VALUES WORTH SHARING Annual Report 2019 LGT Bank Ltd., Vaduz “In the future, we will continue to focus on offering our clients a comprehensive range of asset classes and solutions.” Roland Schubert, Chairman of the Executive Board A look inside the Princely Collections: Veduta painting is the realistic depiction of a land or cityscape that gained popularity during the 18th century as a result of tourism in Italy. The examples thereof held in the Princely Collections demonstrate that beyond serving as mere records, many of these paintings are in fact works of art. For more than 400 years, the Princes of Baroque period. The House of Liechtenstein Cover image: Rudolf von Alt, detail from Liechtenstein have been passionate art has pursued this ideal consistently down “View of the mole in Venice with the Doge’s collectors. The Princely Collections include the generations. We make deliberate use of Palace and Santa Maria della Salute,” 1835 key works of European art stretching over the works of art in the Princely Collections five centuries and are now among the world’s to accompany what we do. For us, they © LIECHTENSTEIN. The Princely Collections, major private art collections. The notion of embody those values that form the basis Vaduz–Vienna promoting fine arts for the general good for a successful partnership with our clients: enjoyed its greatest popularity during the a long-term focus, skill and reliability. www.liechtensteincollections.at Contents 4 Organizational structure 5 The business year in comparison 6 Annual report 8 Balance sheet 9 Off-balance sheet transactions 10 Profit and loss account 11 Appropriation of net profit 12 Flow of funds statement 14 Appendix to the financial statement 18 Remuneration report 24 Notes on the balance sheet 38 Notes on off-balance sheet transactions 40 Notes to the profit and loss account 42 Additional information 46 Report of the statutory auditor 52 International presence 4 Organizational structure as of March 2020 Board of Directors Thomas Piske, Chairman H.S.H. Prince Max von und zu Liechtenstein H.S.H. Prince Hubertus Alois von und zu Liechtenstein Gabrielle Nater-Bass Olivier de Perregaux Internal Audit Daniel Hauser Executive Board Roland Schubert, Chairman Ivo Klein Markus Werner Mark Steiner Statutory Auditor PricewaterhouseCoopers AG, Zurich 5 The business year in comparison Balance sheet 2019 2018 Change absolute % Balance sheet total CHF m 38 501.9 34 590.6 3 911.3 11.3 Shareholders’ funds (after profit distribution) CHF m 3 122.8 3 142.2 -19.4 -0.6 Client deposit CHF m 23 171.1 21 224.3 1 946.8 9.2 Due from clients CHF m 17 302.7 16 059.4 1 243.3 7.7 Profit and loss account Net interest income CHF m 239.7 222.7 17.0 7.6 Net commission and fee income CHF m 314.1 323.2 -9.1 -2.8 Income from financial transactions CHF m 127.5 104.6 23.0 22.0 Gross operating income CHF m 720.5 756.7 -36.2 -4.8 Personnel expenses CHF m 268.9 246.8 22.1 9.0 Operating expenses CHF m 275.5 270.1 5.4 2.0 Result on ordinary business activity CHF m 145.4 195.6 -50.2 -25.7 Income tax CHF m 14.8 13.1 1.7 12.8 Profit for the year CHF m 130.6 182.4 -51.9 -28.4 Capital ratio Capital ratio % 20.4 19.1 1.3 6.8 Client assets under administration Client assets under administration CHF m 96 589.8 86 458.5 10 131.4 11.7 Personnel (full-time equivalents) Staff at year-end 1 050 992 58 5.8 6 Annual report LGT Bank Ltd. reported a good result in a challenging economic Business expenses increased 5 percent in 2019 to CHF 544 and political environment with variable market conditions. million. Operating expenses rose 2 percent to CHF 276 million and personnel expenses increased 9 percent to CHF 269 million. Positive business development This is primarily attributable to an increase in headcount and If the liquidation gains reported in 2018 amounting to CHF higher performance-related compensation components. As at 78 million are excluded, LGT Bank Ltd.’s profit for the year the end of the year, the number of employees increased from would have increased by 25 percent. Taking into account this 992 to 1050 in full-time equivalents. extraordinary prior-year item, gross profit was 27 percent lower and amounted to CHF 176 million. Profit for the year Despite a decline in net asset inflows, assets under manage- declined 28 percent to CHF 131 million. ment increased 12 percent to CHF 97 billion as a result of positive market performance and currency impacts. In wealth management, our core business, income from services decreased by roughly 2 percent to CHF 387 million. Strong capital base In addition to a slight decline in client transactions, this was LGT Bank Ltd. is very well capitalized. As at year-end 2019, primarily due to the fact that the subsidiary in Hong Kong the capital ratio was 20.4 percent of