INVESTOR PRESENTATION | SEPTEMBER 2019 INVESTORA 2019 LEONTEQ AG | PRESENTATION
INVESTOR PRESENTATION LEGAL DISCLAIMER SEPTEMBER 2019 This presentation of Leonteq AG (the “Company”) serves for information purposes only and does not constitute research. This presentation and all materials, docu- ments and information used therein or distributed in the context of this presentation do not constitute or form part of and should not be construed as, an offer (pu- blic or private) to sell or a solicitation of offers (public or private) to purchase or subscribe for shares or other securities of the Company or any of its affiliates or subsidiaries in any jurisdiction or an inducement to enter into investment activity in any jurisdiction, and may not be used for such purposes. Copies of this presen- tation may not be made available (directly or indirectly) to any person in relation to whom the making available of the presentation is restricted or prohibited by law or sent to countries, or distributed in or from countries, to, in or from which this is restricted or prohibited by law This presentation may contain specific forward-looking statements, e.g. statements including terms like “believe“, “assume“, “expect“, “forecast“, “project“, “may“, “could“, “might“, “will“ or similar expressions. Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may result in a substantial divergence between the actual results, financial situation, development or performance of the Company or any of its affiliates or subsidiaries and those explicitly or implicitly presumed in these statements. These factors include, but are not limited to: (1) general market, macroeconomic, governmental and regulatory trends, (2) movements in securities markets, exchange rates and interest rates and (3) other risks and uncertainties inherent in our business. Against the background of these uncertainties, you should not rely on forward-looking statements. Neither the Company nor any of its affiliates or subsidiaries or their respecti- ve bodies, executives, employees and advisers assume any responsibility to prepare or disseminate any supplement, amendment, update or revision to any of the information, opinions or forward-looking statements contained in this presentation or to adapt them to any change in events, conditions or circumstances, except as required by applicable law or regulation. All figures in this presentation that are part of the consolidated IFRS financial statements for the six months ended 30 June 2019 and 2018 are reviewed. All figures in this presentation that are part of the consolidated IFRS financial statements for the twelve months ended 31 December 2018, 2017, 2016 and 2015 are audited. By attending this presentation or by accepting any copy of the material presented, you agree to accept the terms set out above and to be bound by the foregoing limitations. © Leonteq AG 2019. All rights reserved.
2 INVESTOR PRESENTATION SEPTEMBER 2019 AGENDA
• OUR BUSINESS • OUR STRATEGY • OUR PERFORMANCE • SUMMARY
3 INVESTOR PRESENTATION SEPTEMBER 2019 OUR BUSINESS
4 INVESTOR PRESENTATION SEPTEMBER 2019 OUR BUSINESS EXPERTS IN STRUCTURED PRODUCTS AND SAVINGS SOLUTIONS
*
PEOPLE TWO DISTINCT BUSINESS LINES ~500 EMPLOYEES FROM >50 NATIONS 11% * • Founded in 2007 INSURANCE & WEALTH • IPO in 2012 PLANNING SOLUTIONS • Market cap of around CHF 0.6 billion
11 OFFICES 89%* IN 10 COUNTRIES ACROSS EMEA & APAC INVESTMENT SOLUTIONS
CLIENTS AND PARTNERS COMPETITIVE MARKET POSITION BROAD AND DIVERSIFIED CLIENT BASE OF MORE THAN ONE OF THE LEADING STRUCTURED PRODUCT PROVIDERS 1,000 CLIENTS IN MORE THAN 50 COUNTRIES AND WITH MORE THAN CHF 13 BILLION OUTSTANDING VOLUMES 11 RENOWNED BANKING AND INSURANCE PARTNERS
CAPITAL INVESTMENT GRADE RATING TOTAL BIS ELIGIBLE CAPITAL OF CHF 633.5 MILLION AND INVESTMENT GRADE RATING ASSIGNED BY FITCH (BBB-/POSITIVE) COMMON EQUITY TIER 1 RATIO OF 21.2% AND TOTAL BIS AND JCR (BBB+/STABLE) CAPITAL RATIO OF 21.3%
*of total net fee income
5 INVESTOR PRESENTATION SEPTEMBER 2019 BUSINESS LINE 1 | INVESTMENT SOLUTIONS CONNECTING BUYERS AND SELLERS OF STRUCTURED PRODUCTS
