2011 half-year results AMSTERDAM, 16 AUGUST 2011 - Focus on both - - PDF document

2011 half-year results

AMSTERDAM, 16 AUGUST 2011

1

• Focus on both grow th and solidity

Floris Deckers, CEO

• 2 0 1 1 half-year results

Constant Korthout, CFRO

• The best private bank in the Netherlands and Belgium

Floris Deckers, CEO

• Q&A

2

Focus on both growth and solidity in H1 2011

Grow th

• Assets under management + 5% to € 37.3 billion
• Inflow of net new money + 5% (annualised 11% ) to € 1.9 billion
• Total client assets + 3% to € 50.5 billion
• Commission + 7% to € 123.2 million
• Net profit + 85% to € 40.8 million

Numbers based on core activities (excluding non-strategic investments)

Solidity

• Core Tier I ratio 10.2%
• Funding ratio 87.8%
• Diversification and lengthening of funding profile
• European stress test: under adverse stress scenario, Core Tier I ratio

increases to 9.7% in 2012 compared with 9.6% at year-end 2010 (minimum EBA benchmark 5% )

• Reconfirmation Single A- (stable outlook) credit rating by Standard &

Poor’s in July 2011

3

Long-established focus on private banking, complemented by asset management

Private Banking Services Private Banking Private Office CA € 10 million CA € 250,000 Private & Business Banking Centralised services Served through branch offices Specialised team based in 4 offices Asset Managem ent Corporate Finance & Securities

Van Lanschot aim s to be the best private bank in the Netherlands and Belgium

Client Assets H1 -1 1 vs H1 -1 0 + 8 % + 5 %

• 5 %

4

Strong inflow of assets under management

• Total assets under management + 5% to € 37.3 billion
• Inflow of net new money € 1.9 billion (+ 5% , or annualised 11% ) mainly due to increase in

discretionary mandates

• Assets under discretionary management of private clients increased from 32% to 35%
• Total client assets + 3% to € 50.5 billion

Assets under m anagem ent ( € billion) Total client assets ( € billion)

Numbers based on core activities (excluding non-strategic investments)

35.4 37.3 13.6 13.2 49.0 50.5 31- 12- 2010 30- 06- 2011 Savings & deposit s Asset s under management 21.3 14.1 21.6 1.9 15.7 0.0 35.4 37.3 31- 12- 2010 Net new money Market performance 30- 06- 2011 Privat e & Business Banking Asset Management

5

More focus on solidity due to deteriorating market conditions

• Pressure on interest margin due to conscious decision to reinforce the funding profile and

deleverage the balance sheet

• Interest margin H1 2011 1.54% ; adjusted for exceptional items 1.60%
• Commission + 7% to € 123.2 million (H1 2010: € 115.2 million)
• Addition to loan loss provision down 38% to € 27.4 million (H1 2010: € 43.9 million)
• Consolidated net profit + 111% to € 42.8 million (H1 2010: € 20.3 million)
• Net profit (core activities) + 85% to € 40.8 million (H1 2010: € 22.1 million)

Net profit ( € m illion) Total incom e ( € m illion)

Numbers based on core activities (excluding non-strategic investments)

326 290 259 288 310 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011

• 46.3

31.5 40.8 43.6 22.1 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011

6

Solid capital and funding position

• Core Tier I ratio 10.2% ; Tier I ratio 12.7% ; BIS ratio 14.0%
• Van Lanschot meets the published Basel III requirements
• Diversification and lengthening of funding profile through issue of senior unsecured bonds to

institutional investors for an amount of € 500 million

Core Tier I ratio Funding ratio

Numbers based on core activities (excluding non-strategic investments)

87.8% 77.4% 91.2% 89.7% 79.0% 86.2% 2006 2007 2008 2009 2010 H1 2011

9 .6 % 9 .9 % 1 0 .1 % 10.2% 9.6% 0.3% 0.2% 0.1% 31-12-2010 Reduction RWA Profit Other 30-06-2011

