Vontobel Holding AG

Thank you very much and a warm welcome to all of you on the call. Thanks for your interest in Fontobel. I'm here with Thomas Heinzel, our chief financial officer, and we are very happy to give you an update on half year numbers 2023. As usually, I will start with an update on the highlights and achievements of H1 and an update on how we do against our lighthouse, our business plan, our strategy. Then Thomas will guide us through all the numbers in detail. And then I will be back with the outlook and how business has started. Then after that, we will obviously both be very happy to take your questions. So before we go into the details and look into the slides, let me create a little bit of context on where we are. So after record year 21, a very challenging 22 for any investment firm with the weakest and most negative performance of any 50-50 investment portfolio of stocks and bonds probably since 40 or 50 years and a very dismal second half year in 2022 in terms of profitability. We are moving in the right direction and things are improving across the board. What we see is that we continue to run our global diversified business model as a pure play investment firm. When we look into how we do in the different client arenas, we do outstandingly well in wealth management with an annual growth rate of 8.4% of the going concern part of the business. We do sensibly well and very robustly in DI and SST against a very low backdrop of client activity and transactions. And we do exactly as the rest of the highly active high-octane asset management industry is doing with institutional clients. Now let's go and look into it in more detail. So we've seen recovering markets, but we also see persistent uncertainty. However, the macro environment remains uncertain, but we believe we're approaching the end of the interest rate hiking cycle. We have delivered robust financial results after these two very exceptional years I alluded to with wealth management leading the pack with very strong underlying growth. We have seen DI normalizing and we also see improving trends in asset management. Our results are supported by strong net interest income, though as a pure play investment firm the relative weight in our revenues is obviously lower. We also see first signs of improving investor confidence and are actually expecting that this will improve now over the next couple of months given on where we are in the interest rate cycle. We are structurally addressing costs while continue to seize the unique opportunities and while continue to have our focus very much on the long term. However, we have reviewed our business portfolio and we will deliver against the cost target of 65 millions and we are on track and Thomas will share more insights about that. We have accelerated and are expanded our wealth management hiring and we have already signed 50 RMs in first half year. I'll be back with more detail around that. Our strategy, our lighthouse, pure play investment firm focused on client needs that predominantly come from mature markets has already put us in a very good position relative to the geopolitical tensions and geopolitical risks. However, we have decided to fast track the adoption of our footprint relative to the geopolitical tensions and we are through with more than 75% of what needs to be done. in this field. We have further strengthened our balance sheet and our capital ratio. We have navigated the first half year that brought a regional banking crisis in the US, that brought an idiosyncratic risk in Switzerland. We have navigated this with a capital position and the liquidity position that is as solid as ever. This brings us a lot of credibility towards the many, many, many clients that choose us as their new partners, but obviously also brings optionality going forward. Let's look at the numbers. So assets under management are up by 4%. Our net new money very strong, 8.4% in wealth. We then adopt to the global geopolitical situation and we suffer in line with the industry on asset management, leaving us more or less than flat on the net-net basis. Pre-tax profit stands at 150 million, group net at 128. We create added value against our cost of capital with a return on equity of 12.5. CET1 is up 60 basis points to 17.3. We delivered this number against quite the interesting backdrop of markets and environment. So global equity markets have recovered somewhat and they keep recovering as we speak. Bonds markets have at least stabilized. We see us moving towards the end of the interest rate hiking cycle where central banks are closer to achieving their targeted exit rates and we believe that this will be positive for the willingness of especially institutional clients to deploy capital going forward. Volatility on the equity side very low, higher on the interest rate bond side. Then flows in the industry and here it is obviously important to compare apples against apples. So when we look at active fund flows because we were pure active manager cross-border flows are still negative but getting lower so we're delivering exactly within line of the industry obviously we intend to do better than the industry in each and every opportunity Quite a number of important themes in H1 2023. The rate hikes and the impact on inflation and growth. The financial system stability that was put into question. We think we are beyond that. The regulators and the government have acted very decisively both in the US as well as here in Switzerland and we as von Tobel has shown that once again we have navigated challenging waters with very solid numbers and a very, very controlled risk appetite. And this risk appetite will not change also in an environment where we very decisively seize opportunities to win market share. We also have seen what we think is a new wave in the potential of technology and AI to finally now deliver on the year-long