Award winning • One of the largest universe services for clients of structured products • More than 2,000 underlyings Issuance Partners Large structured and 90 payoffs Aargauische Kantonalbank, Cornèr • >28,000 new issuances and product universe • Multi-issuer >81,000 secondary market Bank, Crédit Agricole CIB, Deutsche platform with transactions each year Bank, EFG International, J.P. Morgan, 10 different PostFinance (pilot project); Raiffeisen issuing entities Switzerland, Standard Chartered Bank • More than 100,000 product documenta- tion generated each • Integrated solutions Leonteq’s platform day front-to-back is an active • Automated life-cycle • Servicing the entire market place for the management entire value chain of buy- and sell-side • Pre-trade client structured products suitability checks • White-labelling and service provider for banks
• Integrated IT platform built from ground up Proprietary tools • 70 different tools and applications and technology developed in-house • 2bn product computations in 2 minutes • Complex structures are customised Integrated solutions in real-time for partners
6 INVESTOR PRESENTATION SEPTEMBER 2019 PRODUCT RANGE LARGE UNIVERSE OF PAYOFFS AND ASSET CLASSES
PRODUCT CATEGORIES ASSET CLASSES
Leverage
Return Fixed Commodi- Participa- income ties tion Yield Enhance- ment Equities Capital Protec- tion FX Hybrid
Risk
• Yield enhancement is currently the most demanded • In Switzerland, most prominent asset classes are equity product category in the Swiss market, followed by and foreign exchange leverage products • At Leonteq, equity is by far the most requested asset class • Leonteq’s client predominantly buy yield enhancement products
7 INVESTOR PRESENTATION SEPTEMBER 2019 BUSINESS LINE 2 | INSURANCE & WEALTH PLANNING SOLUTIONS DIGITAL PLATFORM TO LIFE INSURERS
INSURANCE PLATFORM • Enable life insurers to offer attractive and transparent long-term savings and drawdown solutions with both, upside potential Our and downside protection offering STRUCTURED PENSION PRODUCTS • Provide structured solutions with downside protection for life insurers and insurance brokers
Leonteq platform Insurance Partner Distribution Policy holders
Policy life-cycle management
Policy investment Partner sales force Our operating administration model Contingent lifecycle & hedging
Participation Independent brokers platform
8 INVESTOR PRESENTATION SEPTEMBER 2019 INSURANCE PRODUCTS 4 PRODUCTS IN THE SWISS MARKET
GUARANTEE PLAN DRAWDOWN PLAN
• Savings plan for recurring premiums • One-time financed drawdown plan with upside potential and guarantee with guaranteed payments at maturity • Guarantee provider Raiffeisen Bank • Guarantee provider Raiffeisen Bank Switzerland Switzerland
Guarantee at maturity Capital Single Upside on financial markets payout premium
DRAWDOWN PLAN PAYMENT PLAN
• One-time financed drawdown plan • Drawdown plan for recurring premi- with guaranteed payments ums and guaranteed payments • Guarantee provider Bank Cler • Guarantee provider Raiffeisen Bank Switzerland
Guarantee at maturity Guarantee at maturity Single premium Asset accumulation over time
9 INVESTOR PRESENTATION SEPTEMBER 2019 OUR STRATEGY
10 INVESTOR PRESENTATION SEPTEMBER 2019 TRANSFORMATION OF BUSINESS MODEL LEADING MARKET PLACE FOR STRUCTURED INVESTMENT SOLUTIONS
PHASE 1 • Differentiate Leonteq through enhanced client services Client focus • Propositions centred around transparency on product documentation, service throughout the lifecycle, liquidity in the and service offering secondary market, security through the innovation of COSI® products and sustainability
• Introduction of white-labelling partner model • Take advantage of major technology advancements in the world PHASE 2 • Partner model Platform scalability with automation enabling rapid computation (2bn product combinations and scalability of in 2 minutes) technology platform • Offer state-of-the-art tools and services • Position Leonteq as platform business and as a white-labelling service provider
• Leverage of Leonteq’s established client, partner and hedging franchise PHASE 3 • Build truly scalable and leading structured products platform with limited Become a globally balance sheet consumption renowned platform • Project SHIP of high strategic importance; achieve scalability of capital through external hedging providers
2007 – 2011 2012 – 2017 2018 et seq.