7

Strong results in European stress test

• Core Tier I ratio under adverse stress scenario increases to 9.7% in 2012 (year-end 2010: 9.6% )
• No exposure to government bonds of Greece, Portugal, Ireland, Italy and Spain
• Sovereign risk in the bank’s investment portfolio is limited to the Netherlands, Germany and small

amounts in France, Switzerland and Canada

• High quality loan book: nearly half of the portfolio consists of residential mortgages in the

Netherlands and Belgium

• EBA stress test complements the risk management procedures and regular stress testing

programmes performed by Van Lanschot 9.7% 9.8% 10.2% 9.9% Core Tier I ratio 1,167 1,152 1,227 1,170 Core Tier I capital (€ million) 12,031 11,766 12,027 11,764 Risk-weighted assets (€ million) Adverse scenario 2011 2012 Baseline scenario 2011 2012

8

• Focus on both grow th and solidity

Floris Deckers, CEO

• 2 0 1 1 half-year results

Constant Korthout, CFRO

• The best private bank in the Netherlands and Belgium

Floris Deckers, CEO

• Q&A

9

Results H1 2011

14.2 8.6 6.9 Tax 5 7 .8 3 0 .7 4 7 .7 Operating profit before tax 4 3 .6 2 2 .1 4 0 .8 Net profit 8.8 7.2 3.0 Other impairments 32.2 12.0 16.0 Other income 30.1 28.7 29.3 Other commission 86.9 86.5 93.9 Securities commission 176.6 160.3 150.5 Interest 1 0 9 .2 8 1 .8 7 8 .1 Gross result 216.6 205.7 211.6 Operating expenses 3 2 5 .8 2 8 7 .5 2 8 9 .7 I ncom e from operating activities 42.6 43.9 27.4 Addition to loan loss provision H2 2 0 1 0 H1 2 0 1 0 H1 2 0 1 1 € m illion

Numbers based on core activities (excluding non-strategic investments)

10

Increase in net profit due to higher commission and lower provisions

• Net profit in H1 2011 € 40.8 million (H1 2010: € 22.1 million)
• Operating profit before tax € 47.7 million (H1 2010: € 30.7 million)
• Lower interest margin due to stricter focus on private banking strategy and diversification of the

bank’s funding

• Higher commission in line with increase in assets under management
• Trend of decrease in addition to loan loss provision continues

Operating profit before tax ( € m illion)

Numbers based on core activities (excluding non-strategic investments)

30.7 4.0

• - 5.9

16.5 47.7

• 9.8

4.2 8.0 H1 2010 Lower int erest Higher commission Higher

• t her

income Higher

• perat ing

expenses Lower loan loss provision Lower

• t her

impairment s H1 2011

11

Higher commission, lower interest margin

I ncom e from operating activities ( € m illion)

• Commission up 7% on H1 2010 to

€ 123.2 million

• Securities commission + 9% to

€ 93.9 million, due to an increase in management fees

• Interest down 6% on H1 2010 to

€ 150.5 million

• Interest margin 1.54% (H1 2010:

1.59% )

• Other income € 16.0 million

115.2 117.0 123.2 160.3 150.5 176.6 7.0 7.0 13.6 25.2 2.4 5.0 325.8 289.7 287.5 H1 2010 H2 2010 H1 2011 Financial t ransact ions Securit ies and associat es Int erest Commission Numbers based on core activities (excluding non-strategic investments)

12

Pressure on interest margin due to deliberate reinforcement of funding profile and balance sheet deleveraging

I nterest m argin ( % )

• Interest down 6% on H1 2010 to

€ 150.5 million

• Diversification and lengthening of

funding profile through issue of RMBS (November 2010) and senior unsecured bonds (April 2011)

• Stricter focus on lending to target

group clients

• ECB funding fully repaid in 2010
• Interest margin 1.54% (H1 2010:

1.59% )

• Adjusted for exceptional items

1.60%

Numbers based on core activities (excluding non-strategic investments)

1.54% 1.22% 1.60% H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 Int erest margin Int erest margin adjust ed for exept ional it ems

13

More stable commission driven by shift to discretionary mandates

• Just one third of securities commission is transaction related
• Management fee* comprises 68% of total securities commission (H1 2010: 63% ), in part due to

increase in discretionary asset management

• Assets under discretionary management at the end of June 2011 comprise 35% of total assets

under management Private & Business Banking clients (year-end 2010: 32% )

