1 Annual report 2008
2 Where reference is made in this annual report to Ô BinckBankÕ, it denotes BinckBank N.V. Where reference is made in this annual report to Ô Alex BeleggersbankÕ, it denotes what was formerly part of Coš peratieve Raiffeisen-Boerenleenbank B.A. (Ô RabobankÕ ), which BinckBank N.V. acquired in Where reference is made in this annual report to Ô AlexÕ, it denotes the label under which the Alex Beleggersbank services are provided. Where reference is made to Ô SyntelÕ, it denotes the subsidiary Syntel Beheer B.V. This document is a translation of the Dutch original and is provided as a courtesy only. In the event of any disparity, the Dutch version shall prevail. No rights may be derived from the translated document. Continuing the theme of previous annual reports, the illustrations this year again trace the route from BinckBank to a stock exchange, taking in historical and other landmarks, to symbolise the links our clients have with the stock exchange through BinckBank. In previous years, we were in Amsterdam, where our main office is located, and Antwerp, where we have our Belgian branch. This year, we are in Paris, from where we run our French operations. Starting at ➊ the BinckBank branch, our route takes us via ➋ La DŽ fense to ❸ the Arc de Triomphe. Passing ➍ the Eiffel Tower, photographed from the TrocadŽ ro, we cross the Seine on ➎ Pont Alexandre III and make our way to ➏ the Louvre. Our journey ends at ❼ Le Palais Brongniart, the old stock exchange building. The people in the photographs are our colleagues from the Paris branch.
3 1 Contents BinckBank overview...2 Profile of BinckBank... 3 Key figures...4 Chairman s message...8 Important events in BinckBank N.V. shares Vision, mission, strategy and objectives Strengths, weaknesses, opportunities and threats Report of the Management Board Report of the Management Board...22 Risk management under Basel II and Pillar III disclosure...32 In-control statement Personnel and organisation...54 Corporate social responsibility...58 Report of the Works Council...59 CVs CVs of Management Board members...62 CVs of Supervisory Board members Report of the Supervisory Board Corporate governance Introduction...76 Legal structure Management Board...78 Supervisory Board...78 Summary of the 2008 remuneration report...79 Compliance with the Dutch Corporate Governance Code...83 Supervisory Board...84 Anti-takeover defences...85 Article 10 of the Takeover Directive Decree...85 Financial statements...87 Other information A n n u a l R e p o r t Definitions and ratios
4 A n n u a l R e p o r t BinckBank overview
5 3 Profile of BinckBank BinckBank is a full-service online bank for investors, ranked in the top five in Europe. As an online broker, we offer our clients fast, low-cost access to all the important financial markets around the world. As an online bank for investors, we help our clients look after their capital with our online advice and asset management services and online savings. We offer our professional clients fast, low-cost order execution and administrative processing of securities and cash transactions, in the form of insourcing (BPO) or licensing of the appropriate software. Professional Services Professional Services provides services for asset managers and banks. Our online product handles the processing of securities transactions and the relating banking administration process, from order execution to administrative processing, on behalf of our professional clients. The business unit s clients have the option of entering into a service agreement with BinckBank or using software, supplied by Syntel to execute these processes themselves. BinckBank is the largest independent Dutch online bank for investors which is listed on NYSE Euronext Amsterdam. BinckBank has offices in the Netherlands, Belgium, France and Spain and employed 559 people as at year-end 2008 (year-end 2007: 481). BinckBank was founded in 2000 and had 293,236 brokerage and savers as at year-end 2008, of whom 267,668 in the Netherlands, 22,486 in Belgium and 3,082 in France. BinckBank s activities are divided between the Retail and Professional Services business units. Retail Retail provides services for private investors under the Alex and Binck labels. Under the Binck label, we serve in particular the active and experienced independent investor, for whom we provide order execution at very low cost together with a range of facilities such as an investment website, including real-time streaming of prices and news, order book depth, research, advice and analysis. Under the Alex label, we serve private investors who want to make the most of their capital. For these investors we offer a comprehensive investment site, an online savings account and online advice and asset management products. We also provide training courses for clients to help them improve their investing skills. A n n u a l R e p o r t The Binck and Alex labels have been named by various independent research institutes as the best and cheapest online brokers in the Netherlands on several occasions in recent years.