11 INVESTOR PRESENTATION SEPTEMBER 2019 STRATEGIC PRIORITIES FOCUSED EXECUTION SINCE MID-2018
PRIORITIES DEFINED UPDATES & ACHIEVEMENTS
• Simplified organisational structure Reduce Increase efficiency, reduce functional • 1 complexity overlaps and clarify roles and responsibilities Product organisation implemented resulting in a more agile and systematic approach to project management
• Third hedging counterparty connected to the platform
Enable Initiate Smart Hedging Issuance Platform • On average 20% of all relevant transactions are externally quoted 2 scalability (SHIP) to reduce hedging exposure daily • Project on track to be fully operational by mid-2020
• New digital marketplace initiative launched Take targeted steps to grow business • Improved AMC Gateway for asset managers 3 Invest through additional investments in innovation in growth and technology • Advanced late stage discussions with potential new issuance partners
Strengthen capital base to facilitate and • Shareholders equity increased by CHF 196.1 million (+45%) to CHF Strengthen support continued growth in business 631.2 million since end-June 2018 4 capital base volumes • Strong capital position with BIS total capital ratio of 21.3%
12 INVESTOR PRESENTATION SEPTEMBER 2019 SMART HEDGING ISSUANCE PLATFORM (SHIP) ON TRACK TO BE FULLY OPERATIONAL BY MID-2020
LEONTEQ PLATFORM
• 3rd hedging counterparty ISSUERS connected to SHIP • Autocallables and barrier reverse convertibles with equity underlyings available • All major currencies available • Secondary market trading automated with one counterparty CLIENT REQUEST ISSUANCE best price PRIMARY SECONDARY LEONTEQ SHIP
Counterparty 4/5/6/7 Counterparty 1, 2 & 3 live onboarding HEDGING PARTNERS
13 INVESTOR PRESENTATION SEPTEMBER 2019 SHIP STATISTICS Q2 2019 MORE THAN 600 TRADES WITH NOTIONAL OF CHF 350M¹
2 FOCUS AREAS TO KEEP TRADES AND NOTIONAL EXECUTED ON SHIP (CUMULATIVE) POSITIVE MOMENTUM
• Today, SHIP covers approx. 800 350 40% of Leonteq’s product universe (autocallables and
barrier reverse convertibles with 700 underlying equity securities) 300 • SHIP receives external quotes for 20% of transactions in autocallable 600 and barrier reverse convertible 250 products on average each day • 500 Add more product features • Majority of trades running through (mainly Leonteq internal process) SHIP still hedged by Leonteq 200 • Enhance capabilities of existing 400 hedging partners; automate
150 secondary market
300 • Connect additional hedging partners (dependency on external
100 parties) 200
50 100
1 Total platform turnover was CHFb 15.0 for H1 0 0 2019 Apr 2019 May 2019 Jun 2019 2 Data shows SHIP volume hedged both by Leonteq and external counterparties NUMBER OF TRADES (LHS AXIS) NOTIONAL (CHFm; RHS AXIS) (transactions always hedged by the party quoting the best price)
14 INVESTOR PRESENTATION SEPTEMBER 2019 NEW DIGITAL MARKETPLACE REDEFINING THE INVESTMENT EXPERIENCE OF CLIENTS AND PARTNERS
Leonteq CRM Private banks EFG International CRM
• Digital access to one of the largest Raiffeisen Switzerland I V. I. CRM Invest Access Retail banks CRM structured product universes Cornèr Bank
BUY SIDE End investor • New product experience and more J.P. Morgan Public efficient implementation of new distribution End investor payoffs Deutsche Bank End investor Aargauische Kantonalbank Asset managers SELL SIDE • Created for buy- and sell-side III. II. End investor Crédit Agricole CIB Comply Enable • New modules and features will be End investor added in stages Financial advisors PostFinance | pilot project End investor Standard Chartered Bank Pricing platforms Other third parties | Brokerage
Leonteq’s digital marketplace is built on four pillars to create value for the structured product market
