Van Lanschot NV Annual General Meeting of Shareholders - - PowerPoint PPT Presentation

Van Lanschot NV Annual General Meeting of Shareholders

‘s-Hertogenbosch, 8 May 2008

1

Item 2a

Report of the Board of Managing Directors for 2007

2

Van Lanschot’s strategy (I)

Distinct positioning

Real alternative to the large banks Independence is our distinguishing feature

Full-service niche bank

Large enough to provide full-service concept to target groups Small enough to ensure genuine personal service

Client intim acy

The client is key, also in terms of client due diligence Best in class products / full open architecture

Private Banking

Wealthy private individuals

Business Banking

Enterprises and entrepreneurs - combined Aligned to private banking

3

Van Lanschot’s strategy (II)

• Objective: to be the best private bank in the Netherlands and

Belgium

• Increased focus on asset management and advice for the

higher segments

• Specialist teams offering tailor-made solutions
• Emphasis on asset planning
• Deliberate choice for a low risk profile

4

Van Lanschot’s strategy (III)

• The statutory client due diligence requirements demand a

great deal from the organisation

• A strict and systematic approach is necessary
• The Board of Managing Directors enforces the importance of

risk management and client due diligence in the form of

• bjectives and behaviour

5

Financial targets

7.5 6.7 BIS Core Tier I ratio (% ) A A Credit rating 18.0* 16.9 Return on shareholders’ funds (% ) 12.5 12.0 BIS total capital ratio (% ) 9.5 9.0 BIS Tier I ratio (% ) 50 – 60 64.0 Efficiency ratio (% ) (1) > 5 28.6 Growth in income (% ) > 10 8.4 Growth in EPS (% ) Target 2 0 0 7

(1) Excluding the amortisation of intangible assets arising on the acquisition of Kempen & Co, the efficiency ratio was 61.9% * On average

6

Net profit

Net profit for 2007 rises 16.7% to € 215.4 million

Net profit 1 9 9 8 – 2 0 0 7 ( € m illion)

* Excluding effects of the acquisition of CenE Bankiers * * Excluding extraordinary income

49,583 62,443 80,759 90,008 97,576 106,664 119,400 152,398 184,488 215,369

1 9 9 8 1 9 9 9 2 0 0 0 * *2 0 0 1 * * 2 0 0 2 2 0 0 3 2 0 0 4 * 2 0 0 5 2 0 0 6 2 0 0 7

CAGR 1 7 .7 %

7

Return on shareholders’ funds

Target: average 18%

Return on shareholders’ funds 1 9 9 8 – 2 0 0 7 ( % )

1 4 .9 1 6 .4 1 7 .0 1 5 .6 1 5 .7 1 6 .1 1 3 .1 1 6 .3 1 7 .4 1 6 .9 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7

8

Earnings per share

8.4% growth in EPS in 2007 Average number of

• utstanding shares + 7.9%

due to the acquisition of Kempen

Earnings per share 1 9 9 8 – 2 0 0 7 ( € )

* Excluding effects of the acquisition of CenE Bankiers

1 .7 3 2 .1 2 2 .7 1 3 .0 0 3 .3 3 3 .6 6 4 .1 1 4 .6 5 5 .4 8 5 .9 4 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 * 2 0 0 5 2 0 0 6 2 0 0 7

CAGR 1 4 .7 %

9

Dividend per share

Amount available to shareholders in 2007 € 6.04 Proposed dividend of € 3.00 per share (+ 9.1% ) Pay-out ratio: 49.7%

Dividend per share 1 9 9 8 – 2 0 0 7 ( € )

0 .8 4 0 .9 4 1 .3 5 1 .5 0 1 .6 3 1 .8 3 2 .1 1 2 .5 0 2 .7 5 3 .0 0 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7

CAGR 1 5 .2 %

10

Van Lanschot: total return for shareholders (price increase + dividend) in 2007 of 6%

J A N F EB MAR APR MA Y J U N JU L AU G SEP O CT N O V D EC 6 4 6 6 6 8 7 0 7 2 7 4 7 6 VAN L AN SCH O T

S o u r ce : D A T A S T R E A M

11

Share price Van Lanschot vs SNS, ING and Fortis, January 2007 – to date

J F M A M J J A S O N D J F M A M 4 0 5 0 6 0 7 0 8 0 9 0 1 0 0 1 1 0 1 2 0 Va n L a n sch o t Ba n k ie r s SN S Re a a l I N G G r o e p F o r t is

S o u r ce : D A T A S T R E A M

12

Van Lanschot vs Julius Baer, Vontobel, Credit Suisse and UBS, January 2007 – to date