6 4 Key figures * Change % Customer figures Customer Accounts 293, ,323 37% Retail 284, ,933 38% Professional Services 8,527 7,390 15% Number of transactions 7,151,244 6,600,000 8% Retail 6,807,997 6,335,000 7% Professional Services 343, ,000 30% Funds entrusted ( ) 6,065,852,540 8,165,805,000 (26)% Retail 5,001,484,037 6,855,821,000 (27)% Professional Services 1,064,368,503 1,309,984,000 (19)% Income Statement (x 1,000) Net interest income 40,640 41,387 (2)% Net fee & commission income 101, ,942 (9)% Other operating income 6,162 5,504 12% Results on investments 1, % Impairment losses (reversals) financial instruments (205) (1,625) (87)% Total revenue from operating activities 149, ,494 (5)% Employee expenses (38,443) (37,569) 2% Depreciation and amortisation (31,789) (3,188) 897% Other operating expenses (37,316) (33,956) 10% A n n u a l R e p o r t Total expenses (107,548) (74,713) 44% Result from continuing operations 41,460 81,781 (49)% Share in result of associates % Result before tax 41,980 81,861 (49)% Income tax expense (8,941) (16,637) (46)% Tax % 21% 20% Result after tax from continuing operations 33,039 65,224 (49)% Result after tax from discontinued operations 106 1,556 (93)% Net result for the year 33,145 66,780 (50)% IFRS amortisation 28,196 - Fiscal goodwill amortisation 2,792 - Adjusted net profit ** 64,133 66,780 (4)% *) The comparative figures for 2007 are the pro forma combined results of BinckBank and Alex, i.e. the reported results of Binck and Alex are combined. **) Net profit adjusted for IFRS amortisation and the additional tax benefit on the difference between the commercial and fiscal amortisation of intangible assets and goodwill acquired on the purchase of Alex.
7 * Change % Normalised adjusted net profit (x 1,000) Adjusted net profit** 64,133 66,780 (4)% Elimination one-off tax benefit - (4,310) Elimination integration costs Binck & Alex 4,613 - Elimination discontinued operations (106) (1,556) Normalised adjusted net profit 68,640 60,914 13% Information per share & ratios Earnings per share Adjusted earnings per share Dividend per share Cost Income ratio 72% 48% C/I ratio excluding IFRS amortisation 53% 48% C/I ratio excluding IFRS amortisation & integration costs 50% 48% Balance sheet (x 1,000) Cash and balances with central banks 39,289 9,522 Banks 244, ,028 Financial assets, investments 1,578,224 1,398,662 Intangible and tangible assets 387, ,356 Other Assets 328, ,858 Customer deposits 1,747,699 1,772,822 Financial Liabilities, Provisions, Other liabilities 353, ,788 Equity 477, ,816 Balance sheet total 2,578,394 2,756,426 *) The comparative figures for 2007 are the pro forma combined results of BinckBank and Alex, i.e. the reported results of Binck and Alex are combined. **) Net profit adjusted for IFRS amortisation and the additional tax benefit on the difference between the commercial and fiscal amortisation of A n n u a l R e p o r t intangible assets and goodwill acquired on the purchase of Alex.
8 Profit BinckBank* Profit before taxes by segment 16% 60 In euro millions % Retail Professional Services Net profit Normalised adjusted net profit * The comparative figures for 2007 are the pro forma combined results of BinckBank and Alex, i.e. the reported results of Binck and Alex are combined Earnings Per Share 600 Development equity BinckBank In euro In euro millions A n n u a l R e p o r t In euro millions Net Earnings Per Share Additional adjusted Earnings Per Share *) * Net profit adjusted for IFRS amortisation and the additional tax benefit on the difference between the commercial and fiscal amortisation of Intangible assets and goodwill acquired on the purchase of Alex. Income segregation BinckBank * Issued share capital Share premium Reserves *) Unappropriated profit * The treasury shares are subtracted from the reserves for presentation purposes. Costs segregation BinckBack * In euro millions Interest income, Net Commission income, Net Other income Result on investments Impairment losses (reversals) financial instruments Employee expenses Other operating expenses Depreciation and amortisation * The comparative figures for 2007 are the pro forma combined results of BinckBank and Alex, i.e. the reported results of Binck and Alex are combined.
