LGT Annual Report
2014
Contents
LGT at a glance
4
Organizational structure
6
Financial highlights
7
Chairman’s report
8
Corporate governance
10
Consolidated financial statements
11
Risk management
66
LGT Group Foundation
84
International presence
96
LGT at a glance
LGT is a leading international private banking and
private individuals and institutional clients. LGT em-
asset management group that has been fully controlled
ploys approximately 2000 people who work out of
by the Liechtenstein Princely Family for over 80 years.
more than 20 locations in Europe, the Americas, Asia,
As per 31 December 2014, LGT managed assets of
Australia and the Middle East.
CHF 128.8 billion (USD 129.6 billion) for wealthy
Business areas
LGT Private Banking
LGT Asset Management
Wealth management services for private clients,
Discretionary investment management of insti­
including:
tutional client mandates and investment funds
(operating under the brand of LGT Capital Partners)
n
Investment advice and portfolio management
n
Trading advice and execution
n
Loan and credit facilities
LGT Capital Partners is a global leader in managing
n
Philanthropy services
alternative investments and multi-asset products with
an excellent track record spanning over 15 years.
LGT operates locally regulated banks in Liechtenstein,
An international team of over 300 specialists man-
Switzerland, Austria, Hong Kong and Singapore.
ages the assets of over 400 institutional investors
These banks have the principal focus of addressing
including pension funds, insurance companies,
the specific needs of wealthy private clients and they
sovereign wealth funds, banks and foundations.
offer access to state-of-the-art investment services.
In addition to its headquarters in Pfäffikon, Switzer­
LGT also manages the financial investments of the
land, LGT Capital Partners has offices in New York,
Liechtenstein Princely Family.
London, Dublin, Dubai, Hong Kong, Tokyo, Beijing,
Sydney and Vaduz.
4
LGT at a glance
Long-term strategy and corporate philosophy
LGT’s private ownership and efficient governance facil­
itate quick and independent decision-making based
on a long term perspective with regards to corporate
strategy and development.
For the past 15 years, LGT has pursued two strategic
priorities: the international expansion and diversification
of its private banking business, as well as the establishment of an outstanding global investment capacity to
serve the needs of the Liechtenstein Princely Family
and of institutional and private clients. To maximize the
alignment of interests among LGT’s clients, employees
and the shareholder it has been an important part of
LGT’s philosophy that the Princely Family and the employees co-invest in a substantial manner alongside
clients. In a world of growing social and environmental
pressures, LGT is looking to create shared value between
business and society – ideally increasing growth and profits while at the same time creating a positive impact for
the principal stakeholder, society and the environment.
Conservative balance sheet – financial stability
LGT has a healthy balance sheet, a high level of liquidity and a solid capitalization. Its equity capital is well
above the legal requirements and reflects the financial
strengths of the company in international comparison.
LGT is one of the world’s few international private
banks to have its credit rating assessed by independent
rating agencies such as Standard & Poor’s (current rating
for LGT: A+) and Moody’s (current rating for LGT: A1).
LGT at a glance
5
Organizational structure
LGT Group Foundation
H.S.H. Prince Philipp von und zu Liechtenstein
Group Internal Audit
LGT Group
H.S.H. Prince Max von und zu Liechtenstein
Human Resources
Marketing & Communications
Philanthropy
Private Banking
Thomas Piske
Foundation Board
Compliance
Controlling & Accounting
Legal & Tax
Risk Controlling/
Corporate Finance
CFO
Olivier de Perregaux
Asset Management
(LGT Capital Partners)
Dr. Roberto Paganoni
Operations & Technology
(LGT Financial Services)
Dr. André Lagger
H.S.H. Prince Philipp von und zu Liechtenstein, Chairman
Dr. Rodolfo Bogni 1
K B Chandrasekar 2
Dr. Phillip Colebatch 1
Sir Ronald Grierson †
Dr. Dominik Koechlin 1, 2
Prof. Dr. Conrad Meyer 2
Senior Management Board
H.S.H. Prince Max von und zu Liechtenstein, CEO LGT
Dr. André Lagger, CEO LGT Financial Services
Dr. Roberto Paganoni, CEO LGT Capital Partners
Olivier de Perregaux, CFO LGT
Thomas Piske, CEO LGT Private Banking
Internal Audit
Daniel Hauser, Head Group Internal Audit
External Audit
PricewaterhouseCoopers Ltd., Zurich
6
1
Member of the Human Resources and Compensation Committee
2
Member of the Audit Committee
†
Deceased on 23 October 2014
Organizational structure at 31 December 2014
Financial highlights
Assets under administration
2014
2013
2012
2011
2010
2
102 118
86 932
86 079
99 448
84 486
83 547
2 670
2 446
2 532
CHF m
128 795
107 319
of which client assets under administration
CHF m
125 786
104 501 2
of which LGT’s Princely Portfolio
CHF m
3 009
2 818
CHF m
14 429
8 015 2
12 342
5 758
3 102
of which net new money
CHF m
6 755
8 015
10 515
8 562
3 102
of which through acquisition
CHF m
7 674
0
1 827
0
0
of which through disposal
CHF m
0
0
0
-2 804
0
Total operating income
CHF m
1 010
895
957
709
883
Group profit
CHF m
165
139
214
70
148
Appropriation of Foundation earnings and dividends
CHF m
-100 1
-100
-206
-75
-75
Group equity capital
CHF m
3 354
3 216
3 084
2 701
3 084
Total assets
CHF m
35 533
28 312
27 099
26 248
24 388
17.5
19.3
Net new assets
2
Ratios
Tier 1
%
18.4
21.3
21.5
Cost /income ratio
%
75
77
65
2 081
1 921
1 830
1 779
1 889
Headcount at 31 December
75 3
70 4
Rating 5
Moody’s
A1
A1
Aa3
Aa3
Aa3
Standard & Poor’s
A+
A+
A+
A+
A+
1
Proposed
2
Adjusted for reclassified special mandate
3
Excluding charges in connection with the sale of LGT Bank in Liechtenstein & Co. OHG
4
Excluding payment to German authorities in 2010
5
LGT Bank Ltd., Vaduz
Financial highlights
7
Chairman’s report
law in Liechtenstein, group profit increased by 19 percent to CHF 165.0 million. With a Tier 1 capital ratio of
18.4 percent as at 31 December 2014, LGT is very well
capitalized and has a high level of liquidity.
Rise in assets under management to
CHF 128.8 billion
A particular highlight during the period under review
was the significant rise in assets under management
in our private banking and asset management businesses, which was strongly backed by our investment
expertise and our good investment performance. In
H.S.H. Prince Philipp von und zu Liechtenstein, Chairman LGT (left)
and H.S.H. Prince Max von und zu Liechtenstein, CEO LGT (right)
2014, LGT generated attractive net asset inflows of
CHF 6.8 billion from the existing business, which cor­
responds to growth of 6 percent. Including CHF 7.7
billion in selected assets from the private banking portfolios acquired from HSBC Private Bank (Suisse) SA,
LGT made good strategic and operational progress
LGT’s assets under management rose by 20 percent
in the 2014 financial year. In a fragile economic and
to CHF 128.8 billion as at 31 December 2014.
investment environment with continued low interest
rates, total operating income rose by 13 percent to
Private Banking:
over CHF 1.0 billion, compared with the previous year.
Growth in a challenging environment
To this record result, net interest and similar income
The private banking industry is experiencing continued
contributed with CHF 92.5 million (+15 percent), income
pressure due to lower revenue margins and cost
from services with CHF 701.8 million (+8 percent) and
increases arising from low interest rates and regulatory
income from trading activities and other operating
developments. In order to offset these developments
income with CHF 215.5 million (+30 percent).
we have been looking to realize economies of scale
and pursue opportunities for growth and standardiza-
Higher group profit
tion. The recent acquisition of a substantial portfolio
Total operating expenses rose by 10 percent in the
from HSBC should be viewed in this context. This
period under review to CHF 817.2 million. Business
transaction has enabled us to significantly increase
and office expenses increased by 5 percent to CHF
our asset base in Switzerland and demonstrate our
165.5 million. Personnel expenses rose by 12 percent
skills in successfully integrating new businesses.
to CHF 595.5 million, which is primarily attributable
to staff recruiting in 2013 and 2014 as well as per-
Net asset inflows unrelated to this acquisition also
formance-related compensation in accordance with
significantly contributed to the growth of our asset
the growth of the business. The cost-income ratio
base. We are particularly pleased that in 2014, all our
decreased by close to 2 percentage points to 75 per-
private banking platforms and locations contributed
cent compared to the 2013 financial year.
with positive inflows to this development. Since 2011
we have succeeded in increasing assets under admin-
8
Depreciation, amortization and provisions declined by
istration by 60 percent, which is an impressive affirma-
3 percent to CHF 56.2 million. After taking into account
tion of our standing and acceptance with our existing
a higher tax charge arising from changes to the tax
client base.
Chairman’s report
Training our client facing personnel in technical and
and Liechtenstein by the Top Employers Institute. The
advisory skills has been an important priority in recent
renowned institute was particularly impressed by our
years. In 2014, nearly 160 of our relationship managers
HR management and personnel strategy.
in Liechtenstein, Switzerland and Austria concluded
their training at our in-house campus and received
Outlook
their Private Banker LGT certification. Our investments
LGT got off to a good start in 2015 and we are con­
in the quality of our advice and services were once
fident that we are well-positioned to make further
again recognized by a number of independent institu-
progress. We have been pursuing many opportunities
tions in 2014. The Handelsblatt’s Elite Report gave
within our existing strategic framework which should
us the highest “summa cum laude” rating for the
allow us to progress and meet or even exceed expecta-
twelfth consecutive year, and Fuchsbriefe granted us
tions in the coming years. Technological advancements,
a «wholly commended» rating.
new investments and the optimization of processes
have improved our operations’ productivity and helped
Asset Management:
us to strengthen our product and services offering.
Bundling our investment expertise
Alternative asset classes are clearly gaining market
From today’s perspective, we do not expect the lifting
share among institutional and private investors, and
of the minimum exchange rate for the Swiss franc
the importance of strategic asset allocation for invest-
to have a material effect on the 2015 results due to
ment performance is increasingly being recognized.
currency hedging introduced in the past and applied
In 2014 we continued to build and expand our invest-
consistently, and to further growth measures.
ment expertise in these areas. In this context, last year
saw the integration of the former LGT Capital Manage­
Our excellent strategic positioning comes as a result
ment into LGT Capital Partners, thus further strength-
of our international presence in key markets, our high
ening our successful positioning as a leading provider
level of investment know-how, as well as our strong
of multi-alternative investment solutions with strong
capital base and stable ownership structure. We will
asset allocation capabilities. In addition, we completed
further invest in the development of our business and
a project that optimizes the interfaces between Private
continue to pursue our proven long-term strategy of
Banking and Asset Management. Bundling our various
international diversification – always with the aim of
products and competencies effectively will enhance the
standing side by side with our clients as partners in
marketing and positioning of our investment products
every market environment.
and services. Another highlight for our asset management business was the expansion of our global platform
We aim to continue to stand side by side with our
with the opening of an office in Sydney.
clients as partners in every market environment, and
we thank them for the trust they place in us. We also
Personnel management as a success factor
thank our employees for their outstanding dedication
Maintaining and improving the capabilities and com-
throughout the course of the reporting year.
mitment of our staff and the leadership and culture
of the organization is critical to our further success.
We are proud that in all our markets and across all
platforms, we have become a highly sought-after
employer that is attracting the best talent in the
industry. In this context, we are also proud to have
been certified as “Top Employer 2015” in Switzerland
Chairman’s report
9
Corporate governance
LGT and its holding company, LGT Group Foundation,
Internal Audit reports directly to the Founda­tion Board.
are 100% controlled by the Prince of Liechtenstein
The external auditors are re-evaluated on a regular basis.
Foundation (POLF), the beneficiary of which is H.S.H.
Reigning Prince Hans-Adam II. von und zu Liechtenstein.
The consolidated LGT is supervised by the Liechtenstein
The POLF names the Foundation Board of LGT Group
Financial Market Authority (FMA). Companies outside
Foundation. The Group’s Foundation Board meets at
Liechtenstein are supervised by their local authorities.
least four times a year and has constituted two separate committees (Audit Committee, Human Resources
Although it is a privately held company, LGT aims to
and Compensation Committee). The Chairman of the
follow the standard practices of public companies;
Group’s Foundation Board is H.S.H. Prince Philipp von
therefore LGT applies a transparent and proactive com-
und zu Liechtenstein. The CEO of LGT is H.S.H. Prince
munication policy. LGT Bank Ltd. is rated by Moody’s
Max von und zu Liechtenstein, who is responsible for the
and Standard & Poor’s. LGT has applied International
strategic and operational management of the Group.
Financial Reporting Standards (IFRS) since 1996.
The compensation system is supervised by the Human
Resources and Compensation Committee, and consists
of a fixed salary component, a yearly bonus and a
long-term incentive scheme (LTIS). As a privately held
company, LGT has developed an internal LTIS based on
an option scheme. Senior management and other key
people are entitled to participate in the LTIS. The LTIS
is calculated according to a predefined formula which
includes, in particular, the result of operating activities,
the investment performance of the Princely Portfolio
and the Group’s cost of capital. LTIS options are granted
yearly and can be exercised between three to seven
years after grant. In addition to direct compensation,
the employees have the possibility to co-invest directly
in client products. These co-investments are at the full
risk/benefit of the subscribing employee.
10
Corporate governance
Consolidated financial statements
11
Report of the Group auditors
12
Report of the Group auditors
Consolidated income statement
Consolidated income statement (TCHF)
Note
2014
2013
Change
absolute
%
Interest earned and similar income
168 162
167 967
195
0
Interest expense
-75 703
-87 895
12 192
-14
Net interest and similar income
1
92 459
80 072
12 387
15
Income from services
2
701 844
648 576
53 268
8
Income from trading activities
3
164 229
144 355
19 874
14
Other operating income
4
51 242
21 761
29 481
135
1 009 774
894 764
115 010
13
12
Total operating income
Personnel expenses
5
-595 512
-531 073
-64 439
Business and office expenses
6
-165 483
-157 302
-8 181
5
Other operating expenses
7
-56 161
-57 602
1 441
-3
-817 156
-745 977
-71 179
10
192 618
148 787
43 831
29
-27 443
-5 547
-21 896
395
165 175
143 240
21 935
15
164 980
139 180
25 800
19
195
4 060
-3 865
-95
Total operating expenses
Operating profit before tax
Tax expense
Profit for the year
8
Attributable to:
Equity holders of the parent entity
Non-controlling interests
The accompanying notes form an integral part of the consolidated financial statements.
Consolidated income statement
13
Consolidated statement of comprehensive income
Consolidated statement of comprehensive income (TCHF)
Note
Profit for the year
2014
2013
Change
absolute
%
165 175
143 240
21 935
15
610
2 135
-1 525
-71
242 039
155 678
86 361
55
218 899
148 619
70 280
47
24 058
11 501
12 557
109
-918
-4 442
3 524
-79
242 649
157 813
84 836
54
-164 956
43 183
-208 139
-482
-164 956
43 183
-208 139
-482
242 868
344 236
-101 368
-29
242 673
340 176
-97 503
-29
195
4 060
-3 865
-95
Other comprehensive income
Other comprehensive income that may be reclassified
to the income statement
Changes in cumulative translation adjustments
Change in revaluation reserves that may be reclassified
to the income statement, net of tax
25
thereof investments in associates
thereof available-for-sale securities
thereof cash flow hedge
Total other comprehensive income that may be reclassified
to the income statement
Other comprehensive income that may not be reclassified
to the income statement
Actuarial gains/losses on defined benefit plans, net of tax
25
Total other comprehensive income that may not be reclassified
to the income statement
Total comprehensive income for the year
Attributable to:
Equity holders of the parent entity
Non-controlling interests
The accompanying notes form an integral part of the consolidated financial statements.
14
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated balance sheet (TCHF)
Note
2014
2013
Change
absolute
%
Assets
Cash in hand, balances with central banks
9
9 271 191
7 697 095
1 574 096
20
Loans and advances to banks
10
4 547 824
2 984 370
1 563 454
52
Loans and advances to customers
11
10 501 690
7 559 575
2 942 115
39
Securities held for trading purposes
12
5 398
6 109
-711
-12
Derivative financial instruments
30
1 542 335
762 609
779 726
102
Financial assets designated at fair value
13
2 740 986
3 481 853
-740 867
-21
Available-for-sale securities
14
2 648 976
1 883 196
765 780
41
Investments in associates
15
3 009 842
2 818 936
190 906
7
Property and equipment
16
201 576
184 289
17 287
9
Intangible assets
17
414 646
247 862
166 784
67
123 392
104 411
18 981
18
63 509
37 202
26 307
71
Prepayments and accrued income
Deferred tax assets
Other assets
8
18
Total assets
461 876
544 932
-83 056
-15
35 533 241
28 312 439
7 220 802
26
Liabilities
Amounts due to banks
19
1 350 562
993 647
356 915
36
Amounts due to customers
20
26 182 580
20 507 700
5 674 880
28
Derivative financial instruments
30
1 379 421
674 802
704 619
104
Financial liabilities designated at fair value
21
532 742
545 546
-12 804
-2
Certificated debt
22
1 712 801
1 634 729
78 072
5
Accruals and deferred income
77 277
79 693
-2 416
-3
Current tax liabilities
73 142
32 605
40 537
124
Deferred tax liabilities
8
9 539
63 242
-53 703
-85
Other liabilities
23
774 752
487 759
286 993
59
Provisions
24
86 038
76 723
9 315
12
32 178 854
25 096 446
7 082 408
28
Foundation capital
339 044
339 044
0
0
Retained earnings
1 756 692
1 691 712
64 980
4
-39 119
-39 729
610
-2
1 297 429
1 220 346
77 083
6
3 354 046
3 211 373
142 673
4
Total liabilities
Equity capital
Cumulative translation adjustments
Other reserves
25
Total equity capital and reserves
attributable to LGT’s equity holder Non-controlling interests
Total equity capital
Total liabilities and equity capital
341
4 620
-4 279
-93
3 354 387
3 215 993
138 394
4
35 533 241
28 312 439
7 220 802
26
The accompanying notes form an integral part of the consolidated financial statements.
Consolidated balance sheet
15
Consolidated statement of changes in equity
Consolidated statement
Foundation
Retained
Cumulative
Other
Total
Non-
capital 1
earnings
translation
reserves
attribut-
controlling
adjust-
able to
interests
ments
LGT’s equity
of changes in equity
(TCHF)
Total
holders
1 January 2014
339 044
1 691 712
earnings and dividends
0
-100 000
Net profit
0
164 980
0
0
0
0
-39 729
1 220 346
3 211 373
4 620
3 215 993
0
0
-100 000
-4 066
-104 066
0
0
164 980
195
165 175
610
0
610
0
610
0
0
242 039
242 039
0
242 039
0
0
218 899
218 899
0
218 899
Appropriation of Foundation
Changes in cumulative
translation adjustments
Change in revaluation
reserves, net of tax
thereof investments in
associates
thereof available-for-sale
securities
0
0
0
24 058
24 058
0
24 058
thereof cash flow hedge
0
0
0
-918
-918
0
-918
0
0
0
-164 956
-164 956
0
-164 956
0
0
0
0
0
-408
-408
339 044
1 756 692
-39 119
1 297 429
3 354 046
341
3 354 387
Foundation
Retained
Cumulative
Other
Total
Non-
Total
capital 1
earnings
translation
reserves
attribut-
controlling
adjust-
able to
interests
ments
LGT’s equity
Actuarial gains/losses
Change in non-controlling
interests
31 December 2014
Consolidated statement
of changes in equity
(TCHF)
holders
1 January 2013
339 044
1 758 147
-41 864
1 021 485
3 076 812
7 436
3 084 248
earnings and dividends
0
-205 615
0
0
-205 615
-6 876
-212 491
Net profit
0
139 180
0
0
139 180
4 060
143 240
0
0
2 135
0
2 135
0
2 135
0
0
0
155 678
155 678
0
155 678
0
0
0
148 619
148 619
0
148 619
Appropriation of Foundation
Changes in cumulative
translation adjustments
Change in revaluation
reserves, net of tax
thereof investments in
associates
thereof available-for-sale
securities
0
0
0
11 501
11 501
0
11 501
thereof cash flow hedge
0
0
0
-4 442
-4 442
0
-4 442
0
0
0
43 183
43 183
0
43 183
0
0
0
0
0
0
0
339 044
1 691 712
-39 729
1 220 346
3 211 373
4 620
3 215 993
Actuarial gains/losses
Change in non-controlling
interests
31 December 2013
1
Foundation capital is fully paid and cannot be broken down to units.
The accompanying notes form an integral part of the consolidated financial statements.