I. ACCESS II. ENABLE III. COMPLY IV. INVEST • Price discovery • Issuance entity services • PRIIP KiDs Portal • Investment ideas • Smart hedging (SHIP) • Issuance automation • Product documentation • Structuring • AMC* gateway • Lifecycle management • Product suitability • Pricing optimisation • Exchange connections • Secondary markets • Controlled processes • Portfolio optimisation • Distribution channels • Product website • Regulatory & financial • Smart workflows reporting
* Actively Managed Certificates 15 INVESTOR PRESENTATION SEPTEMBER 2019 OUR PERFORMANCE
16 INVESTOR PRESENTATION SEPTEMBER 2019 BUSINESS METRICS CONSISTENT STRONG DOUBLE DIGIT GROWTH RATES
PLATFORM ASSETS* (CHFbn) TURNOVER (CHFbn)
15 40 CAGR CAGR 33% 23% 30 10
20 13.8 11.9 5 11.4 28.8 9.2 26.8 7.6 7.9 10 18.7 18.6 20.9 5.3 14.5 15.0 11.7 3.3 10.4 2.8 3.1 6.9 7.8 0 0.7 1.3 0 3.5 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 19 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 19
STRUCTURED PRODUCTS ISSUED (IN THOUSANDS) OUTSTANDING INSURANCE POLICIES* (IN THOUSANDS)
40 50
CAGR CAGR 40 30 37% 51%
30 20 44 20 41 27 28 33 10 21 27 10 24 13 14 16 19 8 10 13 3 6 3 6 0 1 2 0 1 2 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 19 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 19 * at the end of the respective period
17 INVESTOR PRESENTATION SEPTEMBER 2019 INCOME STATEMENT FOCUS ON SUSTAINABLE, PROFITABLE GROWTH
TOTAL OPERATING INCOME (CHFm) TOTAL OPERATING EXPENSES (CHFm)
300 300 CAGR CAGR • Stable fee income generated in 29% 16% different set of market environment 200 200 • Cost line under control 282 • Since reaching break-even in 2008, 100 220 207 215 100 Leonteq was profitable each year 200 189 192 189 158 140 151 105 128 125 106 115 88 91 94 66 54 71 41 0 23 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 19 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 19
COST-INCOME RATIO (%) NET PROFIT (CHFm)
200 100
50 92 63 69 100 178 39 30 14 21 17 23 0 12 13 -12 82 87 83 91 89 81 73 70 69 67 76
0 -50 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 19 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 19
18 INVESTOR PRESENTATION SEPTEMBER 2019 SOLID BALANCE SHEET LOW RISK PROFILE AND LEVERAGE RATIO OF 7.7%
ASSETS (CHFbn) LIABILITIES AND SHAREHOLDERS’ EQUITY (CHFbn)
• Total assets decreased by 10% Short-term credit to CHF 9.6 billion Cash & receivables 1.7 1.7 & liabilities • Decrease in both assets and liabilities primarily driven by a reduction in positive and negative replacement values of derivative Trading equities 2.1 financial instruments on the back & indices1 of calmer equity markets Own structured 4.1 investment products4
Financial assets / 2.3 investments2
1 Trading financial assets CHFbn 2.0 & trading inventories CHFbn 0.1 Derivatives & 2 Other financial assets designated at fair value 3.0 short positions5 through profit and loss CHFbn 1.8; Financial 3 investments measured at FVOCI CHFbn 0.5 Derivatives 3.3 3 Positive replacement values of derivative financial instruments 0.2 4 Other financial liabilities designated at fair Other liabilities value through profit or loss 0.6 Shareholders’ equity Other assets 5 Negative replacement values of derivative 0.2 financial instruments CHFbn 2.8; Trading financial liabilities CHFbn 0.2
19 INVESTOR PRESENTATION SEPTEMBER 2019 STRONG CAPITAL POSITION TOTAL BIS ELIGIBLE CAPITAL OF CHF 633.5 MILLION
RISK-WEIGHTED ASSETS (IN CHFm) BIS TOTAL CAPITAL RATIO (IN %)
5,000 25 -0.7pp +7%
4,000 20 2,981 2,781
2,381 3,000 4% 15 2,138 2% 1,919 2% 15% 15% 2% 17% 15% 22.0 21.3 2,000 3% 21% 10 19% 20.3 19.6 18.4 20% 18% 17% 17% 1,000 5 62% 66% 63% 60% 62%
0 0 Jun 2017 Dec 2017 Jun 2018 Dec 2018 Jun 2019 Jun 2017 Dec 2017 Jun 2018 Dec 2018 Jun 2019