J F M A M J J A S O N D J F M A M 2 0 4 0 6 0 8 0 1 0 0 1 2 0 1 4 0 1 6 0 Va n L a n sch o t Ba n k ie r s Ju liu s Ba e r Vo n t o b e l Cr e d it Su isse U BS

S o u r ce : D A T A S T R E A M

13

Annual profit for 2007 climbs 16.7%

• Strong growth in clients and funds entrusted continues
• Income from operating activities rose 28.6% to € 648.0 million

in particular thanks to substantially higher commission income

• Net profit up 16.7% to € 215.4 million
• Earnings per share € 5.94, an increase of 8.4%
• Proposed dividend of € 3.00, an increase of 9.1%

14

Net profit for 2007

H2: Gain on sale of Assurantiën of € 20.8 million Kempen had an excellent H1 thanks to the positive stock markets and the performance fees received. The negative sentiment on the equity markets in H2 led to fewer securities transactions

Net profit for 2 0 0 7 ( € m illion)

1 0 1 .6 9 3 .0 2 0 .8 H 1 2 0 0 7 H 2 2 0 0 7 Gain on sale Net profit

1 1 3 .8

15

Kempen & Co

• Acquisition of Kempen & Co reinforces private banking profile

– Van Lanschot Kempen – Kempen Capital Management

• Investment expertise of Kempen used to offer clients a wider

range of products and services

• Kempen is specialist in European property and European small

and midcap equities; new funds were introduced in 2007:

• Kempen Property Hedge Fund
• Orange Global High Dividend Fund
• Orange European Participations
• Kempen Capital Management positioning itself as asset

manager for Dutch institutional parties

16

Van Lanschot capitalises on consolidation battle

Private banking strategy and takeover battle in the Dutch financial sector in 2007 led to substantial inflow of new clients and funds entrusted Savings accounts and deposits of private clients + 77.5% to € 7.1 billion Assets under discretionary management for private clients + 10.5% to € 6.3 billion Number of private clients increased by 7.2%

Savings accounts and deposits of private clients 2 0 0 3 – 2 0 0 7 ( x € billion)

7 .1 3 .3 2 .4 2 .2 4 .0 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7

17

Assets under Management and funds entrusted

1 9 .3 1 8 .6 5 .8 5 .1 4 .8 4 .4 2 0 0 6 2 0 0 7 In- house funds Inst it ut ions Priv at e c lient s

Total assets under m anagem ent ( x € billion) Funds entrusted ( x € billion)

2 9 .9 2 8 .1

4 .8 4 .8 6 .6 9 .8 2 0 0 6 2 0 0 7 Funds ent rust ed: priv at e c lient s Funds ent rust ed: c orporat e

1 4 .6 1 1 .4

18

Assets under Discretionary Management

5 .7 6 .3 4 .9 4 .0 4 .8 4 .4 2 0 0 6 2 0 0 7 In- house funds Inst it ut ions Priv at e c lient s

Assets under discretionary m anagem ent ( x € billion) Developm ent in 2 0 0 7 ( x € billion)

1 5 .4 1 4 .7

1 5 .4 0 .3 1 .0 1 4 .7 1 - 1 - 2 0 0 7 Ne t ne w a sse t s Ma rke t pe rform a nce 3 1 - 1 2 - 2 0 0 7

19

Low risk profile

• Deliberate choice for low risk profile; in line with profile of a private

bank

• No direct or indirect investments in subprime sector, no CDOs, no

SIVs

• High-quality loans portfolio
• Loans almost exclusively provided to Dutch companies and Dutch and

Belgian wealthy private individuals

• No loans to hedge funds
• 138.6% of non-performing loans covered by provision for impairments
• Lending on the interbank market to parties with at least a Single A

rating; no loans to independent investment banks

20

Solid liquidity position

Funding ratio in 2007 up from 77.4% to 91.2% Target: further growth in funding ratio in 2008 € 1.5 billion RMBS securitisation in H1 2007 Repayment of € 1 billion in Floating Rate Notes in 2008:

• Early repayment of € 600

million FRN 2012

• No refinancing of

€ 400 million FRN 2008

Funding ratio 2 0 0 3 – 2 0 0 7 ( % )

7 0 7 5 8 0 8 5 9 0 9 5 3 1 - 1 2 - 0 3 3 1 - 1 2 - 0 4 3 1 - 1 2 - 0 5 3 1 - 1 2 - 0 6 3 1 - 1 2 - 0 7

21

Segment analysis

Operating profit before tax by segm ent

34% 37% 12% 17% 19% 26% 10% 11% 25% 9% 2006 2007 Other activities Corporate Finance and Securities Business Banking Asset Management Private Banking

22

Solid financial position

• - BIS total capital ratio

12.0% (target 12.5% )

• - BIS Tier I ratio 9.0%

(target 9.5% )

• - BIS core Tier I ratio 6.7%

(target 7.5% ) Basel II: standardised approach per 1-1-2008 Risk weighted assets + 16.2% to € 13.6 billion Return on shareholders’ funds 16.9% (target average 18% )

Capital ratios 2 0 0 3 – 2 0 0 7 ( % )

2 4 6 8 1 0 1 2 1 4 1 6 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7

23

Developments in Q1 2008 (I)

• Consolidation battle in the Netherlands provides opportunities

for attracting new clients and new private bankers

• Inflow of new clients continued in the first three months of

2008

• Inflow of funds entrusted continues, albeit at a slightly slower

pace than last year

• Further increase in funding ratio and capital ratios

24

Developments in Q1 2008 (II)

• Financial markets are still continuing to feel the impact of the

credit and confidence crisis

• The unrest on the financial markets is putting pressure on

commission income; in the first three months of 2008, commission income lagged strongly behind last year

25

Developments in Q1 2008 (III)

• Interest margins recover slightly, mainly on the asset side
• On the liabilities side, growth in funds entrusted continues,

despite fiercer competition

• Impact on profit of improved interest margins will be

noticeable with some delay

• In the Netherlands, the bank grants mortgages only as a

customised product and to its own clients

26

Outlook for 2008

• Based on the results for the first three months of the year,

the bank expects earnings per share for 2008 to be lower compared with that for 2007

• The final amount of earnings per share will depend in part on

when the sentiment on the stock markets returns to normal

27

The bank continues to invest (I)

IT project

• 2008 is the year for testing and training
• 2009 will see the roll-out of the core banking system
• The new IT system will free up more time to be spent serving

clients

• Progress is satisfactory
• Less satisfactory are the obstacles encountered within the IT

department – reason to upgrade the quality of IT expertise by

• utsourcing a major part of the IT activities

28

The bank continues to invest (II)

Investing in the recruitment, training and retention of quality employees

• Dedicated recruitment campaign in recent months has led to a

large number of experienced and expert private bankers joining the bank

• Successful introduction of employee share plan – 34% of

workforce have participated in the plan

• Training budget increased further

Van Lanschot NV Annual General Meeting of Shareholders

‘s-Hertogenbosch, 8 May 2008

30

Earnings per share / Amount available to shareholders

215.4 Net profit

• 10.7

Interest on Perpetual loan 3.4 Net effect of amortisation of acquired surplus 208.1 Net profit available to shareholders 34,422 Average number of ordinary shares (x1,000) € 6.04 Am ount available to shareholders 34,422 Average number of ordinary shares (x1,000) € 5.94 Earnings per share 204.7 Net profit for calculation of EPS

• 10.7

Interest on Perpetual loan 215.4 Net profit 2 0 0 7 (in millions of euros)

Dividend of € 3.00 compared with amount available to shareholders of € 6.04 represents a pay-out ratio of 49.7%

Van Lanschot NV Annual General Meeting of Shareholders

‘s-Hertogenbosch, 8 May 2008

32

Item 7

Remuneration policy for members of the Board of Managing Directors

33

Director remuneration package

In putting together the remuneration package for the Board of Managing Directors in 2004, the aim was to create a package that:

• “Is balanced in composition
• Measures up to remuneration packages offered by financial enterprises and

businesses of similar size and market positioning The nature of the remuneration packages is meant to:

• Encourage the Board of Managing Directors to allocate Van Lanschot’s capital as

efficiently as possible

• Support optimal profit growth in the long term
• Avoid chasing the highest possible profit in the short term without regard for

the long term” The methodology is found to be satisfactory. The remuneration package has been adjusted in some respects to become more in line with market and comply with the recommendations of the Corporate Governance Code Monitoring Committee (chaired by Professor Frijns).

34

Director remuneration package

Base salaries are revised twice a year based on:

• Development and performance of the Company
• Development and performance of the Managing Director
• Remuneration trends in the Dutch banking sector
• Developments in the CPI index

Short-term variable benefits are based on:

• The budgeted RAROC rate
• Individual short-term targets

Long-term variable benefits are linked to the average increase in earnings per share (EPS) for a three-year period and are comprised of the conditional award

• f:
• Performance shares (50% )
• Performance options (50% )

Pension contributions are defined. A final-pay scheme was offered until 2004. From that year onwards, the defined contribution plan has been in operation.

35

Remuneration package 2004 to 2008 (short-term benefits)

Short-term variable benefits are based on the defined RAROC target rate:

• RAROC more than 0.5% below target:

no benefits

• RAROC less than 0.5% below target:

20% of base salary

• RAROC between target and 0.5% above target:

40% of base salary

• RAROC more than 0.5% above target:

60% of base salary Short-term variable benefits that are linked to individual targets are based on the extent to which predefined targets have been achieved. Partial achievement of targets results in proportionate benefits.

• Performance at target:

10% of base salary

• Exceptional performance relative to target:

up to 15% of base salary

2005 2006 2007 D ifference w ith R AR OC target 0.6%

• 0.4%

0.5% Benefit 60% 20% 60%

36

Remuneration package 2004 to 2008 (long-term benefits)

The target used for calculating long-term variable benefits is an average increase in EPS by 10% per year for a three-year period. If EPS rises by less than 5% , no benefits are awarded. A sliding scale applies to increases above 5% . Performance at target results in a benefit corresponding with 40% of a managing director’s base

• salary. The maximum benefit is 60% of the base salary.

The rates applicable to the Chairman of the Board of Managing Directors are 50% and 75% respectively.

2004 2005 2006 2007 10% target relative to 2004 3.96 4.36 4.8 5.28 EPS achievement 3.96 4.55 5.38 5.85 Average increase in EPS since 2004 14.9% 16.6% 13.9%

Developments in earnings per share (EPS)

1 2 3 4 5 6

2004 2005 2006 2007 10% target relative to 2004 EPS achievement

37

Competitiveness of remuneration package

Towers Perrin conducted a benchmark study in 2007 involving:

• Base salaries
• Short-term variable benefits
• Long-term variable benefits

A proposal to amend the remuneration package was drafted based on the

• utcome of the benchmark

38

Competitiveness of remuneration package (benchmark)

Labour market peer group

Van Lanschot ABN AMRO BU NL ABN AMRO N.V. ING Retail Banking Fortis Bank Retail Banking Fortis Bank Merchant Banking Rabobank Nederland NIBC SNS Bank Friesland Bank KAS Bank Oyens en van Eeghen UBS NL Petercam Citibank NL Deutsche Bank NL Delta Lloyd Fortis ASR Nedeland Nationale Nederlanden (ING) Onderlinge 's Gravenhage SNS Reaal

39

Findings from benchmark study

Chairman: current total direct compensation is between the 25th percentile and median market level. Both base salary and variable benefits are below median level. Members of the Board of Managing Directors: current total direct compensation is above median level, both where base salary and variable benefits are concerned. Member of Board of Managing Directors (Mr Sevinga): current total direct compensation is below median market level. This also applies to all remuneration components separately.

Member of Board of Managing Directors (Mr Idzerda): position not separately benchmarked.

40

Interpretation and adjustments (general)

Labour market benchmarks are based on peer groups. The members of the Board of Managing Directors are benchmarked against the median; the Chairman is benchmarked against the Q3 of the labour market peer group. A benchmark study is conducted every two years to review whether the remuneration package requires revision. The point of departure is that all members of the Board of Managing Directors are put on a par. Discretionary room in short-term variable benefits is on the increase. There will be an option for awarding a discretionary bonus of up to 25% of the base salary for short-term performance, to be applied exclusively in highly exceptional circumstances (to be established by the Supervisory Board, on the recommendation of the Remuneration Committee). Long-term variable benefits are paid exclusively in the form of performance shares. Performance

• ptions have been abolished.

The calculation cycle for average EPS will continue to be three years. The lock-up period will remain unchanged at five years. The proposed salary changes will take retroactive effect from 1 January 2008, subject to the approval of the Annual General Meeting.

41

Adjustments to base components

Base salary component from: to: Chairman Deckers € 500,000 € 550,000 Sevinga € 325,000 € 330,000 Loven, Zwart € 310,000 € 330,000 Idzerda (to 1-10-2008) € 340,000 € 340,000 Pension contributions from: to: basic/ disability cover basic/ disability cover Chairman 23.6% / 3.2% 27% / 3.33% Members 27% / 3.33% 27% / 3.33% The members of the Board of Managing Directors self-administer their pensions

42

Adjustments to variable components

Short-term variable component from: to: at target/ maximum at target/ maximum Chairman 50% / 75% 75% / 100% Members 50% / 75% 50% / 75% Ratio Individual vs. RAROC 20/ 80 40/ 60 Discretionary element: up to 25% of base salary Long-term variable component from: to: at target/ maximum at target/ maximum Chairman 50% / 75% 100% / 125% Members 40% / 60% 50% / 75% (Sevinga 75% / 100% )

43

Adjustments to base and variable components (financial impact in 2008 at target)

from: to: Salaries € 1,700,000 € 1,795,000 Short-term variable benefits € 850,000 € 1,035,000 Long-term variable benefits € 730,000 € 1,170,000 Pension contributions + disability € 480,625 € 542,377 ___________ ___________ Total € 3,760,625 € 4,542,377

Van Lanschot NV Annual General Meeting of Shareholders

‘s-Hertogenbosch, 8 May 2008