16
Consolidated statement of changes in equity
Consolidated cash flow statement
Consolidated cash flow statement (TCHF)
Note
2014
2013
165 175
143 240
52 970
44 617
27 443
5 547
Changes in accrued income and expenses
286 680
88 750
Interest and similar income received
166 845
182 682
Interest paid
-60 430
-64 290
Cash flow from operating activities
Profit after tax
Impairment, depreciation, provisions
Tax expense
8
Income tax paid
-65 385
-12 716
Cash flow from operating activities before changes in operating assets and liabilities
573 298
387 830
477 145
1 014 135
-2 333 705
-315 804
Loans and advances to banks
Loans and advances to customers
Trading securities and financial instruments designated at fair value
718 596
-71 903
Amounts due to banks
356 775
-237 840
3 045 553
1 422 096
-370 374
-276 586
Cash flow from changes in operating assets and liabilities
1 893 990
1 534 098
Net cash flow from operating activities
2 467 288
1 921 928
256
284
Amounts due to customers
Other assets and other liabilities
Cash flow from investing activities
Proceeds from sales of property and equipment
Purchase of property and equipment
16
-30 014
-24 353
Purchase of intangible assets
17
-186 973
-372
-31 200
0
1 502
0
Cash outflow on acquisition/foundation of subsidiaries
Cash inflow from sale of subsidiaries
Disposals of share of investments in associates
4
4, 15
51 011
2 291
Proceeds from sales of investment securities
14
2 924 732
1 984 761
Purchase of investment securities
14
-3 595 631
-1 943 908
Sale of intangible assets
Change in non-controlling interests
Net cash flow from investing activities
76
0
-408
0
-866 649
18 703
364 439
344 203
-286 367
-282 462
-4 066
-6 876
-100 000
-205 615
-25 994
-150 750
-549
3 255
1 574 096
1 793 136
7 697 095
5 903 959
Cash flow from financing activities
Issue of certificated debt
Repayment of certificated debt
Dividends paid to non-controlling interests
Dividends paid to beneficiary
Net cash flow from financing activities
Effects of exchange rate changes on cash
Change in cash in hand, balances with central banks
At the beginning of the period
9
At the end of the period
9
Change in cash in hand, balances with central banks
9 271 191
7 697 095
1 574 096
1 793 136
Consolidated cash flow statement
17
Notes to the consolidated financial statements
Group accounting principles
Introduction
Basis of consolidation
LGT Group Foundation, Herrengasse 12, Vaduz,
Subsidiaries are fully consolidated from the date on
Principality of Liechtenstein, is the holding company
which control is transferred to the Group. Inter-company
of LGT, a global financial services institution. The
transactions, balances and unrealized gains on trans­
beneficiary of LGT Group Foundation is the Prince
actions between Group companies are eliminated. Sub­
of Liechtenstein Foundation. The beneficiary of the
sidiaries are deconsolidated from the date that control
Prince of Liechtenstein Foundation is the reigning
ceases. The acquisition method of accounting is used to
Prince of Liechtenstein, H.S.H. Prince Hans-Adam II.
account for the acquisition of subsidiaries by the Group.
of Liechtenstein.
The cost of an acquisition is measured at the fair value of
the assets given, equity instruments issued and liabilities
The terms “LGT Group”, “LGT” or “Group” mean
incurred or assumed at the date of exchange. Costs di-
LGT Group Foundation together with its subsidiary
rectly attributable to the acquisition are recognized in the
undertakings and the term “Company” refers to
income statement. Identifiable assets acquired and lia-
LGT Group Foundation.
bilities and contingent liabilities assumed in a business
combination are measured initially at their fair values
Presentation of amounts
at the acquisition date, irrespective of the extent of any
The Group publishes its financial statements in thou-
minority interest. The excess of the cost of acquisition
sand Swiss francs (TCHF) unless otherwise stated.
over the fair value of the Group’s share of the identifiable
net assets acquired is recorded as goodwill. If the cost of
Accounting principles
acquisition is less than the fair value of the net assets
The consolidated financial statements for the financial
of the subsidiary acquired, the difference is recognized
year 2014 are prepared in accordance with Interna­
directly in the income statement. A list of the Group’s
tional Financial Reporting Standards (IFRS). LGT has
principal subsidiary undertakings is provided in note 33.
applied IFRS rules since 1996. The consolidated financial statements are prepared on the historical cost
Investments in associates
convention, as modified by revaluation of available-
Investments in associates are investments in companies
for-sale financial assets, financial assets and liabilities
over which the Group has significant influence but
held at fair value through profit or loss and all
not control, generally accompanying a shareholding of
derivative instruments. A summary of the principal
between 20 and 50% of the voting rights. They may
Group accounting policies is set out below.
also indicate a significant interest in investment funds,
which are managed by the Group but in which there are
The CEO and the CFO of LGT considered the consoli-
no voting rights. LGT associates are recognized using
dated financial statements on 15 April 2015. They
the equity method, and are initially recognized shown
were approved for issue by the Audit Committee of
at fair value plus transaction costs. Unrealized gains
the LGT Group Foundation Board on 22 April 2015.
on transactions between the Group and its associates
The Foundation Board approved the consolidated
are eliminated unless the transaction provides evidence
financial statements for issue on 23 April 2015.
of an impairment of the asset transferred. Accounting
The accounts were presented for approval at the
policies have been changed where necessary to ensure
Foundation Meeting to the Foundation Supervisory
consistency with the policies adopted by the Group.
Board on 23 April 2015. The Foundation Board pro-
The investments in associates are reported in note 15.
posed to the Foundation Meeting of 23 April 2015
18
the distribution of CHF 100 millions to the Prince of
The Group’s share of its associates’ post-acquisition
Liechtenstein Foundation. The accounts on pages
profit or loss is recognized in the income statement,
13 to 79 were approved by the Foundation Board
or in other reserves. Its share of post-acquisition
on 23 April 2015 and are signed on its behalf by
movements in reserves is recognized in reserves. The
H.S.H. Prince Philipp of Liechtenstein, Chairman,
cumulative post-acquisition movements are adjusted
and Olivier de Perregaux, CFO of LGT.
against the carrying amount of the investment.
Notes to the consolidated financial statements
Foreign currencies
Goodwill and fair value adjustments arising from the
Functional and presentation currency
acquisition of a foreign entity are treated as assets
Items included in the financial statements of each of
and liabilities of the foreign entity and translated at
the Group’s entities are measured using the currency
the closing rate.
of the primary economic environment in which the
entity operates (“the functional currency”).
Foreign exchange rates
The conso­lidated financial statements are presented in
The foreign exchange rates for the major currencies
Swiss francs, which is the Group’s presentation currency.
which have been applied are as follows:
Transactions and balances
2014
Average rate
Year-end rate
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing
on the dates of the transactions. Foreign exchange gains
and losses resulting from the settlement of such transactions and from the trans­lation at year-end ex­change
rates of monetary assets and liabilities denomin­ated in
foreign currencies are recognized in the income statement, except when deferred in equity as qualifying cash
flow hedges and qualifying net investment hedges.
CHF per 1 USD 0.9169
0.9936
CHF per 1 EUR
1.2134
1.2024
CHF per 1 GBP
1.5089
1.5492
2013
Average rate
Year-end rate
CHF per 1 USD 0.9237
0.8891
CHF per 1 EUR
1.2271
1.2252
CHF per 1 GBP
1.4498
1.4724
Translation differences on non-monetary items, such
as equities held at fair value through profit or loss, are
Interest income and expense
reported as part of the fair value gain or loss. Trans­lation
Interest income and expense are recognized in the
differences on non-monetary items, such as equities
income statement for all instruments measured at
classified as available-for-sale financial assets, are includ-
amortized cost using the effective interest method.
ed in the fair value reserve in equity.
The effective interest method is a method of calcula­ting
Group companies
the amortized cost of a financial asset or a financial
The results and financial position of all the Group
liability, and of allocating the interest income or interest
entities that have a functional currency different from
expense over the relevant period. The effective interest
the presentation currency are translated into the
rate is the rate that exactly discounts estimated future
presentation currency as follows:
cash payments or receipts through the expected life of
n
n
n
assets and liabilities for each balance sheet presented
the financial instrument or, when appropriate, a shorter
are translated at the closing rate on the date of
period to the net carrying amount of the financial asset
that balance sheet;
or financial liability. When calculating the effective inter­
income and expenses for each account of the income
est rate, the Group estimates cash flows considering
statement are translated at average exchange rates;
all contractual terms of the financial instrument (for
all resulting exchange differences are recognized as
a separate component of equity.
example, prepayment options) but does not consider
future credit losses. The calculation includes all fees
and interest points paid or received between parties to
On consolidation, exchange differences arising from
the contract that are an integral part of the effective
the translation of the net investment in foreign entities,
interest rate, transaction costs and all other premiums
and of borrowings and other currency instruments
or discounts. Once a financial asset or a group of similar
designated as hedges of such investments, are taken
financial assets has been written down as a result of an
to equity. When a foreign operation is sold, such
impairment loss, interest income is recognized using the
exchange differences are recognized in the income
rate of interest used to discount the future cash flows
statement as part of the gain or loss on the sale.
for the purpose of measuring the impairment loss.
Notes to the consolidated financial statements
19
Commission income
Intangible assets
Commission income and any associated expense arising
Goodwill
from the provision of private banking and investment
Goodwill represents the excess of the cost of a business
management services, credit commissions and interest
combination over the fair value of the Group’s share of
are all recognized using the accrual method. Fixed
the net identifiable assets of the acquired subsidiary/
commissions receivable and payable are recognized
associate at the date of acquisition. Goodwill on a
evenly over the life of the relevant contract.
business combination of subsidiaries is included in
“goodwill and other intangible assets”. Goodwill on
Performance fees are defined as management fees
a business combination of investments in associates
payable for the provision of investment management
is included in “investments in associates”. Goodwill is
services, but which are conditional on the performance
tested annually for impairment and c­ arried at cost less
of the fund or account under contract. They are accrued
accumulated impairment losses. Gains and losses on
according to the contract terms for the measurement
the disposal of an entity in­clude the carrying amount
period when they can be reliably measured, and are
of goodwill relating to the entity sold.
invoiced only after confirmation of the performance
Software
fee calculation.
Software acquired by the Group is stated at cost less
Property and equipment
accumulated amortization and accumulated i­mpairment
Property and equipment and their subsequent costs
losses. Subsequent expenditure on software assets is
are stated at cost less accumulated depreciation and
capitalized only when it increases the future economic
accumulated impairment losses. All other repairs and
benefits embodied in the specific asset to which it
maintenance are charged to the income statement
relates. All other expenditure is expensed as incurred.
during the financial period in which they are incurred.
Amortization is recognized in the income statement on
Property and equipment are periodically reviewed for
a straight-line basis over the estimated useful life of the
impairment. An asset’s carrying amount is written
software, from the date that it is available for use. The
down immediately to its recoverable amount if the
estimated useful life of software is three to ten years.
asset’s carrying amount is greater than its estimated
recoverable amount. The recoverable amount is the
Other intangible assets
higher of the asset’s fair value less costs to sell and
Other intangible assets are recognized on the balance
value in use. Depreciation on it is provided, on a
sheet at cost determined at the date of acquisition
straight-line basis, from the date of purchase, over the
and are amortized using the straight-line method over
estimated useful life of the asset. The assets’ residual
their estimated useful economic life, not exceeding
values and useful lives are reviewed, and adjusted if
20 years. The amortization is recognized in other oper-
appropriate, at each balance sheet date. Estimated
ating expenses in the income statement.
asset lives vary in line with the following:
At each balance sheet date other intangible assets are
Freehold buildings
50 years
reviewed for indications of impairment or changes in
Leasehold improvements
period of lease
estimated future benefits. If such indication exists, an
IT equipment
3–5 years
analysis is performed to assess whether the carrying
Office equipment
5 years
amount of other intangible assets is fully recoverable.
Motor vehicles
4 years
An impairment is charged if the carrying amount
exceeds the recoverable amount.
20
Notes to the consolidated financial statements
Financial instruments
Financial assets at fair value through profit or loss
Financial assets
This category has two sub-categories: financial assets
Purchases and sales of financial assets at fair value
held for trading, and those designated at fair value
through profit or loss, held to maturity and available
through profit or loss at inception. A financial asset is
for sale are recognized on the trade-date – the date
classified in this category if acquired principally for t­ he
on which the Group commits to purchase or sell the
purpose of selling in the short term or if so designated
asset. Loans are recognized when cash is advanced to
by management. Derivatives are also categorized as
the borrowers. Financial assets are initially recognized
held for trading unless they are designated as hedges.
at fair value plus transaction costs for all financial
assets not carried at fair value through profit or loss.
The Group designates financial assets and liabilities at
Financial assets are derecognized when the rights
fair value through profit or loss when either
to receive cash flows from the financial assets have
n
expired or where the Group has transferred substantially all risks and rewards of ownership.
the assets or liabilities are managed, evaluated
and reported internally on a fair value basis;
n
the designation eliminates or significantly reduces an
accounting mismatch which would otherwise arise;
Loans and advances
n
the asset or liability contains an embedded derivative
Loans and receivables are non-derivative financial
that significantly modifies the cash flows that would
assets with fixed or determinable payments that are
otherwise be required under the contract.
not quoted on an active market. They arise when the
Group provides money, goods or services directly to
Held-to-maturity securities
a debtor with no intention of trading the receivable.
Held-to-maturity securities are financial assets with fixed
Loans and advances to customers and to banks are
or determinable payments and fixed maturity that LGT
reported at their amortized cost less allowances for
has the positive intention and ability to hold to maturity.
any impairment or losses.
Held-to-maturity securities are carried at amortized cost
subject to a test for impairment. The ­difference between
Investment securities
initial recognition and nominal value is amortized over
Investment securities are classified as financial assets
the period to maturity. This amount and interest income
at fair value through profit or loss, held-to-maturity
are stated as net interest income.
and available-for-sale securities. They are recognized
on the balance sheet and initially measured at fair
Available-for-sale securities
value, which is the cost on the consideration given
Available-for-sale securities are those securities that do
or received to acquire them. Subsequent to initial
not properly belong in trading securities or held-to-
recognition, securities are remeasured at fair value,
maturity securities. They are initially recognized at
except held-to-maturity securities which are carried
fair value (plus transaction costs). Available-for-sale
at amortized cost subject to a test for impairment. To
securities are subsequently remeasured at fair value or
the extent that quoted prices are not readily available,
amounts derived from cash flow models. Fair values for
fair value is based on either internal valuation models
unlisted equity securities are measured using applicable
or management’s estimate of amounts that could be
price/earnings or price/cash flow ratios refined to reflect
realized, based on observable market d
­ ata, assuming
the specific circumstances of the issuer. Unrealized
an orderly liquidation over a reasonable period of time.
gains and losses arising from changes in the fair
value of securities classified as available-for-sale are
recognized in equity. Equity securities for which fair
values cannot be measured reliably are recognized at
cost less impairment. When the securities are d
­ isposed
of or im­paired, the related accumulated fair value
adjustments are included in the income state­ment as
income from investment securities.
Notes to the consolidated financial statements
21
Borrowings
A hedge is regarded as highly effective if actual results
Borrowings are recognized initially at fair value,
are within a range of 80 to 125%.
being their issue proceeds (fair value of consideration
received) net of transaction cost incurred. Borrowings
Changes in the fair value of derivatives that are
are subsequently stated at amortized cost, any differ-
­designated and qualify as fair value hedges and that
ence between proceeds net of transaction costs and
prove to be highly effective in relation to hedged risk
the redemption value is recognized in the income
are recorded in the income statement, along with the
statement over the period of the borrowing using the
corresponding change in the fair value of the hedged
effective interest method.
asset or liability that is attributable to that specific
hedged risk. The fair value change of the hedged item
Other liabilities
in a portfolio hedge of interest rate risks is reported
Other liabilities are reported at amortized cost.
separately from the hedged portfolio in other assets
Interest and discounts are taken to net interest and
or other liabilities as appropriate.
similar income on an accrual basis.
If the hedge no longer meets the criteria for hedge
Derivative financial instruments and hedging
accounting, in the case of interest-bearing financial
Derivatives are initially recognized at fair value on the
instruments the difference between the carrying
date on which a derivative contract is entered into
amount of the hedged position at that time and the
and are subsequently remeasured at their fair value.
value that this position would have exhibited without
Fair values are obtained from quoted market prices
hedging is amortized to net profit or loss over the
in active markets and valuation techniques, including
remaining period to maturity of the original hedge. In
discounted cash flow models and option pricing
the case of non-interest-bearing financial instruments,
models, as appro­priate. All derivatives are carried
on the other hand, this difference is immediately
as assets when fair value is positive and as liabilities
recorded in the income statement.
when fair value is negative.
Changes in the fair value of derivatives that have been
In the case of hedging transactions involving derivative
recorded as a cash flow hedge, that fulfill the criteria
financial instruments, on the inception of the transaction
mentioned above and that prove to be effective in
it is determined whether the specific transaction is
hedging risk are reported under other reserves in
n
a hedge of the value of a balance sheet item
(a fair value hedge), or
n
a hedge of a future cash flow or obligation
(a cash flow hedge).
Group equity capital. If the hedged cash flow or the
obligation leads to direct recognition in the income
statement, the hedging instrument’s cumulative gains
or losses from previous periods in Group equity c­ apital
are included in the income statement in the same
Derivatives categorized in this manner are treated
period as the hedged transaction.
as hedging instruments in the financial statements if
they fulfill the following criteria:
n
n
n
existence of documentation that specifies the
hedging transactions and are in line with the risk
under­lying transaction (balance sheet item
management principles of the Group. However, in
or cash flow), the hedging instrument as well as
view of the strict and specific guidelines of IFRS, they
the hedging strategy/relationship,
do not fulfill the criteria to be treated as hedging
effective elimination of the hedged risks through
transactions for accounting purposes. They are there-
the hedging transaction during the entire reporting
fore reported as trading positions. Changes in value
period (high correlation),
are recorded in the income statement in the corres­
sustained high effectiveness of the hedging
transaction.
22
Certain ­derivative transactions represent financial
Notes to the consolidated financial statements
ponding period.
Measurement of fair values
the Group holds. Price data and parameters used in
For financial instruments traded in active markets, the
the measurement procedures applied are generally
measurement of fair values of financial assets and
reviewed carefully and adjusted, if necessary – particu­
financial liabilities is based on quoted market prices
larly in view of the current market developments.
or dealer price quotations. This includes listed equity
securities and quoted debt instruments on major
The fair value of over-the-counter (OTC) derivatives is
exchanges as well as exchange traded derivatives.
measured using valuation methods that are commonly
accepted in the financial markets, such as present
A financial instrument is regarded as quoted on an
value techniques and option pricing models. The fair
active market if quoted prices are readily and regularly
value of foreign exchange forwards is generally based
available from an exchange, dealer, broker, industry
on current forward exchange rates.
group, pricing service or regulatory agency, and those
prices represent actual and regularly occurring market
Private equity investments for which market quotations
transactions on an arm’s length basis. If the above crite­
are not readily available are valued at their fair values
ria are not met, the market is regarded as being inactive.
as determined in good faith by the respective Board of
Directors in consultation with the investment manager.
For all other financial instruments, fair value is meas-
In this respect, investments in other investment com-
ured using valuation techniques. In these techniques,
panies (fund investments) which are not publicly traded
fair values are measured from observable data in
are normally valued at the underlying net asset value
respect of similar financial instruments, using models
as advised by the managers or administrators of these
to measure the present value of expected future cash
investment companies, unless the respective Board of
flows or other valuation techniques, using inputs (for
Directors is aware of good reasons why such a valu-
example, LIBOR yield curve or FX rates) existing at the
ation would not be the most appropriate indicator of
consolidated balance sheet dates.
fair value.
The Group uses widely recognized valuation models
In estimating the fair value of private equity fund in­­
for measuring fair values of non-standardized financial
vestments, the respective Board of Directors considers
instruments of lower complexity, such as options or
all appropriate and applicable factors (including a sen-
interest rate and currency swaps. For these financial
sitivity to non-observable market factors) relevant to
instruments, inputs into models are generally market-
their value, including but not limited to the following:
observable.
n
reference to the fund investment’s reporting informa­tion including consideration of any time lags between
For more complex instruments, the Group uses intern­ally
the date of the latest available reporting and the
developed models, which are usually based on valuation
balance sheet date of the respective Group entity in
methods and techniques generally recognized as stand­
those situations where no December valuation of the
ard within the industry. Valuation models are used pri­
underlying fund is available. This includes a detailed
marily to value derivatives transacted in the over-the-
analysis of exits (trade sales, initial public offerings,
counter market. Some of the inputs to these models
etc.) which the fund investments have gone through
may not be market observable and are therefore estima-
in the period between the latest available reporting
­ted based on assumptions. The impact on net profit of
and the balance sheet date of the respective Group
financial instrument valuations reflecting non-market ob-
entity, as well as other relevant valuation information.
­servable inputs (level 3 valuations) is disclosed in note 29.
This information is a result of continuous contact
with the investment managers and, specifically, by
The output of a model is always a measure or approxi-
monitoring calls made to the investment managers,
mation of a value that cannot be determined with
distribution notices received from the investment
certainty, and valuation techniques employed may
managers in the period between the latest available
not fully reflect all factors relevant to the positions
report and the balance sheet date of the respective
Notes to the consolidated financial statements
23
Group entity, as well as the monitoring of other finan­-
events that occurred after the initial recognition of the
cial information sources and the assessment thereof;
asset (a “loss event”) and that loss event (or events)
n
reference to transaction prices;
has an impact on the estimated future cash flows
n
result of operational and environmental assessments:
of the financial asset or group of financial assets that
periodic valuation reviews are made of the valua-
can be reliably estimated. Objective evidence that a
tions of the underlying investments as reported by
financial asset or group of assets is impaired includes
the investment managers to measure if the values
observable data that comes to the attention of the
are reasonable, accurate and reliable. These reviews
Group about the following loss events:
in­clude a fair value estimation using widely recog-
n
significant financial difficulty of the issuer or obligor;
nized valuation methods such as multiple analysis
n
a breach of contract, such as a default or delin-
n
the Group granting to the borrower, for economic
and discounted cash flow analysis;
n
n
review of management information provided by the
quency in interest or principal payments;
managers/administrators of the fund investments
or legal reasons relating to the borrower’s financial
on a regular basis; and
difficulty, a concession that the lender would not
otherwise consider;
mark-to-market valuations for quoted investments
held by the managers/administrators of the fund
n
investments which make up a significant portion of
the relevant Group entity’s net asset value.
it becoming probable that the borrower will enter
bankruptcy or other financial reorganization;
n
the disappearance of an active market for that
n
observable data indicating that there is a measurable
financial asset because of financial difficulties;
If the respective Board of Directors comes to the conclusion upon recommendation of the investment man­
decrease in the estimated future cash flows from a
ager after applying the above-mentioned valuation
group of financial assets since the initial recognition
methods, that the most recent valuation reported by
of those assets, although the decrease cannot yet be
the manager/administrator of a fund investment is
identified with the individual f­ inancial assets in the
materially misstated, it will make the necessary adjust­
group, including:
ments using the results of its own review and analysis.
