Van Lanschot Credit Update SEPTEMBER 2012
- Profile of Van Lanschot - 2012 half-year results - putting solidity before profit - The best Private Bank in the Netherlands and Belgium - Funding and liquidity 1
Evolution into an independent Private Bank 1737 2012 1737 Established as a trading house in s-hertogenbosch 29-6-1999 Listed on Euronext Amsterdam 30-9-2004 Acquisition CenE Bankiers 2006 Strategy to be the best Private Bank in the Netherlands and Belgium 1-1-2007 Acquisition Kempen & Co 30-11-2007 Sale of 51% of insurance arm to De Goudse 2012 Sale of Van Lanschot Curacao and trust activities Van Lanschot aims to be the best Private Bank in the Netherlands and Belgium Van Lanschot s strategy is focused on offering high quality financial services Van Lanschot has a solid capital base, strong funding and liquidity position Van Lanschot has offices in the Netherlands and Belgium and also has a presence in Switzerland (Zurich and Geneva), Edinburgh and New York 2
Van Lanschot: a local and authentic bank Widespread presence in the Netherlands and Belgium Around 15% market share in the Private Banking market making it the number 2 player in the Netherlands and Belgium Almost 2,000 employees International Private Banking concentrated in Switzerland Target client groups: - wealthy individuals - entrepreneurs and their businesses - business professionals and executives - charitable associations - institutional investors 3
Van Lanschot is unique compared with other banks Predominantly retail banking Onshore private banking Niche market in the Netherlands and Belgium Full-service bank Extensive branch network Standardised product and service offering Large loan book of mainly residential mortgages Customised product and service offering Strong focus on asset management Loan book of residential mortgages and corporate loans Corporate book is tool for attracting future assets Predominantly offshore private banking Focus on wealth management No full-service offering Limited loan book 4
Strong credit ratings reaffirmed by both S&P and Fitch Standard & Poor s 7 September 2012 Standard & Poor's Ratings Services' outlook on Netherlands-based private bank F. Van Lanschot Bankiers is stable, reflecting our expectation that Van Lanschot should be in position to defend its niche franchise and maintain a strong capital position, even in the event of continued uncertain economic conditions domestically. Credit ratings of F. van Lanschot Bankiers affirmed by S&P in September 2012 under the new rating methodology and assumptions Stable credit ratings - S&P A- / stable / A-2 - Fitch A- / stable / F2 Fitch Ratings 16 November 2011 The affirmations reflect the bank s well-established Dutch private banking franchise, conservative risk appetite, improved funding profile, solid liquidity and solid capitalisation. Source: S&P report dated 7 September 2012 5
Business segments PRIVATE & BUSINESS BANKING ASSET MANAGEMENT CORPORATE FINANCE & SECURITIES - Integrated advisory service for private clients: - Priv@te Banking (up to 250,000) - Private Banking ( 250,000 to 10 million) - Private Office (from 10 million) - Business Professionals / Executives - Equity Management Services - Van Lanschot Belgium - International Private Banking - Advisory services and financing for entrepreneurs and their businesses - Healthcare professionals - Institutional asset management - Fiduciary management - Management of investment funds - Mergers and acquisitions - Capital markets - Sales and trading - Research - H1 2012 revenues 231.1m - H1 2012 operating profit before tax 28.2m - FTEs 1,442 - H1 2012 revenues 25.8m - H1 2012 operating profit before tax 6.0m - FTEs 196 - H1 2012 revenues 19.3m - H1 2012 operating profit before tax 0.7m - FTEs 187 6
Experienced and balanced management team Floris Deckers (1950) Chairman of the Board Constant Korthout (1962) CFO / CRO Ieko Sevinga (1966) Commercial activities Arjan Huisman (1971) COO Background: 23 years at ABN AMRO, including as CEO of Latin America and Netherlands business unit Background: 18 years at Robeco Group, since 2002 as CFO Background: Director of Kempen & Co Background: Partner with Boston Consulting Group Supervisory Board - Tom de Swaan, Chairman (1946) - Jos Streppel, Deputy Chairman (1949) - Willy Duron (1945) - Godfried van Lanschot (1964) - Truze Lodder (1948) - Heleen Kersten (1965) - Abel Slippens (1951) - Former CFO ABN AMRO, former Board member Dutch Central Bank - Former CFO of Aegon - Honorary chairman of KBC Group, former CEO KBC Group - Independent investor - Director of Dutch Opera - Chairperson of Stibbe law firm - Former CEO of Sligro Food Group 7
