Year end results 2016: Consolidated profit increased by 9.5 %
St. Gallen, 16. February 2017
St.Galler Kantonalbank looks back on a successful financial year 2016. Both loans to clients and managed assets experienced positive inflows. Operating income remained at the previous year's level. On the other hand, operating expenses were reduced by 5 %. At 146 million francs, the consolidated profit is 9.5 % higher than in the previous year.
Strong new Business
Last year, St.Galler Kantonalbank expanded its business volume both in loans to clients and managed assets: new business amounted to a strong 2.3 billion francs, which corresponds to a growth of 3.8 %. Net New Loans amounted to 640 million francs
(+2.6 %), while Net New Money amounted to 1.6 billion francs (+4.5 %). As planned, the bank has now returned to the growth path after the past two and a half years, which have been affected by deliberate reductions in connection with the strategic streamlining of the crossborder asset management business and the enforcement of the tax compliance of clients domiciled in foreign countries.
Balanced operating income
Net result from interest operations rose by 5.9 % or 17.3 million francs to 310.6 million francs. Responsible for this growth were the increase in gross result from interest operations (+8.9 million francs) as well as the dissolution of value adjustments for credit default risks (+8.4 million francs), which was possible and necessary due to the very good quality of the credit portfolio. In the course of the year, the regional economy developed well despite the challenging conditions and persisting uncertainties. The early warning indicators in the credit portfolio remain positive.
On the other hand, the result from commission business and services declined by 7.2 % or 7.9 million francs and amounted to 101.8 million francs. The main reason for this was the strong reluctance of investors and thus high holdings in liquidity.
The result from trading activities also declined. Since St.Galler Kantonalbank does not carry out any own trading business, the client trade is decisive in the context of the securities business, so that the result from trading activities declined in line with the commission business and services. Also, in 2015, the result from trading activities benefited from the abolition of the minimum exchange rate of the euro followed by a short-term lively foreign exchange business. The absence of this effect led to a sharp decline in result from trading activities of 17.8 % or 6.6 million francs to 30.6 million francs.
The increase in net result from interest operations as the main contributing factor could almost compensate the other declining earning components of the commission and trading business. As a result, operating income remained almost steady at 448.5 million francs (-0.5 % or -2.4 million francs).
Reduced operating expenses
Operating expenses were reduced by 4.6 % or 11.9 million francs to 246.0 million francs. Personnel expenses fell by 2.0 % or 3.3 million francs to 157.7 million francs compared to the previous year. The headcount was slightly reduced by 0.6 %. Likewise general and administrative expenses declined by 8.9 % or 8.6 million francs and amounted to 88.3 million francs. In the previous year, the result contained procedural costs of the Swiss Bank program of the U.S. Department of Justice, one-time costs associated with the strategic realignment and the integration of Vadian Bank.
Positive key figures
Due to the maintained operating income and the reduction in operating expenses, St.Galler Kantonalbank recorded a rising gross profit in 2016, which rose by 9.5 million francs or 4.9 % to 202.5 million francs. The operating result rose by 31.8 % or 45.0 million francs to 186.5 million francs, mainly as a result of the absence of the expenditures for the Swiss Bank program of the U.S. Department of Justice.
The extraordinary result was reduced by 26.8 million francs. A reserve for general banking risks in the amount of 13.0 million francs was created as a general risk provision. In addition, the extraordinary income of the previous year was 14.5 million francs higher, resulting from the sale of the Swisscanto shares. Consolidated profit rose by 9.5 % or 12.6 million francs to 146.0 million francs.
Unchanged dividend of 15 francs per share
In 2016, shareholders of the St.Galler Kantonalbank benefited from a total return on their shares of 13.9 % (dividend plus share price advance of +9.7 %). The Board of Directors will propose an unchanged dividend of 15 francs per share at the Annual General Meeting on May 3, 2017. This proposal corresponds to the long-term and stable dividend policy with a dividend payout ratio between 50 % and 70 % of the reported consolidated profit. The proposed dividend of 15 francs represents a payout ratio of 57.3 %, based on the consolidated profit, and an attractive dividend yield of 3.8 % - based on the 2016 year-end price of 396 francs.
71.8 million francs for the Canton of St. Gallen
With the proposed dividend, the compensation for the state guarantee as well as the cantonal and municipal taxes the Canton of St. Gallen and the municipalities will be receiving 71.8 million francs for the fiscal year 2016. In this context, there should also be mentioned the tax base, which originates from the salaries of the employees of St.Galler Kantonalbank, who are mainly resident in the Canton of St. Gallen.
Solid capitalization, good Rating
On December 31, 2016 St.Galler Kantonalbank records a shareholders' equity of 2.1 billion francs or an eligible capital of 2.2 billion francs. The total ratio to regulatory capital is
15.6 %. With these values, St.Galler Kantonalbank comfortably meets the capital adequacy requirements under Basel III. The rating agency Moody's ranks SGKB unchanged by a very good Aa1.
New digital Services
In 2016, St.Galler Kantonalbank also expanded its digital services. A new service for existing clients is the possibility to extend mortgages online. This range will be extended in the future, so that new mortgages can be transacted online as well. Already, it is possible to open a clients’ account online by video identification. The launch of this service has been very successful and has often been used during the first weeks after the introduction. Last year, St.Galler Kantonalbank also introduced a Personal Finance Manager within its E-Banking platform, which allows a better management and overview of the client’s own finances.
Outlook financial statements 2017
The St.Galler Kantonalbank expects that the operating business will continue solidly this year and therefore expects a consolidated profit within the range of the reported result 2016.
SGKB Group key figures
|Operating income||448.5||450.9||- 0.5 %|
|Operating result||186.5||141.5||+ 31.8 %|
|Consolidated profit||146.0||133.4||+ 9.5 %|
|CHF mio.||Dec. 31, 2016||Dec. 31, 2015||change|
|Balance sheet||32‘201||31‘189||+ 3.2 %|
|Loans to clients||24'921||24'243||+ 2.8 %|
|Managed assets1||38’330||36'176||+ 6.0 %|
|Shareholders’ equity||2‘148||2'075||+ 3.5 %|
|- 0.6 %
- 0.9 %
1: Managed assets = Client funds (Due to clients in savings and deposits, other due to clients, medium-term notes) and assets under management. Not included are custody assets (=assets that are held solely for transaction and storage purposes and for which the Bank offers no advice to the clients).