect was recognised as a reduction in personnel expenses. Salaries decreased by 3.1 percent to CHF 142.6 million.
General and administrative expenses fell by CHF 1.5 million, or 1.4 percent, to CHF 102.7 million (2011: CHF 104.2 million). Savings with marketing expenses, IT equipment, machinery and furnishings of CHF 4.1 million made a positive contribution to this decrease. Expenses in connection with provisions for legal and litigation risks as well as the allowance for non-current assets held for sale are now reported under general and administrative expenses. In 2012, these expenses totalled CHF 17.3 million (2011: CHF 14.0 million). This position includes also provisions in connection with the US tax situation.
Depreciation and amortisation also decreased compared with the previous year by CHF 1.6 million, or 4.4 percent.
At the end of 2012, adjusted to take into account part-timers, the LLB Group employed 1'090 persons (31 December 2011: 1'123 persons). The average headcount in 2012 was 1'112 persons (2011: 1'105 persons).
Operating income 2012
CHF 408.9 million