HERTOGENBOSCH, August 21, 2003 (PRIMEZONE) -- Van Lanschot:
* Net profit in first half of 2003 up from 51.2 million to 53.3 million (+4.1%) * Earnings per ordinary share rose from 1.71 to 1.77 (+3.5%) * Strict cost control results in efficiency ratio improvement * Return on average shareholders' funds before profit appropriation of 16.7% (2002: 15.6%) * Prospects for 2003: barring unforeseen circumstances earnings per ordinary share up on 2002
"I am more than pleased to see that Van Lanschot was able to improve on the strong result we achieved in the first half of 2002," says Mr H.J. Baeten, Chairman of the Board of Managing Directors of Van Lanschot NV. "Even under extremely difficult market conditions the Bank succeeded in further increasing the number of private and corporate target group accounts and successfully introducing new investment products."
At 53.3 million, Van Lanschot's net profit for the first half of 2003 was up 4.1% on the same period last year (51.2 million). Earnings per ordinary share rose 3.5% from 1.71 to 1.77. These results are satisfactory given the poor economic climate.
The Bank had to face a further deterioration of market conditions during the period under review. The Dutch economy officially slipped into a recession, share prices dropped even further, the housing market stagnated and the global political climate was dominated by the war in Iraq. Consequently, consumers as well as entrepreneurs adopted a very conservative attitude, which hampered the level of activity and the growth in terms of new clients. Even so, the number of private and corporate target group accounts rose again. Van Lanschot extended the number of investment products it offers once more; the service level was improved where possible and so was the Bank's commercial strength. Following the successful introduction of the AEX Airbag in 2002, the Eurozone Airbag was launched this year. The introduction of the Van Lanschot Euro Credit Fund, a fund that invests in corporate bonds, was another great success. The subscription for this fund amounted to 222 million.
Thanks mainly to the great interest in this Fund, assets managed by the Bank rose from 4.7 billion to 5.0 billion in the first half of the year. Total assets held in custody remained virtually unchanged at 12.8 billion (2002: 12.9 billion).
During the period under review, Van Lanschot extended its services to its clients with the introduction of Van Lanschot Summum, a comprehensive insurance concept for private clients that incorporates all aspects of protecting valuable personal belongings and assets. In addition, digital services such as Online Payments (payments via the internet), Online Research (investment information) and Online Portfolio (performance statements) were worked out in further detail.
Results Compared with the first half of 2002, income in the first half of 2003 fell by 2.5 million or 1.3% to 191.7 million. At 107.9 million, net interest was 2.1 million or 1.9% lower. The marginal growth in mortgage loans granted due to the stagnating housing market and depressed interest margins as a result of the fierce competition on the home loan market were important factors.
Commission fell too, by 3.5 million or 4.9% to 68.4 million. Again, securities commission was the main cause of the decrease; the payment transactions commission, non-domestic commission and insurance commission did increase. The development of the stock market prices due to the war in Iraq made many investors even more reluctant to engage in share transactions causing the securities commission for the first half of 2003 to fall by 3.9 million or 7.7%.
Profit on financial transactions was 0.9 million lower due to lower exchange gains on securities and lower income from currency arbitration. Income from securities and participating interests grew by 4.0 million, mainly because the price of the shares in the investment portfolio developed positively, contrary to the market trend.
Furthermore, the strict cost control performed by the Bank contributed to the rise in operating profit. As a result, expenses fell by a total of 4.8 million or 4.0% to 116.9 million. Staff costs decreased by 2.6 million (-3.7%) to 67.9 million. The reduction in the number of employees in the course of 2002 had a positive effect on staff costs in the period under review. Moreover, the number of employees was reduced further from 1,815 to 1,750 FTEs in the first half of 2003 through natural attrition. Other administrative expenses were down as well owing to further cost savings, dropping by 2.5 million (-6.9%) to 33.1 million. At 8.2 million, depreciation remained stable. The efficiency ratio (operating expenses as a percentage of income) for the first six months of the year was 56.9%, an improvement of 3.3 percentage points compared to the full year 2002.
