"Given the testing market conditions, we achieved good results", says Mr H.J. Baeten, Chairman of the Board of Managing Directors of Van Lanschot NV, summarising the bank's performance in 2002. "Continuing growth of the number of private and corporate clients facilitated a further increase in income, despite a sharp fall in securities commissions due to the downturn on the stock markets. Expenses were down, underlining the flexibility and effectiveness of our organisation. In 2003, too, we will have to rely on these qualities to contend with the stagnating economy and the continuing depressed sentiment in the stock markets. Given the current economic and political uncertainties I feel that it is not appropriate to make a profit forecast for the current year at this time."
Van Lanschot managed to achieve better results in 2002. In part this was due to further growth of its client base. The number of private banking clients rose by 3.9%, from 50,339 to 52,309. New concepts such as 'KroonWonen' and 'KroonVermogen' were introduced in the Netherlands, which focus on providing comprehensive advice on house purchasing and wealth planning. The number of business banking clients increased by 8.4%, from 5,142 to 5,572, again mostly reflecting a rise in the number of family businesses. The Successors Academy, aimed at the latter group, was successfully launched in cooperation with De Baak Management Centre. The bank moved into renovated offices in Tilburg, Zwolle, Amstelveen and Hasselt (Belgium) in 2002. In April, the renovated Goes office will be officially inaugurated.
Operating profit after taxation for 2002 was € 97.6 million, an 8.4% increase compared with € 90.0 million for 2001. Net profit (including extraordinary income) was 3.2% down on last year, because in 2001 an extraordinary income of € 10.8 million was achieved. At € 3.25, earnings per ordinary share before extraordinary income were 8.3% higher. Return on average shareholders' funds was 17.0% (2001: 16.8%). Total assets increased from € 10.7 billion to € 11.3 billon at 31 December 2002, while assets under management (advisory and discretionary) fell from € 15.4 billion to € 12.5 billion.
"Van Lanschot will continue to pursue its strategy of focusing on specific target clients, integrated financial services while retaining its own identity, an approach which has proven successfull over the years. Personal attention to clients and providing customised banking and insurance services are central to our business concept. This will continue to distinguish us as a niche player from our competitors", says Mr Baeten, Chairman of the Board of Managing Directors.
Given the slowdown in economic growth and the developments on the stock exchanges, cost control had already received a great deal of attention in 2001. The further deterioration of stock market conditions in 2002 prompted the bank to continue this policy more stringently. As a result the efficiency ratio (operating expenses as a percentage of operating income) improved from 61.6% in 2001 to 60.2% in 2002, after adjustment of the 2001 figures for the release of the IT provision. The Van Lanschot organisation proved to be flexible and effective enough to cope with the adverse market conditions.
Van Lanschot Belgium
In Belgium Van Lanschot conducts mainly securities activities. Our operation was therefore hard hit by the poor stock market conditions. Securities income fell sharply, which was only partly offset by a rise in interest income. The number of employees was reduced by 14%. Due to the associated non-recurring costs, the Belgian subsidiary incurred a loss in 2002, despite the marked increase in the number of clients, up 12% to over 2,600. The increase was almost entirely realised at the top end of the Belgian market. The balance of Belgians and Dutch nationals living in Belgium has shifted to almost 50-50, giving evidence that in Belgium, too, the Van Lanschot business concept is a success. Owing to the strong increase in the number of clients, off and on balance funds entrusted increased by 7% to € 1.2 billion despite considerably lower share prices.
In order to reduce its dependency on the securities markets, the decision was made to expand the range of services Van Lanschot Belgium provides. Van Lanschot Belgium is now also granting mortgages and offering new service concepts to its clients.
International Private Banking
The results of Van Lanschot International Private Banking were satisfactory. Switzerland showed a good result. The number of clients increased considerably, thanks in part to several successful presentations held for high net-worth Dutch nationals living in France, Spain and Portugal. The Luxembourg branch also benefited from these presentations, although its profit fell slightly - as did that of Van Lanschot Curaçao - due to the developments on the financial markets. In February 2003, Van Lanschot Asia Ltd opened a representative office in Hong Kong.
Results
Income rose in 2002 by € 4.4 million to € 377.9 million. The decrease in commissions was upset by an increase in other forms of income. Commission fell by € 24.2 million, or 15.4%, compared with 2001. Net interest was € 19.4 million or 9.9% higher at € 214.7 million, as a result of an increased loans portfolio and an improved interest margin.
Securities commissions fell by € 27.3 million, or 23.2%. In its investment advice, the Bank continues to place emphasis on reducing risks. In 2002, clients invested an amount of € 209 million in Van Lanschot Index Guarantee Contracts. Furthermore, the Van Lanschot Market Neutral Guarantee Certificate, Van Lanschot Fund Support, and the AEX Airbag were introduced, the latter together with ING Bank.
