Zürcher Kantonalbank Annual Report 2018 Interview 1 Annual Report Financial year 2018 Annual Report 2018 E_01_Berichtsteil_2018_(Layout) [P]_1186445.indd 1 25.03.19 15:00 Close to you. E_01_Berichtsteil_2018_(Layout) [P]_1186445.indd 1 25.03.19 15:00 Key figures (group) 2018 2017 Change in % Income statement in CHF million Net result from interest operations 1,213 1,202 0.9 Result from commission business and services 776 770 0.8 Result from trading activities and the fair value option 286 334 – 14.4 Other result from ordinary activities 46 31 49.2 Operating income 2,320 2,336 – 0.7 Operating expenses – 1,430 – 1,434 – 0.2 Value adjustments on participations and depreciation and amortisation of tangible fixed assets and intangible assets – 192 – 120 60.4 Changes to provisions and other value adjustments and losses 194 2 n / a Operating result 892 784 13.7 Extraordinary result 103 8 n / a Changes in reserves for general banking risks – 200 – n / a Taxes – 7 – 11 – 34.9 Consolidated profit 788 782 0.8 Balance sheet (before appropriation of profit) in CHF million Balance sheet total 169,408 163,881 3.4 Mortgage loans 81,256 79,087 2.7 Amounts due in respect of customer deposits 85,537 81,381 5.1 Provisions 255 585 – 56.3 Shareholders’ equity 11,852 11,228 5.6 Key figures in % Return on equity (RoE) 7.1 7.3 Cost / income ratio (CIR) 1 61.4 61.1 Common equity Tier 1 ratio (CET1) 2 17.8 16.5 3 Core capital ratio (Tier 1) 2 20.2 18.8 3 Total capital ratio 2 20.2 18.8 3 Leverage ratio 2 6.8 6.8 Liquidity coverage ratio (LCR) 4 127 153 Customers’ assets in CHF million Total customers’ assets 295,194 288,802 2.2 Headcount / branches Number Headcount after adjustment for part-time employees, as at the reporting date 5,087 5,117 – 0.6 Branches5 75 78 Profit distribution in CHF million Share paid to canton to defray cost of capital 13 18 – 28.5 Distribution to canton 230 230 – Distribution to municipalities 115 115 – Total profit distribution 358 363 – 1.4 Additional compensation for state guarantee 22 23 – 3.5 Additional payments from public service mandate 140 131 6.8 Rating agencies Rating Fitch AAA AAA Moody’s Aaa Aaa Standard & Poor’s AAA AAA 1 Calculation: cost / income ratio (excl. changes in default-related value adjustments 4 Simple average of the closing values on the business days during the quarter under and losses from interest operations). review. 2 In accordance with the provisions for systemically important banks. 5 Including branches of Zürcher Kantonalbank Österreich AG in Salzburg and Vienna 3 Including effects stemming from the changeover to IRB and SA-CCR. as well as six automated banks. E_01_Berichtsteil_2018_(Layout) [P]_1186445.indd 2 25.03.19 15:00 Group structure Zürcher Kantonalbank Key group figures and group structure group and figures group Key Zürcher Zürcher Swisscanto Kantonalbank Representative Kantonalbank ZüriBahn AG Holding Ltd. Finance Offices Österreich AG (Guernsey) Ltd. Swisscanto Fund Management São Paulo Company Ltd. Swisscanto Pensions Ltd. Beijing Swisscanto Asset Management Mumbai International S.A. Singapore E_01_Berichtsteil_2018_(Layout) [P]_1186445.indd 2 25.03.19 15:00 Group mission statement Our vision Close to you We support, advise and offer solutions. Always, everywhere. Throughout your life. — No. 1 in the Greater Zurich Area — Nationally strong — Internationally successful Our goals Powerful Swiss universal bank — Happy clients — Committed staff — High financial stability — Sustainable success Our values Inspiring Motivate, think ahead, show courage Responsible Be reliable, create value, be present Passionate Be involved, enthuse, persevere Our roots The bank of the people of Zurich — For the population and the economy — Continuity in business policy — Economic, ecological and social engagement E_01_Berichtsteil_2018_(Layout) [P]_1186445.indd 3 25.03.19 15:00 Interview Management Report Zürcher Kantonalbank has We derive our fortitude and adopted a new group mission stability from our capital strength, statement. An interview with full-service banking strategy, Chairman Dr Jörg Müller-Ganz highly diversified income model and CEO Martin Scholl. and disciplined cost management. 6 20 Corporate Governance Financial Report We take our responsibility to the Zürcher Kantonalbank gener- Canton of Zurich and its residents ated consolidated profit of seriously. We engage in open, CHF 788 million in financial year transparent dialogue with our 2018. The operating result stakeholder groups. amounted to CHF 892 million. 57 87 Our 2018 financial reporting includes the publications on our financial year and our company profile. It illustrates how Zürcher Kantonalbank creates sustainable value for Zurich as an economic area and a place to live. This year’s thematic focus lies on Zurich as a centre of business and education. The cover features René Kalt, Director of Stiftung Innovations- park Zürich, Claudia Bürgler (right), Deputy Director of Innovationspark Zürich, and Susanna von Känel, responsible for Büro Züri at Zürcher Kantonalbank, photographed in the pavilion of the Innovation Park in Dübendorf. Read our company profile to find out more about our commitment.zkb.ch/unternehmensprofil E_01_Berichtsteil_2018_(Layout) [P]_1186445.indd 4 25.03.19 15:00 Contents 6 Interview 11 In Brief 20 Management Report 57 Corporate Governance 77 Compensation Report 87 Financial Report 180 Glossary 183 Index 186 Branches 187 Contact About the figures: The amounts stated in this report have been rounded off. The total may therefore vary from the sum of the individual values. 0 (0 or 0.0) Figure that is smaller than half the unit of account used – Figure not available or not meaningful E_01_Berichtsteil_2018_(Layout) [P]_1186445.indd 5 25.03.19 15:00 6 Interview Zürcher Kantonalbank Annual Report 2018 Martin Scholl (left) and Dr Jörg Müller-Ganz at the newly modernised Zurich-Neumünster branch, which reopened in 2018 E_01_Berichtsteil_2018_(Layout) [P]_1186445.indd 6 25.03.19 15:00 Zürcher Kantonalbank Annual Report 2018 7 Interview “If you’re inspiring, you’re a step ahead of the rest” Zürcher Kantonalbank has adopted a new group mission statement. Dr Jörg Müller-Ganz, Chairman of the Board of Directors, and Martin Scholl, Chief Executive Officer, explain what that means for employees and the future. Mr Müller-Ganz, Mr Scholl, Zürcher Is there any danger of becoming Which of the Board of Directors’ Kantonalbank presented encourag- spoiled by success? tasks were most intensive in 2018? ing figures again in 2018, despite Scholl: No. It’s a matter of mentality – Müller-Ganz: In addition to many the challenging environment. Why much like athletes who have won a other things, we looked ahead to the is that? competition several times in a row but succession planning for the Executive Müller-Ganz: For years now, the who are still aiming for top results. Board, since many members will reach sustained success of our bank has That’s why it’s so important for us to retirement age at around the same been largely shaped by four factors: have people with the right kind of time in a few years. In December, our values, ownership, strategy and drive in the company. We want to Board member Jürg Bühlmann, previ- organisation and staff. Values you combine the power of our 150-year- ously Head of Logistics, was appointed associate with Zurich, including a old institution with the athletic spirit as the new Head of Corporate Bank- focus on performance, reliability, of a start-up. ing. Now we are working on promptly transparency, accountability, restraint, filling this new vacancy in the Logis- continuity and sustainability, are in Zürcher Kantonalbank launched tics business unit. our DNA. Our owner representatives, its new investment offering in 2018. Zurich’s Parliament, are another Has it met your expectations? How will the Board of Directors factor in our success – they define the Scholl: Absolutely. Our clients place ensure this succession plan? scope of our business activities: a enormous trust in our new investment Müller-Ganz: It’s based on sound business policy focused on continuity, offering. That has a positive effect on groundwork. The Board of Directors the requirement that we refrain from the entire bank. is composed of individuals with an entering into any inappropriate risks extremely diverse range of profes- yet generate appropriate profit, and In 2018, you were able to wrap up sional, entrepreneurial and specialist finally the state guarantee, which the legal dispute with the US experience. This is a good prerequi- exerts discipline over the governing Department of Justice with a fine. site for taking a well-considered bodies and staff and motivates them All’s well that ends well? approach on multidimensional issues to act in moderation. Müller-Ganz: A USD 98.5 million like these. For years now, our bank penalty hurts. I’m still relieved, has been making a targeted effort Scholl: Another success factor is the though, that we reached an agreement towards promoting young talent at all long-term strategy, which we have with the US Department of Justice levels of management, including the essentially been pursuing unchanged on the bank’s legacy business with Executive Board. The result is that we for 20 years. We strive for profit- US clients. The fine will have neither always have internal candidates for oriented growth in our various client a negative impact on our business every function. Plus, Zürcher Kanton- groups, in geographically clearly performance for 2018 nor on our equity albank is an attractive bank at every defined markets. Here we are helped and distributions. We remain one level of the employee hierarchy, also by the fact that our organisation is of the best-capitalised banks in the for people hired from outside.