Leonteq announces 2017 results and successful completion of turnaround
Leonteq AG (SIX: LEON), a leading expert for structured investment products and long term savings solutions, announced today that it delivered profitable growth in 2017 and successfully completed its turnaround programme.
- Net profit improved by 34% to CHF 23.1 million in 2017 despite one-off costs of CHF 15.9 million; earnings per share (EPS) grew form CHF 1.08 to CHF 1.45
- Total operating income rose by 4%, driven by 18% growth in net fee income to CHF 247.0 million, partially offset by negative contributions from hedging activities
- Total operating expenses amounted to CHF 192.1 million, in line with previous cost guidance
- Rightsizing efforts and the optimisation of office space in Zurich and London are now completed, with CHF 24.4 million of annualised savings delivered
- Platform turnover grew by 28% to CHF 26.8 billion and 26,575 structured products were issued in 2017 on the back of solid market demand
- Serviced net new insurance policies more than doubled in 2017 thanks to Leonteq’s competitive product concept in the prevailing low interest rate environment
- Leonteq has started collaboration for the issuance and distribution of Standard Chartered Bank products
- Solid capital position with common equity tier 1 ratio of 19.6%
- Board of Directors to propose to shareholders that no dividend be distributed for the financial year 2017 in order to preserve capital base and invest in further business growth
Marco Amato, Chief Executive Officer a.i. of Leonteq, stated: “I am pleased that we have completed the turnaround within one year. We have increased our issuance capacity with key partner banks, taken the necessary rightsizing measures and demonstrated our ability to rigorously manage our cost base. Our underlying business is healthy and we have seen solid demand for structured products across all regions and business lines despite historically low levels of volatility. In addition, we have onboarded renowned banking and insurance partners and made further progress with our expansion in Asia.”
|CHF million||H2 2016||H1 2017||H2 2017||Change y-o-y||FY 2016||FY 2017||Change y-o-y|
|Net fee income||100.4||119.4||127.6||27%||209.0||247.0||18%|
|Net trading results||(10.1)||(16.4)||(9.4)||(7%)||5.5||(25.8)||na|
|Net interest results||(2.6)||(4.9)||(3.9)||50%||(7.5)||(8.8)||(17%)|
|Other ordinary income||0.0||2.1||0.9||na||0.0||3.0||na|
|Total operating income||87.7||100.2||115.2||31%||207.0||215.4||4%|
|Other operating expenses||(32.4)||(25.9)||(24.1)||(26%)||(56.6)||(50.0)||(12%)|
|Changes to provisions||(4.5)||(7.2)||(2.1)||(53%)||(4.5)||(9.3)||107%|
|Total operating expenses||(108.5)||(99.0)||(93.1)||(14%)||(189.4)||(192.1)||1%|
|Profit / (loss) before taxes||(20.8)||1.2||22.1||na||17.6||23.3||32%|
|Group net profit / (loss)||(20.0)||1.2||21.9||na||17.2||23.1||34%|
STRONG GROWTH IN NET FEE INCOME
Leonteq’s platform assets (volume outstanding) grew to CHF 11.4 billion as at 31 December 2017 from CHF 9.2 billion at end-2016. The platform assets of Leonteq’s platform partners increased to CHF 8.4 billion as at 31 December 2017, up 24% compared to end-2016. The volume of Leonteq’s own products outstanding increased by 25% to CHF 3.0 billion as at 31 December 2017.
ANNUALISED COST SAVINGS OF CHF 24 MILLION ACHIEVED
In line with the cost guidance provided at the beginning of last year, total operating expenses amounted to CHF 192.1 million for 2017, including one-off costs of CHF 15.9 million. This represents a marginal increase (+1%) compared to 2016. Management continued to rigorously execute the cost reduction programme, which resulted in a decrease in headcount from the peak figure of 523 full-time equivalents (FTEs) in October 2016 to 440 FTEs at end-2017. As part of the programme, measures were taken to optimise the use of office space in London and Zurich. These efforts resulted in annualised savings of CHF 24.4 million (of which CHF 8.2 million will benefit the 2018 results). The 2018 cost base before new investments in growth is expected to total CHF 170.3 million.