Van Lanschot is listed on the Amsterdam stock exchange, current market cap* 650 million Delta Lloyd 30% - Shareholder since the early 1970s ABP 13% Rabobank 12% - As a result of the acquisition of Friesland Bank on 2 April 2012 Stichting Frieslân Boppe 11% - Charitable association, former shareholder of Friesland Bank Van Lanschot family 11% - Shareholder agreement renewed in May 2011, with right to maintain shareholding at current level in the event of share issues and to nominate one member of the Supervisory Board SNS Reaal 5% Management and staff 4% - As a result of the acquisition of Kempen & Co - Increasing employee ownership through remuneration policy and employee share plan Freefloat 14% * At 21 September 2012 8
- Profile of Van Lanschot - 2012 half-year results - putting solidity before profit - The best Private Bank in the Netherlands and Belgium - Funding and liquidity 9
Conscious choice for solidity and clear focus on Private Banking Undiminished solid profile - Core Tier I ratio 11.0% - Comfortable leverage ratio 8.1% * - Funding ratio 85.3%; not dependent on the capital markets - Stable credit rating: Single A- (stable outlook) credit rating from Standard & Poor s and Fitch Ratings - The bank already meets the new Basel III requirements Growth in assets under management due to stronger equity markets - Assets under management +2% to 37.5 billion - Assets under discretionary management for Private & Business Banking clients increased from 33% to 35% - Securities commission +4% to 81.4 million - Total client assets more or less unchanged at 49.4 billion Profit recovery held back by higher loan loss provisions - Underlying net profit 16.0 million - Net profit including non-recurring charges 5.7 million - Higher addition to loan loss provision 41.8 million - Investment and cost reduction programme on track * Current definition of leverage ratio = equity attributable to shareholders / total assets 10
Balance sheet is for the client Total assets 18.5 billion* No exposure to Greece, Spain, Portugal, Italy and Ireland 86% of investments have a AAA-rating Cash Liquide and middelen balances en with tegoeden banksbij banken Financial Financiële instruments instrumenten 1.4 1.9 Verplichtingen aan banken Due to banks 1.8 High funding ratio 85.3% Spaargelden en deposito's Customer savings and deposits 11.9 11.9 More than half of the loan book consists of residential mortgages The core activities of Van Lanschot take place in its home markets in the Netherlands and Belgium Loans Kredieten and advances 14.0 14.0 Issued debt Schuldbewijzen securities 1.9 Overig Other 1.3 Diversified funding profile (both maturity and source) Van Lanschot has access to the wholesale market Other Overig 1.2 Eigen EquityVermogen 1.6 High leverage ratio ** 8.1% Assets Equity and liabilities * Encumbered assets = 12.6% of Total assets ** Current definition of leverage ratio = equity attributable to shareholders / total assets 11
Loan book in line with focus on Private Banking Loan book by sector at 30 June 2012-94% of the loan book comprises loans and advances in the Netherlands and Belgium; no loans and advances outside Europe 2% 4% 2% 3% 20% 51% Residential Mortgages Property Financial Holdings Healthcare Services Retail - More than half of the loan book consists of residential mortgages - Strong diversification in terms of sectors and clients; limited concentrations 18% Other - The bank continually reviews the loan book with regard to private banking potential 12
Losses on the mortgage portfolio remain limited - Average mortgage per client is 456,000 (national average in 2011 213,750 * ) - Number of foreclosures in H1 2012 was 15 (total 2011: 12) - Traditionally low level of additions to loan loss provision for mortgage loans - Average Loan-To-Value 90% (year-end 2011: 89%) Gross new business of mortgages Van Lanschot the Netherlands ( million) Mortgage portfolio by maturity at 30 June 2012 917 7% 672 12% 29% 418 204 234 124 2007 2008 2009 2010 2011 2012** 52% >10 years 5-10 years 3-5 years 1-3 years * Source: Hypotheken Data Netwerk ** H1 2012 figure annualised 13