promise of technology to boost efficiency and productivity. And we think we are at the forefront of deploying that given our year-long track record in investing in tech. Our investment performance has become more constructive, especially on the fixed income side where we have always guided that we needed to go through this period of adjustment. This period of adjustment of fast hikes will cause pain also for our relative performance as we are getting closer to the end of the cycle and perhaps in the US have actually already reached it with yesterday's decision, our relative performance and peer positioning is improving. Same is true on the equity side, and we are delivering solidly on multi-asset class, especially when we talk about mandates, both for institutional as well as for private wealth. And some of our quant-driven models are also finding it more easily now to adopt to the environment as it has returned to a more standard economic setting. And we believe that this is a coherent, reliable bedrock to do business going forward. Sustainability and ESG is an important topic and keeps being an important topic. It has moved globally more towards seizing investment opportunities. And we just highlighted here one of our key options, key solutions for our clients. Global Environmental Change Fund, a product that we have since 2008. As it happens sometimes, we have been very early in bringing these opportunities to investors. We now see really global appetite across the theatres from the US to Asia to Europe, coming from different backgrounds, sustainability driven, opportunity driven. But we have always argued that at the end, investment solutions need to answer both things. do well, but also address the challenges of a more sustainable world, but deliver investment performance. And that's exactly what we do. And we see a strong interest of our clients in that. How are we doing against our priorities? We have identified four. Let me quickly go through them as delivering consistently against our plan is very important to us. So we think the new regimes are offering us the opportunity to deliver a more constructive investment performance, especially in fixed income. The adoption was challenging, but we think we are seeing the end of the tunnel. Private markets, we will be in a position in Q3 to launch a very sophisticated offering for our private clients, and there is more to come on this. I already talked about the transition to sustainability where we not only offer investment solutions but also the advice to help clients navigate the sustainability topic. On wealth management and delivering best-in-class experience to our private clients, we have keep delivering outstanding underlying growth of 8.4%, which we think is industry leading. This is thanks to our positioning, our competencies, our capabilities, our great talent, and we have accelerated the adoption of our footprint to the global situation. In the U.S., we have completed the merger with SFA. We are now one company, one firm when it comes to wealth management in the U.S. We're the largest Swiss-based SEC-registered investment advisor, and we're looking forward to use that position as well as the cooperation with UBS Americas. We have also won the first institutional mandate from a U.S. investor. produced in Switzerland. So we think that we are uniquely positioned in our industry being able to export first-class institutional pedigree investment quality into the largest, biggest, deepest market in the world. And we are in the position to do that thanks to the long-term strategic decisions, the investments in systems and processes. We also have a very close eye on scaling our value creation. We will deliver on the cost promise and Thomas will go into more details on that. We have in a challenging environment again improved the capital position and we intend to keep this capital position both for stability as well as for optionality. And we continue to harvest the potential on technology where thanks to our year-long investments into cloud, AI and big data infrastructure, we are very well positioned to put the promise of AI to work and to deliver efficiency. Let me deep dive a little bit deeper into the wealth management organic growth opportunity. So what we want to stress here is that we have now for years built a franchise that is based on being client centric and investment led at the same time that has delivered consistent organic growth. So over the last couple of years, we have consistently delivered annualized growth of 5%, more or less in the range of four billions on a yearly basis. We have further improved the efficiency and the productivity of our relationship managers by giving them tools, systems and processes that allows our relationship managers now to look after 300 million per capita on an average basis. And now we seize the opportunity of the environment. We have hired 50 people in addition, 20 have started, 30 will start in the second half year. And we strongly believe that this is a unique opportunity to organically expand the size of the wealth management franchise at the increased level that would usually only come through M&A opportunities. We are equally as confident that we will be able to continue then going forward to grow the bigger book and the bigger franchise at least with 4% to 6% going forward. We will also not nudge on our position when it comes to culture, risk appetite and incentive models. This is an organic add-on to what Fontobel is, to who we are. But who we are and what we are resonates very well with clients and with talent. We have also adopted our global footprint further and we have gone through more than 70% of the required adoption. With that update on the potential of our wealth management business and what we see in the books and what we look forward to realize, I hand over to Thomas, our Chief Financial Officer.