– adverse changes in the payment status of
Typically, the fair value of such investments are remeas-
borrowers in the group; or
­ured based on the receipt of periodic (usually quarterly)
– national or local economic conditions that
reporting provided to the investors in such vehicles by
correlate with defaults on the assets in the group.
the managers or administrators. For new investments
in such vehicles, prior to the receipt of fund reporting,
The Group first assesses whether objective evidence of
the investments are usually valued at the amount con­
impairment exists individually for financial assets that are
tributed, which is considered to be the best indicator
individually significant, and individually or collectively
of fair value.
for financial assets that are not individually significant.
If the Group determines that no objective evidence of
In cases when the fair value of unlisted equity instru-
impairment exists for an individually assessed finan-
ments cannot be measured reliably, the instruments
cial asset, whether significant or not, it includes the
are carried at cost less impairment.
asset in a group of financial assets with similar credit
risk characteristics and collectively assesses them for
Impairment of financial assets
impairment. Assets that are individually assessed for
Assets carried at amortized cost
impairment and for which an impairment loss is or
The Group assesses at each balance sheet date whether
continues to be recognized are not included in a
there is objective evidence that a financial asset or a
collective assessment of impairment.
group of financial assets is impaired. A financial asset or
24
a group of financial assets is impaired and impairment
If there is objective evidence that an impairment loss on
losses are incurred if, and only if, there is o
­ bjective
loans and receivables or held-to-maturity investments
evidence of impairment as a result of one or more
carried at amortized cost has been incurred, the amount
Notes to the consolidated financial statements
of the loss is measured as the difference between the
period (for example, changes in unemployment rates,
asset’s carrying amount and the present value of esti-
property prices, payment status, or other factors indica-
mated future cash flows (excluding future credit losses
tive of changes in the probability of losses in the group
that have not been incurred) discounted at the finan-
and their magnitude). The methodology and assump-
cial asset’s original effective interest rate. The carrying
tions used for estimating future cash flows are reviewed
amount of the asset is reduced through the use of
regularly by the Group to reduce any differences
an allowance account and the amount of the loss is
between loss estimates and actual loss experience.
recognized in the income statement. If a loan or heldto-maturity investment has a variable interest rate,
When a loan is uncollectible, it is written off against
the discount rate for measuring any impairment loss
the related provision for loan impairment. Such loans
is the current effective interest rate determined under
are written off after all the necessary procedures have
the contract. As a practical expedient, the Group may
been completed and the amount of the loss has been
measure impairment on the basis of an instrument’s
determined. Subsequent recoveries of amounts pre­
fair value using an observable market price.
viously written off decrease the amount of the provision for loan impairment in the income statement.
The calculation of the present value of the estimated
future cash flows of a collateralized financial asset
If, in a subsequent period, the amount of the impair-
reflects the cash flows that may result from foreclo-
ment loss decreases and the decrease can be related
sure less costs for obtaining and selling the collateral,
objectively to an event occurring after the impair-
whether or not foreclosure is probable.
ment was recognized (such as an improvement in
the debtor’s credit rating), the previously recognized
For the purposes of a collective evaluation of impair-
impairment loss is reversed by adjusting the allowance
ment, financial assets are grouped on the basis of
ac­count. The amount of the reversal is recognized in
similar credit risk characteristics (i.e. on the basis of
the income statement.
the Group’s grading process that considers asset type,
industry, geographical location, collateral type, past-due
Assets carried at fair value
status and other relevant factors). Those characteristics
The Group assesses at each balance sheet date whether
are relevant to the estimation of future cash flows
there is objective evidence that a financial asset or a
for groups of such assets by being indicative of the
group of financial assets is impaired. In the case of
debtors’ ability to pay all amounts due according to
equity investments classified as available-for-sale, a
the contractual terms of the assets being evaluated.
signi­ficant or prolonged decline in the fair value of the
security below its cost is considered in determining
Future cash flows in a group of financial assets that are
whet­her the assets are impaired. If any such evidence
collectively evaluated for impairment are estimated on
exists for available-for-sale financial assets, the cumu-
the basis of the contractual cash flows of the assets in
lative loss – measured as the difference between the
the group and historical loss experience for assets with
acquisition cost and the current fair value, less any
credit risk characteristics similar to those in the group.
impairment loss on that financial asset previously rec-
Historical loss experience is adjusted on the basis of
ognized in profit or loss – is removed from equity and
current observable data to reflect the effects of current
recognized in the income statement. Impairment losses
conditions that did not affect the period on which the
recognized in profit or loss on equity instruments are
historical loss experience is based and to remove the
not reversed through the income statement, they are
effects of conditions in the historical period that do
reversed through equity. If, in a subsequent period, the
not exist currently.
fair value of a debt instrument classified as availablefor-sale increases and the increase can be objectively
Estimates of changes in future cash flows for groups
related to an event occurring after the impairment
of assets should reflect and be directionally consistent
loss was recognized in profit or loss, the impairment
with changes in related observable data from period to
loss is reversed through the income statement.
Notes to the consolidated financial statements
25
Renegotiated loans
Leasing
Loans that are either subject to collective impairment
The leases entered into by the Group are operating
assessment or individually significant and whose terms
leases. The expenses from operating leases (the rights
have been renegotiated are no longer considered to be
and responsibilities of ownership remain with the lessor)
past due but are treated as new loans. In subsequent
are disclosed in business and office expenses.
years, the asset is considered to be past due and disclosed only if renegotiated.
Cash in hand
For the purpose of the consolidated cash flow state-
Provisions
ment, cash in hand comprises liquid assets including
Provisions for restructuring costs, legal claims and other
cash and balances with central banks and post offices.
operational risk are recognized, when the Group has a
present legal or constructive obligation as a result of
Taxation
past events, when it is more likely than not that an out­
Corporate tax payable is provided on the taxable profits
flow of resources will be required to settle the obliga-
of Group companies at the applicable current rates.
tion and when the amount has been reliably estimated.
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax
Fiduciary transactions
bases of assets and liabilities and their carrying amounts in
The Group commonly acts as trustees and in other
the consolidated financial statements. Deferred income tax
fiduciary capacities that result in the holding or placing
is determined using tax rates (and laws) that have been
of assets on behalf of individuals, trusts, retirement
enacted or substantially enacted by the balance sheet date
benefit plans and other institutions. These assets and
and are expected to apply when the related deferred
income arising thereon are excluded from these finan-
income tax asset is realized or the deferred income tax
cial statements, as they are not assets of the Group.
liability is settled. Deferred tax assets are recognized where
it is probable that future taxable profit will be available
Repurchase and reverse repurchase transactions
against which the temporary differences can be utilized.
(repo transactions)
Repo transactions are used to refinance and fund money
Employee benefits
market transactions. They are entered in the balance
Short-term benefits
sheet as advances against collateral and cash contribu­
Salaries are recognized in the income statement upon
tions or with pledging of securities held in the Group’s
payment. The amount for bonuses is accrued and will
own account. Securities provided to serve as collateral
be paid at the beginning of the following year.
thus continue to be posted in the corresponding balance
sheet positions – securities received to serve as collateral
Medium-term benefits
are not reported in the balance sheet. Interest resulting
Senior management and other key people of the Group
from the trans­actions is posted as net interest income.
are entitled to participate in a long-term incentive scheme.
The incentive scheme gives the holder the possibility to
26
Contingent liabilities
participate in the development of the economic value
A contingent liability is a possible obligation that arises
added of the Group. In principle, the economic value
from past events and whose existence will be confirmed
added represents the operating profit of the Group and
only by the occurrence or non-occurrence of one or
the return on LGT’s Princely Portfolio after adjustments
more uncertain future events not wholly within the con­­
for capital and refinancing costs. Options granted under
trol of the entity. Or a contingent liability is a present
the scheme cannot be exercised for a period of three
obligation that arises from past events but is not rec-
years from the date of grant of option and are exercis-
ognized because it is not probable that an outflow of
able within three to seven years from the date of grant
resources embodying economic benefits will be required
of option. The annual costs of the scheme are charged
to settle the obligation or the amount of the obligation
to the income statement. The accruals are shown as
cannot be measured with sufficient reliability.
other liabilities until their realization.
Notes to the consolidated financial statements
Pension obligations
For defined contribution plans, the Group pays con-
Group companies operate various pension schemes.
tributions to privately administered pension insurance
The schemes are generally funded through payments
plans on a mandatory, contractual or voluntary basis.
to insurance companies or trustee-administered funds,
The contributions are recognized as employee benefit
determined by periodic actuarial calculations. The
expense when they are due. Prepaid contributions are
Group has both defined benefit and defined contribu­
recognized as an asset to the extent that a cash refund
tion plans. A defined benefit plan is a pension plan
or a reduction in the future payments is available.
that defines an amount of pension benefit that an
employee will receive on retirement, usually dependent
Client assets under administration
on one or more factors such as age, years of service
Client assets under administration are stated according
and compensation. A defined contribution plan is a
to the provisions of the Liechtenstein banking law.
pension plan under which the Group pays fixed contributions into a separate entity.
Events after the reporting period
On 15 January 2015, the Swiss National Bank (SNB)
The liability recognized in the balance sheet in respect of
discontinued the minimum targeted exchange rate for
defined benefit pension plans is the present value of the
the Swiss franc against the Euro. As a consequence,
defined benefit obligation at the balance sheet date less
the major currencies relevant for the Group (EUR and
the fair value of plan assets. If the fair value of the plan
USD) devaluated against the Swiss franc. The abandon­
assets is higher than the present value of the defined
ment of the minimum exchange rate had no impact
benefit obligation, the measurement of the resulting
on LGT’s financial statements 2014.
defined benefit asset is limited to the present value of
economic benefits available in the form of refunds from
Management’s judgments
the plan or reductions in future contributions to the plan.
The Group makes estimates and assumptions that affect
The defined benefit obligation is calculated annually by
the reported amounts of assets and liabilities within the
independent qualified actuaries using the projected unit
next financial year. Estimates and judgments are con­
credit method and takes the specific features of each
tinually evaluated and are based on historical experi-
plan including risk sharing between the employee and
ence and other factors, including expectations that are
employer into account. The present value of the defined
believed to be reasonable under the circumstances.
benefit obligation is determined by discounting the
estimated future cash outflows using interest rates of
Impairment losses on loans and advances
high-quality corporate bonds that are denominated in
The Group reviews its loan portfolios to assess impair-
the currency in which the benefits will be paid, and
ment at least on a quarterly basis. In determining wheth-
that have terms to maturity approximating to the terms
er an impairment loss should be recorded in the income
of the related pension liability.
statement, the Group makes judgments as to whether
there is any observable data indicating that there is a
Remeasurements of the net defined benefit liability,
measurable decrease in the estimated future cash flows
which comprise actuarial gains and losses, the return
from a portfolio of loans before the decrease can be
on plan assets and the effect of the asset ceiling
identified with an individual loan in that portfolio. This
(if any), are recognized immediately in other compre-
evidence may include observable data indicating that there
hensive income.
has been an adverse change in the payment status of
borrowers in a group, or national or local economic condi-
When the benefits of a plan are changed or when a plan
tions that correlate with defaults on assets in the group.
is curtailed, the resulting change in benefit that relates to
past service or the gain or loss on curtailment is recog-
Management uses estimates based on historical loss
nized immediately in profit or loss. The Group recognizes
experience for assets with credit risk characteristics
gains and losses on the settlement of a defined benefit
and objective evidence of impairment similar to those
plan when the settlement occurs.
in the portfolio when scheduling its future cash flows.
Notes to the consolidated financial statements
27
The methodology and assumptions used for estimating
Had all the declines in fair value below cost been con-
both the amount and timing of future cash flows are
sidered significant or prolonged, the Group would have
reviewed regularly to reduce any differences between
suffered an additional TCHF 1 403 (2013: TCHF 2 285)
loss estimates and actual loss experience. To the extent
loss in its financial statements, being the transfer of the
that the net present value of estimated cash flows
total fair value reserve to the income statement.
differs by +5%, the provision would be estimated
to be TCHF 188 (2013: TCHF 190) lower. If the net
Income taxes
present value differs by -5%, the provision would be
The Group is subject to income taxes in numerous juris-
estimated to be TCHF 188 (2013: TCHF 190) higher.
dictions. Significant estimates are required in determining the worldwide provision for income taxes. There
Impairment of goodwill
are many transactions and calculations for which the
The fair value of goodwill is reviewed annually and
ultimate tax determination is uncertain during the ordi-
management assesses whether an impairment charge
nary course of business. The Group recognizes liabilities
needs to be recognized.
for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final
Fair value of derivatives
tax outcome of these matters is differ­ent from the
The fair value of financial instruments that are not
amounts that were initially recorded, such differences
quoted in active markets are measured by using valu­
will impact the income tax and deferred tax provisions
ation techniques. Where valuation techniques (for
in the period in which such determination is made.
example, models) are used to measure fair values,
they are validated and periodically reviewed by qualified
Based on the final outcome of the above-mentioned
personnel independent of the area that created them.
judgment areas (impairment losses on loans and advances, fair value of derivatives and impairment of
Changes in assumptions could affect reported fair value
available-for-sale equity investments), the Group would
of financial instruments. For example, to the extent
need to increase income tax by TCHF 23 (2013: TCHF 24),
that management used a tightening of 20 basis points
in case of favorable market conditions, and decrease
in the credit spread, the fair value of derivative financial
income tax by TCHF 962 (2013: TCHF 1 011), in case
instruments would be measured at TCHF 156 809
of unfavorable market conditions.
(2013: TCHF 82 191) as compared with their reported
fair value of TCHF 162 914 (2013: TCHF 87 807) on
Changes in accounting policies, comparability
the balance sheet date.
and other adjustments
Standards and interpretations that have been
Impairment of available-for-sale equity investments
adopted
The Group determines that available-for-sale equity in-
The Group applied the following new and revised
vestments are impaired when there has been a signifi-
standards and interpretations for the first time in the
cant or prolonged decline in the fair value below their
financial year beginning on 1 January 2014:
cost (cost is defined as historical cost). This determination
n
of what is significant or prolonged requires judgment.
Presentation:
In making this judgment the Group evaluates the fol-
Offsetting Financial Assets and Financial Liabilities
lowing factors: (i) extent of the decline is substantial
(effective 1 January 2014)
(in excess of 20% of cost) or, (ii) the fair value is below
The amendments clarify the meaning of an entity’s
cost on three balance sheet dates or more in succession
current legally enforceable right of set-off and when
(on a semi-annual basis). In addition, impairment may be
gross settlement systems may be considered equiva-
appropriate when there is evidence of a deterioration in
lent to net settlement.
the financial health of the investee, industry and sector
28
Amendment to IAS 32 Financial Instruments:
n
Amendments to IAS 39 Financial Instruments:
performance, changes in technology and operational
Recognition and Measurement:
and financing cash flows.
Novation of Derivatives and Continuation of Hedge
Notes to the consolidated financial statements
Accounting (effective 1 January 2014)
The Group is currently assessing the impact of the new
requirements on the Group’s financial statements.
The IASB has amended IAS 39 to provide relief from
discontinuing hedge accounting when novation of a
n
hedging instrument to a central counterparty meets
Other new and revised standards and interpretations:
specified criteria.
Based on initial analyses, the following new and revised
IFRIC 21 Levies – an interpretation of IAS 37 “Provi­
standards and interpretations which have to be applied
sions, Contingent Liabilities and Contingent Assets”
for financial years beginning on or after 1 January 2016
(effective 1 January 2014)
are not expected to have any significant impact on the
IFRIC 21 clarifies that an entity recognizes a liability
reported results or financial position of the Group:
for a levy only when the activity that triggers pay-
n
Amendments to IFRS 11 Joint Arrangements
n
Amendments to IAS 16 Property, Plant and
ment, as identified by the relevant legislation, occurs.
(effective 1 January 2016)
The adoption did not have any impact on the Group’s
Equipment and IAS 38 Intangible Assets
financial statements.
(effective 1 January 2016)
Standards and interpretations that have not yet
been adopted
New and revised standards and interpretations were
published that must be applied for financial years
beginning on or after 1 January 2015. The Group has
chosen not to adopt these in advance.
The new and revised standards and interpretations that
will be relevant to the Group are as follows:
n
IFRS 9 Financial Instruments
(effective 1 January 2018, early adoption permitted)
In July 2014, the IASB issued IFRS 9, which replaces
IAS 39, “Financial Instruments: Recognition and
Measurement”. IFRS 9 introduces new classification
and measurement requirements for financial assets
and financial liabilities, replaces the current rules for
impairment of financial assets with the expected
credit loss impairment model and amends the requirements for hedge accounting (separately issued
in November 2013).
The Group is currently assessing the impact of the new
requirements on the Group’s financial statements.
n
IFRS 15 Revenue from Contracts with Customers
(effective 1 January 2017, early adoption permitted)
In May 2014, the IASB issued the new standard
which specifies how and when revenue is recognized.
IFRS 15 replaces several other IFRS standards and
interpretations that currently govern revenue recognition under IFRS and provides a single, principles
based five-step model to be applied to all contracts
with customers. The standard also requires entities
to provide users of financial statements with more
informative and relevant disclosures.
Notes to the consolidated financial statements
29
Details on the consolidated income statement
1
Net interest and similar income (TCHF)
2014
2013
18 528
32 517
Interest earned and similar income
Banks
118 299
111 142
Interest income from investment securities
Customers
29 897
23 308
Dividend income from investment securities
1 438
1 000
168 162
167 967
Total interest earned and similar income
Interest expense
Banks
-12 465
-14 518
Customers
-27 349
-30 934
Interest on certificated debt
-35 889
-42 443
Total interest expense
-75 703
-87 895
92 459
80 072
2014
2013
Investment management fees
390 381
365 921
Brokerage fees
118 301
126 461
1 175
862
Net interest and similar income
2
Income from services (TCHF)
Commission income from securities and investment business
Honoraria and consulting
Administration fees and other income from investment business
181 049
145 005
Total commission income from securities and investment business
690 906
638 249
5 364
5 388
Commission income from other services
Lending business
3
Accounts and clearing business
20 829
21 977
Total commission income from other services
26 193
27 365
Commission expenses
-15 255
-17 038
Total income from services
701 844
648 576
2014
2013
Income from trading activities (TCHF)
Foreign exchange, notes
Translation gains/losses
26 062
8 888
Trading gains/losses
51 509
51 877
Interest and dividend income
41 609
39 448
Profit/loss on securities trading
10 579
8 336
Profit/loss on financial instruments designated at fair value
29 235
26 401
5 235
9 405
164 229
144 355
Other trading activities
Total income from trading activities
30
Notes to the consolidated financial statements
4
Other operating income (TCHF)
Note
2014
2013
Realized net result on available-for-sale securities
15 235
2 114
Total income from investment securities
15 235
2 114
315
104
23 192
995
Income from investment securities
Realized net result on disposals of subsidiaries
Realized net result on disposals of associates
Realized net result on investments in associates
5
4
536
Other
12 496
18 012
Total other operating income
51 242
21 761
2014
2013
Personnel expenses (TCHF)
Personnel expenses before long-term incentive scheme
Salaries
252 322
239 903
Bonuses
189 427
164 447
33 733
29 919
Social security costs
Pension costs / benefits
34 146
31 472
Other personnel expenses
21 909
18 863
531 537
484 604
63 975
46 469
Total personnel expenses before long-term incentive scheme
Long-term incentive scheme
6
38
Total personnel expenses
595 512
531 073
Headcount at 31 December
2 081
1 921
Business and office expenses (TCHF)
2014
2013
32 842
32 330
Rents and office expenses
IT expenses
32 129
32 730
Information and communication expenses
21 964
20 906
Travel and entertainment expenses
15 061
13 530
Legal and professional expenses
27 774
20 193
Advertising expenses
16 646
18 123
General expenses
19 067
19 490
165 483
157 302
Total business and office expenses
Notes to the consolidated financial statements
31
7
Other operating expenses (TCHF)
Note
2013
Depreciation on property and equipment
16
23 682
20 596
Amortization of intangible assets
17
19 968
25 535
Other depreciation
Total depreciation and amortization and impairment
1 728
3 437
45 378
49 568
Credit losses
11
2 939
4 351
Recovery of credit losses
11
-2 581
-1 417
358
2 934
Total credit losses/recoveries
Provision for operational risks
Other provisions
23 540
605
-14 376
3 221
Total changes in provisions and other losses
9 164
3 826
Other operating expenses
1 261
1 274
56 161
57 602
2014
2013
Current income tax expense
75 597
33 434
Deferred income tax expense
-48 154
-27 887
Total income tax expense
27 443
5 547
192 618
148 787
Total other operating expenses
8
2014
Taxation (TCHF)
Income tax expense
Reconciliation of the expected to the effective income tax expense
Profit before tax
Income tax expense calculated at a tax rate of 12.5% 1 (2013: 12.5%)
24 077
18 598
Tax rate difference on income components
15 946
-10 746
-12 580
-2 305
27 443
5 547
Income not subject to tax
Total income tax expense
1
32
The rate used is the domestic tax rate in Liechtenstein.