Securities com m ission ( € m illion) Assets under discretionary m anagem ent ( € billion) and m anagem ent fee ( € m illion)

* Including portfolio commission and custody fee Numbers based on core activities (excluding non-strategic investments)

33.1 36.1 45.0 18.4 16.8 18.7 32.4 29.2 29.9 4.8 2.6 0.3 93.9 86.9 86.5 H1 2010 H2 2010 H1 2011 Management fee Port folio & cust ody fee Transact ion relat ed Performance fee 13.6 16.2 18.7 20.9 23.3 26.8 35.2 33.1 36.1 45.0 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011

Aum discret ionary Management fee 41 bps 37 bps 41 bps Margin

14

Operating expenses relatively flat

Operating expenses ( € m illion)

– Staff costs up 4% on H1 2010 to € 113.8 million

• Higher variable pay and higher

participation in employee share plan

• Higher pension obligations
• Number of FTEs decreased to 2,010

at 30 June 2011 (Van Lanschot 1,612; Kempen 398) (30 June 2010: 2,042 FTEs; Van Lanschot 1,654; Kempen 388)

• Other administrative expenses up 1%
• n H1 2010 to € 79.5 million
• Extra addition to deposit guarantee

scheme for DSB

Numbers based on core activities (excluding non-strategic investments)

109.1 117.3 113.8 78.6 81.3 79.5 18.0 18.3 18.0 205.7 211.6 216.6 H1 2010 H2 2010 H1 2011 Depreciat ion and amort isat ion Ot her administ rat ive expenses St aff cost s

15

Strict focus on cost control

Operating expenses ( € m illion)

• Increase in operating expenses due to higher staff costs, additional costs related to legal and

regulatory requirements and investments in IT and asset management

• Partly compensated by cost reduction at Van Lanschot Bankiers

Numbers based on core activities (excluding non-strategic investments)

2 0 5 .7 2.4 2.5 2 1 1 .6 1.0 1.0

• 3.3

2.3 H1 2010 Higher variable pay and higher participation in em ployee share plan Higher pension costs Higher provision deposit guarantee schem e Higher costs I T projects I nvestm ent Kem pen Cost reduction Van Lanschot Bankiers H1 2011

16

Trend of decrease in loan losses continues

• Addition to loan loss provision down 38% to € 27.4 million (H1 2010: € 43.9 million)
• Addition to loan loss provision represents 48 bps (annualised) of average risk-weighted assets

(H1 2010: 64 bps annualised)

20 40 60 80 100 2007 2008 2009 2010 2011 25 bps 30 bps

Addition to loan loss provision ( bps) * Addition to loan loss provision ( € m illion)

* Numbers based on annualised addition to loan loss provision Numbers based on core activities (excluding non-strategic investments)

• 50.6
• 62.6
• 43.9
• 42.6
• 27.4

H1 2009 H2 2009 H1 2010 H2 2010 H1 2011

17

Asset s Equit y and liabilit ies

No exposure to Greece, Spain, Portugal, Italy and Ireland 76% of available-for- sale investments have a triple-A rating 86% of financial assets designated at fair value through profit or loss have a triple-A rating

Balance sheet is for the client

Cash and balances w ithdraw able w ith banks Financial instrum ents Loans and advances Other Savings and deposits Due to banks I ssued debt securities Other Equity 1 .6 1 .5 1 .1 1 5 .1 1 3 .2 2 .5 0 .8 1 .0 1 .8 Total assets € 1 9 .3 billion

Nearly half of the loan book consists of residential mortgages The core activities of Van Lanschot take place in its home markets the Netherlands and Belgium High funding ratio 87.8% Stable base of savings and deposits Diversified funding profile (both maturity and source) Issue of 3-year senior unsecured bonds for € 500 million Very low leverage 13.1

Numbers based on core activities (excluding non-strategic investments)

18

High quality of loan book

• Nearly half of the loan book consists of

residential mortgages

• 97% of the loan book comprises loans

and advances in the Netherlands and Belgium

• Average Loan-To-Value of the property

portfolio approximately 72%

• New loans provided to target group

clients with private banking potential

• Inflow of new loans to the Recovery

Section is declining further both in terms of number and size

Loan book by sector at 3 0 June 2 0 1 1

49% 17% 28% 2% 4% Resident ial Mort gages Commercial Propert y Financial Holdings Healt hcare Ot her