9 7 Business segmentation * Change % (x 1,000) Net interest income 40,640 41,387 (2)% Retail 37,187 39,106 (5)% Professional Services 3,453 2,281 51% Net commission income 101, ,942 (9)% Retail 92, ,407 (10)% Professional Services 8,200 7,535 9% Other operating income 6,162 5,504 12% Retail % Professional Services 5,202 5,504 (5)% Investments result 1, % Retail % Professional Services % Impairment losses (reversals) on financial instruments (205) (1,625) (87)% Retail (205) (1,625) (87)% Professional Services - - Total income from operating activities 149, ,494 (5)% Retail 131, ,174 (7)% Professional Services 17,152 15,320 12% Staff costs (38,443) (37,569) 2% Retail (30,992) (29,479) 5% Professional Services (7,451) (8,090) (8)% Depreciation & amortisation (31,789) (3,188) 897% Retail (31,157) (2,455) 1169% Professional Services (632) (733) (14)% Other operating expenses (37,316) (33,956) 10% Retail (34,686) (32,200) 8% Professional Services (2,630) (1,756) 50% Total operating expenses (107,548) (74,713) 44% Retail (96,835) (64,134) 51% Professional Services (10,713) (10,579) 1% Result from continuing operations (before tax) 41,460 81,781 (49)% Retail 35,021 77,040 (55)% Professional Services 6,439 4,741 36% Cost / income ratios A n n u a l R e p o r t Cost Income ratio 72% 48% C/I ratio Retail 73% 45% C/I Professional Services 62% 69% *) The comparative figures for 2007 are the pro forma combined results of BinckBank and Alex, i.e. the reported results of Binck and Alex are combined.
10 8 A n n u a l R e p o r t Chairman s message Dear shareholders, clients, colleagues and other readers, I look back with mixed feelings on 2008, our eighth year. BinckBank has achieved what I consider a good result in one of the worst-ever years for the stock market but, not least because of the constant media attention, the credit crisis looks set to continue. Every day, a multitude of experts, professionals, traders, analysts and pundits of every hue give us the benefit of their insights. We at BinckBank have kept well clear of the cameras and speaking platforms not because we think the financial consumer is not looking for yet another opinion, but because our time is better spent on growing our business and supporting our clients in these difficult times on the stock markets. That is the only way we can prove to shareholders and clients that they can continue to count on BinckBank even in a credit crisis was a year of challenges and hard work. But thanks to the unflagging enthusiasm and motivation of our staff and, equally important, the loyalty of our clients, some of whom have had a hard time on the stock markets during these difficult days, it was a successful year. It was gratifying to see former competitors BinckBank and Alex Beleggersbank joining forces to face a new common enemy: the credit crunch. We thank our clients and our colleagues most sincerely for their confidence and dedication. The adverse stock market sentiment inevitably had a severe impact on our share price, not least because BinckBank falls into the financial and small cap categories. We strive constantly to increase shareholder value, by growing the business and hence the profit combined with paying an attractive dividend. Given BinckBank s strong capital position and as a sign of our commitment to our shareholders, we launched a share buy-back programme in the middle of the credit crunch. In combination with the growth in the business and the rising trend in our financial results, this programme will provide further support for our share price. BinckBank is focusing on growing the business by maximising client satisfaction, which will expand both the client base and the transaction volume, thus creating shareholder value for investors in BinckBank. In 2008, for example, we introduced a competitive online savings account, launched our services in France, introduced business process outsourcing (BPO) services, launched Alex Bottomline, developed online Alex Academy training courses to help clients manage risk more effectively and made further improvements to our products and services in response to suggestions from clients. Alex and Binck again received recognition for their efforts in 2008, when they were named best online broker in the Netherlands in several third-party surveys. BinckBank s adjusted net profit for 2008 was 64.1 million ( 0.83 per share). Although the market conditions in 2008 were significantly worse than the year before, the number of account holders increased 37%, from 214,323 at the end of 2007 to 293,236 at the end of Transaction volume also increased, up 8% to over 7.1 million. There were few financial institutions which were able to match that rate of growth in the client base. BinckBank s good financial result is partly the product of sustained growth, synergy gains accruing from integration with Alex Beleggersbank and constant focus on cost management. In conclusion, I would like to address a personal word of thanks to you. At the shareholders