Vontobel Holding AG

Good morning everybody. A warm welcome together with Thomas Heinzel, our CFO on behalf of Fontobel for the live stream and update on our half-year results 2021. Thanks for your interest. Welcome to those of you who join on the live stream and a warm welcome also to those of you who join through the telephone conference. As usually, I will kick off with a few highlights and an update on strategy. Then Thomas, our CFO, will guide us through the numbers and then I will be back with an outlook. After that, we are happy to take your questions and have lively discussions. You can post and log questions either through the chat function or then also speak up on the telephone conference. So let's kick off. We present a strong set of results for the first half year of 2021. We are very happy that the numbers prove that we could further strengthen the trust clients put into Fontobel. We have a solid, robust net new money growth at the upper end of our own target range, coming in at around 6% annualized growth rate with 6.6 billion of net new money. We also continue to build market share and further trust with our clients who come in through digital channels. Our advised client assets reach a new record high of 274.5 billion. We have used the first six months of this year also to achieve significant strategic progress in a number of areas. We have continued to make progress in the ultra high net worth segment with a strictly investment led approach. different to the usual lending led approach that we see with many of our competitors in the industry and we have proof points that the broader access to all the capabilities of our investment boutiques leads to success with ultra high net worth clients. We have continued to expand the range of our ESG offering, launching even an impact fund out of the liquid investment space. And we made the accelerated full acquisition of the 40% in 2014. We deliver operating income that is up by 25% year over year coming from all areas. Asset management contributing with 17% growth. Platforms and services as the other institutional client group coming in at 32%. And even wealth management who obviously had to compare to the intense trading period a year ago comes in at plus 9%. Again, self-guided investors through our digital investing offering increased the most with 86% revenue growth. This leads to group net profit up by 50%, up to 191.8 million. This strong profitability in combination with an unchanged controlled risk appetite translates into very solid balance sheet number with a CET1 ratio of 14.5% and a total capital ratio of 25. Page 4 gives you the overview of the key numbers. In addition, you also see the return on equity, which comes in as a very strong 18.7, which is an increase of 5.3 percentage points and which compares nicely against the estimated costs of capital. We have executed these first six months on the back and supported by a very strong setting in terms of strategy and in terms of long-term orientation. We are committed to our lighthouse goals. We believe and are confident that the four levers of our strategic journey, client-centricity, being investment-led, technology-enabled and powered by people, are the right levers for the environment and for the future success of Fontobel. and we have put our whole firm on one collaborative organizational model that starts to prove itself in a very demanding environment. A few further updates on strategic progress on top of the things I already mentioned, and I will also get back in a bit more detail just after the next slides. So in terms of Fontobel experience, in terms of brand recognition, we made it to the top 20 in the European fund business in terms of brand awareness, brand recognition, brand trust, which is quite an achievement for us, given the fact that more than 1,400 companies compete In this market, the strong international footprint also translates in a strong reputation in our home market. Switzerland as our home market still accounts for 40% of our business and our clients' money. We have just been voted strongest Swiss banking brand and the only financial brand in the top 10 Swiss brands. While we do not consider ourselves primarily as a bank, As the saying goes, it's always okay to be number one. A few updates, things to mention on our tipping points for future growth. We make progress in Asia, also in combination with the platform strategies where we had increasing collaborations with local banks in Asia, also a strategic cooperation with Avalok for dairy trade. and our Cosmo funding platform was breaking through the barriers of 10 billion traded volumes. In terms of using data and technology to make us a better partner for our clients, we made progress in one analytical platform, rolled out globally, and we keep pushing with Vault into newer client segments where we offer convincing digital touchpoints to give the opportunity also to these client groups to harvest the potential of investing as the new form of saving. We're also very proud about the development of our partners here at Fontobel, of our teams. We have become more international, more diverse as we continue to make progress on this journey. We regularly ask for feedback because we think feedback is a key success factor in a collaborative company and the feedback we are getting makes us very proud. Over 95% of our people are fully committed to the strategy and are proud to working for Fontola. On the journey of this strategic progress, we also keep learning, we keep adopting, and we keep improving to deliver the best we can in order to offer to our clients. And in this context, we also came to the conclusion that the synergies or the overlap in needs from ultra high net worth clients, multi-family offices and independent asset managers are so convincing that it makes sense to bring the client-facing activities of these two channels closer together, which led us to the decision to move the successful platforms and service unit which has grown by 32% and delivered an organic growth rate on an annualized basis of 10% into the broader wealth management setting. We will execute this as of August 1st. So three points on 24. We became majority shareholder in 2015. The corporation, the partnership has over delivered on all the targets we have announced in 2015. We have now found and agreed on a partnership approach going forward that aligns all the interests, that lets the partners and the teams of 24 focus on