HERTOGENBOSCH, The Netherlands, March 19, 2004 (PRIMEZONE) -- Van Lanschot:
-- Further growth in the number of private and corporate target
group accounts
-- Continuing steady profit growth: net profit rises 9.3% from
97.6 million to 106.7 million
-- Earnings per ordinary share up 9.9% to 3.66**
-- Commission recovers slightly, rising 1.9%
-- Profit reported in Belgium mainly thanks to strong growth
in client base
-- Return on average shareholders' funds increases from 15.7%
to 16.1%
-- Further improvement in efficiency ratio from 60.2% to 57.4%
-- Dividend for 2003 amounts to 1.83 (2002: 1.63)
-- Outlook for 2004: further increase in net profit and earnings
per ordinary share
"Van Lanschot again managed to maintain the upward trend in its results in 2003 and for the first time in its history achieved an operating profit after taxation of more than 100 million. Despite difficult economic conditions in the past three years, we have been able to realise an average annual growth in net profit of almost 10%. This confirms the strength of our strategy," says Mr H.J. Baeten, Chairman of the Board of Managing Directors of Van Lanschot NV.
The Bank realised further growth in the number of both private banking and business banking clients. The increase in private clients was mainly seen in the top segment, while family businesses accounted for most of the growth in corporate clients. The Bank was also successful in attracting young clients.
Van Lanschot's policy in 2003 again concentrated on strict cost control without harming the quality of services, based on among other things an improved organisational structure. Considerable savings were made by clustering all commercial activities geared towards the private and corporate markets in one business unit and through a more efficient organisational structure for the other activities.
Assets held in custody rose from 12.9 billion to 13.7 billion in 2003. In offering investment advice, Van Lanschot responded to the current climate by focusing on limiting risks through diversification of investments and by offering various forms of guarantee investment products. Clients subscribed more than 200 million in the Index Guarantee Contracts issued by the Bank, a product which combines investment on the international stock markets with a guaranteed original capital. There was also much interest in the issue of Airbags, which allow investors to fully participate in rises in the stock exchange index, while any fall in the index is wholly or partly compensated. Another very successful product introduction was the Van Lanschot Euro Credit Fund, an investment fund investing in corporate bonds. With subscriptions totalling 222 million, this was the largest launch of an investment fund in the Bank's history. Including this amount, assets managed grew from 4.7 billion to 5.2 billion in 2003.
A key client group for the Bank is associations and foundations. To assist the directors of these organisations in fulfilling their responsibilities, the Bank introduced Van Lanschot Charitas at the end of the financial year, a service concept tailored to the needs of associations and foundations. Van Lanschot Charitas provides associations and foundations not only with asset management services, but also offers them funds transfer services, directors' liability insurance, accounting assistance, meeting rooms and secretarial support.
Van Lanschot Belgium
After incurring a loss for 2002, Van Lanschot Belgium managed to achieve a profit, albeit a small one, in the year under review. This positive development can be attributed mainly to a substantial growth of the client base, much of which was realised in the top segment of the market. The commercial activities of the Bank were successful in the second half of the year in particular. The strategic decision taken by the Bank at the end of 2002 to relax the target group criteria and to extend its services to include, among other things, the granting of mortgage loans has reaped benefits.
International Private Banking
International private banking activities developed satisfactorily. Despite continuing growth of its client base, Van Lanschot Switzerland suffered more than others from the cautious approach taken by investors. However, this was more than offset by the increase in profit achieved by Van Lanschot Luxembourg and Van Lanschot Curacao.
Results
In 2003, income rose by 0.4 million, or 0.1%, to 378.3 million. Net interest increased by 6.1 million, or 2.8%, from 214.7 million to 220.8 million, due to the continuing growth of the loans portfolio. Commission went up on balance by 1.9%, or 2.5 million, to 135.2 million owing to an increase in domestic and international funds transfer and securities commission, partly offset by a fall in insurance and other commission. Securities commission rose by 4.1% thanks to the hesitant re-emergence of private investors. The impact of this was particularly notable in the second half of the year, with securities commission up 19.0% on the second half of 2002. Insurance commission fell partly as a result of the increasing preference for repeat commission on life insurance as opposed to lump sum commission.
Income from securities and participating interests fell sharply compared with 2002. This was influenced, however, by the significant gains realised on the sale of minority shareholdings in 2002. The profit on financial transactions increased from 8.8 million to 16.2 million.
Expenses fell in the year under review by 10.5 million, or 4.3%, to 232.4 million, with all categories of expenses down on the year before. Staff costs dropped 5.1 million to 138.2 million owing to the decrease in the average number of employees, in full-time equivalents, from 1,815 to 1,724, due entirely to normal staff turnover. Strict cost control resulted in a 5.3 million reduction in other administrative expenses to 62.7 million. Depreciation remained unchanged compared with 2002 at 16.3 million. Value adjustments to receivables of 15.1 million were charged to profit, 0.5% less than in 2002, representing 20 basis points of the average risk-weighted assets. This very low percentage, especially in a year dominated by recession, confirms the effectiveness of Van Lanschot's credit policy.
Tax on operating profit for 2003 amounted to 39.3 million, compared with 37.5 million in 2002, representing a fall in the tax burden from 27.8% to 26.9%. Reporting an operating profit after taxation of 106.7 million, Van Lanschot has achieved an operating profit after taxation of more than 100 million for the first time in its history.
