VZ defies difficult market environment

(lifePR) ( Zürich, )
VZ continued its growth path in the first half year 2008 in spite of the financial market crisis. Compared to the first half year 2007, operating revenues increased 16% to CHF 51.8 million. During the same period net profit rose 31% to 16.3 million. Excluding one-off costs in the first half of 2007, net profit increased 8%.

Matthias Reinhart, President of the Board of Directors and Chairman of the Executive Board, explains that for VZ Group, the continuing financial market crisis has an impact first and foremost on its asset management business: "Declining stock market prices reduce the value of the assets under management and consequently undermine the resulting earnings. And so long as negative sentiment prevails, new money will flow in tardily. The repercussions of the financial market crisis are not so marked on the consultancy side of our business, and we once again recorded a higher number of new clients. As expected, the additional services provided by the newly founded VZ Depositary Bank have helped stabilise and even moderately expand revenues."

As regards the outlook, Matthias Reinhart says that "if financial markets fail to recover sustainably during the second half of the year, we will not be able to achieve our mediumterm growth target of 20% on total revenues in 2008. However, this will not slow our expansion: in the third quarter we will be opening a new branch in Neuchâtel. And we are continuing to recruit and develop well-trained junior employees to become consultants and wealth managers. As soon as stock markets bottom out, our business is set to benefit from volume effects and our broader range of services."

Half-year results in detail

Operating revenues 16% higher

Operating revenues rose to CHF 51.8 million in the first half of the year. This means they are 16% higher than in the previous year and 4% higher than in the second half of 2007. During the period under report VZ Depositary Bank already accounted for 14% of operating revenues. Its contribution rose from 2 percentage points in the first half of 2007 to 10 percentage points by the second half of the year 2007.

Slightly increased management fees

Volume based management fees rose only marginally by 1% relative to the first half of 2007, despite the fact that we acquired new clients since then. There are two reasons for this modest performance: firstly, the strongly negative stock markets are depressing the value of the assets under management. Secondly, no performance fees were generated during the period under report. During the first half of 2007 these accounted for around 7% of total management fees thanks to the strong stock market environment. If performance fees are factored out, management fees rose 9% relative to the first half of the year 2007 (2% relative to the second half of 2007).

Consulting fees in line

Consulting fees rose 9% relative to the same period of the previous year. Our consultancy services continue to focus on the principal topics of retirement and estate planning. These questions are less affected by the financial market crisis. As a consequence, we were able to expand our consultancy activities. Consultancy activities account for a steady 13% of total revenues. Their share will be slightly declining in the years to come, as VZ Depositary Bank's contribution is steadily rising.

Successful VZ Depositary Bank

During the course of the past 18 months some 4,600 portfolio management clients transferred their securities accounts to VZ Depositary Bank. Out of ten new portfolio management clients, nine opt for VZ as their depositary bank. In addition, 1,000 clients opened cash accounts during the same period. VZ Depositary Bank's securities accounts are now also available for clients without a portfolio management mandate. Within the next few months we plan to introduce a time deposit account in order to offer even more attractive interest on client deposits.

Business expansion increases costs

Personnel expenses rose 5% relative to the first half of 2007. If the one-off costs of the IPO and the launch of the bank in the spring of 2007 are excluded, the increase amounted to nearly 19%. The other operating expenses increased by 21% (by 31% taking account of oneoff costs in the first half of 2007). This rise in costs reflects the investment made in the expansion of the branch network and the establishment of VZ Depositary Bank. Relative to the same period of the previous year, the average staff increased 23%. In addition, we built up four new branches since the summer of 2007, located in Winterthur, Thun, Rapperswil (Switzerland) and in Frankfurt (Germany). Under normal market conditions the higher management fees would have fully absorbed the additional expenses caused by this business expansion. Within the current environment, however, the cost increase has depressed margins. For this reason, profit growth failed to keep pace with revenues: Total revenues increased 16%, while net profit only grew 8%. Compared to the net profit in the first half of the year 2007 including one-off effects, net profit increased 31%.

Balance sheet total grows considerably

Relative to 30 June 2007, the consolidated balance sheet total rose from CHF 303 million to reach CHF 753 million. This increase is primarily attributable to the strong growth of VZ Depositary Bank. Client deposits with VZ Depositary Bank grew by CHF 419 million over the past 12 months, and on 30 June 2008 reached a total of CHF 633 million.

Half-year report

The detailed half-year report as well as the investor presentation can be downloaded from www.vzch.com/ir.
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