Property portfolio occupation rates well above the national average - Size of the property portfolio (excluding residential mortgages) at 30 June 2012 amounted to 2.5 billion and is unchanged compared with year-end 2011 - Average property loan at 30 June 2012 was 2.5 million - Average Loan-To-Value 71% (year-end 2011: 70%) - Vacancy of offices (8%) is far below the national average (15% * ) - Over 80% of the property is leased for more than a year Property by sector at 30 June 2012 Occupancy of property at 30 June 2012 8% 8% 9% 13% 39% 47% 17% 23% Industrial Offices Residential Retail Other 36% Unoccupied Rented < 1 year Rented 1-5 years Rented < 5 years * Source: NVM Business 14
Increase in loan loss provision due to deteriorating economic climate Addition to loan loss provision ( million) H1 2009 H2 2009 H1 2010 H2 2010 H1 2011-27.4 H2 2011 H1 2012 Loan loss provision - Addition to provision of 76 bps of average risk weighted assets -50.6-43.9-42.6-36.9-41.8 - Provision strongly influenced by two larger items -62.6 - Addition comprises mainly increases of existing loan loss provisions 15
Diversified investment and trading portfolio with low risk profile - Total investment and trading portfolio of 1.9 billion held mainly for liquidity purposes - Investments resulting from participation in LTRO of 750 million - Portfolio comprises mainly Dutch government bonds and small amounts in Austria and Belgium - No investments in European peripheral countries Investment and trading portfolio by counterparty at 30 June 2012 23% 7% 8% 62% Government & government guaranteed Corporates Funds Banks 16
Solid profile remains strong - Explicit choice for solidity with a focus on private banking - Core Tier I-ratio 11,0%; on the upper side of the market - Funding ratio 85,3%; VL not dependent on capital markets - Stable credit rating since 2009: Single A- (stable outlook) of Standard & Poor s and Fitch Risk weighted assets ( billion) and Core Tier I ratio (%) 9.6% 10.1% 10.9% 11.0% 11.8 11.5 11.0 11.0 31-12-2010 30-06- 2011 31-12-2011 30-06- 2012 RWA Core Tier I ratio 17
Profit recovery held back by higher loan loss provisions - Income -7% to 272.7 million; excluding non-strategic investments 264.4 million - Operating expenses -3% to 211.3 million; excluding non-strategic investments 204.3 million - Addition to loan loss provision rises to 41.8 million - Underlying net profit 16.0 million - Net profit (including non-recurring charges) 5.7 million Net profit ( million) -21.7 42.8 5.7-14.4-0,4 3.6 16.0 H1 2011 Lower income Lower operating expenses Higher additions loan loss provisions Other* H1 2012 * Tax and discontinued operations 18
Interest margin under pressure due to situation on the savings market Interest rates * on Van Lanschot savings 2.06% Dec 2010 1.71% 1.00% Volumes ( billion) 15.7 13.5 June 2011 Interest rates on savings 15.1 Dec 2011 14.3 13.2 13.1 3-month Euribor 14.0 11.9 0.67% June 2012 - Interest income decreased to 126.2 million - Interest margin declined to 1.36% - Significant decline in Euribor rates in H1 2012 did not lead to a corresponding decrease in savings rates - Limited reduction of loan book - Decline of savings and deposits - Van Lanschot is a price follower - Outflow at foreign branches - Return on the LTRO portfolio of approximately 86 basis points (annualised) 31-12-2010 30-06-2011 31-12-2011 30-06-2012 Loans and advances Savings and deposits * Rates in the Netherlands 19
Growth in assets under management thanks to higher equity markets - Total assets under management +2% to 37.5 billion - Outflow at Private & Business Banking due to conscious choice of some clients to liquidate investment portfolios for the purpose of repaying debts - New mandates in H2 2012 amounting to 1.8 billion, including the Pension Fund for the Dutch Butchers Industry Assets under management ( billion) 0.1-0.7 1.4 36.1 36.7 36.7 36.1 36.1 37.5 30-06-2011 31-12-2011 Net inflow Asset Management Net outflow Private & Business Banking Market performance 30-06-2012 20
Assets under Management (AuM) and commission in basis points (bps) by segment - Stable margins over longer period - Higher transaction fees in Q1 2012 boosted the margins on assets under non-discretionary management - Margin on fiduciary management and niche strategies remain relatively stable Breakdown of AuM ( billion) and commission (bps) Private & Business Banking Breakdown of AuM ( billion) and commission (bps) Asset Management 85 81 77 42 38 40 39 29 35 14 14 12 13.9 12.4 12.3 8.2 7.9 8.6 6.5 6.1 6.6 7.5 10.3 10.0 H1 2011 H2 2011 H1 2012 H1 2011 H2 2011 H1 2012 AuM - Discretionary BPS - Discretionary AuM - Non-discretionary BPS - Non-discretionary AuM - Fiduciary management BPS - Fiduciary management AuM - Niche strategies BPS - Niche strategies 21
- Profile of Van Lanschot - 2012 half-year results - putting solidity before profit - The best Private Bank in the Netherlands and Belgium - Funding and liquidity 22
Van Lanschot s strategy: unchanged but accelerated Mission Vision Targets Strategy To offer high-quality financial services to high net-worth individuals, entrepreneurs and other select client groups, whereby the interest of our clients is leading Van Lanschot aims to be the best private bank in the Netherlands and Belgium To be able to measure the achievement of its vision, Van Lanschot has formulated targets relating to clients, employees, and financial ratios; Van Lanschot aims to realise the targets in harmony with all its stakeholders 1. Focus on private banking 2. Enhance commercial effectiveness 3. Invest continually in service quality 4. Maintain a solid profile Core Values Ambitious Independent Committed Professional 23
Changing client behaviour due to market conditions Lower risk appetite - Preference for risk averse investments - Fewer investment transactions - Investments converted into liquidity - Staying put: clients reluctant to switch banks Deleveraging - Trend among private clients to repay mortgage and other debts - Private banking clients have more resources in the form of savings or proceeds from selling investments Preference for discretionary asset management - Increasing number of clients prefer the convenience and performance of discretionary mandates instead of non-discretionary mandates - Inflow of new money mainly in discretionary mandates 24
In normal market conditions, the recovery of profit comes from income growth What is needed for recovery to normalised profit levels? Recovery of capital markets decrease of interest rates on savings Return of confidence in the financial markets return of investors growth in assets under management to 50 billion Economic recovery Decrease of loan loss provision to normalised level (annual addition to loan loss provision of 25-30 bps) What can Van Lanschot do itself? Successful implementation of the investment and cost reduction programme Gross reduction of cost base by 60 million from 2015 25
Summary of cost reduction initiatives An investment and cost reduction programme was initiated in H1 2012; under this programme the followings steps have been taken: Private & Business Banking - Regionalisation: five branches closed; another three to be closed in H2 2012 - Concentration of investment and corporate advisory teams International Private Banking - Decision to sell the activities of Van Lanschot Curacao and Trust - Closure of Van Lanschot Luxembourg - International private banking activities to be concentrated in Switzerland Other - Kempen Capital Management has total responsibility for investment policy - Further initiatives aimed at process improvements 26
Reduction of operating expenses on track - Investment and cost reduction programme is aimed at achieving a run rate of operating expenses of 380 million * in 2015 - Target is a gross reduction in operating expenses of 60 million in 2015 compared with 2011 - Taking into account inflation and further investments, the net reduction is expected to amount to 40 million Projected operating expenses excluding non-recurring charges ( million) 420 8.1 407.0-40m 381.5 412.3 380 2011 2012 E 2013 E 2014 E 2015 E * Excluding non-strategic investments 27
- Profile of Van Lanschot - 2012 half-year results - putting solidity before profit - The best Private Bank in the Netherlands and Belgium - Funding and liquidity 28
As a Private Bank, majority of funding is customer savings and deposits - Largely self funded in line with a traditional Private Bank: funding ratio 85.3% Funding mix at 30 June 2012 Customer deposits ( billion) 10% 8% 6% 13.5 4.2 13.1 4.4 11.9 4.2 11% Customer savings & deposits Debt securities & subordinated loans Interbank funding Shareholders' funds Other funding 65% 3.8 3.9 3.7 5.5 4.9 4.1 31-12-2010 31-12-2011 30-06-2012 Deposits Savings Other 29
Key focus areas for wholesale funding - Van Lanschot has relatively high proportion of retail funding, not dependent on capital markets - New requirements anticipated under Basel III - The bank wishes to demonstrate access to wholesale funding markets going forward I - Continued diversification of funding sources Van Lanschot s focus on funding and liquidity II - Regular presence on wholesale markets III - Lengthening of the term structure, i.e. building a curve IV - Debt investor relations 30
