Vontobel Holding AG

Welcome, ladies and gentlemen, to the presentation of Fontobel's full year results 2021. I am here together with Thomas Heinzel, our Chief Financial Officer. As usually, I will kick off with some of the key results. I will give a strategic update, then Thomas will guide us in detail through the numbers, and I will be back very shortly with the outlook for 2022. After that, as usually Thomas and I do look forward to have your questions, which you can then log both on the phone as well as on the chat. We're happy to report very strong results for 2021. We have very strong earnings, record net profit of 384 million. This is up 48% year over year. Growth has been delivered across all client units. 80% of our revenues do come from asset management and wealth management, highlighting the robust, repeatable business model we have built as a pure play, buy-side global investment firm. We have delivered also very solidly on our strategic progress. We have geared up for further growth in the US with bringing the fixed income boutique from Zurich at the disposition of US investors and with the announcement of our acquisition of the Swiss-based US business of UBS, Swiss Financial Advisors. We have also completed in 2021 another significant capital allocation transaction with fully acquiring 24 asset management, bringing the net profit through to our shareholders and building a very strong fundament for further common growth. Our ESG offering keeps expanding across all asset classes. We have delivered a strong set of numbers also from a capital perspective. Our capital light business model keeps proving itself. We deliver a return on equity of 18.8% against an increased CET1 capital ratio of 16.6%. On the back of these strong results from a capital perspective, as well as on the back of confidence for 2022, our board of directors has decided to propose a dividend increase of 75 cents up to 3 francs per share. We are well positioned. We enter 2022 with confidence. More on that on the outlook at the end of our presentation. Let's have a look on a few key numbers. So record levels in assets under management, strong growth with 11%. Our net new money at firm level is just shy of our target range of 4 to 6% at 3.7% composed of very strong flows from wealth management. and asset management flows coming in below our target range. However, we are committed to reaching targets going forward both at the firm level as well as within the asset management division. Income profit shows sound, sensible operational leverage and the return on equity is very attractive relative to the capital base that we have built. We have delivered these numbers being guided by a very clear lighthouse, by a very clear North Star where we want to go. We have this long-term ambition that we want to be known as one of the leading and most trusted global investment firms. We thoroughly believe that the four key levers to get there are to be client-centric and investment-led at the core at the same time. We believe that technology helps us to serve our clients better and we are convinced that people will continue to make the difference. We work towards that long-term ambition with very clear business plans and very clear priorities. and we have delivered against these priorities in 2021. We repeatably and systematically measure feedback from our clients and we're very proud and happy that we get very strong feedback from our clients with not only high but even increasing net promoter and client satisfaction scores across all client units. We also have been able to strengthen the awareness of our brand. We have been named the strongest financial brand in Switzerland. We are among the top 50 brands in Europe when it comes to investment funds and being an investment firm. So we're very happy and believe that the power of the brand will further help us to deliver growth going forward. On this step towards a pure play investment firm, wealth management has delivered not only strong headline results, but if you go into the flows, 70% of these flows go directly into investment mandates, advisory or discretionary. A point we're very proud of because it shows that we can attract net new money based on the investment led proposition. I will get back to the tipping points for growth later in my strategy update on the US. We also kept investing in digital channels, both the Vault platform where we have been learning over the last two years with families and friends and also taken the technology setup learnings and we will be ready to roll this out now in 2022. Great place to work. We keep being an employer of choice. We measure the feedback from our talents very regularly and systematically and we're very happy with the strong feedback we get. People are proud and happy to work at Fontobel as they can bring themselves to work, take ownership and go the extra mile for our clients. As an investment firm, we watch our investment results very carefully. 2021 has been a strong year in demand for ESG products and clean technology products on the equity side. Some of our more institutional tilted products, who are fully fundamental, bottom-up, highly quality tilted, have been challenged in this momentum-driven market of 2021. Q4 of last year and also the first weeks of this year showed some shakeouts in some of the valuations. We will stick to our style conviction and we are convinced that we deliver added value to our clients going forward. MultiAsset had a strong year. Strong performance, good inflows, strong partnerships. We're very happy with that. As we have announced, we had a one-off outflow of one low margin mandate, but the underlying business is very sound and has also started well into the new year. fixed income great performance across the board i would like to highlight two core capabilities the multi-strat multi-sector dynamic bond strategies we do out of 24 which is obviously a very interesting product for investors to navigate the current uncertain interest rate environment and the emerging market debt franchise that we have built here out of zurich We are confident, given the investment quality, the performance quality, that both boutiques will deliver growth going forward. Let me now share three key drivers of the further development of the company that we see now in 2022. One being ESG. We have been early movers in this. We have launched actually our first ESG product in 1998. We have brought our first investment product that addresses the transition towards a cleaner and safer world in 2008. We have been a founding member of the major society in Switzerland in 2014. So this is really part of our history, part of our convictions. We share today with you, the market, our six commitments on ESG. We work on our own duties on our E by pledging a net zero by 2030 on our own investments and operations, by pledging our commitments and further developments on diversity and inclusion working on