Numbers based on core activities (excluding non-strategic investments)

19

Low risk investment and trading portfolio

I nvestm ent and trading portfolio by counterparty at 3 0 June 2 0 1 1 I nvestm ent and trading portfolio by country at 3 0 June 2 0 1 1

• Total investment and trading portfolio of € 1.5 billion
• Government bonds and government guaranteed bonds held for liquidity purposes
• Only government bonds of the Netherlands, Germany and in small amounts France, Switzerland

and Canada

Numbers based on core activities (excluding non-strategic investments)

80% 11% 8% 1% Government & guarant eed Corporat es Funds Banks 80% 12% 1% 7% The Net herlands Germany France Ot her

20

Funding consists mainly of funds entrusted by clients

Funding m ix at 3 0 June 2 0 1 1

• Funding ratio 87.8%
• Solid funding position based on stable customer savings and deposits
• Van Lanschot issued 3-year senior unsecured bonds for € 500 million in April 2011
• With the aim of diversifying the funding profile, Van Lanschot placed € 750 million of RMBS notes

(Citadel) and raised a total of € 410 million in the market through long-term repo transactions at the end of 2010

Stable level of funds entrusted ( € billion)

69% 15% 4% 9% 3% Custom er savings & deposits Debt securities & subordinated loans I nterbank funding Shareholders' funds Other funding 9.1 4.5 5.5 5.0 1.1 4.1 3.8 4.0 5.2 4.8 4.2 4.2 1 5 .3 1 3 .4 1 3 .5 1 3 .2 31-12-2008 31-12-2009 31-12-2010 30-06-2011 Deposits Savings Other

Numbers based on core activities (excluding non-strategic investments)

21

Good balance of wholesale funding in terms of maturity and funding source

• Van Lanschot has been

successful in raising funds in wholesale markets in 2010 and 2011

• Diversified wholesale funding:

senior unsecured notes, subordinated loans, asset backed funding and long-term repo transactions

• Strong diversification on maturity

and funding sources

W holesale funding by m aturity ( € m illion)

• 100

200 300 400 500 600 700 800 900

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 > 2021

CMBS LT Repo RMBS Senior Subordinat ed

22

Van Lanschot meets published Basel III requirements

Leverage Net Stable Funding Ratio Liquidity Coverage Ratio

PRO FORMA AT 3 0 JUNE 2 0 1 1 UNDER BASEL I I I

19 30- 06- 2011 Max 33 191% 30- 06- 2011 Min 100% 106% 30- 06- 2011 Min 100%

23

Summary of H1 2011

Grow th in assets under m anagem ent results in higher com m ission Solid capital and funding position

• Assets under management + 5% to € 37.3 billion
• Inflow of net new money € 1.9 billion, mainly in discretionary mandates
• Total client assets + 3% to € 50.5 billion
• Commission + 7% to € 123.2 million
• Securities commission + 9% to € 93.9 million
• Core Tier I ratio 10.2% , Tier I ratio 12.7% , BIS ratio 14.0%
• The balance sheet is for our clients: very low leverage 13.1
• Funding ratio 87.8% ; long-term funding position strengthened by raising

wholesale funding

• Reconfirmation Single A- (stable outlook) credit rating by

Standard & Poor's in July 2011

Good operating profit in H1 2 0 1 1

• Income up 1% on H1 2010
• Addition to loan loss provision down 38%
• Operating profit before tax € 47.7 million
• Net profit € 40.8 million
• Earnings per ordinary share € 0.87

Numbers based on core activities (excluding non-strategic investments)

24

• Focus on both grow th and solidity

Floris Deckers, CEO

• 2 0 1 1 half-year results

Constant Korthout, CFRO

• The best private bank in the Netherlands and Belgium

Floris Deckers, CEO

• Q&A

25

Van Lanschot’s strategy on track in 2011

Targets Vision Mission Strategy Core Values

To be able to measure the achievement of its vision, Van Lanschot has formulated targets relating to clients, employees, and financial ratios; Van Lanschot aims to realise the targets in harmony with all its stakeholders To offer high-quality financial services to high net-worth individuals, entrepreneurs and other select client groups, whereby the interest of our clients is leading