Notes to the consolidated financial statements
2014
2013
-220
-281
-46 491
-29 197
-1 867
1 653
180
-87
Deferred income tax expense comprises the following temporary differences
Accelerated depreciation for tax purposes
Provisions
Financial instruments
Pensions
Other temporary differences
Total deferred income tax expense
244
25
-48 154
-27 887
3 422
3 562
Deferred income tax assets and liabilities relate to the following items
Deferred income tax assets
Accelerated depreciation for tax purposes
Provisions
Financial instruments
Pensions
Other temporary differences
Total deferred income tax assets
831
365
3 282
1 521
55 738
31 557
236
197
63 509
37 202
1 030
1 303
241
46 394
2 022
1 569
Deferred income tax liabilities
Accelerated depreciation for tax purposes
Provisions
Financial instruments
0
7 796
Other temporary differences
Pensions
6 246
6 180
Total deferred income tax liabilities
9 539
63 242
26 040
46 517
-48 154
-27 887
Movement on the deferred income tax assets and liabilities is as follows
At 1 January
Income statement charge
Available-for-sale securities: fair value measurement
Actuarial gains/losses on defined benefit plans
Other changes
Cumulative translation adjustments
At 31 December
Income tax on other
comprehensive income
Cumulative translation adjustments
-304
7 709
-210
0
-49
5
-53 970
26 040
Tax expense/
Net of tax
2014
Before tax
Tax expense/
Net of tax
2013
Before tax
tax benefit
Change in revaluation reserves
560
-32 157
tax benefit
610
0
610
2 135
0
2 135
242 599
-560
242 039
155 374
304
155 678
-197 113
32 157
-164 956
50 892
-7 709
43 183
46 096
31 597
77 693
208 401
-7 405
200 996
Actuarial gains/losses on
defined benefit plans
Other comprehensive income
There are losses available for offset against future income which are currently not shown in the balance sheet, as the utilization of the carry forward losses is uncertain.
Notes to the consolidated financial statements
33
Details on the consolidated balance sheet
9
Cash in hand, balances with central banks (TCHF)
2014
Cash in hand
10
26 294
28 573
Balances with central banks
9 244 897
7 668 522
Total cash in hand, balances with central banks
9 271 191
7 697 095
2014
2013
3 919 863
2 149 020
627 961
835 350
4 547 824
2 984 370
Loans and advances to banks (TCHF)
Loans and advances to OECD banks
Loans and advances to non-OECD banks
Total loans and advances to banks
11
2013
Loans and advances
2014
to customers (TCHF)
Gross
Impairment
Carrying
2013
Gross
Impairment
Carrying
amount
allowance
amount
amount
allowance
amount
Mortgage-backed
3 930 307
-3 200
3 927 107
3 523 379
-4 948
3 518 431
Other collateral
6 288 978
-7 876
6 281 102
3 882 217
-7 569
3 874 648
306 506
-13 025
293 481
178 408
-11 912
166 496
10 525 791
-24 101
10 501 690
7 584 004
-24 429
7 559 575
Without collateral
Total loans and advances
to customers
Specific allowance
for impairment
2014
Mortgage-
Other
Without
backed collateral collateral
At 1 January
Charges to allowance
Release of allowance
Allowance utilized
Reclassifications
Currency translation
At 31 December
2013
Total Mortgage-
Other
Without
Total
backed collateral collateral
4 949
7 483
5 971
18 403
4 841
5 363
5 841
16 045
686
181
785
1 652
309
3 307
428
4 044
-2 071
-251
-259
-2 581
-207
-1 065
-145
-1 417
-342
0
-285
-627
0
-120
-222
-342
-18
0
18
0
0
0
0
0
-4
1
-95
-98
6
-2
69
73
3 200
7 414
6 135
16 749
4 949
7 483
5 971
18 403
Portfolio allowance
for impairment
At 1 January
0
86
5 940
6 026
0
32
5 690
5 722
Charges to allowance
0
337
950
1 287
0
57
250
307
Release of allowance
0
0
0
0
0
0
0
0
Currency translation
0
39
0
39
0
-3
0
-3
At 31 December
0
462
6 890
7 352
0
86
5 940
6 026
Total allowance
for impairment
24 101
24 429
2014
2013
44 052
36 254
Additional information on credit risks
Non-performing customers’ loans
Additional information about loans and advances is shown separately in the risk management notes.
34
Notes to the consolidated financial statements
12
Securities held for trading purposes (TCHF)
2014
2013
Total securities held for trading purposes
5 398
6 109
4 601
4 414
thereof listed
13
Financial assets designated at fair value (TCHF)
Securities designated at fair value to match financial liabilities through profit or loss
14
2014
2013
532 160
546 958
Other securities designated at fair value through profit or loss 1, 2
2 208 826
2 934 895
Total financial assets designated at fair value
2 740 986
3 481 853
1
Thereof listed TCHF 1 049 740 (2013: TCHF 1 768 685)
2
Thereof subordinated securities TCHF 5 800 (2013: TCHF 5 902)
Available-for-sale securities (TCHF)
At 1 January
Currency translation
Additions
Disposals and redemption
Revaluations
2014
2013
1 883 196
1 962 237
55 028
-51 501
3 595 631
1 943 908
-2 924 732
-1 984 761
39 853
13 313
At 31 December
2 648 976
1 883 196
Total available-for-sale securities
2 648 976
1 883 196
thereof fixed-income securities maturing within one year
thereof listed
587 540
553 401
1 041 469
871 608
4 040
4 040
0
0
4 040
4 040
Specific allowance for impairment on available-for-sale securities
At 1 January
Release of impairment
At 31 December
Notes to the consolidated financial statements
35
15
Investments in associates (TCHF)
At 1 January
Additions
2014
2013
2 818 125
2 669 506
0
0
Disposals
-51 011
0
Revaluation through other comprehensive income
242 090
148 619
3 009 204
2 818 125
649 687
758 076
At 31 December
Details of investments in associates
Fixed-income
Real estate investment trusts
170 020
80 317
Equities
828 434
781 184
Hedge fund investments
792 324
647 887
Private equity investments
539 249
532 626
Cash
Total investments in associates
29 490
18 035
3 009 204
2 818 125
LGT’s investments in associates at 31 December 2014 and 2013
Name
Principal activity
Financial Investments SP, Grand Cayman
Investment company
Financial Investments 2 SP, Grand Cayman
Investment company
Investments in other associates (TCHF)
2014
2013
811
2 187
At 1 January
Additions
0
0
Disposals
0
-1 297
Income
Dividends
Impairment
4
536
-141
-559
0
0
Currency translation
-36
-56
At 31 December
638
811
3 189
3 479
Details of investments in other associates
Assets
Liabilities
1 064
689
Operating income
2 143
3 566
13
1 787
Net profit/loss
LGT’s investments in other associates at 31 December 2014 and 2013
Ownership interest in %
of ordinary/participation
Name
Quantis Investment Management Zrt., Budapest
Total of investments in associates
36
Notes to the consolidated financial statements
Principal activity
shares held
Investment management company
30.0
2014
2013
3 009 842
2 818 936
16
Property and equipment (TCHF)
Freehold
Leasehold
IT/Office
Motor
buildings
improvements
equipment
vehicles
269 931
36 833
77 099
342
Total
Cost
At 1 January 2014
Currency translation
384 205
0
529
437
0
966
Additions to scope of consolidation
10 626
0
707
0
11 333
Additions
15 115
2 081
12 804
14
30 014
Disposals
-3 413
-72
-8 038
-17
-11 540
292 259
39 371
83 009
339
414 978
121 235
21 282
57 231
168
199 916
0
196
237
0
433
At 31 December 2014
Accumulated depreciation
At 1 January 2014
Currency translation
Additions to scope of consolidation
Charge for the year
Disposals
At 31 December 2014
0
0
655
0
655
7 131
5 017
11 445
89
23 682
-3 413
-48
-7 822
-1
-11 284
124 953
26 447
61 746
256
213 402
167 306
12 924
21 263
83
201 576
Total
Net book value
at 31 December 2014
Property and equipment (TCHF)
Freehold
Leasehold
IT/Office
Motor
buildings
improvements
equipment
vehicles
264 394
33 339
72 668
361
370 762
10
-94
-85
0
-169
Cost
At 1 January 2013
Currency translation
Additions
8 655
2 611
13 046
41
24 353
Reclassifications
-1 163
1 163
0
0
0
Disposals
-1 965
-186
-8 530
-60
-10 741
269 931
36 833
77 099
342
384 205
116 629
16 999
56 068
138
189 834
Currency translation
0
-28
-29
0
-57
Charge for the year
6 682
4 386
9 439
89
20 596
-111
111
0
0
0
At 31 December 2013
Accumulated depreciation
At 1 January 2013
Reclassifications
Disposals
At 31 December 2013
-1 965
-186
-8 247
-59
-10 457
121 235
21 282
57 231
168
199 916
148 696
15 551
19 868
174
184 289
2014
2013
420 615
395 082
Net book value
at 31 December 2013
Insurance value of tangible assets
Insurance value
Notes to the consolidated financial statements
37
17
Intangible assets (TCHF)
Goodwill
Software
Other in-
Total
tangible assets
Cost
At 1 January 2014
159 914
145 557
Currency translation
61 576
367 047
337
0
-146
191
88 647
0
98 010
186 657
Additions
0
316
0
316
Disposals
0
-97
0
-97
248 898
145 776
159 440
554 114
22 997
71 035
25 153
119 185
336
0
0
336
Charge for the year
0
14 578
5 390
19 968
Disposals
0
-21
0
-21
23 333
85 592
30 543
139 468
225 565
60 184
128 897
414 646
Goodwill
Software
Other in-
Total
Additions to scope of consolidation
At 31 December 2014
Accumulated amortization and impairment
At 1 January 2014
Currency translation
At 31 December 2014
Net book value at 31 December 2014
Intangible assets (TCHF)
tangible assets
Cost
At 1 January 2013
159 997
Currency translation
145 185
61 459
366 641
-83
0
117
34
Additions
0
372
0
372
Disposals
0
0
0
0
159 914
145 557
61 576
367 047
At 31 December 2013
Accumulated amortization and impairment
20 347
56 479
16 933
93 759
Currency translation
At 1 January 2013
-109
0
0
-109
Charge for the year
2 759
14 556
8 220
25 535
0
0
0
0
22 997
71 035
25 153
119 185
136 917
74 522
36 423
247 862
2014
2013
192 802
104 155
Disposals
At 31 December 2013
Net book value at 31 December 2013
Goodwill
Goodwill is allocated to the following organizational units
(cash-generating units; CGUs) based on the anticipated synergies:
LGT Bank (Switzerland) Ltd., Basel
LGT Capital Partners Ltd., Pfäffikon 1
LGT ILS Partners Ltd., Pfäffikon
Total
7 263
25 500
32 762
2
225 565
0
136 917
The three organizational units represent the level at which the goodwill is monitored for internal management purposes.
The calculation of the realizable amount of the units was based on the respective fair value less costs to sell. The value of client assets
was determined on the market prices of companies with similar business activities, for 2014 for asset management companies in the
range of 4 to 8% and for private banking companies in the range of 1 to 4%. An additional calculation of the realizable amount of
the three organizational units based on the fair value in use was lower than the value of client assets. The higher of both values is
used for impairment testing.
38
1
Merger of LGT Capital Management Ltd., Pfäffikon and LGT Capital Partners Ltd., Pfäffikon on 9 April 2014
2
LGT Capital Partners Ltd., Pfäffikon sold intangible assets to ILS Partners Ltd., Pfäffikon in November 2014
Notes to the consolidated financial statements
18
Other assets (TCHF)
Precious metals
Other
Total other assets
19
Amounts due to banks (TCHF)
2013
437 057
508 700
24 819
36 232
461 876
544 932
2014
2013
Deposits on demand
766 423
395 261
Time deposits
584 139
598 386
1 350 562
993 647
Total amounts due to banks
20
2014
Amounts due to customers (TCHF)
Deposits on demand
Time deposits
Savings deposits
Total amounts due to customers
2014
2013
16 377 916
11 766 481
8 124 242
6 987 369
1 680 422
1 753 850
26 182 580
20 507 700
Notes to the consolidated financial statements
39
21
Financial liabilities designated at fair value (TCHF)
2014
2013
Certificate issues designated at fair value
532 742
545 546
Total financial liabilities designated at fair value
532 742
545 546
There were no gains or losses attributable to changes in the credit risk for those financial liabilities designated at fair value in 2014 (2013: TCHF 0).
Certificate issues designated at fair value at 31 December (TCHF)
Product
issue
LGT GIM Index Certificates
Nominal Interest Maturity 14 Fair value Fair value
Date of
up to 2004 EUR
1
LGT GIM Index Certificates II
value ’000 rate %
2
LGT GIM Index Certificates II/2 3
LGT GIM Index Certificates III
4
Crown Absolute Return Index Certificates 5
2014
2013
54 530
–
28.02.2017
65 564
63 051
up to 2006 EUR 119 078
–
30.06.2019
143 174
155 163
2006 EUR
26 528
–
31.03.2016
31 896
38 591
up to 2008 EUR
75 975
–
31.07.2016
91 349
90 564
continuously EUR
5 476
–
30.11.2018
6 584
6 446
continuously EUR
0
–
31.07.2014
0
1 023
Crown Alternative SV Index Certificates 7
continuously EUR
74 419
–
30.06.2017
89 478
64 016
LGT GATS Index Certificates 8
continuously EUR
36 345
–
30.09.2019
43 699
49 145
LGT M-Smart Allocator Index Certificates 9
continuously EUR
50 732
–
31.08.2017
60 998
59 568
Crown Absolute Return Index Certificates II
6
continuously USD
0
–
31.12.2027
0
854
LGT ex Fixed Income Emerging Markets IU Index Certificates 11 continuously USD
0
–
31.12.202715
0
7 758
continuously USD
0
–
31.12.202715
0
6 724
continuously USD
0
–
31.12.2027
0
2 643
532 742
545 546
LGT ex Equities Emerging Markets Leaders IU Certificates
LGT ex Hedge Funds GIM IU Index Certificates 12
LGT ex Hedge Funds GATS IU Index Certificates
13
10
15
15
Total certificate issues designated at fair value
at 31 December
Linked to the performance of LGT Premium Strategy GIM (EUR) index administered by LGT Capital Partners (FL) Ltd. with a duration from 2002 to 2017
incl. one 5-year extension option.
2
Linked to the performance of LGT Premium Strategy GIM II (EUR) index administered by LGT Capital Partners (FL) Ltd. with a duration from 2004 to 2019
incl. one 5-year extension option.
1
3
Linked to the performance of LGT Premium Strategy GIM II (EUR) index administered by LGT Capital Partners (FL) Ltd. with a duration from 2006 to 2016
incl. two 5-year extension options.
4
Linked to the performance of LGT Premium Strategy GIM III (EUR) index administered by LGT Capital Partners (FL) Ltd. with a duration from 2006 to 2016
incl. two 5-year extension options.
5
6
7
8
Linked to the Crown Absolute Return (EUR) index administered by LGT Capital Partners Ltd. with a duration from 2003 to 2018 incl. one 5-year extension option.
Linked to the Crown Absolute Return II (EUR) index administered by LGT Capital Partners Ltd. with a duration from 2004 to 2014 incl. two 5-year extension options.
Linked to the Crown Alternative SV (EUR) index administered by LGT Capital Partners Ltd. with a duration from 2007 to 2017 incl. two 5-year extension options.
Linked to the performance of LGT Premium Strategy GATS (EUR) index administered by LGT Capital Partners (FL) Ltd. with a duration from 2004 to 2019
incl. one 5-year extension option.
9
Linked to the LGT M-Smart Allocator (EUR) index administered by LGT Capital Partners (FL) Ltd. with a duration from 2007 to 2017 incl. two 5-year extension options.
10
Linked to the LGT ex Equity Emerging Markets II (USD) index administered by LGT Capital Partners (FL) Ltd. with a duration from 2007 to 2027
incl. two 5-year extension options.
11
Linked to the LGT ex Fixed Income Emerging Markets II (USD) index administered by LGT Capital Partners (FL) Ltd. with a duration from 2007 to 2027
incl. two 5-year extension options.
12
Linked to the LGT ex Hedge Funds GIM IU (USD) index administered by LGT Capital Partners Ltd. with a duration from 2007 to 2027 incl. two 5-year extension options.
13
Linked to the LGT ex Hedge Funds GATS IU (USD) index administered by LGT Capital Partners Ltd. with a duration from 2007 to 2027 incl. two 5-year extension options.
14
15
40
Maturity represents the earliest possible notice.
Prematurely redeemed.
Notes to the consolidated financial statements
22
Certificated debt (TCHF)
Bond issues (net book value)
1
Subordinated cash bonds (fixed-rate medium term notes) 2
Other cash bonds (fixed-rate medium term notes)
Shares in bond issues of the Swiss mortgage lending institution
Total certificated debt
2014
2013
1 558 784
1 482 699
220
470
136 758
151 560
17 039
0
1 712 801
1 634 729
1
Net book value of bond issues is calculated using the effective interest method. Bonds held by LGT companies are eliminated.
2
Interest 2014 is payable on the subordinated cash bonds at various rates ranging from 2.0625 to 2.9375%. The interest charge for the year on these bonds
was TCHF 10 (2013: TCHF 14).
Bond issues at 31 December (TCHF)
Issuer
LGT Finance Ltd.
Date of
Nominal
Interest
issue
value
rate %
10.02.2006
CHF 250 000
2.250
Net book
value 2013
0
240 827
LGT Finance Ltd.
25.05.2011
CHF 200 000
2.125
25.11.2015
174 901
182 855
08.12.2009
CHF 300 000
2.750
08.12.2016
287 590
287 905
LGT Finance Ltd.
12.05.2010
CHF 250 000
2.500
12.05.2017
247 508
246 958
LGT Bank Ltd.
02.07.2012
CHF 250 000
2.000
02.07.2019
250 885
238 358
LGT Bank Ltd.
10.02.2014
CHF 300 000
1.500
10.05.2021
299 222
0
LGT Bank Ltd.
08.02.2013
CHF 300 000
1.875
08.02.2023
298 678
285 796
1 558 784
1 482 699
2014
2013
Other liabilities (TCHF)
Amounts due to long-term incentive scheme
148 225
106 384
Amounts due to bonuses
237 557
171 496
Post employment benefit obligations
331 610
135 654
57 360
74 225
774 752
487 759
2014
2013
At 1 January
76 723
78 234
Current year expenses
24 269
5 801
Other
Total other liabilities
24
10.02.2014
Net book
value 2014
LGT Finance Ltd.
Total bond issues at 31 December
23
Maturity
Provisions (TCHF)
Provisions released
Provisions utilized
Currency translation
At 31 December
-15 105
-1 975
-75
-5 289
226
-48
86 038
76 723
Notes to the consolidated financial statements
41
25
Other reserves (TCHF)
Revaluation reserves – investments in associates
Revaluation reserves – available-for-sale securities
Revaluation reserves – cash flow hedge
Revaluation reserves – actuarial gains/losses
Total other reserves
2014
2013
1 372 897
1 153 999
72 488
48 429
1 246
2 164
-149 202
15 754
1 297 429
1 220 346
1 153 999
1 005 380
-23 192
0
Revaluation reserves – investments in associates
At 1 January
Disposals
Gains/losses from change in fair value
At 31 December
242 090
148 619
1 372 897
1 153 999
Revaluation reserves – available-for-sale securities
At 1 January
Disposals
Gains/losses from change in fair value
Deferred income tax
At 31 December
48 429
36 928
-15 234
-2 114
39 853
13 311
-560
304
72 488
48 429
Revaluation reserves – cash flow hedge
At 1 January
Gains/losses from change in fair value
At 31 December
2 164
6 606
-918
-4 442
1 246
2 164
15 754
-27 429
-197 113
50 892
Revaluation reserves – actuarial gains/losses
At 1 January
Gains/losses on defined benefit pension plans
Deferred income tax
At 31 December
42
Notes to the consolidated financial statements
32 157
-7 709
-149 202
15 754
26
Contingent liabilities, commitments and fiduciary transactions (TCHF)
2014
2013
257 515
189 479
Contingent liabilities
Credit guarantees and similar instruments
80 612
84 910
Total contingent liabilities
Other contingent liabilities
338 127
274 389
Committed credit lines and other commitments
559 676
568 404
559 676
568 404
604 370
770 687
604 370
770 687
2014
2013
520 563
365 868
469 170
365 868
of which irrevocable commitments
Fiduciary transactions
of which fiduciary investments
Information about derivative financial instruments is shown separately in note 30.
27
Pledged and assigned assets/assets subject to reservation of ownership,
which are used to secure own liabilities (TCHF) 1
Book value of pledged and assigned assets (as collateral)
of which financial assets designated at fair value
of which mortgages
Actual commitments
1
51 393
0
222 376
53 349
There are no assets subject to reservation of ownership.
The assets are pledged for commitments in respect of Lombard limits at central banks, for loans from Swiss mortgage lending institution, for securities deposits
relating to X-Clear/Swiss Stock Exchange and limits for cash settlement of securities transactions with EUROCLEAR BANK SA.
28
Lending transactions and pension transactions with securities (TCHF) 1
Claims from cash deposits in connection with securities borrowing and reverse repurchase transactions
Liabilities from cash deposits in connection with securities lending and repurchase transactions
2014
2013
1 108 770
444 979
250 548
88 910
158 727
26 649
158 727
26 649
1 990 257
1 703 422
502 236
603 111
Own securities lent or provided as collateral within the scope of securities lending or borrowing
transactions, as well as own securities transferred from repurchase transactions
of which capable of being resold or further pledged without restrictions
Securities borrowed or accepted as collateral within the scope of securities lending or borrowing
transactions, as well as securities received from reverse repurchase transactions, which are capable
of being resold or further pledged without restrictions
of which resold or further pledged
1
These transactions are conducted under terms that are usual and customary to standard lending, and securities borrowing and lending activities, as well as
requirements determined by exchanges where the bank acts as an intermediary.
Notes to the consolidated financial statements
43
29 Fair value measurement (TCHF)
Valuation principles
Fair value is defined as the price that would be received for the sale of an asset or paid to transfer a liability in an orderly trans­
action between market participants in the principal or most advantageous market as of the measurement date. In measuring fair
value, the Group utilizes various valuation approaches and applies a hierarchy for prices and inputs that maximizes the use of
observable market information, where available.
All financial and non-financial assets and liabilities measured or disclosed at fair value are categorized into one of three fair value
hierarchy levels. In certain cases, the inputs used to measure fair value may fall within different levels of the fair value hierarchy.