what they do best, which is delivering added value to their clients and which will add two percentage points additional uptick to the return on equity for Fontobel shareholders. We see this full buyout as a milestone on a journey that can lead much further, as the demand for sophisticated fixed-income solutions remains very big. 24 has outstanding investment capabilities. Fontobel brings the global footprint to the table and we tap into very large and very fast-growing asset pools. This leads us to the core capability of any investment firm, which is the ability to navigate the wealth of our clients in demanding and choppy markets. Here the usual update, a key message 73% of the money in all our funds is ranked four or five stars. So we have a robust and solid footing in terms of performance quality. I gave you an update in February on the end-year numbers in terms of fixed income, where we stood at 54% first and second quartile, as we still were digesting the massive downturn from last March. As you see now, as I indicated in February, the fixed income strategies have recovered fully. We're back to 90% four- and five-star ranking over one, three, and five years. We also have very strong multi-asset class numbers over three and five years. Our mandates have been doing even better than the funds that are listed here. When we look at our equity products, all our core equity products are quality style, bottom-up, highly concentrated portfolios. They are generally challenged as the whole investment approach is in this market, which also has tendencies to leap into hyper growth or leap into momentum phases in the markets. However, we will remain true to our investment beliefs and I think the net new money we could gather in the first six months proves that we match our convictions with the long-term lenses of the clients who put their trust in us. ESG is a topic we have been engaging on for years. We keep moving forward. We have integrated ESG respectively sustainability criteria now in the absolute majority of all of our investment strategies. We have launched a number of additional sustainable slash ESG investment strategies with a sustainable emerging market debt fund. or the already mentioned Global Impact Fund, which claims to prove an additional social impact out of liquid investing, which is a very promising approach from our point of view. We believe ESG will mainstream. That's the direction in which we are working, and we will keep you updated on our progress in this journey. These were my key highlights on the achievements and the results for H121. With that, I gladly hand over to Thomas, our CFO, who will lead us through the numbers in more detail.

Thank you very much. Warm welcome from me as well. Advised client assets have been on a record 274.5 billion in growth versus year end of 10.6%. Assets under management have also grown slightly more by 11.2% to almost a quarter trillion, 244.2 billion. If you look at where this is coming from, you see performance has contributed 13 billion to the growth, net new money 6.6, and important compared to last year, FX effects have contributed 5.1 billion of growth, as opposed to last year where we had quite some headwind, we have tailwind from the FX markets in this half year. Net new money 6.6 billion or 6% annualized growth, positive contributions from all the client units and all the asset classes. Wealth management has grown 2.2 billion, that is 7% or annualized growth rate. We're very happy with this. This is driven by two important remarks on this. First of all, it is broad-based. All the units of asset management have contributed. And secondly, 83% of these inflows were in products with recurring revenues. Platforms and services, 0.8 billion. That's a 9% growth, very strong half year. and in asset management, 2.9 billion, a strong spurt in the second quarter of this year, up to 4.3%. Please don't forget that we had to book out a very low fee-bearing advisory mandate of 1.5 billion, which has also affected the 2.9 billion growth significantly. If you look at the income and profit development, operating income up 25%, costs up 17%. That combined with a tax rate of 17.8% has led to a group net profit growth of 48%, from 129.2 million to 191.8 million in the first half of 2021. The cost development includes one-off charges of 9.1 million, which are IFRS personnel costs. That has to do with a share-based plan that we have introduced for 24 asset management acquisition, which is booked in the personnel costs with a minus of 24.6 million, and adjustments in the pension plan, which was a write-up, a credit of 15.5 million. In total, roughly 9 million cost development one-offs. If you look at the revenue growth, that was 157 million. The costs grew 74 million. That is a marginal cost income ratio, if you may, of 47%, which is, of course, driven by the higher revenues, but also shows that our first efforts on cost containment are gaining traction. That leads to a cost-income ratio of 69.6%, or if we adjust it for the one-offs, it's 68.4%. Operating income has grown significantly. If we look at the asset-based businesses, asset management, which is the largest block year-over-year, has grown by 17%. Platform and services, we mentioned already, very strong, half-year, 32%. and wealth management has grown by 9%. I'll come to that in a second, what the drivers are, but it's difficult to compare it to the first half of 2020 when we had a different corona situation and the trading revenues and net interest income was at a different place. Strong growth has been seen in digital investing, self-directed digital clients, 86% growth. That is obviously driven by a benign market environment, but there's also a couple of structural reasons behind it. First of all, what we have seen is retail clients coming back to the market. It's not only that we see this, also our partner through all of the channels see that. For example, many brokers have record high account openings in the first half of this year. Secondly, we've broadened our product range and we have gained market share and in particular we have gained significant market share and grown quite strongly in Asia. And lastly, the hedging costs have decreased versus the last year. The return on assets, not a lot to say about asset management. In wealth management, what you see year on year, it is minus seven basis points. Those are driven in essence by four factors. Number one, we've started growing. According