meeting on 28 April 2009, I shall stand down as chairman, hand over to my intended successor Koen Beentjes and leave BinckBank. Kalo Bagijn, Hanneke Nieuwenhuis, Pim Bertens and I founded BinckBank in 2000 and it has been an intense pleasure working for the growth of the business ever since. It is now time for the organisation to welcome a new generation of Management Board members who can take it forward to the next phase of international expansion. In 2006, Pieter Aartsen assumed responsibility for the new Professional Services business unit. Benefiting from his specific experience in this field, the business unit has grown rapidly, BPO services have been added and new opportunities are being opened up by our best-execution service initiative. At the end of 2007, Evert Kooistra was appointed CFO, a new post which had become increasingly necessary in an environment which is growing increasingly
11 9 complex. Nick Bortot, who has been with BinckBank since the beginning and was responsible inter alia for our successful expansion into Belgium, succeeded Kalo Bagijn in May 2008, bringing new plans and an individual management style that suits the size of the Retail business unit. If the shareholders approve, Koen Beentjes will take over from me as Chairman of the Management Board on 28 April Koen Beentjes is a highly skilled banker who comes to us from ING Direct and has relevant international experience. BinckBank also has experienced, expert and motivated managers in the business units and staff departments. It has been a pleasure to work with this professional team which possess the right mix of skill and enthusiasm to lead BinckBank through a future full of new and significant challenges. In that knowledge, I leave BinckBank with some sadness, but with peace of mind. A n n u a l R e p o r t Thierry Schaap Chairman of the Management Board
12 Important events in 2008 Jan Jul 10 January BinckBank announces its intention to appoint Evert Kooistra to the Management Board as CFO 25 July BinckBank announces the appointment of Koen Beentjes as COO and successor to Thierry Schaap 28 January Start of BPO services for Friesland Bank 25 July BinckBank announces adjusted net profit of 31.4 million in its first-half report, despite adverse stock market climate Feb February Binck named Best broker overall by IEX Netprofiler, with Alex in second place Sep September Binck is awarded the Gouden Stier (Golden Bull) for the best internet broker in 2008 and Alex receives the same award as the best investment institution in September BinckBank launches its services in France 10 Mar 3 March BinckBank announces record profit for September Alex starts Alex Academy Online A n n u a l R e p o r t May May Nick Bortot (Retail) and Evert Kooistra (CFO) are appointed to the Management Board by the shareholders and co-founder Kalo Bagijn leaves the company 6 May As well as an adjusted net profit of 17.6 million, BinckBank announces in its first-quarter report that the synergy gains and operational benefits of the acquisition of Alex Beleggersbank would be greater than expected and would be realised ahead of schedule Oct 29 September BinckBank in Belgium opens 20,000th account 30 September BinckBank opens share buy-back programme October Binck and Alex named the best brokers by Beursbulletin 10 October Because of a sharp fall of share prices many investors start investing; BinckBank announces a sharp rise in the number of new investor accounts 15 October 1,000th investor account opened in France 30 May The last of the trading activities are hived off in a management buy-out and the Trading business unit ceases to exist 24 October BinckBank posts good third-quarter figures, with an adjusted net profit of 46.1 million, and announces that as many investor accounts had been opened in the first three weeks of October as in the whole of the third quarter of 2008 Jul 24 July BinckBank and Optiver announce a joint venture to set up one of the first best-execution service in the Netherlands Dec December Binck comes top in an online investment survey by Consumentenbond, the Dutch consumer association
13 BinckBank N.V. shares Listing BinckBank ordinary shares are traded continuously on NYSE Euronext Amsterdam and have been included since 1 March 2006 in the Amsterdam Midkap Index (AMX), with a weighting as at 31 December 2008 of 2.83% of the index. The ISIN code is NL (Reuters: BINCK AS, Bloomberg: BINCK NA). The shares were monitored in 2008 by analysts at RBS, ING, Fortis, Kempen & Co, Petercam, Rabo Securities, SNS and Theodoor Gilissen Bankiers. The total number of shares in issue as at 31 December 2008 was 76,040,066, with a market capitalisation of 420 million (2007: 779 million). Options on BinckBank N.V. ordinary shares have been traded since 21 March Key figures for BinckBank shares Figures per share Profit per share on continuing operations Profit per share on discontinued operations Total profit per share Adjusted profit per share 0.83 Dividend per share* Net asset value Year-end BinckBank N.V. share price AEX Index Price/earnings ratio * Subject to approval by the General Meeting of Shareholders. Share price and volumes (no.) ** 2006** Opening price Share price high Share price low Year-end price Total turnover 90,492,493 86,815,383 94,480,425 Daily turnover - high 2,287,767 3,041,189 2,322,616 Daily turnover - low 24,802 39,670 40,399 Average daily turnover 353, , ,511 A n n u a l R e p o r t ** Historical prices have been adjusted for the rights issue on