MARKET RISK CREDIT RISK OPERATIONAL RISK NON-COUNTERPARTY-RELATED RISK
• Risk-weighted assets increased by 7% mainly driven by • FINMA requirement: 10.5% higher market risk exposure as a result of growth in • platform assets (+16%) and related investment activities BIS total capital ratio well above 20% as of 30.06.2019
20 INVESTOR PRESENTATION SEPTEMBER 2019 SUMMARY
21 INVESTOR PRESENTATION SEPTEMBER 2019 SUMMARY FOCUS ON TRANSFORMING LEONTEQ’S BUSINESS MODEL
• Leonteq made important steps towards becoming a globally renowned platform for structured investment products
• Solid performance in H1 2019 despite challenging start into the year
• Focused execution of key strategic initiatives over the past 12 months
• SHIP on track to be fully operational by mid-2020
• Further basis laid to deliver 2020 financial targets
22 INVESTOR PRESENTATION SEPTEMBER 2019 APPENDIX
23 INVESTOR PRESENTATION SEPTEMBER 2019 INCOME STATEMENT
CHFm FY 2015 FY 2016 FY 2017 FY 2018 H1 2018 H1 2019 CHANGE Y-O-Y
Net fee income 228.7 209.0 247.0 272.5 145.7 120.9 (17%)
Net trading result (4.1) 5.5 (25.8) 21.4 (3.7) 7. 5 N/A
Net interest result (4.9) (7.5) (8.8) (14.9) (7.5) (5.2) (31%)
Other ordinary income — 0.0 3.0 3.4 1. 6 1. 4 (13%)
Total operating income 219.7 207.0 215.4 282.4 136.1 124.6 (8%)
Personnel expenses (94.4) (111.5) (113.6) (115.7) (60.7) (58.8) (3%)
Other operating expenses (41.5) (56.6) (50.0) (53.2) (24.4) (19.3) (21%)
Depreciation (14.6) (16.8) (19.2) (16.7) (8.1) (14.3) 77%
Changes to provisions — (4.5) (9.3) (3.5) (2.5) (1.7) (32%)
Total operating expenses (150.5) (189.4) (192.1) (189.1) (95.7) (94.1) (2%)
Profit/(loss) before taxes 69.2 1 7. 6 23.3 93.3 40.4 30.5 (25%)
Taxes (0.6) (0.4) (0.2) (1.8) (0.3) (0.3) 0%
Group net profit/(loss) 68.6 1 7. 2 23.1 91.5 40.1 30.2 (25%)
24 INVESTOR PRESENTATION SEPTEMBER 2019 KEY PERFORMANCE INDICATORS
GROUP KPIS FY 2015 FY 2016 FY 2017 FY 2018 H1 2018 H1 2019
Cost-income ratio 69% 91% 89% 67% 70% 76%
Return on equity 17% 4% 6% 18% 19% 10%
Investment Solutions
Platform assets (CHFbn)1 7.9 9.2 11.4 11.9 13.2 13.8
Whereof platform partner business (CHFbn) 4.7 6.8 8.4 8.8 9.7 9.8
Whereof Leonteq business (CHFbn) 3.2 2.4 3.0 3.1 3.5 4.0
Turnover (CHFbn) 18.6 20.9 26.8 28.8 15.9 15.0
Whereof issuance partner business (CHFbn) 10.4 15.6 18.3 19.8 11.0 9.3
Whereof Leonteq business (CHFbn) 8.2 5.3 8.5 9.0 4.9 5.7
Fee income margin (bps) 114 94 84 86 83 71
Issuance partner margin (bps) 111 85 82 72 71 64
Leonteq margin (bps) 119 121 89 115 110 83
Insurance & Wealth Planning Solutions
Number of outstanding policies1 23,632 26,781 33,388 41,195 37,150 44,287
1 At the end of the respective period
25 INVESTOR PRESENTATION 1 SEPTEMBER 2019 SHAREHOLDER STRUCTURE
SIGNIFICANT SHAREHOLDERS2 SHAREHOLDER STRUCTURE1 Raiffeisen Switzerland3 29.02%
Lukas Ruflin family interests4 8.15%
Sandro Dorigo 2.45%
Subtotal shareholders’ agreement 39.62%
Rainer-Marc Frey5,6 12.15% 20% 29% Credit Suisse AM7 3.00%
Directors and Executives8 0.93%
Total 55.70% 1 As per Leonteq share register on 30 June 2019 2 As per significant shareholding disclosures on SIX Swiss Exchange 3 Includes 2.9% of shares subject to call options held by the Lukas Ruflin family interests 7% 33% 4 670,688 shares are subject to a lock-up until October 2025; Lukas Ruflin family interests additionally hold call options in relation to 2.9% 11% share held by Raiffeisen 5 H21 Macro Limited / creation of obligation to notify: 29 March 2019 6 Includes written put options, representing 2.14% of the outstanding shares RETAIL INVESTORS BANKS FUNDS 7 Credit Suisse Funds AG / creation of obligation OTHER LEGAL ENTITIES NOT REGISTERED to notify: 25 February 2019 8 Excluding shareholdings of Lukas Ruflin
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