Leonteq AG (SIX: LEON) delivers strong growth in revenues and record profitability in the first half of 2022, driven by unprecedented market conditions.
Financial highlights in H1 2022
Focused execution of Growth Strategy 2026
Lukas Ruflin, Chief Executive Officer of Leonteq, stated: “Leonteq generated exceptional growth in revenues and profitability in the first half of 2022. While this strong performance was particularly driven by heightened market volatility, our results also demonstrate the resilience of our business and the benefits of the continued diversification of our revenue streams over the past few years. In line with our Growth Strategy 2026, we remain focused on further expanding Leonteq’s ecosystem for innovative investment solutions and on pursuing our sustainable growth path.”
1 Tax provisions in the amount of CHF 12.3 million reclassified to taxes.
The first half of 2022 was marked by unprecedented market conditions with elevated levels of overall market volatility, including exceptional fluctuations in the share prices of selected large-cap companies at around the time of their fourth quarter 2021 and first quarter 2022 earnings announcements. Leonteq continued to focus on disciplined risk management and saw more than a five-fold increase in its net trading result in the first half of 2022.
At the same time, in view of the generally more challenging market environment for investors, Leonteq recorded subdued levels of client activity in most of its regions, reducing net fee income by 32% compared to the same period of 2021. This was also driven by a significant reduction in the number of large ticket transactions. Despite these headwinds, Leonteq’s franchise remained strong, with around the same number of clients entering into transactions in the first half of 2022 as in the prior-year period. Furthermore, turnover generated with Leonteq’s own issued products remained relatively stable at CHF 7.1 billion, while turnover generated with Leonteq’s historic platform partners decreased to CHF 3.5 billion in the first half of 2022 from CHF 6.2 billion in the first half of 2021. This demonstrates investor confidence in Leonteq’s investment grade credit rating as well as its stand-alone position as an established player in the structured products market.
As a result of this combination of factors, total operating income grew to CHF 289.2 million in the first half of 2022, up 41% year on year.
Total operating expenses increased to CHF 143.4 million in the first half of 2022, up 15% year on year, mainly reflecting higher performance-driven variable costs and higher provisions for legal cases. In support of its Growth Strategy 2026, Leonteq also continued to invest in strategic initiatives to further enhance its business and technology platform.
Leonteq reported 81% growth in profit before taxes to CHF 145.8 million in the first half of 2022, up from CHF 80.6 million in the first half of 2021. Income tax expenses of CHF 27.8 million in the first half of 2022 were significantly higher than the figure of CHF 6.2 million reported in the prior-year period, which benefited from tax-loss carry-forwards.
As a result, and in line with the guidance provided on 3 June 2022, Leonteq reported record Group net profit of CHF 118.0 million in the first half of 2022, compared to CHF 74.4 million in the prior-year period. Earnings per share rose by 60% to CHF 6.45, compared to CHF 4.04 in the first half of 2021
Shareholders’ equity totalled CHF 823.2 million as of 30 June 2022, compared to CHF 802.1 million as of 31 December 2021. Together with deferred fee income of CHF 67.0 million, Leonteq further strengthened its capital base to CHF 890.2 million as of 30 June 2022. Annualised return on equity was 29% for the first half of 2022 (H1 2021: 22%).
As communicated when Leonteq announced its full-year 2021 results on 10 February 2022, the current year marks the beginning of a new five-year strategy cycle. In the first half of 2022, Leonteq made progress in executing its Growth Strategy 2026 across all four dimensions:
In an effort to further expand and diversify its offering across products, asset classes and issuers, Leonteq introduced a new innovative white-labelling issuance model via structuringHUB, which is designed to reduce time-to-market and costs for banks when joining the Leonteq ecosystem. VP Bank, the first structuringHUB sponsor, recently began issuing its own structured products. Leonteq also entered into a new collaboration with Ixios Asset Management for the exclusive distribution of Ixios funds and the launch of a series of thematic Actively Managed Certificates (AMCs).
After intensive development and implementation work, Swissquote joined Leonteq’s multi-issuer platform, offering investors in EMEA and selected APAC countries access to yield enhancement payoffs from Switzerland’s market leader in online banking.