For disclosure purposes, the level in the hierarchy within which the instrument is classified in its entirety is based upon the lowest
level input that is significant to the position’s fair value measurement.
Level 1
Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt
instruments on exchanges and exchange traded derivatives.
Level 2
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices). This level includes investments in hedge funds, mutual funds, the majority of
OTC derivative contracts and structured debt.
Level 3
Inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes mainly
private equity investments, issued structured debt as well as equity investments with significant unobservable components.
Valuation governance
LGT’s fair value measurement and model governance framework includes controls that are intended to ensure an adequate quality
of fair value measurements reported in the financial statements. Responsibility for the ongoing measurement of financial and
non-financial instruments at fair value resides with Trading and Treasury, but is validated by Group Risk Controlling, which is independent of Trading and Treasury. In carrying out their valuation responsibility, Trading and Treasury is required to consider the
availability and quality of external market information and to provide justification and rationale for their fair value estimates.
Independent price verification is undertaken by Group Risk Controlling. The objective of the independent price verification process
is to validate the business’s estimates of fair value against available market information and other relevant data. By benchmarking
the business’s fair value estimates with observable market prices and other independent sources, the degree of valuation uncertainty embedded in these measurements is assessed and managed as required in the governance framework.
Valuation techniques
Valuation techniques are used to value positions for which a market price is not available from market sources. This includes in
principle all derivatives transacted in the OTC market. LGT uses widely recognized valuation techniques for determining fair values
that are not actively traded and quoted. The most frequently applied valuation techniques include discounted value of expected
cash flow and option pricing methodologies.
Discounted value of expected cash flows is a valuation technique that measures fair value using estimated expected future cash
flows from assets or liabilities and then discounts these flows using a discount rate or discount margin that reflects the credit
and/or funding spreads required by the market for instruments with similar risk and liquidity profiles to produce a “present value”.
When using such valuation techniques, expected future cash flows are estimated using an observed or implied market price for
the future cash flows or by estimating the expected future cash flows using industry standard cash flow projection models. The
discount factors within the calculation are generated using industry standard yield curve modeling techniques and models.
Option pricing models incorporate assumptions regarding the behavior of future price movements of an underlying referenced asset
or assets to generate a probability-weighted future expected payoff for the option. The resulting probability-weighted expected
payoff is then discounted using discount factors generated from industry standard yield curve modeling techniques and models.
44
Notes to the consolidated financial statements
Fair value disclosure and classification within the fair value hierarchy
The classification in the fair value hierarchy of the Group’s financial and non-financial assets and liabilities is summarized in the
table below.
Fair value at the end of the period
2014
Level 1
Level 2
Level 3
Total
Assets
Loans and advances to banks 1
0
4 551 335
0
4 551 335
Loans and advances to customers 1
0
10 638 701
0
10 638 701
4 601
797
0
5 398
0
1 542 335
0
1 542 335
Financial assets designated at fair value
1 153 860
1 584 296
2 830
2 740 986
Available-for-sale securities
1 907 087
685 171
56 718
2 648 976
Securities held for trading purposes
Derivative financial instruments
Precious metals
Total assets at fair value
437 057
0
0
437 057
3 502 605
19 002 635
59 548
22 564 788
0
1 351 331
0
1 351 331
Liabilities
Amounts due to banks 1
0
26 187 846
0
26 187 846
Derivative financial instruments
0
1 378 352
1 069
1 379 421
Financial liabilities designated at fair value
0
532 742
0
532 742
Certificated debt 1
0
1 832 542
0
1 832 542
0
31 282 813
1 069
31 283 882
Level 1
Level 2
Level 3
Total
Loans and advances to banks 1
0
2 991 078
0
2 991 078
Loans and advances to customers 1
0
7 651 715
0
7 651 715
4 415
1 694
0
6 109
0
762 609
0
762 609
Financial assets designated at fair value
1 864 180
1 614 627
3 046
3 481 853
Available-for-sale securities
1 259 998
568 717
54 481
1 883 196
Amounts due to customers
1
Total liabilities at fair value
There were no transfers from Level 2 to Level 1 and vice versa.
Fair value at the end of the period
2013
Assets
Securities held for trading purposes
Derivative financial instruments
Precious metals
Total assets at fair value
508 700
0
0
508 700
3 637 293
13 590 440
57 527
17 285 260
0
994 253
0
994 253
Liabilities
Amounts due to banks 1
0
20 510 641
0
20 510 641
Derivative financial instruments
0
672 909
1 893
674 802
Financial liabilities designated at fair value
0
545 546
0
545 546
Certificated debt 1
0
1 702 821
0
1 702 821
0
24 426 170
1 893
24 428 063
Amounts due to customers
1
Total liabilities at fair value
There were no transfers from Level 2 to Level 1 and vice versa.
1
These items are not measured at fair value in the balance sheet but fair value is disclosed in the notes. See page 79 for a reconciliation to the carrying amount.
Notes to the consolidated financial statements
45
Reconciliation of Level 3 items
Derivative
Financial
Available-
2014
financial
assets/
for-sale
Total
liabilities
securities
instruments
designated
at fair value
Assets
At 1 January
0
3 046
54 481
57 527
Total gains/losses
0
-742
5 789
5 047
0
-665
-234
-899
thereof in profit/loss
0
-77
6 023
5 946
Purchases
thereof in other comprehensive income
0
799
41 651
42 450
Issues
0
0
0
0
Sales
0
-234
-45 203
-45 437
Redemptions
0
0
0
0
Currency translation
0
-39
0
-39
Transfers into/out of Level 3
0
0
0
0
At 31 December
0
2 830
56 718
59 548
1 893
0
0
1 893
Liabilities
At 1 January
Total gains/losses
thereof in profit/loss
-788
0
0
-788
-788
0
0
-788
0
0
0
0
Purchases
thereof in other comprehensive income
0
0
0
0
Issues
0
0
0
0
Sales
0
0
0
0
Redemptions
0
0
0
0
-36
0
0
-36
0
0
0
0
1 069
0
0
1 069
Currency translation
Transfers into/out of Level 3
At 31 December
There were no transfers either into or out of Level 3 in 2014.
46
Notes to the consolidated financial statements
Reconciliation of Level 3 items
Derivative
Financial
Available-
2013
financial
assets/
for-sale
Total
liabilities
securities
instruments
designated
at fair value
Assets
At 1 January
0
Total gains/losses
5 910
22 027
27 937
0
-534
3 386
2 852
thereof in profit/loss
0
122
-244
-122
thereof in other comprehensive income
0
-656
3 630
2 974
Purchases
0
125
32 545
32 670
Issues
0
0
0
0
Sales
0
-2 244
-3 477
-5 721
Redemptions
0
-224
0
-224
Currency translation
0
13
0
13
Transfers into/out of Level 3
0
0
0
0
0
3 046
54 481
57 527
2 451
0
0
2 451
-585
0
0
-585
-585
0
0
-585
At 31 December
Liabilities
At 1 January
Total gains/losses
thereof in profit/loss
0
0
0
0
Purchases
thereof in other comprehensive income
0
0
0
0
Issues
0
0
0
0
Sales
0
0
0
0
Redemptions
0
0
0
0
Currency translation
27
0
0
27
Transfers into/out of Level 3
0
0
0
0
1 893
0
0
1 893
2014
2013
-81
480
-884
-1 219
At 31 December
There were no transfers either into or out of Level 3 in 2013.
Gains/losses included in profit/loss for financial instruments
measured at fair value based on Level 3
Total gains/losses included in profit/loss for the period
Total gains/losses for the period included in income from trading
activities for assets/liabilities held at the end of the reporting period
Notes to the consolidated financial statements
47
30 Derivative financial instruments
In the normal course of business, LGT and its subsidiaries use various derivative financial instruments to meet the financial needs of
their customers, to generate revenues through trading and market-making activities, and to manage their exposure to fluctuations
in interest and foreign exchange rates. Derivatives used for trading purposes include foreign exchange forwards, stock options and
warrants as well as forward rate agreements (FRAs). Within the context of asset and liability management, interest rate swaps are
primarily employed. LGT controls the credit risk from derivative financial instruments through its credit approval process and the
use of control limits and monitoring procedures. LGT uses the same credit procedures when entering into derivatives as it does for
traditional lending products.
The following table summarizes the total outstanding volumes in derivative financial instruments. Positive and negative replacement
values are stated at gross values, without taking into consideration the effect of master netting agreements.
Types of derivative financial
2014
instruments held for trading
Notional
Positive
Negative
amount replacement replacement
(TCHF)
value
value
477 007
2 416
4 402
82 361 396
1 371 592
1 173 475
2013
Notional
Positive
Negative
amount replacement replacement
value
value
380 672
5 749
8 148
76 218 679
673 029
560 483
Interest rate products
Interest rate swaps
Foreign exchange products
Foreign exchange forwards
Foreign exchange swaps
Foreign exchange OTC options
312 614
3 136
7 408
125 077
580
2 430
5 965 098
27 896
28 053
3 237 383
18 663
18 191
Precious metal products
Precious metal forwards
3 599 482
38 006
34 130
670 398
8 238
13 650
803 987
44 727
25 127
635 241
36 902
33 929
211 422
14 068
10 587
139 347
12 475
12 484
51 868
1 166
1 166
72 515
1 522
1 522
Other products
1 687 565
37 101
60 828
579 485
2 305
7 487
Total contracts
95 470 439
1 540 108
1 345 176
82 058 797
759 463
658 324
Notional
Positive
Negative
Notional
Positive
Negative
Precious metal OTC options
Derivatives on shares and indices
OTC Options
Credit derivatives
Swaps
Types of derivative financial
2014
instruments held for hedging
amount replacement replacement
(TCHF)
value
value
2013
amount replacement replacement
value
value
Interest rate products
Interest rate swaps (cash flow hedges)
220 000
2 227
0
300 000
3 146
0
Interest rate swaps (fair value hedges)
775 330
0
34 245
915 330
0
16 478
995 330
2 227
34 245
1 215 330
3 146
16 478
Total contracts
1
1
LGT applies fair value hedge accounting for a portfolio hedge of interest rate risk by using interest rate swaps to hedge its exposure to market fluctuations of
fixed-rate instruments. The fair value adjustment of the underlying instruments related to interest rate risk was TCHF 23 362 (2013: TCHF -11 420). A matching
amount of TCHF -23 310 (2013: TCHF 11 297) is included in the replacement value attributable to derivative hedging instruments.
48
Notes to the consolidated financial statements
31 Offsetting financial assets and liabilities
Financial assets and liabilities subject to offsetting netting arrangements and similar agreements
Assets
at 31 December 2014
(TCHF)
Gross
Gross
Net
amounts of
amounts
amount of
Impact of
Financial
Net
financial
set off
financial
master
collateral instruments
amount
on the
assets
netting
collateral
balance
presented
agree-
on the
ments
assets
sheet
Amounts not set off on the balance sheet
Cash
balance
sheet
Central bank funds sold
and securities purchased
under resale agreements
1 108 770
0
1 108 770
0
0
1 096 804
11 966
882 854
0
882 854
722 994
64 276
0
95 584
1 991 624
0
1 991 624
722 994
64 276
1 096 804
107 550
Positive market values
from derivative
financial instruments
Total assets
Liabilities
at 31 December 2014
(TCHF)
Gross
Gross
Net
amounts of
amounts
amount of
Impact of
Financial
Net
financial
set off
financial
master
collateral instruments
amount
on the
liabilities
netting
collateral
balance
presented
agree-
on the
ments
liabilities
sheet
Amounts not set off on the balance sheet
Cash
balance
sheet
Central bank funds sold
and securities purchased
under resale agreements
250 548
0
250 548
0
0
244 406
6 142
financial instruments
1 107 737
0
1 107 737
723 921
280 872
0
102 944
Total liabilities
1 358 285
0
1 358 285
723 921
280 872
244 406
109 086
Negative market values
from derivative
Notes to the consolidated financial statements
49
Assets
at 31 December 2013
Gross
Gross
Net
amounts of
amounts
amount of
Impact of
Financial
Net
financial
set off
financial
master
collateral instruments
amount
on the
assets
netting
collateral
balance
presented
agree-
on the
ments
(TCHF)
assets
sheet
Amounts not set off on the balance sheet
Cash
balance
sheet
Central bank funds sold
and securities purchased
under resale agreements
444 979
0
444 979
0
0
431 054
13 925
Positive market values
from derivative
financial instruments
Total assets
Liabilities
at 31 December 2013
581 498
0
581 498
368 697
66 848
0
145 953
1 026 477
0
1 026 477
368 697
66 848
431 054
159 878
Gross
Gross
Net
amounts of
amounts
amount of
Impact of
Financial
Net
financial
set off
financial
master
collateral instruments
amount
on the
liabilities
netting
collateral
balance
presented
agree-
on the
ments
(TCHF)
liabilities
sheet
Amounts not set off on the balance sheet
Cash
balance
sheet
Central bank funds sold
and securities purchased
under resale agreements
88 910
0
88 910
0
0
87 114
1 796
financial instruments
396 547
0
396 547
348 602
11 862
0
36 083
Total liabilities
485 457
0
485 457
348 602
11 862
87 114
37 879
Negative market values
from derivative
50
Notes to the consolidated financial statements
32 Capital resources
Capital adequacy and the use of capital are monitored by the Group and by individual operating units, employing techniques based
on the guidelines developed by the Basel Committee on Banking Supervision and implemented by the Liechtenstein Government
for supervisory purposes.
The Basel Committee guidelines require minimum risk ratios for all international banks of 8%. These ratios measure capital adequacy by comparing the Group’s eligible capital with balance sheet assets, off-balance sheet commitments and market positions
at weighted amounts to reflect their relative risk. Assets are weighted according to broad categories of notional risk, first being
multiplied by a conversion factor and then being assigned a risk weighting according to the amount of capital deemed to be
necessary for them. Off-balance sheet commitments and default risk positions are also multiplied and risk-weighted. Market risk
is calculated with the standard approach.
The Group and its individually regulated operations have complied with all externally imposed capital requirements throughout
the period.
The following table analyzes the Group’s capital resources as defined for regulatory purposes:
Capital resources (TCHF)
Capital resources
thereof non-controlling interests
thereof “innovative” instruments
Other deductions
Net core capital before adjustments
2014
2013
3 354 387
3 215 993
341
4 620
0
0
-132 240
-207 592
3 222 147
3 008 401
upper tier 2 capital
0
0
lower tier 2 capital
36
80
tier 3 capital
Other deductions (intangible assets)
Net capital resources
Required capital (TCHF)
Approach
Credit risk
Standard
On-balance sheet
Non-counterparty risks
Market risk
Standard
thereof interest rate risks
thereof equity position risks
thereof foreign exchange risks
thereof commodities risks
thereof option risks
Operational risk
Total
Capital adequacy ratio
Net capital resources
Basic indicator
0
0
-414 646
-247 862
2 807 537
2 760 619
994 643
859 896
978 561
844 448
16 082
15 448
79 785
48 146
12 814
14 573
477
710
7 271
6 429
59 203
26 344
20
90
143 098
128 059
1 217 526
1 036 101
18.4%
21.3%
2 807 537
2 760 619
Notes to the consolidated financial statements
51
33Subsidiaries
The Group’s principal subsidiary undertakings at 31 December 2014 were:
Name
Principal activity
Registered office
Ownership
interest in %
of ordinary
shares held 1
LGT Bank Ltd.
Banking
Vaduz – Liechtenstein
100.0
LGT Capital Invest AGmvK 2
Asset management
Vaduz – Liechtenstein
100.0
LGT Capital Partners (FL) Ltd.
Asset management
Vaduz – Liechtenstein
100.0
Asset management
Vaduz – Liechtenstein
100.0
(formerly LGT Capital Management Ltd.)
LGT Fondsleitung Ltd.
LGT Funds SICAV
Asset management
Vaduz – Liechtenstein
100.0
LGT Portfolio Management AGmvK 2
Asset management
Vaduz – Liechtenstein
100.0
LGT Premium Strategy AGmvK
Asset management
Vaduz – Liechtenstein
100.0
LGT Strategy Units (Liec) AGmvK
Asset management
Vaduz – Liechtenstein
100.0
LGT Capital Partners Advisers Ltd.
Investment advisers
Vaduz – Liechtenstein
100.0
LGT Private Equity Advisers Ltd.
Investment advisers
Vaduz – Liechtenstein
60.0
LGT Financial Services Ltd.
Services company
Vaduz – Liechtenstein
100.0
LGT Audit Revisions AG
Audit services
Vaduz – Liechtenstein
100.0
LGT Bank (Switzerland) Ltd.
Banking
Basel – Switzerland
100.0
Artinba Ltd., in Liquidation
Fine art services
Basel – Switzerland
100.0
LGT Capital Partners Ltd.
Asset management
Pfäffikon SZ – Switzerland
100.0
Asset management
Pfäffikon SZ – Switzerland
100.0
LGT Investment Partners Ltd.
Investment advisers
Pfäffikon SZ – Switzerland
100.0
LGT Holding International Ltd.
Holding company
Pfäffikon SZ – Switzerland
100.0
Crown Verwaltungsgesellschaft mbH
Investment advisers
Munich – Germany
LGT Capital Partners (U.K.) Ltd.
Investment advisers
London – United Kingdom
100.0
LGT Bank (Ireland) Ltd.
Banking
Dublin – Ireland
100.0
LGT Capital Partners (Ireland) Ltd.
Asset management
Dublin – Ireland
100.0
LGT Fund Managers (Ireland) Ltd.
Fund administrator
Dublin – Ireland
100.0
LGT Holding Denmark ApS
Holding company
Copenhagen – Denmark
100.0
LGT Fund Management (Lux) S.A.
Investment advisers
Luxembourg – Luxembourg
100.0
LGT Bank (Singapore) Ltd.
Banking
Singapore
100.0
LGT Investment Consulting (Beijing) Ltd.
Investment consulting
Beijing – China
100.0
LGT Capital Partners (Asia-Pacific) Ltd.
Investment advisers
Hong Kong – China
100.0
LGT Investment Management (Asia) Ltd.
Investment advisers
Hong Kong – China
100.0
LGT Holding (Malaysia) Ltd.
Holding company
Labuan – Malaysia
100.0
LGT Capital Partners (Japan) Co. Ltd.
Investment advisers
Tokyo – Japan
100.0
LGT Capital Partners (Dubai) Ltd.
Investment advisers
Dubai – United Arab Emirates
100.0
LGT (Middle East) Ltd.
Investment advisers
Dubai – United Arab Emirates
100.0
LGT Capital Partners (USA) Inc.
Investment advisers
New York – USA
100.0
LGT Clerestory LLC
Investment advisers
New York – USA
100.0
LGT Capital Partners Holding (USA) Inc.
Holding company
New York – USA
100.0
LGT ILS Partners Ltd.
52
3
4
Notes to the consolidated financial statements
50.0
Name
Principal activity
Registered office
Ownership
interest in %
of ordinary
shares held 1
LGT Bank (Cayman) Ltd.
Banking
Grand Cayman – Cayman Islands
100.0
LGT Certificates Ltd.
Holding company
Grand Cayman – Cayman Islands
100.0
LGT Finance Ltd.
Holding company
Grand Cayman – Cayman Islands
100.0
LGT Global Invest Ltd.
Holding company
Grand Cayman – Cayman Islands
100.0
Holding company
Grand Cayman – Cayman Islands
100.0
LGT Investments Ltd.
Holding company
Grand Cayman – Cayman Islands
100.0
LGT Participations Ltd.
Holding company
Grand Cayman – Cayman Islands
100.0
LGT (Uruguay) S.A.
Bank representation
Montevideo – Uruguay
100.0
Investment advisers
Sydney – Australia
100.0
LGT Investment Portfolio Ltd.
4
LGT Capital Partners (Australia) PTY Ltd.
4
1
Ownership interest equals voting interest. Ownership interest is unchanged from previous year unless specified.
2
Within the scope of consolidation of LGT since 31 October 2014
3
Merger of LGT Capital Management Ltd., Pfäffikon and LGT Capital Partners Ltd., Pfäffikon on 9 April 2014
4
Was established during 2014
LGT Swiss Life Non Traditional Advisers Ltd. was liquidated on 24 June 2014.
Global Fine Art Services AG was liquidated on 12 November 2014.
34 Interests in unconsolidated structured entities
The Group is principally involved with structured entities through investments in and loans to structured entities and sponsoring
structured entities that provide specialized investment opportunities to investors.
Interests in unconsolidated structured entities (TCHF)
Domicile
Cayman Islands
2014
2013
Number
NAV
Number
NAV
4
3 358 342
5
7 926 118
Finland
1
240 471
1
245 036
Germany
2
131 773
2
147 092
Guernsey
Ireland
4
997 008
4
783 955
25
8 039 873
23
7 710 959
Liechtenstein
6
14 379 483
4
9 415 940
Luxembourg
12
6 400 484
10
4 850 223
Switzerland
3
1 064 781
3
1 216 738
United Kingdom
1
67 962
0
0
USA
2
118 127
2
131 394
Total
60
34 798 304
54
32 427 455
Notes to the consolidated financial statements
53
Nature of risk
Risk associated with unconsolidated structured entities
The following table summarizes the carrying values recognized in the statement of financial position of the Group’s interests in uncon­
solidated structured entities. The maximum exposure to loss presented in the table below is contingent in nature and may arise as a
result of the provision of liquidity facilities, and any other funding commitments, such as financial guarantees provided by the Group.
