Vontobel Holding AG

Accomplished 2022. Let me share with you first a couple of highlights and an update on strategy. Then I will ask Thomas to go through the detailed numbers and then I will be back with the outlook. And then obviously after that, Thomas and I will be most happy to take your questions. So, 2022 was a challenging year for a pure play, buy-side investment firm. However, fully consistent with our business model, we have delivered a satisfactory set of numbers. On top of that, we have demonstrated disciplined execution, both in achieving milestones and implementing key steps towards our lighthouse journey, as well as in protecting our conservative risk appetite and navigating challenging years in terms of volatility and risks. Another proof point for our risk awareness also in the long-term perspective of our firm. Let's look into the solid financial performance. Very strong outstanding wealth management results. 5.6% annualized growth, industry-leading organic growth, third year in a row, a little bit more colour from my side, highly diversified across quarters, highly diversified across the different business areas, coming from the focus markets in the developed world that we focus on and coming in with very high quality as discretionary or advisory mandates, posting on top rock solid margins. Digital investing clients, we are obviously exposed to investor sentiment and investor sentiment was low in 2022, has normalized to the trajectory we saw before the extraordinary year of 2021. On the asset management side, in line with the industry headwinds, as a high conviction, active asset managers, our outflows were in line with what other similar industry players saw. As we have announced last year, we have taken measured, sensible steps to protect our strategic flexibility and to make sure that we will be in a position of strength to seize the opportunities that this kind of environment will undoubtedly create. We have reported on the investor day against the delivery against the business plan 2022. We delivered on all key steps, including organic and inorganic growth. We have also announced the business plan for 2023 and 2024, which will be based on capitalizing on our strength. One of our strengths is very clearly our balance sheet and our capital position. Despite the fact that we have digested the full SFA acquisition, our CET1 ratio increased to 16.7%. The capital position and the constructive outlook into the future of our business model brings the Board to proposing a stable dividend of 3 francs to the AGM. Let's look at a couple of numbers in more detail. Assets under management. We are facing the worst drawdown in global capital markets, down by 16% to $204 billion. Net new money aggregated. as the sum of outstanding flows in wealth management and within industry position asset management flows at minus 2.1%, operating income stands at 1.285, pre-tax at 2.267, group net profit at 230 million, return on equity double-digit 11.2 dividend as proposed to the AGM and as a commitment to the future at 3 francs. How do these numbers stack up in the long-term comparison? These numbers actually still are a top 10 result in the history of Fontobel and given the environment we had faced, another proof point for the key drivers of our long-term value creation. We think and act long term. We are focused on our key strengths. We deploy a conservative risk profile, as we have shown again, in a world of war, and huge volatility in 2022, we have acted with foresight and ahead of the curve, and we are disciplined in our execution. The backdrop that we faced in this year, and you see here the yearly returns from a 50-50 portfolio, 50% U.S. 50% US Treasury as a proxy for global capital markets. The worst drawdown since the 30s of the last century. And not only the worst drawdown, also one of the fastest. So, as a pure play investment firm, we were faced with a very fast walkout of revenues during 2022. But how did we navigate against this backdrop from an investment perspective? We think we navigate reasonably well. We're confident that the consistency and the quality of our track records and our investment styles give us the opportunity now to move confidently in the new year. As we have seen now, stabilization towards end of last year and a highly increased engagement level from clients going forward and especially on the fixed income side we expect to turn into positive territory in the flow side very fast. Quality of investment performance is robust and consistent with what we have promised to our clients as our business results are consistent with our strategy and our positioning. This quality of our investment-led promise also underpins our next step in the business plan towards our lighthouse. We face different trends and a changing world – inflation, central bank hiking, we expect continued growth in private markets, we are respectful about the geopolitical environment, we expect clients to continue to expect an even more digital hybrid client experience, and we need to answer to these trends and to these changes in the environment with a strategy that is based on our strength. This is what we have shared with you in detail on the Investor Day, our four priorities to 2024. Delivering future-proof investment solutions, navigating the new regimes, providing access to our clients to private markets, which we will execute in 2023, Delivering best-in-class private client experience, we start from a very strong basis of strength in our private client business and we will continue to personalize and to further enhance our service models and offer more flexibility to our clients. making further progress in the US. We consumed the acquisition of SFA. All our products from London and from Zurich are available to US investors. We have won a first institutional mandate. So we have everything in stock that we need in order to make further progress in the US and the environment obviously asks for an enhanced focus on scaling value creation on the capital efficiency side, but also on operational excellence. What we implement across all priorities and we as a firm is our commitment to sustainability. We have been early movers in this field. We have been implementing sustainable investment strategies since the 90s. However, together with the board, we have sharpened our commitments to the area of sustainability. We label this in six commitments. The first three is our homework. We address the E with a path to net zero, the S with our commitment to our employees and team members in terms of diversity and inclusion, and the G with stakeholders like you to provide you all the transparency in order to challenge and engage with us. The next three, as an investment firm, we pledge to advise our private clients on the opportunities and challenges of ESG investing while respecting their own futures and their own definitions of their destinies. As a discretionary manager in our investment solutions, we pledge to incorporate ESG considerations into our active decisions. As a firm rooted in Switzerland, we are aware that we operate on a license granted by society, so we will commit to the community engagement that is respectable in this context. This was it from my side with an update on strategy, where we are. I now hand back to Thomas, our Chief Financial Officer, for the detailed results, and then I will be back with the outlook. Thomas, please. Thank you very much.