• 1. Focus on private banking
• 2. Enhance commercial effectiveness
• 3. Invest continually in service quality
• 4. Maintain a solid profile

Ambitious Committed Independent Professional Van Lanschot aims to be the best private bank in the Netherlands and Belgium

26

Financial targets

Credit rating Leverage

Credit rating: Single A from at least 2 credit rating agencies Leverage less than 2 0

Capital

Core Tier I ratio: at least 1 0 .0 % ; increasing in the future to 1 2 .0 %

• Improved capital position to be realised through profit

retention, dividend policy and balance sheet management

Numbers based on core activities (excluding non-strategic investments) 8.2% 9.6% 10.2% 10.0% H1 2010 H2 2010 H1 2011 Target

13.4 13.1 14.0 <20.0 H1 2010 H2 2010 H1 2011 Target A A- A- A- A 2008 2009 2010 2011 Target

27

Financial targets

Market share

Achieve higher grow th in our target group m arkets

• Assets under management growing towards € 50 billion

by year-end 2013 (including expected market performance)

Return on Equity *

W ithin 1 2 - 1 8 m onths approxim ately 1 0 % , in the m edium term higher than 1 2 %

• Equity is defined as Core Tier I capital

Grow th earnings per share *

At least 5 % per annum

• Long-term target after a return to normal profit levels of

at least € 4 per share in 2013

* Numbers based on annualised result Numbers based on core activities (excluding non-strategic investments) 29.4 35.4 37.3 50.0 H1 2010 H2 2010 H1 2011 Target

3.3% 7.0% 6.1% 10.0% H1 2010 H2 2010 H1 2011 Target 1.94 1.74 4.00 0.96 H1 2010 H2 2010 H1 2011 Target

€ billion € euros

28 28

On track to normal profit levels

• Higher income driven by inflow of assets under management and increased management fee
• Investments in service quality combined with strict cost control will eventually lead to cost

reductions

• Should the economic recovery continue, loan losses are expected to decline further

Expected developm ent of incom e and operating expenses

Numbers based on core activities (excluding non-strategic investments)

2007A 2008A 2009A 2010A 2011E 2012E 2013E Tot al income Tot al operat ing expenses

29

17.1 16.9 15.7 15.1 15.3 13.4 13.5 13.2 31- 12- 2008 31- 12- 2009 31- 12- 2010 30- 06- 2011 Loans and advances Savings and deposit s

Interest margin influenced by market trends

Key factors which influence the interest margin:

• Development of interest rates on savings and deposits (+ / -)
• Development of volumes (+ / -)
• Repricing of the loan book (+ )
• Raising wholesale funding within the scope of Basel III requirements (-)

Loan book and entrusted funds ( € billion)

Numbers based on core activities (excluding non-strategic investments)

30

• 0.5

0.6 1.3 1.7 1.9 5.4% 5.4% 4.4%

• 2.0%

2.4% H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 51% 57% 63% 66% 68% 49% 43% 37% 34% 32% H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 Transaction related com m ission Managem ent fee 28% 27% 32% 32% 35% 72% 73% 68% 68% 65% H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 Non-discretionary Discretionary

Higher commission driven by strong increase in assets under management and shift to discretionary mandates

Total assets under m anagem ent ( € billion) Net inflow AuM ( € billion)

% related to total amount of AuM at the start of the period

Assets under discretionary m anagem ent Private & Business Banking Managem ent fee and transaction com m ission

Numbers based on core activities (excluding non-strategic investments)

23.3 13.5 14.5 14.0 18.1 20.9 3 1 .6 3 5 .4 3 7 .3 30-06- 2010 31-12- 2010 30-06- 2011 Non-discretionary Discretionary

31

Increase in assets under management and income per CRO

• Client assets per Client Relationship Officer (Private & Business Banking) up 15% on H1 2010 to

€ 87.7 million

• Income per CRO up 9% on H1 2010 to € 0.7 million

Client assets per CRO ( € m illion) I ncom e per CRO Private & Business Banking ( € thousand)