Financial statement
at 31 December 2014
(TCHF)
Financial
Financial
Financial
instruments
instruments
instruments
ments and
exposure
(fair value
(available-
(trading)
guarantees
to loss
through profit
for-sale)
Commit-
Collateral
Maximum
Domicile
and loss)
Cayman Islands
1 053 056
293 086
0
151 323
408 156
-377 650
1 527 971
0
0
0
0
2 405
0
2 405
Finland
Germany
0
150
0
4
2 822
0
2 976
Guernsey
0
418
0
0
0
0
418
Ireland
0
10 529
1 380
156 383
253 956
0
422 248
Liechtenstein
0
0
1
0
28 818
-28 814
5
Luxembourg
0
370
769
19 526
87 376
0
108 041
Switzerland
0
7 079
568
0
0
0
7 647
USA
0
17 838
0
0
0
0
17 838
1 053 056
329 470
2 718
327 236
783 533
-406 464
2 089 549
Loans
Commit-
Collateral
Maximum
Total
Financial statement
at 31 December 2013
(TCHF)
Financial
Financial
Financial
instruments
instruments
instruments
ments and
exposure
(fair value
(available-
(trading)
guarantees
to loss
through profit
for-sale)
Domicile
and loss)
Cayman Islands
1 056 867
263 540
0
14 884
293 946
-144 346
1 484 891
0
0
0
0
2 450
0
2 450
Finland
Germany
0
170
0
0
2 695
0
2 865
Guernsey
0
292
0
0
0
0
292
Ireland
0
9 119
0
78 107
207 567
0
294 793
Liechtenstein
1 484
0
0
0
21 836
-21 836
1 484
Luxembourg
0
425
0
858
47 530
0
48 813
Switzerland
0
5 957
2 705
0
0
0
8 662
USA
0
12 680
0
0
0
0
12 680
1 058 351
292 183
2 705
93 849
576 024
-166 182
1 856 930
Total
54
Loans
Notes to the consolidated financial statements
35 Operating segments
LGT is the private banking and asset management group of the Princely House of Liechtenstein. It has its headquarters in Vaduz,
Principality of Liechtenstein. The Group’s segmental reporting comprises the three operating business units: Private Banking, Asset
Management and Operations & Technology. All the remaining operating income and expenses, which are not directly connected
to these business units, including consolidation adjustments, are shown under Corporate Center.
LGT’s reportable segments are strategic business units that offer different products and services to external and internal customers.
They are managed separately because each business unit pursues its own specific client strategy and requires different technology
as well as marketing strategy.
The segment reporting reflects the internal management structure. The segments are based upon the products and services provided
or the type of customer served and they reflect the manner in which financial information is currently evaluated by management.
The results of these lines of business are presented on a managed basis. Both the external and the internal reports are prepared in
accordance with International Financial Reporting Standards (IFRS).
Private Banking offers private clients a comprehensive range of services around the world. Asset Management manages discretionary
mandates and investment funds for institutional and private investors worldwide focusing on alternative investments and multi-asset
solutions. Operations & Technology is the IT and business service provider for the whole Group.
The segment reporting shown here has changed compared with the segment reporting presented in the last annual report. There
are two reasons for this; firstly, the merger of Traditional Asset Management and Alternative Asset Management led to the two
segments being combined into a single Asset Management Business Unit. Secondly, the internal reporting requirements have
changed, which has led to a change in the structure of the segment reporting. The figures as of 2013 have been restated.
The accounting policies of the operating segments are the same as those described in the summary of the Group accounting
principles. Income and expenses are assigned to the individual business lines in accordance with current market prices and based
on the client relationships. Indirect costs resulting from services provided internally are accounted for according to the principle
of causation and are recorded as a revenue increase for the service provider and as a cost increase for the service beneficiary.
Depreciation and provisions are stated at effective costs.
Information about the operating income from external customers for each product and service, or group of similar products and
services, is not available. The costs of developing such reporting would be excessive.
Notes to the consolidated financial statements
55
Operating segments at 31 December 2014
(TCHF)
Private
Asset
Operations &
Corporate
Banking
Management
Technology
Center 5
Group
Net interest income 1
105 040
-3 537
5 536
-14 580
92 459
Non-interest income (other income)
570 551
263 091
7 483
76 190
917 315
38 664
9 730
128 097
-176 491
0
714 255
269 284
141 116
-114 881
1 009 774
Personnel expenses
-304 206
-150 743
-57 738
-82 825
-595 512
Business and office expenses
-207 158
-54 486
-57 976
154 137
-165 483
-17 002
-727
-23 077
-4 572
-45 378
-722
0
364
0
-358
-18 150
-291
0
9 277
-9 164
Total internal operating income 2
Total operating income
Depreciation, amortization and impairment
Credit losses/recoveries
Changes in provisions and other losses
Other operating expenses
-1 194
-108
0
41
-1 261
Total operating expenses
-548 432
-206 355
-138 427
76 058
-817 156
Segment result before tax
165 823
62 929
2 689
-38 823
192 618
-27 443
Tax expense 3
Non-controlling interests
-195
Net profit
Profit/loss of associates
164 980
0
4
0
242 090
242 094
34 950 951
398 627
506 630
-322 967
35 533 241
Additional information:
Segment assets
Property and equipment
183 299
4 512
13 765
0
201 576
Intangible assets
302 157
44 641
67 848
0
414 646
19 172
2 928
7 914
0
30 014
0
638
0
3 009 204
3 009 842
31 353 762
231 093
420 262
173 737
32 178 854
1 247
323
316
195
2 081
84 241
43 776
0
778
128 795
Capital expenditure
Investments in associates
Segment liabilities
Headcount
Client assets under administration in CHFm 4
1
Management primarily relies on net interest income, not gross income and expense, in managing the segments.
2
Operating income from transactions with other segments at market prices.
3
The Group does not allocate tax expense/tax income to reportable segments.
4
Client assets under administration include double-counted assets and LGT’s Princely Portfolio.
5
Corporate Center includes the net result of the Princely Portfolio, net Group financing cost, the cost of all Group functions and consolidation adjustments.
Geographical information
Operating income 1
Capital expenditure
Non-current assets
at 31 December 2014 (TCHF)
Liechtenstein
374 855
9 781
158 686
Switzerland
636 562
16 645
367 628
-197 138
581
82 546
86 958
1 712
2 447
108 423
1 293
4 913
Other Europe
Americas
Asia
Other countries
Group
1
56
114
2
2
1 009 774
30 014
616 222
Operating income is attributed to countries/regions on the basis of the LGT companies’ domicile.
Notes to the consolidated financial statements
Operating segments at 31 December 2013
(TCHF)
Private
Asset
Operations &
Corporate
Banking
Management
Technology
Center 5
Group
Net interest income 1
103 114
-4 143
4 657
-23 556
80 072
Non-interest income (other income)
504 483
222 843
6 430
80 936
814 692
22 588
1 652
124 863
-149 103
0
630 185
220 352
135 950
-91 723
894 764
Personnel expenses
-276 854
-131 434
-53 436
-69 349
-531 073
Business and office expenses
-167 985
-22 936
-56 922
90 541
-157 302
Total internal operating income 2
Total operating income
-16 504
-545
-21 562
-10 957
-49 568
Credit losses/recoveries
Depreciation, amortization and impairment
-2 934
0
0
0
-2 934
Changes in provisions and other losses
-3 685
0
0
-141
-3 826
Other operating expenses
-1 014
401
-1
-660
-1 274
Total operating expenses
-468 976
-154 514
-131 921
9 434
-745 977
Segment result before tax
161 209
65 838
4 029
-82 289
148 787
-5 547
Tax expense 3
Non-controlling interests
-4 060
Net profit
Profit/loss of associates
139 180
0
536
0
149 614
150 150
27 601 079
304 430
445 116
-38 186
28 312 439
Additional information:
Segment assets
Property and equipment
167 850
2 064
14 375
0
184 289
Intangible assets
118 789
46 742
82 331
0
247 862
13 411
1 468
9 474
0
24 353
0
811
0
2 818 125
2 818 936
24 247 070
153 069
357 928
338 379
25 096 446
1 108
309
308
196
1 921
66 648
38 847
0
1 824
107 319
Capital expenditure
Investments in associates
Segment liabilities
Headcount
Client assets under administration in CHFm 4
1
Management primarily relies on net interest income, not gross income and expense, in managing the segments.
2
Operating income from transactions with other segments at market prices.
3
The Group does not allocate tax expense/tax income to reportable segments.
4
Client assets under administration include double-counted assets and LGT’s Princely Portfolio.
5
Corporate Center includes the net result of the Princely Portfolio, net Group financing cost, the cost of all Group functions and consolidation adjustments.
Geographical information
Operating income 1
Capital expenditure
Non-current assets
Liechtenstein
390 073
11 885
178 099
Switzerland
371 781
7 165
163 997
20 837
715
83 145
at 31 December 2013 (TCHF)
Other Europe
Americas
20 099
423
657
Asia
91 974
4 165
6 253
Other countries
Group
1
0
0
0
894 764
24 353
432 151
Operating income is attributed to countries/regions on the basis of the LGT companies’ domicile.
Notes to the consolidated financial statements
57
36 Client assets under administration (CHF m)
Client assets under administration (excluding Princely Portfolio) which are stated according to the provisions of the Liechtenstein
banking law are as follows:
2014
2013
Client assets in own-managed funds
25 542
25 039
Client assets under management
31 216
24 049 1
Other client assets under administration
69 028
55 413
125 786
104 501 1
12 937
13 007
14 429
8 015 1
of which net new money
6 755
8 015 1
of which through acquisition
7 674
0
Total client assets under administration (including double counting)
of which double counting
Net new assets
1
Adjusted for reclassified special mandate
Client assets in own-managed funds
This item covers the assets of all the actively marketed investment funds of LGT.
Client assets under management
The calculation of assets with management mandate takes into account client deposits as well as the fair value of securities, loan-stock
rights, precious metals and fiduciary investments placed with third-party institutions. The information covers both assets deposited
with Group companies and assets deposited at third-party institutions for which Group companies hold a discretionary mandate.
Other client assets under administration
The calculation of other client assets under administration takes into account client deposits as well as the fair value of securities,
loan-stock rights, precious metals and fiduciary investments placed with third-party institutions. The information covers assets for
which an administrative or advisory mandate is exercised.
Double counting
This item covers investment fund units from own-managed funds as well as certain assets that are included in client assets under
management.
Custodian assets
Custodian assets are excluded.
58
Notes to the consolidated financial statements
37
Pensions
2014
2013
1.10%
2.25%
Principal actuarial assumptions
Discount rate
Average future salary increases
1.00%
1.00%
Future pension increases
0.00%
0.00%
Mortality tables used
BVG 2010 GT BVG 2010 GT
Average retirement age
60/60
60/60
Employees covered by the major plans 1
1 671
1 569
453
447
Male
26.2
26.1
Female
28.8
28.7
1 086 511
942 424
-1 418 121
-1 078 078
-331 610
-135 654
0
0
-331 610
-135 654
Service cost
-27 724
-26 815
Interest cost
-24 567
-21 129
21 514
17 387
Retirees covered by the major plans
The average life expectancy in years of a pensioner retiring at age 60 is as follows:
Balance sheet (end of year)
Fair value of plan assets
Defined benefit obligation
Funded status
Unrecognized asset due to IAS 19.64
Net assets/liabilities
Income statement
Interest income
Past service cost
0
0
Curtailment, settlement, plan amendment gains/losses
0
0
Administration expense
-292
-201
Net pension expenses
-31 069
-30 758
90 227
40 721
-135 654
-187 110
Actual return on plan assets
Movement in the assets/liabilities recognized in the balance sheet
At 1 January
True-up opening balance sheet
Expense recognized in the income statement
Employer’s contributions (following year expected contribution)
Total prepaid/accrued pension cost
0
-30 758
32 226
31 322
1 157
564
whereof operating income/expense
4 210
4 306
whereof financing income/expense
-3 053
-3 742
-197 113
50 892
Total gains/losses recognized in other comprehensive income
Change of unrecognized assets due to IAS 19.64
At 31 December
1
0
-31 069
0
0
-331 610
-135 654
Apprentices, trainees and certain part-time employees are not covered by the plans.
Notes to the consolidated financial statements
59
2014
2013
-1 078 078
-1 042 447
Movement in the defined benefit obligation
At 1 January
Service cost
-27 724
-26 815
Employees’ contributions
-18 947
-18 344
0
0
-24 567
-21 129
0
0
Past service cost
Interest cost
Curtailments/settlements
Benefits paid
-2 979
3 099
-265 826
27 558
At 31 December
-1 418 121
-1 078 078
Defined benefit obligation participants
-1 029 920
-746 071
-388 201
-332 007
18.3
16.4
942 424
855 337
21 514
17 387
Actuarial gains/losses on benefit obligation
Defined benefit obligation pensioners
Duration
Movement in the fair value of plan assets
At 1 January
Interest income
Employer’s contributions
32 226
31 322
Employees’ contributions
18 947
18 344
2 979
-3 099
-292
-201
Benefits paid
Administration expense
Return on plan assets excluding amount recognized in net interest
At 31 December
Composition and fair
value of plan assets
Quoted in an active market
Other
Domestic
Foreign
Domestic
Foreign
0
0
43 561
0
68 713
23 334
1 086 511
942 424
Total
%
43 561
4.0
at 31 December 2014
Cash and cash equivalents
Real estate
Bonds
AAA to BBB below BBBnot rated
Equity
Investment funds
0
0
56 720
0
56 720
5.2
2 809
104 070
0
0
106 879
9.8
2 809
100 505
0
0
103 314
9.5
0
0
0
0
0
0.0
0
3 565
0
0
3 565
0.3
112 798
209
0
0
113 007
10.5
55 559
172 384
472 548
69 537
770 028
70.9
Bonds
0
28 993
251 910
6 863
287 766
26.5
Equity
4 407
58 761
156 760
4 558
224 486
20.7
41 848
50 165
17 771
0
109 784
10.1
9 304
0
16 136
0
25 440
2.3
0
34 465
29 971
58 116
122 552
11.3
0
0
-12 769
0
-12 769
-1.2
Real estate
Commodities
Alternative investments
Derivatives
Currencies
Other assets/liabilities
Total
0
0
-12 769
0
-12 769
-1.2
4 677
0
4 408
0
9 085
0.8
175 843
276 663
564 468
69 537
1 086 511
100.0
The plan assets include property occupied by the Group with a fair value of TCHF 13 200 (2013: TCHF 13 200).
60
Notes to the consolidated financial statements
Composition and fair
Quoted in an active market
value of plan assets
Other
Total
%
0
48 344
5.1
0
56 720
6.0
Domestic
Foreign
Domestic
Foreign
Cash and cash equivalents
0
0
48 344
Real estate
0
0
56 720
at 31 December 2013
Bonds
AAA to BBB -
2 229
97 707
0
0
99 936
10.6
2 229
97 707
0
0
99 936
10.6
below BBB-
0
0
0
0
0
0.0
not rated
0
0
0
0
0
0.0
Equity
97 957
189
0
0
98 146
10.4
Investment funds
43 111
150 415
349 852
87 399
630 777
66.9
Bonds
0
18 482
211 368
8 113
237 963
25.3
Equity
4 364
79 613
108 669
5 810
198 456
21.1
30 385
29 805
16 728
0
76 918
8.2
8 362
0
13 087
0
21 449
2.3
0
22 515
0
73 476
95 991
10.2
Real estate
Commodities
Alternative investments
Derivatives
Currencies
Other assets/liabilities
Total
0
0
554
0
554
0.1
0
0
554
0
554
0.1
3 707
0
4 240
0
7 947
0.9
147 004
248 311
459 710
87 399
942 424
100.0
2014
2013
Defined benefit pension plans
Remeasurements DBO
Actuarial gains/losses arising from plan experience
Actuarial gains/losses arising from demographic assumptions
Actuarial gains/losses arising from financial assumptions
Remeasurements assets
True-up of opening balance sheet
Total recognized in other comprehensive income
Sensitivities
Discount rate +0.25%
-265 826
27 558
1 179
-15 777
0
0
-267 005
43 335
68 713
23 334
0
0
-197 113
50 892
DBO
Service cost
-63 592
-3 199
Discount rate -0.25%
68 353
3 473
Salary increase +0.25%
21 651
1 587
Salary increase -0.25%
-19 788
-1 477
44 162
1 674
0
0
53 979
2 000
Pension increase +0.25%
Pension increase -0.25% (not lower than 0%)
Increase of one year life expectancy at retirement age
The Group expects to contribute TCHF 32 562 to its defined benefit pension plans in 2015 (2014: TCHF 32 226).
The measurement date for the Group’s defined benefit plans is 31 December.
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice,
this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the
defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation
calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the
pension liability recognized within the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis have not changed compared with the previous period.
Notes to the consolidated financial statements
61
Nature of plans
IAS 19 (revised) specifies new disclosure requirements with relation to pension plans, the regulatory framework and risk characteristics.
Regulatory framework
Pension plan legal structure
LGT currently operates two employer-specific defined benefit pension schemes, i.e. the LGT Group Personnel Welfare and Pension
Foundation (Personalvorsorgestiftung (PVS) der LGT Gruppe) in Switzerland and in Liechtenstein. Both pension schemes consist of a
pension plan and a capital savings plan. The pension fund is a separate legal entity. Under Swiss and Liechtenstein law, all employees are
required to be members of the pension scheme. Minimum benefits are stipulated by law (for old-age, disability, death and termination).
LGT’s pension schemes cover more than legally prescribed minimum requirements.
The Foundation Board of the welfare and pension fund foundation comprises eight individuals for the pension fund in Switzerland, and
six individuals for the pension found in Liechtenstein – 50% of whom are employer representatives, and the other 50% are employee
representatives.
Other entity’s responsibilities
The members of the Foundation Board decide about the benefits to be provided, how these are to be financed, and the fund’s asset
allocation. They are responsible vis à vis the beneficiaries and the authorities.
Special situation
The pension scheme has no minimum funding requirement (when the pension fund is in a surplus position), although it does have a
minimum contribution requirement as specified below. In accordance with national legal provisions, where a pension fund is operated
in a surplus position, limited restrictions apply in terms of the board member’s ability to apply benefits to the members of the locally
determined “free reserves”. In cases where the pension fund enters into an underfunded status, the active members together with LGT
are required to make additional contributions until such time as the pension fund is again in a fully funded position.
Funding arrangements that affect future contributions
Swiss and Liechtenstein law provides for minimum pension obligations on retirement. Swiss and Liechtenstein law also prescribes minimum
annual contribution requirements. An employer may provide or contribute a higher amount than specified by Swiss and Liechtenstein
law – such amounts are specified under the terms and conditions of the pension schemes. In addition, employers are able to make
one-off contributions or prepayments to these pension funds. Although these contributions cannot be withdrawn, they are available
to the company to offset its future employer cash contributions to the pension fund.
Even though a surplus may exist in the pension fund, Swiss and Liechtenstein law requires that minimum annual contribution requirements continue. For the active members of the pension fund, annual contributions are required from both the employer and the
employee. The employer contributions must be at least equal to the employee contributions, but may be higher, as stated separately
in the regulations of the pension fund.
Minimum annual contribution obligations are determined with reference to an employee’s age and current salary, however, as indicated
above, these can be increased under the pension schemes.
In the event that an employee leaves the employ of LGT prior to reaching a pensionable age, the termination benefit (pension scheme)
and the cumulative balance of the savings contributions (capital savings scheme) are withdrawn from the pension scheme and invested
in the pension scheme of the employee’s new employer.
In the event of the liquidation of LGT, or the pension fund, LGT has no right to any refund of any surplus in the pension fund.
Any surplus balance is to be allocated to the members (active and pensioners).
General risk
The company faces the risk that the equity ratio can be affected by a bad performance of the assets of the pension fund, or a change
of assumptions. Therefore the sensitivities applying to the main assumptions (discount rate and salary increase) have been calculated
and disclosed.
62
Notes to the consolidated financial statements
38
Long-term incentive scheme
Movements in the number of options outstanding
Number of series
Year of issue
9
10
11
12
13
14
15
16
2007
2008
2009
2010
2011
2012
2013
2014
Duration from
1.4.2007 1.4.2008 1.4.2009 1.4.2010 1.4.2011 1.4.2012 1.4.2013 1.4.2014
Duration to
1.4.2014 1.4.2015 1.4.2016 1.4.2017 1.4.2018 1.4.2019 1.4.2020 1.4.2021
At 1 January 2014
Granted
Exercised
1 311
2 535
2 147
2 624
3 228
3 208
3 249
0
Total
18 302
0
0
0
0
0
0
0
3 488
3 488
-1 311
-715
-312
-322
-521
0
0
0
-3 181
Lapsed/without value
0
-10
-5
-5
-29
-48
-55
0
-152
At 31 December 2014
0
1 810
1 830
2 297
2 678
3 160
3 194
3 488
18 457
Total
Number of series
Year of issue
8
9
10
11
12
13
14
15
2006
2007
2008
2009
2010
2011
2012
2013
Duration from
1.4.2006 1.4.2007 1.4.2008 1.4.2009 1.4.2010 1.4.2011 1.4.2012 1.4.2013
Duration to
1.4.2013 1.4.2014 1.4.2015 1.4.2016 1.4.2017 1.4.2018 1.4.2019 1.4.2020
At 1 January 2013
Granted
Exercised
275
2 148
2 757
2 766
3 070
3 256
3 296
0
17 568
0
0
0
0
0
0
0
3 249
3 249
-275
-837
-220
-619
-439
0
0
0
-2 390
Lapsed/without value
0
0
-2
0
-7
-28
-88
0
-125
At 31 December 2013
0
1 311
2 535
2 147
2 624
3 228
3 208
3 249
18 302
2014
2013
Options outstanding at the end of the year were as follows:
Number of series
Year of issue
Expiry date
Exercise price (CHF)
9
2007
1.4.2014
32 634
0
1 311
10
2008
1.4.2015
37 061
1 810
2 535
11
2009
1.4.2016
32 859
1 830
2 147
12
2010
1.4.2017
34 760
2 297
2 624
13
2011
1.4.2018
13 871
2 678
3 228
14
2012
1.4.2019
12 877
3 160
3 208
15
2013
1.4.2020
14 546
3 194
3 249
16
2014
1.4.2021
13 773
3 488
0
18 457
18 302
In 2014, the fair value changes of the options of TCHF 63 975 were charged to personnel expenses (2013: TCHF 46 469).