I will now provide the update, the details on the financials. Before we start, I would like to remind you that we are comparing all the numbers to a record year. While we said it last year, memories are generally short. 2021 was the best year we have ever had. 2022 was a challenging year for investors and the investment industry. With rising inflation and interest rates, declining markets, the war in the Ukraine and increasing geopolitical tensions in general, Fontobel also felt the impact of this. That results in a revenue decline to 1.285 billion or 16% versus the record 2021, But don't forget, key drivers of our business model are financial markets investor and investor sentiment, both of which have suffered significantly throughout the year. We have reduced our costs by 5%, but the revenue decline outpaced the cost reduction, which led to a decline in our group net profit to 230 million after a record 383 last year. Cost-income ratio increased to 78%. The ROE eased up to 11.2%. Let's dive into the individual drivers. Assets under management. What you can see, assets under management, we had a steep decline of 16%, being almost back to the 2019 levels. The root cause of the decline is clearly visible. The market development explains 15% of that decline. Net New Money contributed negative 2%, FX a bit more than 1%. In general, FX wasn't a big driver in this year. And SFA increased the assets under management through the 6.2 billion acquisition to 204.4 billion. Moving into assets under management and net new money by the client unit. Assets under management in asset management declined by 25%, which was driven by market development and outflows, as we have said earlier. Wealth management lost 3% to 93 million, including the 6.2 million AUM from SFA. Without SFA, it would be roughly a 10% decline. Net new money in wealth management, let me start with wealth management, was outstanding at 5.7%. And more than the absolute number, the 5.4 billion, we are very happy about the fact that the inflows were of very high quality. They were mostly stemming from developed countries. A high share of inflows went into the mandate and the inflows were very consistent across all the regions and across all the quarters. Net new money in asset management has experienced significant outflows of 7.4%. Here the main contributors were clearly the equity boutiques, in particular quality growth had substantial outflows. But there was also some, call it bad luck at work. 24 asset management lost 2.5 billion through the LDI situation in the UK end of September. Outflows that had in principle nothing to do with 24. And here we are expecting a significant part of these outflows to come back over the course of the year. The good news overall here is that we saw a slowdown of the outflows into the year end and a flat January. Operating income trading result decreased by 31% to $338 million. Notable here is that the second half was even more difficult than the first half. In the second half, the revenues basically normalized to 2019 levels or to the 2019 trend. However, the last days seem to indicate that we have found a bottom here. Net fee and commission income has reduced by 15%, which is pretty much in line with the AUM reduction. And net interest income, as expected, has developed well. The growth was 65% year over year, or if you look at it half year over half year, in the second half year, net interest income has more than doubled. The key driver was obviously the balance sheet business, deposits and loans. And on the deposits, we have mostly Swiss francs, followed by US dollar and euros, where we saw a substantial effect of interest rate rise only after September kicking into our P&D. Looking through the operating income by client unit reflects the picture from before. Asset management is down to 475 million. Wealth management has remained resilient, mainly through the acquisition of SFA. And digital investing has reduced by 40%. Now let's take a look into the margins. I start with the right hand side with wealth management because here is relatively obvious what happened. What you can see is the recurring commission income has remained stable. The commission income which is non-recurring or trading driven has been reduced and the gap has been filled by net interest income. So net interest income has more than compensated the reduction in the transaction based margin decline. On asset management, our margin reduced by 5 basis points to 37 basis points from 42 last year. This number is of course below our long-term aspiration of 40 basis points. But what happened? The key drivers of the reduction are a change in product mix and net new money and that explains roughly 3 basis points. Performance fees have vanished over the course of the year. They would explain another basis point in reduction. And finally, there are some technical items, which are the fifth basis point, the third point and the fifth basis point of the reduction, which explain also another one basis point, half of which would be one-offs. In essence, in asset management, the margins reflect outflows from higher risk and higher margin products, both in the equity and in the debt area, for example, emerging markets, and inflows to the lower margin multi-asset space. Looking at the operating expenses, we have reduced our operating expenses by 5% to 1,018,000,000 CHF. So cost has come down 5% overall. Most reduction is coming from personnel costs which were down 11% and we had a slight increase in the general expenses. That was driven basically by normalization of travel and entertainment. With COVID falling away, of course, travel picked up again and some increases in non-discretionary IT spending, such as data costs, licenses and so on. Hence, the cost-income ratio snapped back above the 78%, which is significantly above our target. And