our S, and continuously deliver on our G with transparent disclosures and reporting. And we obviously believe that ESG and the transition the world is going through offers a world of opportunities to investors. Therefore, we will bring ESG solutions to our advisory clients in our offering across all client units. And we firmly believe that ESG will mainstream and become part of each and every investment process. We have also shown for you how we stack up on the institutional side against now the dominating taxonomy with Article 6, 8 and 9 funds. Another level of growth, very clearly the US. The US is the largest market in the world with 50% to 60% share on the wealth management respectively on the asset management side. We have been in the US since 1984. We have always believed in this market, stayed true to this market. Today it's 8% of our business. We have significantly geared up our abilities to tap into these pools in 2021. On the asset management side, we brought the fixed income boutique to the US starting now in November and December with reaching out to clients and as we speak, executing the first road shows in the US. In 2022, we'll bring the other Zurich based boutiques, especially sustainable equities and our quant manager Wescor to the US market as well. On the wealth management side, we have in December announced the acquisition of the Swiss-based US business of UBS. With that acquisition, which is intended to close in Q3, will come a cooperation with UBS Americas for our Swiss-based investment offering. So very strong lineup and a lot of potential going forward to increase Fontobel's fair share in the US. Third topic is reaching out to the evolving needs of our clients and enabling them to grow. Clients want to interact in different ways. Clients need to start investing earlier in their life and it's our role to help them on this journey. We have continued to learn and develop our Vault platform and we will be now ready in H1 of 2022 to roll this out. The positioning is very clear. It's an investment-led positioning and it's a hybrid service offering. So we will pack not only the 300 investment experts into one app, we will also make it accessible both in a purely digital journey as well in a hybrid journey with giving access to expert advice. We trust this will be interesting for additional client segments And we have also very good experience that this platform, this technological capability lends itself nicely to B2B cooperation. That's it, ladies and gentlemen, from my side with the update on the strategy and some of the highlights. I now hand over to Thomas for the numbers.

Thank you very much. Warm welcome and a good morning from my side as well. This year on the P&L side, we were able to show record financial performance. Let me start with assets under management at 244 billion and net new money of 8.1. The operating income was just about 1.5 billion, an increase of 21% over last year. And with only 13% increase in costs in operating expenses, that has translated into a lower cost income ratio, which was driven by better operating leverage and a group net profit of 384 million. That's an increase 48% year over year. What you can see also are capital productivity numbers are very strong at a return on equity of 18.8%, which has led to a record basic earnings per share of 6.69 Swiss francs per share. If you go now into the details a bit more, assets under management have grown 11%, as we said, 244 billion, just shy of a quarter of a trillion. If you look at the assets under management development, 3.7 was the net new money, 3.7% was coming from net new money. FX for this year, we had a slight tailwind of 0.3% and then performance contributed 7% of the 11% increase, increased from 220 to 244 billion. If you look into the assets under management and net new money, first of all, I would like to mention that we have integrated platforms and services and wealth management as we have announced at the half year results. That has been an economic decision to further and better serve our ultra high clients. What we see from the numbers is, let me start with wealth management had a very strong year. The net new money has been 5.6 billion, which is 6.8% for this year, clearly above our target range. And the good news is it was across all of the business areas and very steadily across the year. So we didn't have big jumps. It was a very steady development over the course of the year. Second interesting and good news is more than one third was coming from new RMs, which shows two things. First of all, we are the employer of choice. RMs want to join us. And secondly, it highlights a functioning recruiting and integration process of new relationship managers. The fly in the ointment is the net new money in asset management, 1.9 billion. There's a couple of drivers that I would quickly want to mention. First of all, there were two large mandates, large mandate outflows, which together were more than 3 billion. They had low revenue, so less impact on the revenue side, but big impact here on the net new money. Secondly, 24 and multi-asset have been doing very well in terms of flows. Fixed income has shown very strong performance, but in the second half of the year we saw some more muted demand due to inflation fears coming up. And then equity could not participate in the industry-wide flows. That would explain the below our expectation net new money in asset management. If we move on to the operating income, what you can see here is first, it has been strong growth across the board, except net interest income, which is still a function of the interest rate environment that we're dealing with. Asset management and wealth management grew by 15%. That basically reflects the fact that what I said earlier, the outflows in asset management were with low revenues, so didn't have a big impact on the revenues. The strongest improvement here is obviously digital investing with more than 70% growth, which has been coming from significant demand from self-directed clients. And that is also a result of optimizing our distribution efforts and strategic progress that we made across our businesses. If you take a step back, if you take a look at the income composition, it is roughly 40-40-20, 40% asset management, 40% wealth management, 20% digital investing, which is something we consider to be efficient and is a business mix that we believe is good for value creation. What I want to mention as well here and you'll find more details in the annual report is we did a restatement though of commission costs into trading costs. So nothing on the top and bottom line but within the income we have the commission costs and trading costs changed a little bit between the two directions. Let's quickly talk about the margins. Asset management margin has remained stable. There was a little bit of up and down, but in only very, very small changes. We had a bit of headwind from the