14 BinckBank share price in January 2008: highest intraday quote May 2008: Q1 08 results: Net profit 9.7 mln (up 39.6%) Share price March 2008: FY 07 results: Net profit 32.2 mln (up 33.9%) 25 July 2008: H1 08 results: Net profit 15.5 mln (up 12.4%) 30 September 2008: New share buyback program announced. Target BIS ratio of 15% 24 October 2008: Q3 08 results: Net profit 22.9 mm (up 7.0%) 10 October 2008: 52 week low Volume Dec-07 Jan-08 Feb-08 March-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Volume Share price BinckBank 12 A n n u a l R e p o r t BinckBank s relative performance is measured against a peer group of international competitors which engage in more or less comparable activities and whose stock market profiles are similar to BinckBank s. They are Avanza (Sweden), DAB Bank (Germany), Boursorama (France), Comdirect (Germany), E*trade Financial (United States), Nordnet % change from year-end Securities (Sweden), Optionsxpress (United States), Schwab (United States), Swissquote (Switzerland) and TD Ameritrade (United States). In fifth place in terms of total shareholder return (TSR), BinckBank s share price performed better than average in 2008, compared with this group. 0 Dec-07 Jan-08 Feb-08 March-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Peer group index BinckBank
15 Share capital Share capital Authorised share capital 100,000, ,000, ,000,000 Issued share capital at beginning of year 77,093,508 30,837,403 30,837,403 Shares issued during year - 46,256,105 - Shares cancelled during year Issued share capital at year-end 77,093,508 77,093,508 30,837,403 Buy back of shares 1,053, , ,145 Priority shares Average shares in issue for year 76,870,870 32,829,886 30,551,278 Year-end market capitalisation ( ) 420,159, ,415, ,076,328 The share buy-back programme In a press release on 30 September 2008, BinckBank announced the start of a programme of buying back BinckBank ordinary shares with the aim of reducing the share capital. The target for BinckBank s capital policy is a solvency ratio (BIS ratio) of between 12% and 20%. As part of its capital policy, it is BinckBank s dividend policy in principle to distribute 50% of the adjusted net profit as dividend each year. BinckBank s capital policy also envisages distributing surplus capital to the shareholders, in the form of dividend or by buying back the company s own shares, if the BIS ratio approaches 20%. With the BIS ratio standing at 16.8% on 30 September 2008, the Management Board decided, with the approval of Stichting Prioriteit Binck, to start a share buy-back programme. If the solvency ratio (BIS ratio) falls below 15%, the buy-back programme will be temporarily suspended until a sufficient capital buffer has been built up again. Shares are repurchased in accordance with the authority vested in the Management Board by the General Meeting of Shareholders of BinckBank on 6 May The shareholders will be invited to renew the authority to buy back shares each year. Implementation of the buy-back programme BinckBank has entered into an agreement with Fortis Bank Nederland B.V. ( Fortis ) under which Fortis will implement the buy-back programme independently, i.e. without BinckBank s intervention, in accordance with the provisions of EU regulation 2273/2003 (safe harbour rules). The Compliance department is monitoring the conduct of the buy-back programme. In the period from 1 October 2008 to 31 December 2008, BinckBank repurchased 1,024,580 shares at an average price of Dividend policy BinckBank s articles of association prescribe that, if and to the extent that the profit permits, a dividend will first be paid on the priority shares equal to 6% of their nominal value (50 x 0.10 x 6%). The holder of the priority shares Stichting Prioriteit Binck will then determine what part of the remaining profit is to be retained. That sum is not distributed to the shareholders, but is added to the company s reserves. The profit remaining after the appropriation to reserves by the priority shareholder is placed at the 13 A n n u a l R e p o r t