Van Lanschot Assurantiën made good progress in 2002 and further extended its client base. Gross profit for the year increased considerably despite a disappointing life insurance market. The decrease in commission income from this market was more than offset by an increase in commission from the corporate fire and legal liability insurance market. Insurance commission at Van Lanschot Assurantiën rose by € 2.5 million or 14.1%, partly due to the acquisition of F. van Harskamp in Rotterdam and the consequential loss insurance portfolio of AZL in Eindhoven. Commissions from payment transactions was up € 1.2 million, or 11.3%. Other commissions fell by € 0.6 million, mainly due to a decrease in corporate finance activities. The profit on financial transactions decreased by € 1.1 million to € 8.8 million. Income from securities and participating interests grew € 10.3 million to € 21.7 million. The fall in the value of the share investment portfolio was more than offset by the gain on the sale of a number of shareholdings.
Expenses in 2002 went down by 0.9% to € 242.8 million. Staff costs were € 9.7 million or 7.3% higher, due to increased pension charges caused - among other things - by the introduction on 1 January 2002 of new pension schemes. Adjusted for the higher pension charges, staff costs were slightly lower due to the reduction in the number of FTEs from 1,890 to 1,815.
Other administrative expenses were down € 0.5 million, or 0.7%. If the release of the IT provision of € 13.6 million included in other administrative expenses in 2001 is eliminated, the decrease was 17.1%. This significant cost reduction is the direct result of our intensified cost control policy. Depreciation was up € 1.9 million, or 13.4%, following investments in IT and property.
Value adjustments to receivables of € 15.2 million were charged to profit. In accordance with the decision taken in 2001 and the extra addition of € 13.6 million in that year, no addition to the Fund for general banking risks was made in 2002.
Tax on operating profit amounted to € 37.5 million, € 0.9 million lower than in 2001. The effective tax rate declined from 29.9% to 27.8%. In contrast with 2001, when there was extraordinary income of € 10.8 million, there were no extraordinary items in 2002.
Dividend
After distribution of the dividend on preference shares, the profit on ordinary activities attributable to holders of ordinary shares amounted to € 94.2 million (2001: € 86.6 million). Based on the average number of ordinary shares, earnings per ordinary share before extraordinary income amounted to € 3.25 as against € 3.00 in 2001, an 8.3% increase. In 2001, a pay-out ratio of 50% was applied due to the bank's strong financial position. The same percentage will be applied for 2002. Subject to the shareholders' approval of the annual accounts, the cash dividend per ordinary share for 2002 will therefore amount to € 1.63 (2001:
€ 1,50).
Balance sheet
Total assets increased by € 0.5 billion to € 11.3 billion in 2002. The loans portfolio increased by € 655 million, consisting of a decrease in loans to the public sector of € 50 million and an increase in loans to the private sector of € 704 million. Growth in the corporate market amounted to € 96 million; the private market increased by € 608 million, € 360 million of which related to home mortgage loans. The mortgage loans portfolio stood at € 4.8 billion at 31 December 2002. Interest-bearing securities were reduced by € 237 million as a consequence of sales, from € 910 million to € 673 million. Following sales and downward value adjustments, the item shares fell by € 77 million.
Funds entrusted were up € 403 million to € 8.0 billion in 2002, of which over € 150 million related to funds entrusted by corporate clients. At € 860 million, debt securities were some € 75 million lower following redemptions. The capital base at 31 December 2002 was € 984 million, € 90 million higher than at 31 December 2001.
The bank's total risk-weighted assets amounted to € 7.4 billion at 31 December 2002, an increase of around 10% on 31 December 2001. The BIS total capital ratio was 12.7%, comfortably above the minimum requirement of 8%. The BIS Tier I ratio stood at 8.4% at 31 December 2002. The minimum requirement for this ratio is 4%.
Van Lanschot will launch a Euro Medium Term Note (EMTN) programme of € 2.5 billion in the near future. Van Lanschot and six other leading international banks will act as dealers under this programme, which is to be arranged by Rabobank International. Setting up this programme will enable the bank to issue various types of debt securities quickly and flexibly. The bank intends to make a first offering under this programme before the summer, provided that the market conditions are favourable.
Prospects for 2003
The economy is experiencing a severe slowdown and the stock markets have deteriorated even further. In addition, the unstable political situation has left its mark. The current economic climate does not give any reason to predict a recovery of the stock exchanges. Van Lanschot therefore assumes that commission income will remain under pressure.
The bank successfully reduced costs in the 2002 financial year and will continue to apply strict cost controls in the current financial year. The present economic and political climate entails great uncertainty. The bank therefore cannot at this stage make any profit forecast for 2003.
Annexes:
Key data
Consolidated balance sheet
Consolidated profit and loss account
Ten-year summary
Important dates in 2003:
Annual General Meeting of Shareholders: 8 May 2003
Ex-dividend date: 12 May 2003
2002 dividend available for payment: 21 May 2003
Publication of half-year 2003 figures: 22 August 2003 (before opening of trade)
's-Hertogenbosch, 14 March 2003
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The full press release with tables can be downloaded from the following link:
