Development of our key performance indicators

The LLB Group communicates its objectives in a transparent way and compares its performance with its objectives.

Growth

2007 – 2011, Net new money inflow in percent

Growth (Net new money inflow in percent) (bar chart)

KPI: net new money inflow.
Objective: net new money inflow must amount to at least 3 percent per year.

Review

In 2007, we were able to achieve strong net new money inflows in Eastern Europe and in the Middle East. In 2008 and 2009, the financial and economic crisis as well as tax debates made the acquisition of net new money in the International Market Business Division significantly more difficult. In 2010, we achieved gratifying net new money inflows in all business divisions. We also acquired new mandates in the International Market Business Division.

2011 business result

In 2011, we recorded gratifying net new money inflows in the Domestic Market and International Market Business Divisions. In the Institutional Market Business Division, we recorded a slight minus on account of outflows from clients and intermediaries.

Cost efficiency

2007 – 2011, Cost/income ratio in percent

Cost efficiency (Cost / income ratio in percent) (bar chart)

KPI: cost/income ratio.*
Objective: in industry comparison, the cost/income ratio must attain a top position.
As of 2012: 55 – 60 percent.

* The costs include write-offs and value adjustments in relation to the operating income.
   As of 2012: personnel and general and administrative expenses and write-offs in relation to
   the operating income.

Review

The first-time consolidation of Bank Linth led to a rise in the cost/income ratio in 2007. In 2008 and 2009, the global financial and economic crisis had an unfavourable effect on the cost/ income ratio. In 2010, the cost/income ratio increased again due to falling earnings. Historically low interest rates and the result from financial investments, which is directly booked to profit and loss accounts, as well as value adjustments had a negative effect on the overall result.

2011 business result

In 2011, earnings decreased again and operative costs increased slightly. The specific value adjustment of a Lombard loan that we undertook in September 2011 had a negative impact on total costs and as a result on the cost/income ratio.

Capital efficiency

2007 – 2011, Return on equity in percent

Capital efficiency (Return on equity in percent) (bar chart)

KPI: return on equity.
Objective: return on equity must be above 12 percent.*

* Assuming regular market conditions.

Review

Until 2007, we managed to continually increase capital efficiency and maintain our challenging key performance indicator. Reasons for this were our growth activities and favourable business conditions in the financial markets. In 2008 and 2009, the financial and economic crisis as well as our negative result from financial investments led to a decline in revenues and therefore to a lower return on equity. By 2010, the return on equity had declined to 6.2 percent and was below our medium-term objectives.

2011 business result

The return on equity declined to 0.7 percent. The main reason for this was the specific value adjustment of a Lombard loan. At the same time, revenues from the commissions and fees as well as the securities trading business decreased.

Capital efficiency

2007 – 2011, Tier 1 ratio in percent

Capital efficiency (Tier 1 ratio in percent) (bar chart)

KPI: tier 1 ratio.
Objective: the tier 1 ratio must amount to 16 percent.

Review

Since 2007 we have been able to continually increase the tier 1 ratio. In 2010, we achieved 13.9 percent, a level that is not only noticeably above the legal minimum of 8 percent but also above our then medium-term target value of 12 percent. In order to provide our clients with an above-average security level, even within the new regulatory framework conditions, we raised our medium-term objective to 16 percent as of 2011. This target shall be achieved by the end of 2016.

2011 business result

At 13.9 percent, the tier 1 ratio remained above the legal requirements. Despite continual credit growth the value remained stable, compared with 2010, since neither the capital base nor the risk-weighted assets significantly changed.

Target range of cost/income ratio of 55 to 60 percent

As at 31 December 2011, our cost/income ratio stood at 95.6 percent. All expenses, including, for example, the specific value adjustment of a Lombard loan, are covered in this calculation. This key figure is greatly distorted by value adjustments and provisions in 2011. That is why the cost/income ratio is below our target value.

From 2012, we will calculate the cost/income ratio without the item «value adjustments, provisions and losses». As a result, the key figure will be more meaningful in an industry comparison and is less subject to strong fluctuations. An internal analysis and an external benchmarking have shown that – taking into account the new calculation approach – a target range of 55 to 60 percent will result in a healthy cost/income ratio while still retaining innovative strength.

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