On the Smart Hedging Issuance Platform, all hedging counterparties successfully transitioned to the use of the new alternative reference rates and by now eight counterparties (including Leonteq) are contributing quotes and executing trades.
Leonteq maintained its leading position in offering crypto assets in a securitised format by increasing its universe to a total of 30 crypto assets. It also launched an own rule-based index strategy that tracks the financial performance of a basket of crypto assets as well as a dynamic index strategy that allows investors to participate in Bitcoin with less risk.
In the first half of 2022, Leonteq began to develop an automated retail flow platform designed to offer clients a large range of securitised leverage products. In this context, Leonteq hired a team of renowned industry experts to drive the newly established Retail Flow Business initiative which aims to further grow and diversify Leonteq’s product offering and client franchise.
Reflecting Leonteq’s increasingly diversified business offering that goes beyond the traditional structured products business, revenues from new business activities contributed 53% of overall revenues in the first half of 2022, an increase of 7 percentage points from the prior-year period.
Leonteq continued to invest in digital client solutions in the first half of the year, leveraging its scalable technology platform. As part of these efforts, it recently launched a new range pricing feature on LynQs that allows parameters to be combined in accordance with individual investor wishes, with matrix pricing results presented in the form of a heatmap in a matter of seconds.
LynQs was named “Best Issuance Platform” by Structured Retail Products (SRP) in recognition of the continuous improvements made by Leonteq and its efforts to offer clients a wide variety of functionalities and rapid processing.
Client transactions decreased to 105,948 in the first half of 2022 (H1 2021: 142,452) but remained well above the pre-pandemic level of 74,503 recorded in the first half of 2019, reflecting Leonteq’s continued business expansion.
Leonteq started developing a crypto asset platform to support the custody, trading and settlement of digital assets as part of the expansion of its operating platform. It has also continued to build out its SIGMA platform, which enables savings solutions on an automated and scalable basis. The number of pension savings contracts managed on the platform increased to 54,051 at end-June 2022 from 52,997 at end-2021.
Leonteq maintained its strong position in its Swiss home market in the first half of 2022. Together with its platform partners, Leonteq remained the leading issuer of SIX-listed yield enhancement products with a market share of 25%, and it currently ranks as the number four issuer of total SIX-listed structured products with a market share of 8%. At this year’s Swiss Derivative Awards, Leonteq was recognised as the top service provider for the 12th consecutive year and received a special award for its white-labelling program.
As a testament to the company’s strong client focus and service quality, which are recognised in the European market, Leonteq won a total of five awards at the SRP Europe Awards 2022. In Italy, Leonteq’s continued progress in establishing a strong market position was recognised at the Italian Certificate Awards, where it received four accolades, including taking first place in the “Certificate of the Year” category. In Portugal, Leonteq further strengthened its service centre in Lisbon, where it currently has 55 employees.
As part of its ambition to further expand its offering to serve an international client base, Leonteq strengthened its regional management team in Asia and launched Shari’a compliant trust certificates with the aim to grow its business in the Middle East.
On the back of heightened market uncertainty, Leonteq registered reduction in client activity in most of its regions in the first half of 2022. Switzerland’s net fee income was less affected due to positive contribution from its Pension Savings business and the transfer of the sales coverage for the Nordics region from Europe to Switzerland. As a result, net fee income in its home market totalled CHF 51.3 million in the first half of 2022 (H1 2021: CHF 60.0 million), operations in Europe generated net fee income of CHF 51.0 million (H1 2021: 85.8 million) and net fee income in the Asia region (including the Middle East) was CHF 13.3 million (H1 2021: CHF 24.2 million).
Underscoring its commitment to responsible investing and to integrating ESG best practice across its business, Leonteq established a Sustainability Committee in the first half of 2022 which is positioned at the Executive Committee level. The Board of Directors and its subcommittees regularly monitor the related sustainability programmes and initiatives.
Among the measures implemented in 2022 is the publication of Leonteq's Code of Conduct & Ethics. This document further emphasises the company's commitment to preserving its high legal, ethical and moral standards as well as a culture of strict compliance with local and international laws and regulations.
