GROUP RESULTS FOR THE FIRST HALF OF 2019
As communicated when it announced its full-year 2018 results, Leonteq had a subdued start to 2019. January, in particular, was characterised by high levels of market, economic and political uncertainty with decreased levels of client activity. As a result, economic revenues declined sharply to CHF 8.1 million compared CHF 26.1 million in January 2018. Net fee income decreased by 17% to CHF 120.9 million in the first half of 2019, reflecting the subdued start to the year and reduced contributions from large ticket transactions1. In the first half of 2019 net trading income rose to CHF 7.5 million from CHF -3.7 million in the prior-year period, driven by positive hedging contributions1 and an improved treasury result1. As a result, total operating income declined by CHF 11.5 million to CHF 124.6 million in the first half of 2019 compared to the prior-year period.
Total operating expenses remained relatively stable at CHF 94.1 million in the first half of 2019 compared to CHF 95.7 million in the prior-year period. In line with the announced hiring plan, headcount increased to 495 FTEs at end-June 2019 compared to 486 FTEs at end-2018.
Group net profit totalled CHF 30.2 million in the first half of 2019, a decrease of 25% compared to the prior-year period. Shareholders’ equity totalled CHF 631.2 million as at 30 June 2019, an increase of CHF 23.5 million (or 4%) compared to 31 December 2018. Leonteq maintained its strong capital position, with total BIS eligible capital of CHF 633.5 million and a total capital ratio of 21.3% as at 30 June 2019.
Marco Amato, Chief Financial Officer of Leonteq, stated: “Leonteq’s half-year 2019 results are evidence that the company can deliver a solid performance even in a difficult market environment. At the same time and while keeping our cost base controlled, we continued to invest in our people and in key strategic initiatives. We also further strengthened our capital position, capitalised on the investment grade ratings we obtained in the first half of 2019 and created a further basis for the achievement of our 2020 financial targets.”
CAPITALISING ON CREDIT RATINGS AND IMPROVED OFFERING FOR ISSUANCE PARTNERS
In Leonteq’s Investment Solutions business line, total platform assets1 reached a record CHF 13.8 billion as at 30 June 2019, an increase of 16% from CHF 11.9 billion at end-2018. Turnover1 decreased to CHF 15.0 billion in the first half of 2019 compared to CHF 15.9 billion in the prior-year period (up 16% compared to the second half of 2018). As anticipated and already announced with the half-year 2018 results, fee income margin1 decreased by 12 basis points to 71 basis points as a result of the more intense competitive market environment.
Leonteq reached a major strategic milestone in the first half of 2019 when it was assigned investment grade ratings by Fitch Ratings (BBB-/positive) and Japan Credit Rating Agency (BBB+/stable). In relation to this, Leonteq increased the outstanding volume of own issued products by 29% to CHF 4.0 billion as at 30 June 2019 compared to end-2018 and grew the turnover of Leonteq products by 16% to CHF 5.7 billion compared to the first half of 2018 (up 39% compared to the second half of 2018).
As part of its efforts to further improve operational efficiency and enhance the level of automation for its issuance partners, Leonteq added new functionalities and features to the white-labelling platforms of Raiffeisen, Cornèr Bank and Credit Agricole CIB. It also launched an upgraded white-labelling platform for EFG. The platform assets of Leonteq’s issuance partners increased by 11% to CHF 9.8 billion as at 30 June 2019 compared to end‑2018, while turnover generated with issuance partners decreased by 15% to CHF 9.3 billion compared to the first half of 2018 (up 6% compared to the second half of 2018). In the first half of 2019, Leonteq also advanced its late stage discussions with potential new issuance partners.