16 volume Shares repurchased relative to permitted maximum 120, ,000 80,000 60,000 40,000 20,000 Sep 08 Oct 08 Nov 08 Dec 08 Shares repurchased 25% of average volume past 20 days 14 A n n u a l R e p o r t disposal of the General Meeting of Shareholders, which can choose whether to distribute the remaining profit, add it to reserves or a combination of the two. With due observance of the provisions of BinckBank N.V. s articles of association, dividends may be paid in ordinary shares instead of cash. The company may not place an amount of profit at the disposal of the General Meeting of Shareholders unless it considers that its capital is adequate. If, with due observance of the foregoing, an amount of profit is placed at the disposal of the General Meeting of Shareholders, the priority shareholder will use its best endeavours to ensure a pay-out ratio of 50% of the adjusted net profit dividend proposal The shareholders will be invited to approve a total dividend for the 2008 financial year of 0.41 per share (50% of the adjusted net profit for 2008), net of 15% dividend tax. An interim dividend of 0.20 per share in cash having been distributed in August 2008, the proposed final dividend will be 0.21 per share in cash. The company will not pay a stock dividend. Subject to the approval of the General Meeting of Shareholders on 28 April 2009, the shares will be quoted ex-dividend from 30 April The final dividend will then be paid on 6 May Shareholdings Six shareholders have disclosed interests of over 5% as at 31 December 2008 pursuant to the Financial Supervision Act. These are Boron Investments N.V. (9.88%), Delta Lloyd Group (9.41%), Vereniging Friesland Bank (9.40%), J. Kluft (6.11%), Navitas B.V. (5.17%) and Aquiline Capital Partners (5.12%). The free float is 54.91%. As at year-end 2008, the members of BinckBank s Management Board held the following shares: - Thierry Schaap : 1,022,995 shares - Nick Bortot : 39,280 shares - Pieter Aartsen : 22,214 shares - Evert Kooistra : 5,768 shares Shareholders BinckBank Free Float 54.91% Aquiline Capital Partners 5.12% Boron Investments N.V. 9.88% Navitas B.V. 5.17% Delta Lloyd Groep 9.41% Vereniging Friesland Bank 9.40% J. Kluft 6.11%
17 Investor Relations Because it attaches great importance to maintaining a good relationship with investors and analysts, BinckBank endeavours to provide optimum transparency and consistency in its communications. All published documents containing information on BinckBank s performance, strategy and activities are posted in downloadable form on the website www. binck.com from the date of publication. The Management Board gives regular presentations for analysts and investors. BinckBank also maintains contact with investors and analysts via one-to-one conversations, presentations and conference calls. The agenda for the Annual General Meeting of Shareholders is posted on the website com. Printed copies of the annual report are available from the company on request financial calendar Tuesday 28 April Annual General Meeting Tuesday 28 April First-quarter results Thursday 30 April Ex-dividend Tuesday 5 May Record date Wednesday 6 May Dividend payable Monday 27 July Half-year results Tuesday 28 July Ex interim dividend Thursday 30 July Interim dividend record date Friday 31 July Interim dividend payable Friday 30 October Third-quarter results Investor Relations department Tel: Fax: A n n u a l R e p o r t
18 Vision, mission, strategy and objectives 16 A n n u a l R e p o r t Vision Internet brokerage: a growing market The internet enables private investors to make better-informed choices and makes it easier and quicker for them to invest independently. Internet brokerage offers significant advantages over the more traditional channels (by telephone and/or via an account manager). For that reason, online brokerage is a growing market. This growth is expected to be stronger in the European countries south of the Netherlands. The internet is changing competitive relationships and places the client first The internet has also changed the relationship between new and existing providers, enabling new players to set up in business at relatively low cost and compete with the established players. Comparison websites make it easier for consumers to find and compare products and services from new and existing players, which they can discuss in online newsgroups. This helps consumers to make rational choices based on price, quality or a combination of the two, rather than choices based on brand name. In our view, the image of a company is thus no longer defined solely by its marketing campaigns and is increasingly being determined by consumer experience that is published on the internet. Client satisfaction will therefore become an increasingly significant factor in companies future growth. Internet brokerage is a high-volume low-price price business (economies of scale) We envisage growing consolidation among providers of online brokerage in Europe in the medium term, with larger players making more cross-border acquisitions, as some French and German players have already done on a smaller scale. The reason is simple: higher transaction volume (bigger scale) will ultimately help to reduce the cost per transaction, which is essential to long-term competitiveness. A similar trend has already been experienced on the more mature US online brokerage market. MiFID will change the relationship