During the period under review an amount of 7.7 million was charged to profit due to value adjustments of receivables. This is 0.2 million (3.2%) more than in the same period last year, based on prudence in view of the weak economic environment. Tax on operating profit amounted to 21.6 million, assuming a tax burden of 28.8% (full-year 2002: 27.8%). Operating profit after taxation thus amounted to 53.3 million, compared with 51.2 million in the first half of 2002. Since there was no extraordinary income in either of the periods, these amounts also represent net profit.
With respect to the contribution of our foreign branches, the depressed mood on the financial markets impacted Van Lanschot Luxembourg and Van Lanschot Switzerland. Although this factor also played a role at Van Lanschot Curacao, there was an increase in the result owing to the beneficial effect of a lower US dollar exchange rate on costs. Van Lanschot Belgium achieved a marked improvement in its results compared to the same period last year, owing in part to the cost savings implemented in 2002 and the broadening of both the target group criteria and the range of products. The number of target group accounts and the assets managed and held in custody on behalf of clients rose in the first six months of the year, despite the poor stock exchange conditions.
Balance sheet Total assets at 30 June 2003 amounted to 11.8 billion, 0.5 billion (4.1%) more than at 31 December 2002. The loans portfolio increased by 491 million, 200 million of which consisted of loans to the public sector. At 101 million, the net growth of the home mortgage loans portfolio to 4.9 billion was fairly modest, owing in part to the decrease in the number of properties sold and a relatively large number of unscheduled repayments and renewals. On the other hand, there was a marked increase in corporate lending of 206 million or 8.1%. By taking an active position in the market, for example through presentations for entrepreneurs, the Successors Academy and the economy barometer TrendMeter, Van Lanschot is increasing awareness of its added value for family businesses.
On balance, funds entrusted remained virtually unchanged in the first half year: a decrease in savings of 70 million was set off to a large extent by an increase in other funds entrusted of 62 million. However, as a result of the issue of Floating Rate Notes, debt securities rose by 400 million. The issue was made as part of a Euro Medium Term Note programme of 2.5 billion that was arranged in the spring with the objective of enabling Van Lanschot to issue various types of debt securities quickly and flexibly to fund growth of the Bank's assets.
The group capital base fell from 1,034 million at 31 December 2002 to 1,028 million, following a slight decline in subordinated loans.(1). The return on average shareholders' funds for the first six months of 2003 was 16.7%, as against 15.6% in 2002.(2) During the period under review, the Bank's risk-weighted assets rose from 7.4 billion to 7.6 billion. The BIS total capital ratio was 12.4% (2002: 12.7%), comfortably above the minimum requirement of 8%. At 8.4% the BIS Tier 1 ratio was the same as for 2002 (the minimum requirement for this ratio is 4%).
Prospects The Dutch economy is facing hard times, reflected by a sharp further decrease in prices on the stock market in the first few months of the year. Now that the war in Iraq is over, the prospects for the US economy in particular seem to be improving somewhat and the stock markets have shown signs of recovery. Under the current circumstances it is no easy task to forecast the result for 2003 as a whole. The results achieved in the first half-year, however, reinforce our expectation that Van Lanschot's earnings per ordinary share in 2003 -- barring unforeseen circumstances -- will exceed those of 2002.
Annexes: Key data Consolidated balance sheet at 30 June 2003 Consolidated profit and loss account Consolidated statement of cash flows Movements in shareholders' funds at 30 June 2003 (1) The definition is different due to the fact that the balance sheet must be presented before profit appropriation from now on; under the old definition there would have been an increase of 984 million to 1,000 million. (2) Under the old definition, the return on average shareholders' funds for the first half-year would have been 17.7%, as against 17.0% for 2002 as a whole.
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Financial calendar for 2004
Publication of 2003 figures 19 March 2004
Annual General Meeting of Shareholders 12 May 2004
Publication of half-year 2004 figures 20 August 2004
F. van Lanschot Bankiers NV is the oldest independent Dutch bank, with a history dating back to 1737. The Bank focuses on three target groups: high net-worth individuals, medium-sized businesses (including family businesses) and institutional investors. Van Lanschot stands for high-quality services founded on integrated advice, personal service and customised solutions. Van Lanschot NV is listed on the Euronext Amsterdam Stock Market.