Thank you very much. Welcome also from my side and I would like to guide you now through the financial results. What is important for you to remember is we do not adjust our numbers. That means sometimes our numbers need a bit of deeper digging and need a bit of explanation and this is one of these times where we need to do it. But it also means that if you look into comparisons, you will also have to dig a little bit deeper to compare with our peer group in order to make sure that it is an apples to apples comparison. Assets under management are standing at 212. which is up 4%, operating income 696 million, up 1% from the first half of 2022. The operating expenses at 546 are up 8%. We will talk a bit about why this increase is so strong and that all leads us to a group net profit of 127.6 million swiss francs this is a reduction of 16 percent versus the first half of last year but it is also an increase of over 60 percent versus the second half of the last year at that point i want to remind you a little bit about 2022 what happened is in the first couple of months, in the first weeks and months, we were still having this bonanza of retail trading. So January was an excellent month, and that then started with all the negative incidents that happened. So the war in the Ukraine, the interest rates would continue to increase in the second half of the year, the debacle with the UK pension funds. So we had a series of negative news. And if you look at the numbers, if you look at the numbers on a monthly basis, what we see is we see if you seasonally adjust the trough around October, November, and we're clearly on a path of improvement. Also what played a role as well is FX, which the dollar development has hurt us over the course of the first half of 2023. The cost income ratio stands at 78.2% and the return on equity with 12.5% is above the cost of capital and hence we're generating value. If we dig into this, assets under management have slightly increased by 4% to $212 billion. But what you see as well is from 2021 to the first half of 2022, and these are half year and year end numbers, of course, we had this significant decline over the first half of 2022, which you will then see when we try to explain a bit the revenues and what happened in that regard. Assets under management development net new money minus 0.5 if we adjust for the impact of our market focus initiative it would be plus 0.5 over wealth management and asset management and FX in that regard has cost us 2.2 billion and performance has delivered 10.6 to take us to the 2.12 billion. If you look into the assets under management and net new money by client unit, what you can see is asset management's assets under management have declined by 8% year over year and is slightly up since the second half of the year. In wealth management, we have seen an increase of 14% from the 86 to the 98 billion. Even if you adjust for SFA, that would be an increase of roughly Now, net new money, net new money development is 0.9, basically consists of three different things that need to be taken into account. First of all, the wealth management, the core engine of wealth management has delivered 3.9 billion, which is an 8.4% annualized growth rate, net new money over assets, average assets under management. So a very, very strong number here. Then we have this initiative which we have announced, which led to 1.8 billion outflows, which is basically we exit the business with Russian domiciled clients and we exit the business, the B2C business in Asia with the local rep office that we have closed down as part of the cost initiative. Asset management on the other side had an outflow of 3 billion, which in total later stand to an official number of minus 0.9. If you adjust for the outflows, it will be plus 0.9. The operating income, there's a couple of remarkable things here to mention. First of all, operating income is up 1% year over year. FX here hurt us by 15 million. So that is roughly, that number would be roughly 4% increase year over year. And what you can see as well is one of the strong drivers has been net interest income. Net interest income has tripled over the period of time to 95 million. And that is also above our expectations. The reason for this is why it is over our expectations with the strong asset management inflows. A lot of the money has arrived at cash and it stayed in our deposits for quite a bit before it then got deployed into the investment side. The net fee and commission income with stable margins, which we'll talk about in a second, and lower average AUM, you see it coming down, but slightly improving over the second half. Also on the trading income, that has recovered a lot versus the second half of last year. despite the fact that we closed down our Hong Kong operations, again, B2C business that we're working on closing down, which is also single digit million number in revenues that have fallen away. What you see here as well, now I'm moving to the operating income is, the digital income, which reflects the self-directed