Van Lanschot has access to various funding programmes Debt Issuance Programme / MTN Non-MTN / Specials Unsecured - 5.0 billion programme - prospectus updated 14 March 2012 - used for wholesale funding (senior unsecured and subordinated), and structured retail products - Private placements - Euro and non-euro issues on standalone documentation - Private placements - Structured products - Hybrid instruments Bloomberg ticker: LANSNA Corp Bloomberg ticker: LANSNA Corp Citadel Programme Lancelot Programme Asset Backed - RMBS, top quality mortgage portfolio, fully originated and serviced by Van Lanschot - The Citadel programme was successfully established with the objective to diversify funding and to create eligible assets - Placed: Citadel 2010-I A1 and A2 notes - Retained: Citadel 2010-II and Citadel 2011-I - Call date 26 August 2015 Bloomberg ticker: CITAD Mtge - On 26 January 2012 Van Lanschot called the Lancelot 2006 transaction on the first call date - Lancelot 2006 was a hybrid CMBS transaction consisting of part of Van Lanschot s commercial real estate loans portfolio Bloomberg ticker: LANCE Mtge 31
Van Lanschot has access to the wholesale markets - Strong funding position based on stable level of bond issuance Long-term funding raised in 2011 and 2012 YTD: - Wholesale market issues: - Sep 2012 issue of CHF 250 million 3.5-year fixed coupon senior unsecured notes - Jul/Aug 2012 private placement of approx. 153 million Citadel 2010-I A-notes - Apr 2012 issue of 135 million 7-year fixed coupon senior unsecured notes - Apr 2011 issue of 3-year senior unsecured bonds to institutional investors for 500 million - Apr 2011 issue of approx. 65 million of Trigger Notes with a three year term - May 2011 issue of Floored Floater for approx. 90 million with a ten year term - Eligible assets: - Jan 2011 Closing of Citadel 2011-I, 1.5 billion ( 324 million Class A1 and 801 million Class A2 notes / ECB eligible) 32
Comfortable funding diversification across maturities and types of instruments Wholesale funding by maturity at 21 September 2012 ( million) 3,000 2,500 2,000 1,500 1,000 500 0 Buffer 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 >2021 - Wholesale funding is well diversified in terms of maturity - Successful in raising funds in wholesale markets in 2011 and 2012 - CMBS transaction (Lancelot) called in January 2012 - Liquidity buffer of approx. 3 billion at 21 September 2012 LT Repo Perpetual RM BS Senior Subordinated Liquidity buffer 33
Van Lanschot already meets the published Basel III requirements - For several years now Van Lanschot has consistently targeted the Basel III requirements - Consequently Van Lanschot already meets the Basel III requirements PRO FORMA AT 30 JUNE 2012 UNDER BASEL III Leverage ratio (%) Liquidity Coverage Ratio (%) Net Stable Funding Ratio (%) 162% 5% Min 3% Min 100% 104% Min 100% 30-06-2012 30-06-2012 30-06-2012 34
Contacts at Van Lanschot Constant Korthout +31 73 548 33 99 CFRO constant.korthout@vanlanschot.com Geraldine Bakker-Grier +31 73 548 33 50 Investor Relations Manager g.a.m.bakker@vanlanschot.com Ralf van Betteraij +31 73 548 8718 Manager Treasury Funding Management r.vanbetteraij@vanlanschot.com 35
Van Lanschot 36
Disclaimer Forward looking statements This presentation contains forward looking statements concerning future events. Those forward looking statements are based on the current information and assumptions of the Van Lanschot management concerning known and unknown risks and uncertainties. Forward looking statements do not relate to definite facts and are subject to risks and uncertainty. The actual results may differ considerably as a result of risks and uncertainties relating to Van Lanschot s expectations regarding such matters as the assessment of market risk and revenue growth or, more generally, the economic climate and changes in the law and taxation. Van Lanschot cautions that expectations are only valid on the specific dates, and accepts no responsibility for the revision or updating of any information following changes in policy, developments, expectations or the like. The financial data regarding forward looking statements concerning future events included in this presentation have not been audited. 37