300 350 400 450 500 550 600 650 700 H1 2010 H2 2010 H1 2011 25 bp 30 bp

Numbers based on core activities (excluding non-strategic investments)

29.5 32.6 46.6 55.1 76.1 87.7 30- 06- 2010 30- 06- 2011 Savings and deposit s Asset s under management

+ 1 5 %

32

Maintaining focus on operational efficiency

Expected developm ent of efficiency ratio ( % )

• Investments in service quality to

clients and investments in staff and IT continue

• Increased costs due to implementation
• f new legal and regulatory

requirements and increasing supervision

• Strict focus on target group clients will

lead to more efficient deployment of CROs

• Shift to discretionary mandates

generates operational leverage

• New systems, organisation of branch

network and bundling of expertise at the offices will lead to more efficiencies

Numbers based on core activities (excluding non-strategic investments)

7 3 .0 % 6 8 .9 % 7 5 .4 % 8 5 .5 % 6 4 .0 %

2007A 2008A 2009A 2010A 2011E 2012E 2013E

33

Investments in Operational Excellence

Securities Online services

• Introduction Execution Only (EO) in H1 2011 (Stage I)
• Combination of BankView/ eXimius leading for securities workflow
• Gradual implementation per client group
• Next stages concern advisory, discretionary asset management and

eBankView

• VIPinvest under Van Lanschot label
• Upgrade ‘Beleggers Giro’ system in H2 2011
• Additional functionality aimed at investment proposition (e.g.

development ‘VIPinvest Regie-Advies’, Execution Only platform)

Other

• Product range and product features rationalisation
• Further steps to outsourcing, e.g. payment platform
• Review started into optimisation of lending systems

Process optim isation

• Account opening process for current, savings and securities

accounts completed for new clients

• Electronic communication for new and existing clients
• Reduction double data entry between front and mid-office
• Selection of platform completed

34

Risk management remains a priority

Movem ent in loan loss provision ( € m illion) I nflow Recovery Section and addition to loan loss provision as % of the average RW A

• Addition to loan loss provision of 48 bps (annualised) of average risk-weighted assets

(H1 2010: 64 bps annualised)

• Inflow of new loans to the Recovery Section is declining further both in terms of number and size
• Further decline of loan losses dependent on economic recovery continuing

Numbers based on core activities (excluding non-strategic investments)

254.6 214.9

• 67.1

27.4 31- 12- 2010 Loans writ t en

• ff

Addit ion t o provision 30- 06- 2011

Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 I nflow Recovery Section Addition loan loss provision as a % of RWA

35

Van Lanschot is a bank with a low risk profile

CLEAR BUSI NESS MODEL

• Strategy aimed at onshore private banking
• Full-service offering for high net-worth individuals and entrepreneurs
• Relationship model, not a product-oriented bank
• Home markets in the Netherlands and Belgium

BALANCE SHEET I S FOR OUR CLI ENTS

• 78% of the balance sheet consists of loans and advances
• No exposures to complex financial instruments, such as sub-prime, CDOs, SIVs, or

sovereign debt in Southern Europe and Ireland

• Virtually no trading for own account

SOUND BALANCE SHEET

• Solid capital base
• Low leverage
• Ample liquidity and funding

36

• Focus on both grow th and solidity

Floris Deckers, CEO

• 2 0 1 1 half-year results

Constant Korthout, CFRO

• The best private bank in the Netherlands and Belgium

Floris Deckers, CEO

• Q&A

37

Disclaimer

Forw ard looking statem ents This presentation contains forward looking statements concerning future events. Those forward looking statements are based on the current information and assumptions of the Van Lanschot management concerning known and unknown risks and uncertainties. Forward looking statements do not relate to definite facts and are subject to risks and

• uncertainty. The actual results may differ considerably as a result of risks and

uncertainties relating to Van Lanschot’s expectations regarding such matters as the assessment of market risk and revenue growth or, more generally, the economic climate and changes in the law and taxation. Van Lanschot cautions that expectations are only valid on the specific dates, and accepts no responsibility for the revision or updating of any information following changes in policy, developments, expectations or the like. The financial data regarding forward looking statements concerning future events included in this presentation have not been audited.