Significant inputs to measure the fair value of the options are the economic value added as described in the Group accounting
principles under employee medium-term benefits and the exercise price shown above.
Notes to the consolidated financial statements
63
39
Related-party transactions (TCHF)
2014
2013
3 325
3 490
12 500
10 416
The following emoluments were made by the Group to the members of the Foundation Board
and to Group and business unit executives during the year.
Total emoluments of Foundation Board members
Salaries and bonuses
Long-term incentive scheme
Total emoluments of Group and business unit executives
3 514
1 735
16 014
12 151
The following loans, advances and commitments made by the Group at preferential terms
customary in the banking industry to and on behalf of the above-mentioned related parties
were outstanding at year-end
Advances
2 365
4 035
Mortgages and other loans
4 034
4 293
Total
6 399
8 328
Hedge fund and private equity co-investment plan of senior LGT managers
Each year the employees of LGT Capital Partners Ltd., which acts as investment adviser to LGT’s alternative assets investment
vehicles, and members of LGT’s management are invited to invest in the same private equity and hedge fund investments as
LGT’s customers. At 31 December 2014, LGT’s employees had committed a total of USD 85.2 million (2013: USD 80.6 million) to
the alternative investment co-investment plans.
Transactions with the Prince of Liechtenstein Foundation
A number of Group transactions were concluded with the Prince of Liechtenstein Foundation (POLF), the beneficiary of the
LGT Group Foundation, in the normal course of business, including loans, deposits and other transactions. The transactions were
reported as follows:
2014
Loans
Deposits
2013
0
1 142
2 074
40 108
Transactions with post-employment benefit plans
A number of Group transactions were concluded with post-employment benefit plans in the normal course of business, including
loans, deposits and other transactions. The transactions were reported as follows:
Deposits
40
2014
2013
43 528
48 295
Operating lease commitments (TCHF)
The Group leases various offices and warehouses under non-cancellable operating lease agreements.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Not later than one year
2014
2013
26 823
23 909
Later than one year and not later than five years
86 676
67 675
Later than five years
25 702
31 117
139 201
122 701
8 448
12 293
130 753
110 408
Subtotal
Less sublease rentals received under non-cancellable leases
Total
Operating leasing expenses in the gross amount of TCHF 28 239 are included in operating expenses. (2013: TCHF 27 752).
64
Notes to the consolidated financial statements
41
Business combinations (TCHF)
Private banking assets from HSBC Private Bank (Suisse) SA
On 1 December 2014, LGT acquired a portfolio of select private banking assets as well as the respective staff from HSBC Private
Bank (Suisse) SA. Since this date, the business which has become part of LGT Bank (Switzerland) Ltd., has been fully consolidated
according to the acquisition method.
The business contributed TCHF 3 751 to operating income and TCHF -2 647 to LGT’s profit in the period from 1 to 31 December
2014. If the business had been already acquired on 1 January 2014, the operating income of LGT would have amounted to
TCHF 1 058 021 and the Group profit to TCHF 190 236.
Details of the net assets acquired and goodwill are as follows:
2014
Cash paid
186 657
Deferred payment
0
Total purchase price
186 657
Fair value of net assets acquired
98 010
Total goodwill
88 647
The goodwill arising from the acquisition consists largely of the personnel know-how of the relationship managers acquired, the
improvement of market share in high-potential markets as well as obtaining a critical mass at the location of Lugano.
The assets and liabilities arising from the acquisition are as follows:
2014
Loans and advances to banks
Loans and advances to customers
1 955 604
574 409
Derivative financial instruments
13 758
Property and equipment
10 678
Intangible assets
98 010
Prepayments and accrued income
Amount due to customers
Derivative financial instruments
Accruals and deferred income
Other liabilities
Net assets acquired
Purchase price paid in cash or cash equivalents
Cash and cash equivalents in purchased entities
Cash outflow on acquisition
730
2 539 364
12 369
19
3 427
98 010
186 657
0
-186 657
Notes to the consolidated financial statements
65
Risk management
66
Notes to the consolidated financial statements
Risk management
Risk management framework and process
Risk is defined by the adverse impact on profitability of several distinct sources of uncertainty. Taking risk is inherent to the financial
­business and an inevitable consequence of being in business. This note presents information about the Group’s risk exposure and the
objectives, policies and processes for measuring and managing the different risk categories.
The risk policy of LGT comprises two key elements. The risk strategy, which details the overall approach to risk-taking desired by the
Board, and the risk principles, which translate the risk strategy into operating standards for both the risk organization and the required
risk processes.
Consistent with the overall business strategy, the aim of risk management is to achieve an appropriate balance between risk and return
and minimize potentially adverse effects on the financial performance of the Group.
LGT employs the “Internal Capital Adequacy Assessment Process” (ICAAP), based on the standards of the Basel Committee on Banking
Super­vision, to ensure a capital basis appropriate to its risk situation. Several risk management policies are designed to identify, assess
and analyze the different risk categories, to set guidelines, appropriate risk limits and controls (risk mitigation) and to monitor the risks
and adherence to limits with reliable and up-to-date information systems. The effectiveness of the risk policy, risk process and risk
ge
o e
4 . Mre vi
ni
w tor/
2. A
an s
na
tify
en
ss/
se lyze
a
1.
Id
organization is regularly reviewed. The figure illustrates the four equivalent key elements of the LGT risk process.
3. M
a
The Foundation Board is responsible for the Group’s risk policy and its regular review. On a daily basis risk monitoring is conducted by
the line management. The overall responsibility lies within the executive management teams of each business unit. The risk controlling
unit oversees the risk-taking activities of the Group. The control of risk is thus conducted outside of and independently of line management. LGT’s risk controlling unit is responsible for risk supervising and risk reporting for the whole Group.
LGT has identified several types of risk to which it is exposed to and applied them in ICAAP.
Strategic and business risk
Market risk
Liquidity and funding risk
Credit risk
Operational risk
Interest rates
Currency
Equity prices
Asset and Liability Management
Cash flows
Refinancing
Counterparty default
Concentration
Collateral
Processes
Employees
Technology
External
Regulatory and reputational risk
Notes to the consolidated financial statements
67
Strategic and business risk
Strategic risk is the danger of losses arising from strategic decisions, changes in the economic and competitive environment, inadequate
or insufficient implementation of strategic objectives, or lack of capability to adjust to changing economic needs. Moreover, it comprises
the danger of losses resulting from the dependency on highly qualified staff.
Business risk arises from unexpected changes in market conditions having a negative impact on profitability.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
prices. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and
­specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, foreign
exchange rates and equity prices. The Group separates exposures to market risk into either trading or non-trading portfolios.
The market risk arising from trading and non-trading activities is monitored by Group Risk Controlling and for the trading portfolios by the
Risk Management of the Trading Department. Regular reports are submitted to Group management and the heads of the business units.
Trading portfolios also include those positions arising from market-making transactions where the Group acts as principal in the m
­ arket.
Non-trading portfolios primarily arise from the interest rate management of the Group’s banking assets and liabilities. Non-trading
portfolios also consist of foreign exchange and equity risks arising from the Group’s available-for-sale investments.
The asset and liability management (ALM) manages the interest rate risk in the banking book and the group-wide foreign exchange rate
risk. The ALM profile and the corresponding risks are limited on LGT level and for each of the banking entities separately. The risk limits
are defined as the change in the market value of equity given a standardized shift in interest and exchange rates respectively. In addition
gap limits are defined to limit maturity mismatch activities. The limits set for the ALM profile are considered to be conservative.
Market risk measurement
As part of the management of market risk, the most important measurement category for the Group is the sensitivity analysis of its
trading and non-trading portfolios, to estimate the market risk of positions held, based on assumptions for changes in interest rates,
foreign exchange rates, equity prices and volatility. The Board sets limits on the total fair value change that may be accepted for the
Group, trading and non-trading separately. These limits are monitored by Group Risk Controlling for the trading portfolios on a daily
basis, and for the non-trading portfolios on a monthly basis. On the basis of the sensitivity analysis the Group undertakes various
hedging strategies and also enters into interest rate swaps to match the interest rate risk associated with loans to which the fair value
option has been applied. The table on the next page shows a summary of LGT’s sensitivity analysis.
In addition, market risks on the trading portfolios are managed by limiting the volume and maximum loss accepted overall and by p
­ osition.
LGT performs stress tests to obtain an indication of the potential size of losses that could arise in extreme conditions. The stress testing
applies stress movements of each risk category and ad hoc stress testing, which includes applying possible stress events to s­ pecific positions or regions. The stress testing is tailored to the business and typically uses scenario analysis.
Market risk organization and reporting
Responsibility for risk control lies with the Asset and Liability Committee (ALCO) which defines basic principles for the refinancing activity
of the LGT (focusing on medium to long-term money) and advises the CEO of LGT on capital market transactions.
The control of the ALM risks is primarily applied by way of an active management of the repricing gaps in the different time bands.
Transactions carried out in the ALM area must be notified to the ALCO by a representative of Group Risk Controlling at the next meeting.
Moreover, the Group Trading and Investment Committee (GTIC) is responsible for the regular review of all trading activities and for
ensuring the effectiveness of the risk policy, risk processes and the risk organization.
68
Notes to the consolidated financial statements
Summary sensitivity analysis
Negative fair value change reflected in income statement
Interest rate
Currency
Equity price
+100 bp
-20%
-10%
Trading portfolio/designated at fair value
9 197
171 916
388
Total
9 197
171 916
388
Interest rate
Currency
Equity price
+100 bp
-20%
-10%
Trading portfolio/designated at fair value
20 305
226 409
525
Total
20 305
226 409
525
Interest rate
Currency
Equity price
+100 bp
-20%
-10%
23 340
401 571
4 283
0
0
300 920
23 340
401 571
305 203
Interest rate
Currency
Equity price
+100 bp
-20%
-10%
14 674
257 127
653
0
0
281 813
14 674
257 127
282 466
at 31 December 2014 (TCHF)
Negative fair value change reflected in income statement
at 31 December 2013 (TCHF)
Negative fair value change reflected in equity
at 31 December 2014 (TCHF)
Non-trading portfolios
Investments in associates
Total
Negative fair value change reflected in equity
at 31 December 2013 (TCHF)
Non-trading portfolios
Investments in associates
Total
Currency risk
The Group takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position
and cash flows. The CEO of LGT sets limits on the level of exposure by currency and in aggregate for both overnight and intraday
positions, which are monitored daily.
Currency risk strategy and measurement
Exchange rate risk control is implemented within the framework of LGT’s overall appetite for risk. The aim of an appropriate asset and
liability risk management system is to manage the exchange rate risk of LGT and the Group companies to optimum effect. The limits
must be applied using appropriate limit types to reflect the risk. In this context gap limits for limiting matching maturities within specific
maturity segments are used.
The following table summarizes the Group’s exposure to foreign currency exchange rate risk at 31 December. Included in the table are
the Group’s financial instruments at carrying amounts, categorized by currency.
Notes to the consolidated financial statements
69
Foreign exchange exposure
CHF
EUR
USD
Other
Total
at 31 December 2014 (TCHF)
Cash in hand, balances with central banks
9 210 468
58 492
1 220
1 011
9 271 191
Loans and advances to banks
1 236 225
1 017 643
1 656 762
637 194
4 547 824
Loans and advances to customers
4 602 167
1 661 330
2 857 994
1 380 199
10 501 690
767
769
2 435
1 427
5 398
Securities held for trading purposes
Financial assets designated at fair value
Available-for-sale securities
1 353 880
537 961
27 862
821 283
2 740 986
641 119
406 466
461 456
1 139 935
2 648 976
Investments in associates
3 009 842
0
0
0
3 009 842
Remaining assets
2 258 184
44 797
61 725
442 628
2 807 334
22 312 652
3 727 458
5 069 454
4 423 677
35 533 241
133 166
259 495
601 468
356 433
1 350 562
5 733 468
6 498 112
10 895 911
3 055 089
26 182 580
0
532 742
0
0
532 742
Total assets
Amounts due to banks
Amounts due to customers
Financial liabilities designated at fair value
Certificated debt
1 694 839
17 962
0
0
1 712 801
Remaining liabilities
2 280 199
57 037
37 578
25 355
2 400 169
Total liabilities
9 841 672
7 365 348
11 534 957
3 436 877
32 178 854
Net foreign exchange exposure of balance sheet
12 470 980
-3 637 890
-6 465 503
986 800
3 354 387
Derivative financial instruments
-8 858 999
3 475 331
6 453 489
-859 674
210 147
3 611 981
-162 559
-12 014
127 126
3 564 534
CHF
EUR
USD
Other
Total
7 666 887
28 184
1 016
1 008
7 697 095
563 079
251 908
1 181 499
987 884
2 984 370
3 832 768
1 187 127
1 501 350
1 038 330
7 559 575
Total net foreign exchange exposure
Foreign exchange exposure
at 31 December 2013 (TCHF)
Cash in hand, balances with central banks
Loans and advances to banks
Loans and advances to customers
Securities held for trading purposes
Financial assets designated at fair value
Available-for-sale securities
Investments in associates
Remaining assets
Total assets
Amounts due to banks
Amounts due to customers
Financial liabilities designated at fair value
545
3 736
0
6 109
646 058
190 276
838 388
3 481 853
597 563
194 096
253 600
837 937
1 883 196
2 818 936
0
0
0
2 818 936
1 273 828
34 585
56 975
515 917
1 881 305
18 562 020
2 342 503
3 188 452
4 219 464
28 312 439
153 380
265 769
410 797
163 701
993 647
5 295 187
4 987 378
7 603 281
2 621 854
20 507 700
0
527 567
17 979
0
545 546
Certificated debt
1 614 977
19 752
0
0
1 634 729
Remaining liabilities
1 350 435
24 369
18 729
21 291
1 414 824
Total liabilities
8 413 979
5 824 835
8 050 786
2 806 846
25 096 446
Net foreign exchange exposure of balance sheet
10 148 041
-3 482 332
-4 862 334
1 412 618
3 215 993
Derivative financial instruments
-6 801 793
3 480 922
4 850 082
-1 393 320
135 891
3 346 248
-1 410
-12 252
19 298
3 351 884
Total net foreign exchange exposure
70
1 828
1 807 131
Notes to the consolidated financial statements
Interest rate risk
Interest rate risk associated with non-trading financial instruments (loans and advances, fixed-income securities, term deposits, certificated
debt, and derivative financial instruments) is part of the Group’s asset and liability management process. Interest rate risk is measured
by the use of gap analysis and interest rate sensitivities. The Asset and Liability Committee decides on any appropriate use of derivative
financial instruments. The principal interest-related derivatives used are interest rate swaps and forward rate agreements. LGT also applies
fair value hedge accounting to mortgage loan portfolio interest rate risk.
Interest rate risk strategy and measurement
Interest rate risk control is implemented within the framework of LGT’s overall appetite for risk. The aim of an appropriate asset and
liability risk management system is to manage the interest rate risk of LGT and the Group companies to optimum effect. The limits
must be applied using appropriate limit types to reflect the risk. The following limit types are used in this context:
n
n
Gap limits for limiting matching maturities within specific maturity segments.
Interest rate sensitivity limits for limiting the maximum potential loss on the fair value of equity resulting from detrimental market
movements in interest rates.
The following analysis shows the absolute changes in fair values given a change of the respective key rate by +100 basis points.
Interest rate sensitivity analysis (CHF m)
All currencies 2014
Within
More than
More than
More than
6 months
6 and
1 and
5 years
less than
less than
12 months
5 years
Total
-2.0
-7.9
-12.6
32.1
9.6
All currencies 2013
0.2
-5.6
-6.6
18.0
6.0
CHF 2014
2.1
18.2
9.4
33.9
63.6
CHF 2013
4.9
30.0
8.7
21.7
65.3
USD 2014
2.1
-7.4
-12.3
-0.5
-18.1
USD 2013
-0.8
0.4
-7.0
-1.3
-8.7
EUR 2014
-5.9
-17.1
-4.6
-0.8
-28.4
EUR 2013
-2.3
-23.3
-3.8
-2.2
-31.6
The table below summarizes the average interest rate by major currencies for monetary financial instruments not carried at fair value
through profit or loss:
31 December 2014
CHF in %
EUR in %
USD in %
31 December 2013
CHF in %
EUR in %
USD in %
Assets
Loans and advances to banks
0.07
0.30
0.31
0.07
0.35
0.59
Loans and advances to customers
1.12
1.33
1.53
1.38
1.58
1.57
Available-for-sale securities
1.82
0.47
1.05
2.28
0.89
1.31
Liabilities
Amounts due to banks
0.07
0.06
0.14
0.08
0.35
0.23
Amounts due to customers
0.10
0.02
0.05
0.13
0.03
0.10
Certificated debt
2.04
0.61
0.00
2.20
0.66
0.00
Notes to the consolidated financial statements
71
Liquidity risk
Liquidity risk is the risk that an entity will be unable to meet a financial commitment to a customer, creditor or investor in whatever
location or currency. The management of liquidity is primarily directed toward ensuring that local funding requirements can be met.
The distribution of sources and maturities of deposits is managed actively in order to ensure access to funds and to avoid a concentration of funding demand at any one time or from any one source. Sources of liquidity are regularly reviewed by a separate team in
Group Treasury to maintain a wide diversification by currency, geography, provider, product and term.
Liquidity management is subject to the overall monitoring and control of Group Treasury, which also manages excess liquidity for
individual entities. LGT Bank Ltd., Vaduz, which attracts the majority of customers’ cash deposits within the Group, also performs the
Group Treasury function.
The Group’s liquidity management process includes:
n
day-to-day funding, managed by monitoring future cash flows to ensure that requirements can be met. The Group maintains an
n
maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen interruption
active presence in global money markets to enable this to happen;
to cash flow;
monitoring balance sheet liquidity ratios against internal and regulatory requirements; and
n managing the concentration and profile of debt maturities.
n
Group Treasury also monitors unmatched medium-term assets, the level and type of undrawn lending commitments, the usage of
overdraft facilities and the impact of contingent liabilities such as standby letters of credit and guarantees. The assumptions regarding
gross loan commitments are based on expert opinions and also differentiated by the type of limit and the client type.
In the following table, assets and liabilities are structured according to contractual terms. It summarizes the overall funding and
investment structure of the Group.
72
Notes to the consolidated financial statements
Cash flow of assets and liabilities
at 31 December 2014 (TCHF)
Within
More than
More than
More than
More than
1 month
1 and
3 and
1 and
5 years
less than
less than
less than
3 months
12 months
5 years
0
0
0
Cash in hand, balances with central banks
9 271 191
Loans and advances to banks
2 780 248
616 953
1 151 229
0
0
4 548 430
Loans and advances to customers
5 559 832
1 825 863
1 113 323
1 656 344
510 009
10 665 371
0
2 719
0
2 432
265
5 416
32 890 666
36 115 587
17 275 917
66 157
12 304
86 360 631
76 684
1 686 316
411 733
628 981
0
2 803 714
241 503
755 902
538 825
1 033 834
120 915
2 690 979
0
3 009 842
0
0
0
3 009 842
Securities held for trading purposes
Derivative financial instruments
Financial assets designated at fair value
Available-for-sale securities
Investments in associates
Remaining assets
Total assets
Amounts due to banks
0
Total
9 271 191
0
560 448
0
0
0
560 448
50 820 124
44 573 630
20 491 027
3 387 748
643 493
119 916 022
1 124 774
144 388
78 758
3 713
0
1 351 633
Amounts due to customers
24 651 792
764 418
474 190
302 810
0
26 193 210
Derivative financial instruments
32 755 905
36 105 046
17 216 687
90 505
16 318
86 184 461
0
532 742
0
0
0
532 742
1 120
11 742
226 067
927 599
700 029
1 866 557
0
171 806
0
0
0
171 806
58 533 591
37 730 142
17 995 702
1 324 627
716 347
116 300 409
Committed credit lines
559 676
0
0
0
0
559 676
Contingent liabilities
338 127
0
0
0
0
338 127
Within
More than
More than
More than
More than
Total
1 month
1 and
3 and
1 and
5 years
less than
less than
less than
3 months
12 months
5 years
Financial liabilities designated at fair value
Certificated debt
Remaining liabilities
Total liabilities
Cash flow of assets and liabilities
at 31 December 2013 (TCHF)
Cash in hand, balances with central banks
7 697 095
0
0
0
0
7 697 095
Loans and advances to banks
1 215 315
1 119 235
656 106
0
0
2 990 656
Loans and advances to customers
3 714 675
1 039 872
840 089
1 661 849
464 259
7 720 744
0
4 399
400
1 334
0
6 133
37 112 893
25 802 488
14 153 514
26 879
18 036
77 113 810
Securities held for trading purposes
Derivative financial instruments
Financial assets designated at fair value
25 649
1 704 941
571 312
1 260 110
0
3 562 012
150 476
680 887
466 337
592 697
26 801
1 917 198
Investments in associates
0
2 818 936
0
0
0
2 818 936
Remaining assets
0
614 108
0
0
0
614 108
49 916 103
33 784 866
16 687 758
3 542 869
509 096
104 440 692
734 402
169 757
77 212
12 786
0
994 157
Available-for-sale securities
Total assets
Amounts due to banks
Amounts due to customers
18 848 960
787 194
569 916
310 823
0
20 516 893
Derivative financial instruments
37 088 299
25 794 737
14 058 087
40 328
11 133
76 992 584
0
545 546
0
0
0
545 546
1 000
261 109
50 733
868 701
606 884
1 788 427
Financial liabilities designated at fair value
Certificated debt
Remaining liabilities
0
156 416
0
0
0
156 416
56 672 661
27 714 759
14 755 948
1 232 638
618 017
100 994 023
Committed credit lines
568 404
0
0
0
0
568 404
Contingent liabilities
274 389
0
0
0
0
274 389
Total liabilities
Notes to the consolidated financial statements
73
Derivative cash flows
at 31 December 2014 (TCHF)
Within
More than
More than
More than
More than
1 month
1 and
3 and
1 and
5 years
less than
less than
less than
3 months
12 months
5 years
Total
Derivatives held for trading/hedging
Foreign exchange derivatives
Outflow
32 754 973
36 102 435
17 207 585
62 783
3 600
86 131 376
Inflow
32 890 428
36 114 840
17 272 891
59 759
3 604
86 341 522
Outflow
933
2 611
9 101
27 722
12 718
53 085
Inflow
237
747
3 025
6 398
8 699
19 106
Interest rate derivatives
Other derivatives
Outflow
0
0
0
0
0
0
Inflow
0
0
0
0
0
0
Total outflow
32 755 906
36 105 046
17 216 686
90 505
16 318
86 184 461
Total inflow
32 890 665
36 115 587
17 275 916
66 157
12 303
86 360 628
Within
More than
More than
More than
More than
Total
1 month
1 and
3 and
1 and
5 years
Derivative cash flows
at 31 December 2013 (TCHF)
less than
less than
less than
3 months
12 months
5 years
Derivatives held for trading/hedging
Foreign exchange derivatives
Outflow
37 087 438
25 792 185
14 047 308
10 318
0
76 937 249
Inflow
37 112 801
25 801 348
14 148 838
10 152
0
77 073 139
861
2 552
10 778
30 010
11 133
55 334
92
1 140
4 675
16 726
18 036
40 669
0
0
0
0
0
0
Interest rate derivatives
Outflow
Inflow
Other derivatives
Outflow
Inflow
74
0
0
0
0
0
0
Total outflow
37 088 299
25 794 737
14 058 086
40 328
11 133
76 992 583
Total inflow
37 112 893
25 802 488
14 153 513
26 878
18 036
77 113 808
Notes to the consolidated financial statements
Credit risk
Credit risk is the risk that a counterparty of a financial instrument fails to meet its contractual obligation and causes LGT to incur a
financial loss. Credit risk exposures arise principally in lending activities that lead to loans and advances, and investment activities that
bring debt securities and other bills into the Group’s asset portfolio. Further there is also credit risk in derivative financial instruments
and off-balance sheet financial instruments, such as loan commitments and financial guarantee contracts.