clients that do the trading, they have not yet recovered to the same degree as we have seen on the institutional side. So these self-directed clients, which were basically the ones fuelling this huge 2021 development at the 2021 Bonanza, they're still very careful and they're still on the sidelines. If you look into wealth management, that's a 23% increase year over year in revenues and asset management is down 18 and this 18 is explained by the average AUM, the reduction that we had over the first half of last year and hence the comparison is slightly down. moving to the return on assets what you can see on asset management not a lot of movement there is minor business mix effects of 0.3 basis points normally we wouldn't even show the rounded number but it is it is almost flat and nothing nothing happened on the asset management side on the on the margin but that is a reflection that even in times when you see outflows we're very strict on our pricing discipline and we hold the pricing discipline so the effects here were also minor effects on business mix. Wealth management has increased significantly, not surprisingly as well. Commission income has remained stable. The commission income, the transaction-based commission income has been recovering, so clients have been more active than in the second half. roughly at the level of the first half but still clients are a bit careful in particular those that have missed the uptick from the first half year are very cautious now to get into the market because obviously they're afraid that they're now exiting at a high and then we will see a decline in september Should we see the markets continuing to evolve or even if we should, should we see the market going down, we're expecting that these clients who are generally also more optimistic but have timing questions will re-engage with us and then the commission income could increase. And finally, net interest income, which we have mentioned already, most of the net interest income that we generate is here reflected in wealth management, which took the margin to 82 basis points. Operating expenses, the number that needs a bit of explanation, the 8% increase. Let me start from the right-hand side to go down by the other direction. First of all, we had an item that is an IFRS, a non-recurring IFRS booking item that is related to the share-based benefit program and the incentive accruals. The main driver were the massive reduction in our bonus pool in 2022 and the fact that there was an extremely strong price movement in front of shares between year end 2021 and the grant date of our shares in March 2022. So that contributed a lot. And this year it was going in the other direction, explaining 21 million. Moving to the next point, wealth management growth, the SFA acquisition, don't forget the acquisition has been closed in August and the full costs, because some of the people moved in then in September, the full costs, this is the first half year where we have the full costs of SFA on our books. And then we have said it already as a strategic direction, the organic growth in wealth management has cost another 10 million. Moving to the cost side, what you can see here is we have mentioned that we have the 65 million exit rate cost target, and we said the cost to achieve the 65 million are 15, in our estimate roughly 15 million. What you see already is in year, so to say, we have 15 million gross reductions achieved already, and the cost to achieve these reductions, severance payments and other things, amount to 9 million. Moving on, the costs that we have incurred and that I just explained show up mostly in the personnel line item. If you look at the cost-income ratio, 78.2%, even if you correct for the one-off, even if you correct for the FX, which would take us 2.5% to 3% down, the number is still too high, and we have more work to do here on the cost-income ratio. The structural efficiency measures, as mentioned, are on track. More work to be done. capital, and I will talk a bit about the balance sheet now. On the deposit side, our balance sheets, the deposits are 11.5 billion if you look into our balance sheet. That, however, doesn't reflect our deposits. We have a product called TermNote, which is in essence a term deposit, a fixed term deposit, but it is tradable and as such is treated under IFRS like a structured product. You will find this in other liabilities at fair value and that's $2.5 billion. So our total deposit base is $14 billion and hasn't changed a lot over the first half of 2022. If you look at the loans, the loan book is down $320 million, but again here we have seen a very limited amount of deleveraging. Where the 320 are coming from is mostly to do with the market focus and the clients that we have let go, which typically had a higher usage of loans and Lombard loans. So that explains that. We have further strengthened the balance sheet, capital, deposit, the bond portfolio, liquidity. All of our ratios have been going up. CET1 is up 60 basis points. The RWA, despite the RWA being slightly