between stock exchange, liquidity provider and broker The introduction of MiFID (Markets in Financial Instruments Directive) will change the relationship between stock exchange, liquidity provider and broker in the future. The requirement to execute orders at best price will result in the creation of alternative trading platforms and alliances between those parties. Private clients want a bank that places the customer first Now that the financial establishment has seriously betrayed his confidence, the private financial consumer is looking for reliable providers of transparent services who place the client s interests first ahead of their own. All private banks are looking to outsource securities administration Because the processes involved in the execution and administration of securities transactions are often expensive and labour-intensive for banks, we expect them to seek to reduce their costs by increasingly outsourcing this work or using new software. Another cost-raising factor is the increasing regulation, creating an ever more complex environment which requires changes to their systems and processes. Mission BinckBank seeks to maximise shareholder value by maximising customer satisfaction. Strategy We aim to constantly surprise our clients with the high quality of our product, our intensive client focus and our low prices. This has our highest priority at all times, because we want our clients to be ambassadors for our services and so help our client base to grow (25% of new clients opening an account with Binck have been introduced via an existing client). By focusing on achieving the highest possible client satisfaction and thus growing our client base, we are creating shareholder value for the investors in BinckBank.
19 Our ambition is to be the largest European fullservice online bank for investors. Our strategy is built on five pillars: I Further growth in our existing services, based on a financially scalable business model (transaction gathering with fully automated processing of transaction streams) II Expansion of our banking activities within the investment universe (online bank for investors) and BPO activities within the Professional Services division III International expansion driven by aggressive pricing and comparative advertising, followed later by broadening of the product range IV Constant cost control V Financially conservative solvency and liquidity policy, aimed at steady profit growth Objectives Operational objectives Our objective for the Retail business unit is to retain our market leadership in online brokerage in the Netherlands and grow into the largest European full-service online bank for private investors. We plan to do this by improving our products and broadening our product range. Our extended product range will include additional services for investors, such as; - online saving - online advice and asset management - deployment of our distributive power and - an investment fund supermarket V - Conservative financial policy I - Further growth existing services Shareholder Value Our ambition for the Professional Services business unit is to attain market leadership in services to asset managers in the Netherlands and Belgium, while growing our services to banks both by insourcing securities order execution, securities administration and securities-related payments (business process outsourcing) and by licensing software. We also intend to develop our presence in the securities transaction execution chain with our new best-execution services initiative. Our strategy envisages expansion of our services within Europe. Financial constraints on strategy We seek to achieve steady growth in earnings per share while pursuing a very conservative capital policy. The development of our earnings per share depends to some extent on developments on the financial markets. While this is a variable over which we essentially have no influence, we can reduce that dependence by focusing on variables we can affect, by growing our client base, applying rigorous cost control and broadening our product range and BPO services. In difficult market conditions, we shall choose profitability support over short-term growth. Consequently, the marketing budget will be largely II - Expanding activities within investment universe 17 A n n u a l R e p o r t IV - Constant Cost control III - International Expansion
20 variable and will move with the financial results we achieve. The objective in our capital policy is a solvency ratio of at least 15% and a secure liquidity position. Surplus capital will be returned to shareholders in dividend and via the share buy-back programme. Targets Our medium-term (2 4 years) targets are: Position as at 31 December ,000 Dutch investment accounts 202, ,000 Belgian investment accounts 22, ,000 advice and asset management accounts 8, total savings deposits of 1.5 billion 861 million 5. total client assets of 10 billion 6.1 billion 6. break-even level in France A n n u a l R e p o r t