In order to also further develop its workplace culture, Leonteq began working with Great Place to Work®. As a first step in the process, it conducted an employee survey, the results of which will be used to guide the implementation of efforts to further develop Leonteq's corporate culture and standing as a great place to work.
Committed to diversity and inclusion, Leonteq became a member of Advance, the leading business association for gender equality in Switzerland. As a member of Advance, Leonteq has entered a network of more than 130 Swiss-based companies committed to increasing the share of women in management. As part of this membership, Leonteq employees have access to various skill building workshops, cross-company mentoring programmes, best practice sharing sessions as well as networking opportunities.
Through its investments in key initiatives over the past few years, Leonteq has created a solid and diversified foundation for the company to build on. Leonteq’s client franchise remained strong in the first half of 2022 but heightened investor uncertainty is expected to persist in a market environment characterised by higher levels of volatility, increasing inflationary pressures and rising interest rates. Leonteq will continue to maintain a prudent approach to risk management and its trading result is expected to continue partially compensating for subdued client demand in periods of higher market volatility. As a result, Leonteq targets record group net profit for the full-year 2022 (previous record result was CHF 155.7 million in 2021).
Lukas Ruflin, Chief Executive Officer of Leonteq, stated: “While the market environment is likely to remain highly uncertain in the second half of 2022, we are confident that we can continue to achieve profitable growth for our shareholders. We will stay fully focused on our business and on the systematic execution of our strategy as we work towards the targets we have set for 2026.”
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, 21 July 2022, at 9.45 a.m. CEST.
The presentation can be followed live via audio webcast with a simultaneous slide show.
If you wish to join the phone Q&A session, please dial in using the following numbers 10-15 minutes before the start of the presentation and ask for ‘Leonteq half-year 2022 results’:
This press release, the half-year 2022 results presentation and the half-year 2022 report are available at: https://www.leonteq.com/halfyearresults
A digital playback of the telephone conference will be available approximately one hour after the event and can be accessed for one month at: https://www.leonteq.com/halfyearresults
The definitions of Alternative Performance Measures used in this press release are provided in the Half-Year Report 2022 on page 7.
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LeonteqLeonteq is a Swiss fintech company with a leading marketplace for structured investment solutions. Based on proprietary modern technology, the company offers derivative investment products and services and predominantly covers the capital protection, yield enhancement and participation product classes. Leonteq acts as both a direct issuer of its own products and as a partner to other financial institutions. Leonteq further enables life insurance companies and banks to produce capital-efficient, unit-linked pension products with guarantees. The company has offices and subsidiaries in 13 countries, through which it serves over 50 markets. Leonteq AG is listed on the SIX Swiss Exchange (SIX: LEON).
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This press release may contain specific forward-looking statements, e.g. statements including terms like “believe“, “assume“, “expect“, "target" “forecast“, “project“, “may“, “could“, “might“, “will“ or similar expressions. Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may result in a substantial divergence between the actual results, financial situation, development or performance of the Company or any of its affiliates or subsidiaries and those explicitly or implicitly presumed in these statements. These factors include, but are not limited to: (1) general market, macroeconomic, governmental and regulatory trends, (2) movements in securities markets, exchange rates and interest rates and (3) other risks and uncertainties inherent in our business. In addition, currently, it is very difficult to provide a meaningful prediction on how the governmental actions in response to the ongoing outbreak of a novel coronavirus disease (COVID-19) and other COVID-19 related factors will affect Leonteq's operations and how long such measures will remain in place. The COVID-19 outbreak has caused, and may continue to cause, uncertainty, economic instability and a significant decrease of total economic output in the affected areas and globally. The impact of the COVID-19 outbreak on the general economic environment in the markets in which Leonteq operates remain uncertain and could be significant. Against the background of these uncertainties, you should not rely on forward-looking statements. Neither the Company nor any of its affiliates or subsidiaries or their respective bodies, executives, employees and advisers assume any responsibility to prepare or disseminate any supplement, amendment, update or revision to any of the information, opinions or forward-looking statements contained in this press release or to adapt them to any change in events, conditions or circumstances, except as required by applicable law or regulation.