IMPROVED BOTTOM LINE AND SOLID CAPITAL POSITION
Following the return to profitability in the first half of 2017, net profit improved to CHF 21.9 million in the second half of 2017 compared to a loss of CHF -20.0 million in the prior-year period. Net profit for 2017 rose to CHF 23.1 million and EPS to CHF 1.45, both up 34% year on year. Due to the increase in retained earnings, Leonteq’s total eligible capital was CHF 419.7 million as at 31 December 2017, compared to CHF 386.7 million as at 31 December 2016. Risk-weighted assets increased by 26% to CHF 2,137.6 million on the back of business growth, an increase in platform assets and higher market and credit risk exposures. The BIS total capital ratio as well as the common equity tier 1 ratio was 19.6% as at 31 December 2017, compared to 22.7% at end-2016.
To preserve the capital base and invest in further business growth, the Board of Directors will propose to the Annual General Meeting of 28 March 2018 that no dividend be distributed for the financial year 2017
GROWTH ACROSS ALL REGIONS
Driven by positive client sentiment and solid demand for structured products, Leonteq issued a record 26,575 structured products (+27%) in 2017. As a result, total turnover grew by 28% to CHF 26.8 billion. In its home market of Switzerland, Leonteq grew its revenues by 25% to CHF 102.3 million. The Asia region continued to perform strongly, delivering a 21% increase in net fee income year on year to CHF 36.2 million. Leonteq made further progress in its efforts to onshore the operation in Japan and it registered Leonteq Securities (Japan) Preparation Limited in Tokyo. The business in Europe grew by 12% to CHF 108.5 million in 2017.
ISSUANCE AND DISTRIBUTION OF STANDARD CHARTERD BANK PRODUCTS
In the second half of 2017, Leonteq and Standard Chartered Bank, a leading global financial institution, have started a collaboration for the issuance and distribution of structured products under the Standard Chartered Bank Notes, Certificates and Warrants Programme. As part of the collaboration, Leonteq supports Standard Chartered Bank in the distribution of structured products in Switzerland, the European Economic Area, Hong Kong and Singapore.
Furthermore, Leonteq has made solid progress in its cooperation with Crédit Agricole CIB after the launch in the first quarter of 2017. A platform solution was developed specifically for the bank to enhance its in-house issuance capabilities and to offer structured products to its own clients.
David Schmid, Head of Investment Solutions & Banking Solutions at Leonteq, stated: “We are delighted to have begun our cooperation with such globally renowned banking partners. Leonteq’s automated product platform and diversified distribution network in Europe and Asia gives Standard Chartered Bank access to a broader range of markets and clients for its structured products. The distribution activities have got off to a good start and we have recorded promising client demand.”
FOCUS ON PROFITABLE GROWTH
Going forward, Leonteq’s priorities will continue to include expanding the scope of its existing cooperation with banking partners and broadening the product offering. It will continue to rigorously manage costs while selectively investing in new hires and in important growth projects, such as the onshoring of the operation in Japan as well as the further development and expansion of its cooperation with Crédit Agricole CIB and Standard Chartered Bank. Total operating expenses of around CHF 180 million (excluding one-off costs; currently no material items are anticipated) are expected for the full year 2018.
The implementation of IFRS 15 (Revenue from Contracts with Customers) – the new revenue standard for revenue recognition requirements in IFRS and US GAAP, effective January 2018 – is expected to reduce eligible capital by CHF -21 million in 2018, while deferred income will increase by the same amount, resulting in a more stable revenue line.
To drive profitable growth in the future, Leonteq will continue to focus on the automation of payoffs and front-to-back processes as well as on implementing additional measures to boost client profitability and optimise balance sheet usage at transaction level. Leonteq has also launched a new project to reduce the capital intensity of its structured product business by transferring market risk to external hedge providers.
LEONTEQ 2017 FULL-YEAR RESULTS PRESS AND ANALYST CONFERENCE
A press and analyst conference with Marco Amato, CEO a.i. and CFO of Leonteq, will be held today, 8 February 2018, at 09.30 CET at the SIX Convention Point.
If you wish to participate by telephone, please use the following dial-in details:
- Dial-in number Switzerland: +41 (0)58 310 50 00
- Dial-in number UK: +44 (0) 207 107 06 13
- Dial-in number USA: +1 (1)631 570 5613
Please dial in 10-15 minutes before the start of the presentation and ask for ‘Leonteq 2017 full-year results.
A digital playback of the telephone conference will be available approximately one hour after the conference call and can be accessed for 48 hours via the following numbers:
- Switzerland: +41 (0)91 612 43 30
- UK: +44 (0)207 108 62 33
- USA: +1 (1)631 982 45 66
Please enter access code 10233 followed by #.