we are fully committed to that target and to getting the cost-income ratio back to 72. However, it will be very difficult to pull that off in the next year. Nevertheless, we work on various measures. We have already put measures in place in Q1, which was basically a reduction of variable compensation, a freeze of headcount growth and some IT budget adjustments. Those have delivered a 50 million reduction or roughly 5% of the cost base. Additional measures of 65 million gross exit rate, which we have announced after Q3, will be put in place in this month, which is also slightly above 6% cost reduction. And those are basically mostly coming from standard measures, which I would call standard house cleaning, which is reviewing the external spend. Productivity increases by improving our processes, by improving our setup. And the last one is strictly focused on a strategy and the alignment of our business portfolio. That's, for example, a reason why we have reduced our, why we have run down or shut down our business wealth management business in Hong Kong. And do not forget, we're not only working on costs, of course. No one ever shrunk to greatness. So what we are focusing on is a significant focus on revenues in areas in particular where we under-asseted, where we have lost assets and where we can regain revenues without additional investments. What I wanted to mention here as well, of course, the second round of cost reduction, the 65 million will have some costs to achieve because we will have to do some investments in order to realize those cost gains. Moving on to capital, first and foremost, Our balance sheet and our capital position is very strong. Total capital ratio and CET1 ratio are all up, and they are significantly above the regulatory and the internal requirements. CT1 capital generation overall was 2.1 percentage points, including all the adjustments for treasury valuations in the OCI and everything included. The impact of the SFA transaction was roughly 1.8 percentage points and then another 0.2 percentage points were added by the cyclical capital buffer for mortgages, which the SMB has introduced for all Swiss banks as of end of September. Overall, the risk-weighted assets were down 400 million, 100 were added from the SFA integration. As we have presented in 2020, we have now implemented a substantial part of our capital light approach and significantly reduced our risk-weighted assets from 2020 end of 2020 to now by 15%. While we are going to continue to optimize our balance sheet, we expect our RWAs to develop more in line with the business development in the future. On the dividend, the chart generally speaks for itself. There's two important remarks that I would like to make. First, even in a difficult year with an unprecedented speed of market decline, we generated a positive economic value, so we generated shareholder value. Second, as a consequence of the strong capital generation, the BOD proposes a constant dividend to the AGM of 3 Swiss Francs, despite that being a very high payout ratio of 73%. Overall, if you look at what you see here, this means we had 11 years of stable or rising dividends and we paid out more than 1.5 billion CHF to our shareholders, all at the same time while increasing our shareholder equity from 1.6 to 2 billion. Summarizing up the KPIs and the targets. There's no denying that 2020 was a difficult year for Fontobel. But I would like to repeat three key messages. First, don't forget all the comparisons are against 2021, which was a record year, the best year for Fontobel we ever had. Second, we've taken measures to bring our cost-income ratio and with it other P&L and other productivity KPIs back towards our long-term target of 72%. And finally, our capital position remains very strong and hence we will propose a constant dividend of 3 Swiss Francs to the AGM. That's all from my side. I hand over to Zeno for the final remarks.

Thank you very much. So, quick recap. We have delivered. a set of numbers that is in line with our positioning and with a very difficult market environment for a pure play, buy side only investment firm. We have taken all the decisions required to protect our strategic flexibility and to protect our ability to harvest the opportunities that may arise in this kind of environment. Everything that has happened in the world only confirms our positioning as a pure-play investment firm with a focus on developed markets with a client-centric and investment-led approach. Our capital strength gives us the backbone to profit from opportunities in this environment. How have we started in the new year and what will we focus on in H1 2023? Our key target is to work with our clients on the opportunities that this changed investment environment brings to the table. And what we see is investors are coming back to the table. We see an increase in client interaction, we see an increase in client sentiment and our pipelines, especially also on the institutional and wholesale side, are building up. This confirms what we have seen already in December with a flattening out of flows and a neutral start into the new year from where we are confident that we will be able to build going forward. The rest of the start into the new year on the revenue side and on investor activity was constructive as well. We will implement the cost measures as we do this in order to protect the long-term focus and the long-term flexibility. We will execute on the four strategic priorities, bringing future-proof investment solutions with access to private markets in 2023 for our clients with further improved private client experience progress in the US and a commitment to the scalability of our business model. We would like to thank you for your time and your interest in Fontobel and we wish you a successful day. Thank you. Thank you very much.