business mix with fixed income growing more than equity. And we had tailwind on the other side from performance fees and the large mandates that we have mentioned earlier. But in essence, very, very small movements in a stable return on assets here. What's important to mention here is two things. First of all, we demand fair price for quality products. That is one of the reasons why the ROA stays where it is. And secondly, what's important to note is we did not make pricing compromises despite the pressure on the net new money that we had. On the wealth management side, the picture is very similar. The commission income has remained relatively stable down a basis point. And if you adjust for the rounding differences, what you will see that most significant chunk of changes was coming from net interest income, which is a phenomenon that we will maybe that we have seen for a couple of years now, a continuous erosion of the net interest income. But with the latest development of interest rates, we will see how that will look for the coming year. costs i think on the costs we have a good story to tell as well what you see on the cost growth is significantly less than the revenue growth which led to a cost income ratio improvement of five percentage points the cost growth on personal in general has been roughly 70 percent were variable costs and 30 percent were fixed costs the 70 percent on personal had also the one-off effects that we have described in half year. In there, the 30% were hirings mostly in the area of front units, concretely in investments, concretely relationship managers, and in the digital space. If you look at the general expenses, same thing, 70% were one-off increases, 30% reflect a more normalized environment as we had it in the second half of the year with travel and entertainment expenses going back and also with marketing that has increased. If you look at the cost income ratio, the marginal cost income ratio has been at 45%, which is something that we want to aspire to. Of course, that was helped by the nature of the revenues. We had this strong increase in digital and digital investing by nature of the digital business has very low marginal costs and that has been reflected here. The last remark I would like to make here is we are going to invest more in the next year in Volt and in the analytics, which means we increase our investments on top of our current spend, which will then also have an impact on the cost income ratio. Capital, we have very strong capital levels. What you can see is we have grown the CET1 ratio to 16.6% and we have grown the total capital ratio to 23.4%. So even after the pro forma of the SFA acquisition, we would be with 14.5 and 21.1, we would be above the previous year. So capital generation has been very strong this year. That has to do with CT1 capital going up, obviously driven by the strong results. And secondly, we have significantly reduced the risk-weighted assets from 7.4 to 6.6 billion. That is a consequence of the new model that we have announced, which would allow us much better cross-border improvements. And also we have slightly reduced the risk appetite into the second half of the year. The leverage ratio is at 4.9% up from 4.6%. So if we want to take a step back briefly, so what we did this year is we have two acquisitions. We made two acquisitions. And pro forma and back of the envelope, those two acquisitions contributed more than 30 million of bottom line to shareholders, available to shareholders. And yet we have increased the CET1 ratio from 13.8 to somewhere around 14.5%. So also that underpins the strong capital generation that we could deliver this year. As a consequence, and Zeno mentioned this already, the board proposes an increase in the dividend of 33% to 3 Swiss francs. The capital productivity numbers that we're showing here are very good. The return on equity of 18.8%. the return on tangible equity of 26 and for comparability with other banks we are also showing the return on cet1 ratio which would be at 34 if you do the math and look at cost of equity and the return on equity we would end up at almost 170 million economic value added back of the envelope which is also a record value creation that we have shown this year summarizing it all up we were below the targets in net new money yes we had some tailwind from the market yes but we also made good progress on a couple of strategic initiatives as seno has mentioned and also financial financially with good operating leverage with a strong capital productivity and strong value creation we've acquired two firms additional adding more than 30 million to the bottom line these are always performer numbers despite increasing the capital ratios. So we have been doing very well. Net new money, as we mentioned, is below our expectations. All the numbers are in the range or above the range. For the payout ratio, we would quickly mention that, first of all, we did two acquisitions this year. That's why it dropped slightly below the 50%. And we have a strong focus on sustainability of the dividend. so for the financial outlook we are going to step up our investments in technology next year we continue our capital efficiency work that has delivered significant contribution to the risk-weighted assets reduction we will further be cautious with the risks in an environment that is driven by uncertainty and as long as the uncertainty persists we will be cautious and we will continue to work on being able to scale and improving our scale benefits So that's all from my side and I hand back to Zeno for the outlook.

Thank you very much, Thomas. And then let's move into the outlook for 2022. So as we have seen, we delivered very strong financial results, but which is even more important going forward, strong strategic progress. And we increased significantly our abilities going forward to deliver organic and inorganic growth. We enter 2022 with confidence. We are aware that we have inflationary uncertainty. We have geopolitical risks. And despite some, I would say, very, very strong lights at the end of the tunnel, hopefully, obviously, the pandemic is still with us. We will focus in 2022 on a number of things. One is we intend to scale further our ESG offering and make that more prominent in the part at the point of sales to our clients. We continue to work very successfully globally with the global banks partners and we think we can do more together. We will bring all the boutiques to the U.S. marketplace and have them online in the U.S. market. We reach for completion of the SFA integration by Q3 and also aim to kickstart then this cooperation with UBS Americas. And we are now ready to bring Volt to the Swiss marketplace in release 2.0 in H1 of this year. How did the year start? We had a robust start into 2022. We had a robust start both on revenues as well as on the flow side. So the year has started in an acceptable way and in a robust way for us.