to an analysis that we did, if money in wealth management is funded until everything is invested and we are at the full return on asset, that takes roughly nine to 12 months. That is something that we see. Secondly, we have some traction on the ultra-high business as a strategic initiative. Zeno mentioned this earlier. That also contributed a decline of 1.5 basis points. And lastly, as I mentioned, net interest income in wealth management was down by 25%. That is basically driven by the US dollar. And then trading, of course, was significantly below the trading fees in the first half of last year. So that explains the difference. The pre-tax profit growth was 93 million or 58% if adjusted for one-off items and FX movement. What you see here, the FX movement is negative. That is still driven by the second half of last year when we had the dollar cratering versus the Swiss franc. This half year, we had a slight tailwind, as I mentioned earlier. US dollar was basically on average the same as in the second half of last year. and Euro and Pound we gained. So for this half, the FX was slightly positive, but on a year-on-year, it is still a negative contribution of 11 million that you can see here. That overall has led to a very solid and resilient balance sheet and capital ratios. The equity, total equity has gone up by 68 million to 1.96 billion in total. That despite 127 million charge from the 24 acquisition. And that has led to the CET1 capital increase by 5.3%. Since we haven't increased our risks, the risk-weighted assets are basically unchanged. That leads to a higher CET1 ratio of 14.5% and higher total capital ratio of 20.5%. Leverage ratio has come slightly down. What I want to mention here that gives us further capacity for any organic or inorganic growth initiatives on our balance sheet. Value creation was very strong in the first half. We have an ROE of 18.7% versus the estimated cost of equity of roughly 9%. And return on tangible equity is at 25.9%. Anybody looking at the return on ZT1 ratio, that would be north of 33%. What is important on this chart is to show that the trend of increasing value creation is continuing and the momentum is still there. With that, I already come to the summary of the business KPIs. Net new money growth, the 6.6 billion, the 6% is on the top range of our targets. All the other ratios are above target. Operating income growth, 25%, which is over the 4% to 6% range. Pre-tax profit growth, net profit growth, just shy of 50%. Cost income ratio below 70, so it's also below our target of 72%. CT1 ratio is 2.5% above our target. Total capital ratio 4.5% and return on equity at 18.7 is also significantly above our objective. So all in all, if I can sum this up, we had a very strong first half of 2021. With that, I would hand back to Zeno for the outlook.

Thank you very much, Thomas, for this overview on the numbers. Let me turn to the last piece of our presentations. In this environment and obviously also after now many, many years of bull markets, both on the equity as well as on the fixed income side, one of the questions that come up in discussions with investors is obviously the question of timing. And I just wanted to share a little piece of research that we have done, which looked at what made sense over the last 20 years. And what made sense over the last 20 years was actually to be invested at all times. And I would claim that also going forward, putting capital to work in a systematic fashion makes a lot of sense. So what you see here in black is how a 50-50% strategy has performed over 20 years. When you just let it run completely unchanged in markets, it would have delivered an annual excess over the riskless rate of 3.3%. And if you had started to time in the wrong way and missed the top 10 days or the top 20 days or even the top 40 days, your annualized return would have been strongly reduced. If we add to that what we claim to do as an active manager, we added to that the tactical asset allocation signals that come out of our Westcorp quantitative modeling and you see that actually then trying to navigate markets add value if it's done in a systematic and robust fashion and also that added value is pretty robust through time. So we think it's another proof point for a truth we already know very well. To have added value for investors, you need to be on a common journey in the long term, which means that clients and investment firms need to be partners, need to understand and trust each other, be transparent about expectations and investment outcomes and then the results can be very handsome for everybody involved. And this is what we are committed to. This is everything we do trying to help investors build better futures. Let's move to the outlook. We think that the environment remains helpful to what we do best. We see and witness a strong and ongoing demand for professional investment advice. We see that the distinctive quality driven content driven strategy is rewarded by trust, by flows. but also by stable margins we believe that the adding technology investing in technology investing into people will continue to to add value going forward so we see a momentum we see also a strong upside in terms of the possibilities we have from the investment side from the from the opportunities on the distribution side. We will remain very prudent when it comes to sizing our risk appetite. We will continue to invest. How did we get off into H2? We had a good start into H2. We see robust revenues so far, but obviously, let me remind you again that there is some History has shown that there is some cyclicality in our business and that July, August and December happen in H2 on a very regular basis. However, we came off the blocks nicely for H2 and obviously the strength of our strategy and the strength of our capital position gives us ample optionality going forward. that was it from our side with the overview we are happy to take your questions now again a quick reminder there are two channels for the questions either the chat function on the live stream system or the queue on the telephone conference I will try to combine the two channels in no particular order. Let's start with an easy one to start off. We have a question from Peter Stentz over the chat function. Thomas, I would hand that to you. There is a question regarding a comment on page nine. How is the increase in return of equity of two percentage points calculated? Thomas, can you take that?