Dividend
After distribution of the dividend on preference shares, the profit attributable to holders of ordinary shares amounts to 103.3 million. Based on the average number of ordinary shares -- as from 2003 excluding shares repurchased to cover the share option plan, as a result of new regulations -- earnings per ordinary share for 2003 amounted to 3.66. Earnings per ordinary share for 2002 were 3.25; under the new calculation method, this would be 3.33 (solely for comparative purposes). Given Van Lanschot's comfortable financial position the decision was made to apply a pay-out ratio of 50%, the same as in 2002. Subject to the approval of the annual accounts, the dividend per ordinary share for 2003 will amount to 1.83 and be distributed in cash.
Balance sheet
Total assets increased in 2003 by 290 million, or 2.6%, to 11.6 billion. Loans and advances to private individuals rose 6.4%, or 391 million, 299 million of which related to the growth in the mortgages portfolio. The new mortgage concept, Van Lanschot Garantierentehypotheek, launched in 2002 was one of the main contributors to this continued growth. This mortgage is based on a variable interest rate, but this rate is capped during a certain period. Loans and advances to corporate clients fell 53 million, a drop of 2.1%. Shares fell during the year under review from 379.4 million to 231.5 million as a result of sales of the equity portfolio and lower long option positions of clients. The sale of shares has reduced the sensitivity of the Bank's results to the stock exchange climate.
Funds entrusted were down by 141.7 million. This reduction was almost entirely attributable to savings accounts, a direct and logical consequence of the high interest rates offered on internet savings accounts by competitors. The increase in total assets was largely financed by debt securities issued under the 2.5 billion EuropeanMedium Term Note programme introduced at the beginning of 2003. As a result, debt securities increased from 860.2 million to 1,345.2 million. Shareholders' funds increased 9.1% to 692.6 million, thanks to the retained earnings for 2002 and the profit for 2003. With the Fund for general banking risks remaining at the same level and subordinated loans decreasing by 7.7 million, the group capital base increased on balance by 50.1 million to 1,080.9 million.
Corporate Governance
The Supervisory Board and the Board of Managing Directors of Van Lanschot have discussed the Corporate Governance Code issued by the Tabaksblat Committee and in general, concur with the principles of the Code, although its policies may deviate on some points. Consultations on the implementation of the principles will take place in the current financial year.
Financial ratios
The efficiency ratio improved from 60.2% to 57.4% in the year under review. The return on shareholders' funds before profit appropriation was 16.1% in 2003 against 15.7% in 2002. With increased shareholders' funds and a limited growth in total assets, the BIS Tier 1 ratio improved from 8.4% to 8.7%. Risk-weighted assets increased by 5.7% in the year under review, from 7,385 million to 7,805 million. The BIS total capital ratio fell from 12.7% to 12.6%. These capital adequacy ratios of Van Lanschot comfortably meet the required minimum ratios.
Medium-term targets
In the publication of its half-year figures for 2003, Van Lanschot announced that it would review its medium-term targets for return on shareholders' funds and growth in earnings per ordinary share. Various considerations played a role in this, for example, the definition of return on shareholders' funds was changed in the year under review to reflect the fact that the balance sheet is now presented before profit appropriation. In addition, the Bank's return on shareholders' funds is already relatively high. It has been decided to set the medium-term target for the return on shareholders' funds at an average of 15% (was at least 15%) and for growth in earnings per ordinary share at an average of 10% (was at least 12%).
Prospects for 2004
Since the last quarter of 2003, there have been some signs of a cautious recovery of the economy in the eurozone. Although it seems that the favourable economic conditions will continue in the US and Asia, it remains to be seen whether the exchange rate of the euro against the dollar will hamper the recovery of the European economy. Signs of an increase in corporate investment in the Netherlands and Belgium are still scant. The consumer and business confidence indices, too, give little cause to be optimistic for 2004. And the dependency on exports only increases vulnerability.
Accordingly, Van Lanschot is expecting only very modest growth this year. Until the level of investment picks up, the demand for funding will remain low. Given the current highly liquid position of banks, the Bank expects any growth in the volume of lending to be set off by further pressure on margins and pressure on the margins on savings accounts to continue. As a consequence of these developments, net interest is expected to increase only slightly.
The prospects for the securities operations have improved. The upturn on the stock markets has meant that investor confidence is slowly returning, in anticipation of economic recovery. Van Lanschot therefore expects the number of transactions to grow compared with 2003, and corresponding higher securities commission and custody fees. Close monitoring of costs will continue in 2004, so that the increase in expenses will be very small.
The strict credit policy exercised during the recession of the last few years has had a positive influence on the quality of the loans portfolio. As a result, the Bank hopes that value adjustments to receivables will not increase compared with 2003. Barring unforeseen circumstances, Van Lanschot expects net profit and earnings per ordinary share for 2004 can increase again.
Annexes:
Key figures Consolidated balance sheet Consolidated profit and loss account Ten-year summary
Key dates:
2004 Annual General Meeting of Shareholders 12 May Ex-dividend date 14 May 2003 dividend payable 26 May Publication of 2004 half-year figures 20 August
2005 Publication of 2004 figures 17 March Annual General Meeting of Shareholders 11 May
***Complete release including annexes can be downloaded from the following link:***
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.
** With effect from 2003, the average number of ordinary shares no longer includes shares repurchased to cover the share option plan, as a result of new regulations. Earnings per ordinary share for 2002 were 3.25. For the purpose of reporting the percentage increase, earnings per ordinary share for 2002, calculated according to the new method, of 3.33 were used, solely for comparative purposes.