up by 300 million roughly, the leverage ratio is unchanged at 5%. And we had a very strong funding position throughout the year with a liquidity coverage ratio of just short of 180%. I've also mentioned a couple of times that we have a conservative risk stance. We kept this. This was very helpful last year in the second half. It was also very helpful here in the first half. Currently, we're still being careful in the outlook, but we're currently already discussing that we should move to a more neutral stance in terms of the risks because we see a slight recovery. We have not moved yet, but we will contemplate that over the summer. On the business model, I've mentioned it already, return on equity is at 12.5%. We are creating value as we do since 2014. Every year we have created value for the shareholders. The return on CET1 ratio, we just mentioned this for comparability, is 22.8%. Our objective for the ROE stands at 14% and we are committed to get back to this 40% in the very near future. Comparing to our targets, the balance sheet targets are very good. CT1 ratio, total capital ratio. On the P&L ratio, we have a bit more. On the P&L related targets, we have a bit more to do, as I said earlier. Now, if we synthesize very quickly, we're on the path of improvement. Wealth management had an excellent year. Asset management is in line with the industry. And clients are still waiting. Our balance sheet is very strong and has even grown stronger over the course of the year. And the costs are driven by a lot by one-off costs or explainable effects. Still, we have more to do there. And with that, I hand over back to Zeno.

Thank you very much, Thomas. I'll be back with a quick recap and outlook. So we have delivered robust numbers against an environment and fully in line with our business model and our strategy. We believe that the developments that we see have actually validated our strategic priorities and our positioning. It has validated that our investment-led approach works as a strong organic growth driver in wealth management. Our focus on developed markets has been validated too. A, by the fact that we can win market share in mature markets. B, that we obviously have a good, strong low-risk position to adopt to the geopolitical tensions. And as we have shown, we have fast-tracked our adoption to the geopolitical environment. Even if tensions should move from the European theatre to the Asian theatre, we will be done with the adoptions of our business books already. So how are we looking into H2 of 2023? A couple of thoughts around that. First, we will deliver the structural cost relief, which we think is very important, that it focuses our business model and it focuses our strengths and our ambitions on areas where we see strong potential future growth. We will complete the adoption of our footprint to the new geopolitical realities. We have already done more than 70% and we expect this to be finished before year-end. Our capital position, our balance sheet position will remain our fortress. We will use it both for stability and trust towards the strong organic growth, but also for optionality should inorganic opportunities arise. What do we see in the first weeks? What do we see in our pipelines? What do we see when we talk to clients? when we grow through our businesses. On the wealth management side, we are very convinced that we can use the market environment to structurally grow our wealth management franchise. We have delivered and built a franchise that has shown 5% annualized growth on average, 300 million load per RM, 4 billion plus net new money at an absolute size. We have now a market environment where we can do organically a size change that would usually only be available through M&A. And we are confident that we have the brand, the competencies, the capabilities, the people then to continue to grow the larger book with at least the target range of 4% to 6% going forward. When we go into DI and SST, Obviously, we cannot predict the appetite for transactions from self-guided clients. But what we see is that when I look at market shares, market positioning, our partnership discussions we're having, when I look at what we roll out from a technology standpoint of view, we will be able to repeat what we've shown in H1, that against very low trading volumes, we deliver low-risk, resilient revenues. On the asset management side, I keep repeating myself now for the third time in a row, I know, I'm aware of that, that we need to see the end of the cycle of the interest rate hiking in order to trigger the willingness of institutionals to put capital to work in more high octane fixed income products. We are ready to get these flows. As you have seen, the performance is constructive enough and our product range is as attractive as ever. And we have significantly moved closer to the end of this rating hike. And obviously we have a strong intention to move back to our pattern that we do better than the industry. That's it from our side. We wish you a successful day. Thank you very much. Thank you.