Retail & Corporate Banking
Private and corporate client business
The Retail & Corporate Banking of the LLB Group encompasses the lending, deposit and payments business with private clients in Liechtenstein and Switzerland, as well as investment and asset management business with an amount of up to CHF 0.5 million. It is also a valuable partner for the business community in Liechtenstein and the east of Switzerland. The focus of its corporate client business lies in providing an array of services for small and medium-sized enterprises.
The Retail & Corporate Banking achieved operating income amounting to CHF 98.4 million in 2012. This corresponds to a share of around 24.1 percent of the total earnings of the LLB Group. In 2012, interest differential business with CHF 72.3 million was once again the main revenue generator. The LLB succeeded in further strengthening its market leader position in mortgage lending business in Liechtenstein. Our Bank Linth subsidiary expanded its mortgage lending volumes in the east of Switzerland. Against the backdrop of historically low interest rates, and due to the fierce competition situation, interest margin shrank. Clients chose safety and therefore many credit applications involved long-term fixed-rate mortgages. The LLB adjusted its lending policy in 2012. A conservative lending policy aims to ensure a high-quality mortgage loan portfolio.
Real estate market
In Liechtenstein the mortgage market is booming, although so far there is no sign of a real estate pricing bubble. The LLB is proactively pursuing a conservative lending policy with respect to collateral values, own capital required and affordability. Whereas the volumes in private residential construction in Liechtenstein have expanded sharply in recent years, in 2012 signs of a levelling off became evident. The volume of financing facilities for office and commercial buildings declined in 2012.
In the overall Swiss market no real estate bubble can be discerned. In individual regions, family homes are overvalued, but low interest rates and high immigration levels are continuing to lend support to prices. In the east of Switzerland too, residential property prices continued to rise 2012. In the commercial office real estate market, falling demand is running parallel with high levels of new construction activity, leading to downward pressure on rental prices.
Economic development in Europe is of great significance to Liechtenstein and Switzerland as business centres because the EU is the most important trading partner for both countries. In 2012, the export industry again had to contend with adverse exchange rates and currency effects. In the first two quarters, Liechtenstein’s exports decreased by 3.8 percent, but in the third quarter they climbed by 6.4 percent and continued expanding up to the end of the year. In Switzerland, goods exports have stagnated since the beginning of 2011. High exchange rates and declining global economic growth depressed export volumes again in the first half of 2012. In total, with growth of 0.4 percent, exports remained virtually unchanged. Investments in construction projects and private consumer spending are providing support for the Swiss economy. Moreover, the Swiss National Bank (SNB) is continuing to maintain the minimum exchange rate of CHF 1.20 per Euro.
Corporate and private pension provisioning
The clients of the LLB Group benefit from our holistic care and service concept. As part of this concept, we are consistently expanding our private financial planning and corporate pension provisions services. Accordingly, Liechtensteinische Landesbank AG has established itself in the Liechtenstein market as a competence centre for corporate and private pension planning and provisioning.
The pension fund capital of LLB Liechtenstein Pension Foundation continued to grow thanks to the pleasing development on the European stock markets, it stood at CHF 348 million at 31 December 2012 (CHF 291 million in 2011). It provided services to 329 (320 in 2011) companies with 3'895 (3'345 in 2011) employees. The ALVOSO LLB Swiss Pension Fund had 255 (253 in 2011) companies with 1'350 (1'268 in 2011) employees. The pension fund capital amounted to CHF 175 million (CHF 159 million in 2011).
The interest rate on the retirement capital of the persons insured stood at 2.5 percent. The annual pension payments amounted to around CHF 27 million. In terms of size and market share, the LLB Pension Fund Foundation was the second largest among independent collective pension schemes in Liechtenstein. In 2012, we carried out a review of our basic conditions. Two points stood at the centre of attention. Firstly, the technical interest rate, which in view of the demographic development was reduced to 3.5 percent from 1 January 2012. Secondly, the stipulation of the pension conversion rate, which currently stands at 7.0 percent and will be reduced to 6.8 percent from 1 January 2015. The LLB Liechtenstein Pension Foundation has a very good structural ratio: for each pensioner there are sixty active insured contributors.