Vontobel investments in future impact positively on profit & growth

Ridhima Sharma
clock • 3 min read

Vontobel remains on track and performed successfully in the first half of 2018, delivering a good financial result. The acquisition of Notenstein La Roche Privatbank AG, which ideally complements Vontobel’s above-average organic growth in Wealth Management, created a broader basis for future growth. Vontobel continued to invest selectively in new talents and technology across all its divisions in the first six months of 2018.

Group net profit grew by 31% in the first six months of 2018 to CHF 132.7m (first half of 2017: CHF 101.5m). Earnings per share rose by 28% to CHF 2.28 (first half of 2017: CHF 1.78). In a highly competitive operating environment, Asset Management was once again Vontobel’s strongest earnings driver with pre-tax income of CHF 92.5m (first half of 2017: CHF 69.5m). Combined Wealth Management – comprising Wealth Management and the External Asset Managers business – continued the positive trend seen in recent years, displaying strong profit momentum. In the first half of 2018, pre-tax profit grew by 46% to CHF 56.2m compared to the first half of 2017 (CHF 38.4m). Financial Products generated another very solid pre-tax profit of CHF 51.9m (first half of 2017: CHF 51.5m).

Asset Management was the strongest contributor, as it benefited from the growth in Fixed Income products. Combined Wealth Management also experienced a dynamic net inflow of new money in the first six months of the year. This pleasing result was driven in particular by strong growth in its Swiss home market as well as in Latin America and Italy. In total, Vontobel generated a net inflow of new money of CHF 5.1bn in the first half of 2018. Client assets reached a new record level of CHF 253.6bn, compared to CHF 246.5bn at the end of 2017.

The purchase of Notenstein La Roche Privatbank AG was funded by Vontobel using own equity and through the successful placement of a CHF 450m Additional Tier 1 (AT1) bond. This financing structure ensures Vontobel has the flexibility to fund further growth in the future. At the same time, it maintained the stable voting structure of its shareholder base, which is not impacted by the AT1 bond. At June 30, 2018, the BIS common equity tier 1 ratio (CET1 ratio) was 19.1% and the BIS total capital ratio was 26.4%. Since the Notenstein La Roche transaction was completed on 2 July 2018 – i.e. two days after the balance sheet date – the BIS CET1 ratio is expected to reach around 12% and the total capital ratio is expected to be around 18% at the end of 2018. Vontobel’s return on equity was 15.1% in the first half of 2018. It thus significantly exceeds its cost of capital and its own target return of over 12%.

Vontobel has raised the profitability targets for Wealth Management. The target cost/income ratio has been adjusted from 75% to 70% and the target gross margin has increased from 65 basis points to 68 basis points. The target growth rates remain unchanged. At the same time, the 2020 profit targets that apply to Vontobel as a whole have increased. It aims to achieve a cost/income ratio of less than 72% (previously 75%) and a return on equity of more than 14% (previously 12%).

Financial Products grows market share in Europe and Asia and moves ahead with platform strategy and international expansion. Vontobel increases 2020 profitability targets: Cost/income ratio to improve to less than 72% (previously: 75%) and return on equity to exceed 14% (previously 12%). It aims to further increase already solid profitability in current financial year compared to 2017.