RESILIENT OFFERING OF INSURANCE PRODUCTS IN CHALLENGING INTEREST RATE ENVIRONMENT
The Insurance & Wealth Planning Solutions business line defined and implemented measures to improve the attractiveness of its savings and drawdown solutions for policyholders in response to the challenging interest rate environment, thus expanding the company’s product shelf. Furthermore, it started to invest into a new cloud-based environment for its insurance platform, helping to increase the development and testing velocity. Despite the headwind of a strong decline in long-term interest rates, Leonteq’s Insurance & Wealth Planning Solutions business line saw net fee income grow by 6% to CHF 13.9 million and total operating income increase by 13% to CHF 16.1 million in the first half of 2019. The number of outstanding policies serviced on the platform increased by 8% to 44,287 policies as at 30 June 2019.
BUSINESS TRANSFORMATION WELL ON TRACK
In mid-2018, Leonteq defined a number of key strategic initiatives to transform its business model with a focus on delivering enhanced scalability and further growth, achieving optimized capital usage, and completely renewing the investment experience for clients and partners based on a fully digitalised approach. In the first half of 2019, further significant progress was made with these strategic initiatives:
- Leonteq continued to advance its Smart Hedging Issuance Platform (SHIP) project, which is designed to reduce hedging exposure by offering Leonteq’s issuance partners the opportunity to enter into hedging transactions for their issued products with external hedging partners. SHIP made good progress in the first half 2019 with a total of three hedging counterparties providing external quotes for around 20% of all transactions in products such as autocallables and barrier convertibles (representing approximately 40% of Leonteq’s total automated product offering). Leonteq is currently onboarding up to three additional hedging counterparties and expects to connect them to the platform in the second half of 2019. As previously communicated, the initiative is expected to be implemented in stages and to be fully operational by mid-2020.
- Leonteq launched a new initiative in 2018 to fully transform the company’s structured products offering. Using the latest advances in technology, Leonteq aims to provide its clients with a completely new investment experience by giving them external access to applications, services and product data that were previously only available internally. The new marketplace will provide digital access to one of the largest structured product universes and issuance partners will be able to white-label all tools and services. New modules and features will be added to the digital marketplace in stages.
- As part of its digital marketplace initiative, Leonteq redesigned its platform for Actively Managed Certificates (AMC) in the first half of 2019. This innovative solution for asset managers is designed to customise and implement an investment strategy offering greater flexibility, cost efficiency and transparency. The benefits of the AMC offering include excellent time-to-market in the issuing process, high flexibility in terms of product design, execution across most asset classes and instruments, and detailed daily reporting on a single AMC basis. In the first half of 2019, revenues generated with AMCs contributed 8% to the company’s fee income.
LEONTEQ HALF-YEAR 2019 RESULTS PRESS AND ANALYST CONFERENCE CALL
A press and analyst conference call with Lukas Ruflin, CEO of Leonteq, and Marco Amato, Deputy CEO and CFO of Leonteq, will be held today, 25 July 2019, at 08.30 a.m. CEST.
If you wish to participate, please use the following numbers:
- 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 56 13
Please dial in 10-15 minutes before the start of the presentation and ask for ‘Leonteq half-year 2019 results’.
 DEFINITION OF ALTERNATIVE PERFORMANCE MEASURES USED IN THIS PRESS RELEASE
- Economic revenues are defined as sales and trading income earned and are considered to be recognised at trade date without applying IFRS revenue recognition rules; economic revenues do not include certain other income components such as rental income or project cost reimbursements by third parties
- Fee income margin is defined as IFRS net fee income relative to turnover in basis points
- Hedging contributions are defined as the net result of hedging activities
- Large ticket transactions are defined as a single primary or secondary transaction on a single product with a single client where Leonteq earns a fee of CHF 0.5 million or more
- Treasury result is defined as the net funding costs related to Leonteq’s own issued products
- Platform assets are defined as the outstanding volume of products issued and traded through Leonteq’s platform
- Turnover is defined as the aggregate notional amount of structured products issued (by Leonteq and its issuance partners) through Leonteq’s platform plus the aggregated notional amount of structured products (issued by Leonteq and its issuance partners) traded through Leonteq’s platform