risk-weighted assets. It conducts certain transactions on own account and this income therefore remains substantially above the minimum regulatory is now for the first time being reported under income from requirement of 8 percent. trading. Net interest income rose roughly 8 percent to CHF 240 million. This was driven by increased volume, the higher Recognition of achievements US dollar interest rates and the correct assessment of market In 2019, LGT’s achievements were once again recognized by a movements. Income from trading increased 17 percent to number of independent juries. At the Financial Times Group’s CHF 124 million. This is primarily attributable to higher gains PWM (Professional Wealth Management) and The Banker mag- on own securities as well as the transfer out of income from azines Global Private Banking Awards, LGT received the Best services mentioned previously. The significant 67 percent Private Bank for Alternatives award for the second time. In the decrease in other income to CHF 35 million mainly reflects Elite Report assessment, LGT Bank Ltd. for the fourth consecu- the above-mentioned fact that high gains were recorded in tive year received the highest possible score and for the 17th time 2018 as a result of the liquidation of two companies. in a row was given the highest “summa cum laude” rating. Expansion in sustainable investments Despite an overall positive outlook, the impact that the In following with our long-term corporate philosophy, which COVID-19 pandemic will have should not be underestimated. focuses on sustainable value creation for all stakeholders, LGT At the time of going to print (April 2020), the global short- to has over the years expanded its offering of environmentally medium-term economic outlook has substantially deteriorated and socially sustainable investment solutions. LGT introduced and will also have a negative impact on our business. While an its sustainable equity and bond funds in 2009, and in 2017, accurate prediction remains impossible at this stage, we have it launched a comprehensive sustainability rating for equities, already started to adjust our priorities to address the rapidly bonds, funds and ETFs. In 2019, LGT Bank Ltd. launched a new changing conditions and the increased risk environment. portfolio management solution with a focus on sustainability. Thanks to its very prudent business philosophy, LGT Bank Ltd. This marks a further important step toward significantly increas- has successfully navigated recessions, market turmoil and other ing the share of sustainable investments in client portfolios. crises since its founding in 1921. We remain highly confident that with its well capitalized balanced sheet and high liquidity, Ownership structure of LGT Bank Ltd. LGT Bank Ltd. is in a strong position to successfully overcome All shares of LGT Bank Ltd. are held by LGT Group Holding Ltd., the challenges ahead. Our long-term and comprehensive a 100 percent subsidiary of LGT Group Foundation. No own approach to business remains an important prerequisite for shares were acquired or taken as pledge, either directly or sustainable success. In these challenging times our stable indirectly. LGT Bank Ltd. is part of LGT Group (LGT), a global ownership structure enables us to take a cross-generational private banking and asset management group that takes an perspective together with our clients, creating value both integrated approach to the management and development today and tomorrow. of the individual Group companies. The LGT Annual Report contains more detailed information on the Group’s financial We thank our clients for the high level of trust they place in strength, expertise and development. LGT and our employees for their strong commitment during the reporting year. Outlook LGT Bank Ltd. will continue to focus on providing efficient Thomas Piske, Chairman of the Board of Directors services and offering its clients a comprehensive range of asset Roland Schubert, Chairman of the Executive Board classes and solutions. We want to achieve further profitable growth by building on our strengths and our long-term strategy. 8 Balance sheet Assets (TCHF) Appendix 31.12.2019 31.12.2018 Change absolute % Cash and cash equivalents 5 963 184 5 614 503 348 681 6.2 Debt instruments of public authorities and bills which are eligible for refinancing at central banks 3, 22 133 243 246 260 -113 017 -45.9 Due from banks 16 7 955 297 6 183 793 1 771 504 28.6 Due from clients 1, 16 17 302 685 16 059 376 1 243 309 7.7 of which mortgage loans 1, 16 3 276 941 3 520 103 -243 162 -6.9 Bonds and other fixed-interest bearing securities 2, 3, 4, 21, 23, 40 5 395 969 4 944 545 451 424 9.1 Participations 5, 7, 8, 40 295 295 0 0.0 Shares in affiliated companies 5, 6, 8, 21, 40 20 655