Within LGT credit risk is primarily incurred by LGT Bank Ltd., Vaduz. Therefore the credit risk management and control are centralized
in this unit. The conservative lending policy is established by internal directives, guidelines and written policy papers. These guidelines
include: (i) regulations on maximum single credit lines, (ii) limits on unsecured lending exposures to any one customer or
customer group, and (iii) strict credit handling procedures and internal controls.
Credit risk strategy
Lending is an integrated part of the business philosophy of LGT and thus complementary to the wealth management s­ ervices offered.
Any transaction must be viewed in the context of the whole client relationship. It is not the policy of LGT to extend credit facilities
on a stand-alone basis, but only in conjunction with assets deposited or to be deposited with LGT. The risk appetite of LGT is low to
moderate. The center for lending business within LGT is the credit function at LGT Bank Ltd., Vaduz.
As part of its comprehensive system for monitoring lending exposures, regular reports are provided at a Group level to the Foundation
Board on (i) credit risk ratings, (ii) allowances, (iii) country exposures and (iv) bank limits. Stress testing of securities and property
collateral is carried out regularly and on an ad hoc basis if requested by management. In addition, ad hoc reports of special events, as
well as daily reports of global exposures to specific customers, are also provided on request.
Credit risk measurement
Loans and advances
In measuring credit risk of loans and advances to customers and to banks at a counterparty level, the Group assesses the probability of
default of individual counterparties using internal rating tools. They have been developed internally and combine statistical analysis with
credit officer judgment and are validated, where appropriate, by comparison with externally available rating data. The Group regularly
validates the performance of the rating tools and their predictive power with regard to default events.
Debt securities and other bills
For debt securities and other bills, external ratings such as Standard & Poor’s or Moody’s are used for managing the credit risk exposures.
The credit function at LGT Bank Ltd., Vaduz is responsible for extending counterparty limits, while Treasury Department manages the
individual positions within these limits. The investments in these securities and bills are viewed as a method of gaining improved credit
quality mapping and, at the same time, of maintaining a readily available financing source to meet the funding requirement.
Assets by countries
In addition to the limitation of credit exposures of customers or customer groups, LGT has restricted the group of countries in which
credit risks may be incurred. Limits are established for these countries which are reviewed by the Foundation Board at least annually.
The table below shows the allocation of assets by countries/country groups:
Assets by countries/country group (TCHF) 1
2014
in %
2013
in %
17 107 614
48.1
13 097 574
46.3
Other Europe
6 372 206
17.9
5 089 436
18.0
Americas
5 762 283
16.2
5 539 735
19.5
Asia
3 179 173
9.0
2 374 682
8.4
Other countries
3 111 965
8.8
2 211 012
7.8
35 533 241
100.0
28 312 439
100.0
Liechtenstein and Switzerland
Total
1
Based on risk domicile of the assets
Notes to the consolidated financial statements
75
Derivative financial instruments
The Group maintains strict control limits on net open derivative positions. At any time, the amount subject to credit risk is limited to the
current fair value of instruments that are favorable to the Group, which in relation to derivatives is only a small fraction of the contract,
or notional values used to express the volume of instruments outstanding. This credit risk exposure is managed as part of the overall
lending limits with customers, together with potential exposures from market movements (an add-on factor is calculated depending on
underlying risks and time to maturity of the contract).
Settlement risk arises in any situation where a payment in cash, securities or equities is made in the expectation of a corresponding
receipt in cash, securities or equities. Daily settlement limits are established for each counterparty to cover the aggregate of all settlement
risk arising from the Group’s market transactions on any single day. As member of the CLS (Continuous Linked Settlement) network
LGT is able to mitigate major parts of its daily settlement risk via forex netting.
Off-balance sheet financial instruments
The primary purpose of off-balance sheet financial instruments is to ensure that funds are available to a customer as required. LGT has
credit commitments in the form of guarantees and standby letters. These credit commitments carry the same credit risk as loans, and
therefore the same lending criteria and identical limitation processes are applied.
Risk limit control and mitigation policies
LGT systematically manages, limits and controls concentrations of credit risk. As part of the credit risk management policy, exposures are
structured by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to geographical
segments. The risks and their changes are closely monitored on a revolving basis and subject to an annual or more frequent review,
when considered necessary. Centralized loan approval procedures ensure a consistent lending process.
In line with the conservative credit policy a major part of the Group’s credit exposure is mitigated. The principal collaterals used within
LGT are mortgages over residential properties and charges over financial instruments such as debt securities, equities and funds. Upon
initial recognition of loans and advances, the fair value of collateral is based on valuation techniques commonly used for the corresponding assets. In subsequent periods, the fair value is updated by reference to market prices or indexes of similar assets. Because of the
fact that mortgages are granted primarily within Liechtenstein and Switzerland, LGT is exposed to the market trends of the real estate
sector in these countries.
Collateral accepted as security for assets (TCHF)
2014
2013
1 111 781
457 218
Fair value of financial assets accepted as collateral that the Group is permitted to sell or repledge
in the absence of default
When trading derivatives with banking counterparties in the Interbank market, the Group uses netting and credit support agreements
to mitigate credit risk.
76
Notes to the consolidated financial statements
Impairment and provisioning policies
The Group’s policy requires the review of individual financial assets that are above materiality thresholds at least annually or more regularly when individual circumstances require it. Impairment allowances on individually assessed accounts are determined by an evaluation
of the incurred loss at balance-sheet date on a case-by-case basis, and are applied to all individually significant accounts. The assessment
normally encompasses collateral held (including reconfirmation of its enforceability) and the anticipated receipts for that individual account.
Assets are summarized separately if contractual interest or principal payments are past due but the Group believes that impairment
is not appropriate yet.
Distribution of loans and advances by credit quality
2014
Loans and
advances
advances
advances
advances
to banks
to customers
to banks
to customers
4 547 824
10 093 557
2 984 370
7 361 877
Past due but not impaired
0
409 067
0
189 846
Impaired
0
23 167
0
32 281
4 547 824
10 525 791
2 984 370
7 584 004
0
24 101
0
24 429
4 547 824
10 501 690
2 984 370
7 559 575
Loans and
Loans and
Loans and
Loans and
advances
advances
advances
advances
to banks
to customers
to banks
to customers
Past due up to 30 days
0
373 658
0
174 643
Past due 31–60 days
0
536
0
3 402
Past due more than 60 days
0
34 873
0
11 801
Total
0
409 067
0
189 846
Neither past due nor impaired
Total loans and advances (gross)
Less allowance for impairment
Total loans and advances (net)
Loans and
2013
Loans and
(TCHF)
Distribution of loans and advances which were past due
but not impaired (TCHF)
Loans and
2014
2013
Collectively assessed impairment allowances are provided for: (i) portfolios of homogenous assets that are individually below materiality
thresholds; and (ii) losses that have been incurred but have not yet been identified, by using the available historical experience, experi­
enced judgment and statistical techniques.
Allowance for impairment (TCHF)
2014
Loans and
2013
Loans and
Loans and
Loans and
advances
advances
advances
advances
to banks
to customers
to banks
to customers
Specific allowance for impairment
0
16 749
0
18 403
Portfolio allowance for impairment
0
7 352
0
6 026
Total
0
24 101
0
24 429
LGT obtained assets by taking possession of collateral held as security. Repossessed properties are sold as soon as practicable, with
the proceeds used to reduce the outstanding indebtedness.
Carrying amount of collateral and other credit enhancements obtained (TCHF)
Residential, commercial and industrial property
2014
2013
850
0
Loans and advances to banks are highly diversified with a large number of mainly European banks of prime quality. Over 30% of
counterparties had a rating of at least “AA”, and over 90% a rating of at least “A”. LGT is closely monitoring these positions and
applies strict criteria in order to assess whether or not a bank qualifies for lending.
Credit lending is typically granted to LGT Bank’s private banking clientele in the context of the bank’s comprehensive wealth management business. Lending activities are granted in accordance with conservative lending and valuation criteria with a robust tracking
record; the majority of mortgage loans remains concentrated in Liechtenstein and Switzerland. Loans and advances to customers are
qualitatively assigned within an internal rating system.
Notes to the consolidated financial statements
77
Operational risk
Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external
events. This risk can be caused deliberately or accidentally or be of natural origin and encompass all elements of the organization.
Operational risks are inherent in all types of products, activities, processes and systems.
LGT has established a group-wide Operational Risk Committee which provides the CEO of LGT with support in the early identification
of these risks and in implementing appropriate measures. These tasks are based on the principles stipulated in the ’Sound Practices for
the Management and Supervision of Operational Risk’ issued by the Basel Committee on Banking Supervision. The set guidelines ensure
that risk management takes care of all defined risk categories:
Internal and external fraud
Employment practices and workplace safety
n Customers, products and business practices
n Damage to physical assets
n Business disruption and system failures
n Execution, delivery and process management.
n
n
Operational risk measurement
The operational risk measurement approach is based on three dimensions: a risk self-assessment, key risk indicators and an error event
data base. In the case of essential operational risk events, the business units and group functions immediately inform Group Risk Controlling
which then analyses, monitors and reports relevant data and initiates appropriate actions.
Regulatory risk
Regulatory risk is the overall risk that a change in laws and regulations or a non-compliance with them will materially impact a security,
business, sector or market. A change in laws or regulations made by the government or a regulatory body can increase the costs of
operating a business, reduce the attractiveness of investment and/or change the competitive landscape.
Therefore the regulatory risk management of LGT focuses on the early identification of new regulatory requirements, the effective
adoption of new regulatory requirements within LGT and the implementation of processes and procedures to ensure that all business
lines within LGT permanently meet the respective legal and regulatory requirements.
Reputational risk
Ultimately, if risks are not identified, adequately managed and monitored, this may lead – apart from financial losses – to reputation
being damaged. Reputational risk is defined as the risk of potential damage through deterioration of LGT’s reputation or due to negative
perception of its image among customers, counterparties, equity holders and/or regulatory authorities.
LGT pursues a holistic reputation risk management consisting of both preventive measures and a dedicated crisis management. Preven­
tive measures are defined within the code of conduct introduced by LGT. Within the context of crisis management LGT has established
processes and organizational structures to address crises and specifically trained all respective employees in order to ensure rapid and
adequate responses to potential crises.
78
Notes to the consolidated financial statements
Fair value of financial instruments not carried at fair value
Fair value information is used for business purposes in measuring an enterprise’s overall financial position. Fair value information
permits comparisons of financial instruments having substantially the same economic characteristics.
Financial assets (TCHF)
2014
2013
Carrying amount
Fair value
Carrying amount
Fair value
4 547 824
4 551 335
2 984 370
2 991 078
10 501 690
10 638 701
7 559 575
7 651 715
Loans and advances to banks
Loans and advances to customers
Financial liabilities (TCHF)
Amounts due to banks
Amounts due to customers
Certificated debt
1 350 562
1 351 331
993 647
994 253
26 182 580
26 187 846
20 507 700
20 510 641
1 712 801
1 832 542
1 634 729
1 702 821
Loans and advances to banks
The measured fair value of loans and advances to banks is based on discounted cash flows using prevailing market interest rates
for debts with similar credit risk and remaining maturity.
Loans and advances to customers
Loans and advances are stated net of impairments. The measured fair value of loans and advances to customers represents the
discounted amount of estimated future cash flows expected to be received.
Amounts due to banks or to customers
The calculation of the fair values of the amounts due to banks or customers is based on the discounted cash flow method using
interest rates for new debts with similar remaining maturity.
Certificated debt
The aggregated fair values are calculated under the discounted cash flow method. The model is based on a current yield curve
appropriate for the remaining term to maturity.
Notes to the consolidated financial statements
79
Pillar III disclosures according to Basel II
Geographical credit risk
Switzerland
Oceania
North America
Liechtenstein
Latin America
at 31 December 2014 (TCHF)
Loans and advances
Liquid assets
9 230 605
132
1 707
68
0
Loans and advances to banks
1 207 304
2 040
344 640
122 847
59
Loans and advances to customers
Mortgages
Securities
Other assets
Replacement value after netting
892 912
160 636
256 025
451 611
98 138
1 670 854
5 053
0
1 550 353
0
9 413
476 128
637 598
9 620
134 363
59 720
3 896
2 120
77 674
596
344 121
12 611
97 111
289 832
4 789
13 414 929
660 496
1 339 201
2 502 005
237 945
Contingent liabilities
24 705
2 015
4 233
95 380
6 788
Commitments
26 181
147
191
16 961
666
Total
Off-balance sheet
Deposit and reserve liabilities
6
0
87 469
38 844
0
257 041
6 130
77 763
189 571
1 997
Securities
0
0
0
0
0
General allowance
0
0
0
-2 756
0
Add-ons
Total 2014
13 722 862
668 788
1 508 857
2 840 005
247 396
Total 2013
10 494 530 592 698 1 057 204 2 410 490 196 201 14 261
24
52
15 432
3
5 812
0
26
1 533
0
Europe
Caribbean
Asia
Africa
Total
60 527
0
80
4
9 293 123
Impaired loans
Impaired loans
Specific allowance
Loans and advances
Liquid assets
Loans and advances to banks
1 923 725
249
1 066 312
2 961
4 670 137
Loans and advances to customers
1 884 765
1 730 992
1 098 996
79 658
6 653 733
394 257
0
251 540
0
3 872 057
2 845 807
3 186 332
683 423
0
7 982 684
Mortgages
Securities
Other assets
Replacement value after netting
Total
48 024
6 759
11 884
31
210 704
585 910
186 697
20 298
966
1 542 335
7 743 015
5 111 029
3 132 533
83 620
34 224 773
84 778
44 786
9 356
9 034
281 075
Off-balance sheet
Contingent liabilities
Commitments
98 730
100
88
0
143 064
Deposit and reserve liabilities
42 921
24 836
12 482
0
206 558
443 509
87 948
16 074
688
1 080 721
-2 188
-1 434
15
0
-3 607
Add-ons
Securities
-4 134
0
-461
0
-7 351
Total 2014
General allowance
8 406 631
5 267 265
3 170 087
93 342
35 925 233
Total 2013
5 992 705 4 559 754 2 353 969 43 590 27 701 141 Impaired loans
Impaired loans
Specific allowance
80
Notes to the consolidated financial statements
10 540
35
33
8
40 388
9 378
0
0
0
16 749
Credit risk/distribution according
to counterparty or sector
States and
Public
Administrative
Multilateral
International
central banks
authorities
facilities
development
organizations
at 31 December 2014 (TCHF)
banks
Loans and advances
Liquid assets
Loans and advances to banks
Loans and advances to customers
Mortgages
Securities
Other assets
Replacement value after netting
Total
9 293 123
0
0
0
0
228 408
39 993
52 937
3 561
0
79 768
115 366
283 972
45 502
0
10
0
284
43
0
524 387
157 101
595 619
436 080
0
2 035
50
455
969
0
20 692
480
4 163
7 116
0
10 148 423
312 990
937 430
493 271
0
Off-balance sheet
Contingent liabilities
Commitments
Deposit and reserve liabilities
Add-ons
Securities
General allowance
3 587
5
704
1 831
0
52
463
4 485
54
0
0
0
0
0
0
8 913
334
3 003
1 150
0
0
0
0
0
0
0
0
0
0
0
Total 2014
10 160 975
313 792
945 622
496 306
0
Total 2013
8 398 403 12 770 710 049 307 793 2 889 Impaired loans
0
0
0
0
0
Specific allowance
0
0
0
0
0
Banks
Corporates
Retail
Mortgage-
Overdue
Impaired loans
backed
Loans and advances
Liquid assets
Loans and advances to banks
Loans and advances to customers
Mortgages
Securities
Other assets
Replacement value after netting
Total
0
0
0
0
0
2 303 322
4 425
0
0
0
720 543
2 297 075
3 012 047
93 751
5 709
20 383
25 107
80 479
3 718 646
27 105
1 488 915
2 312 212
0
0
0
17 248
8 989
180 328
529
0
709 755
521 514
56 753
0
0
5 260 166
5 169 322
3 329 607
3 812 926
32 814
21 159
158 483
93 550
1 716
0
1 138
12 488
91 829
32 555
0
0
206 558
0
0
0
Off-balance sheet
Contingent liabilities
Commitments
Deposit and reserve liabilities
Add-ons
430 268
291 352
44 087
0
0
Securities
0
0
0
0
0
General allowance
0
0
-7 351
0
0
Total 2014
5 712 731
5 838 203
3 551 722
3 847 197
32 814
Total 2013
4 765 245
3 399 336
2 131 532
3 404 782
48 016
Impaired loans
0
3 281
7 725
930
28 452
Specific allowance
0
3 281
7 725
163
5 580
Impaired loans
Notes to the consolidated financial statements
81
Credit risk/distribution according
Investment
Covered
in associates
notes
Liquid assets
0
0
0
Loans and advances to banks
0
0
Loans and advances to customers
0
0
to counterparty or sector
Short-term
Investment
Other
Total
0
0
9 293 123
2 037 491
0
0
4 670 137
0
0
0
6 653 733
fund shares
at 31 December 2014 (TCHF)
Loans and advances
Mortgages
0
0
0
0
0
3 872 057
526 591
0
0
1 941 779
0
7 982 684
Other assets
0
0
101
0
0
210 704
Replacement value after netting
0
0
221 862
0
0
1 542 335
526 591
0
2 259 454
1 941 779
0
34 224 773
Contingent liabilities
0
0
40
0
0
281 075
Commitments
0
0
0
0
0
143 064
Deposit and reserve liabilities
0
0
0
0
0
206 558
0
0
301 614
0
0
1 080 721
-3 607
0
0
0
0
-3 607
Securities
Total
Off-balance sheet
Add-ons
Securities
0
0
0
0
0
-7 351
Total 2014
General allowance
522 984
0
2 561 108
1 941 779
0
35 925 233
Total 2013
324 535
0
1 426 876
2 768 922
0
27 701 148
Impaired loans
0
0
0
0
0
40 388
Specific allowance
0
0
0
0
0
16 749
Impaired loans
Credit risk/credit risk
reduction
at 31 December 2014 (TCHF)
Covered by
Covered by
Mortgage-
Other
financial
guarantees and
backed
collateral
collateral
credit derivatives
Total
Loans and advances
Liquid assets
Loans and advances to banks
Loans and advances to customers
Mortgages
Securities
Other assets
Replacement value after netting
Total
0
0
0
0
0
843 711
0
0
0
843 711
3 872 818
64 301
94 639
134 477
4 166 235
64 479
500
3 744 363
11 833
3 821 175
0
0
0
0
0
1 519
1
529
39
2 088
388 542
23 116
0
34 839
446 497
5 171 069
87 918
3 839 531
181 188
9 279 706
167 467
1 044
1 716
4 020
174 247
7 763
0
32 555
0
40 318
Off-balance sheet
Contingent liabilities
Commitments
Deposit and reserve liabilities
0
0
0
0
0
70 764
0
0
6 812
77 576
Securities
0
0
0
0
0
General allowance
0
0
0
0
0
Total 2014
5 417 063
88 962
3 873 802
192 020
9 571 847
Total 2013
3 377 163
10 186
3 437 760
175 523
7 000 632
188
0
23 299
77
23 564
35
0
2 990
0
3 025
Add-ons
Impaired loans
Impaired loans
Specific allowance
82
Notes to the consolidated financial statements
Segmentation of credit risk
0%
10%
20%
35%
50%
9 293 123
0
0
0
0
at 31 December 2014 (TCHF)
Loans and advances
Liquid assets
Loans and advances to banks
Loans and advances to customers
Mortgages
Securities
Other assets
Replacement value after netting
Total
806 599
0
2 954 261
0
895 602
4 007 298
0
111 774
2 444
141 917
76 387
0
500
2 527 571
909 815
807 096
0
1 406 885
0
2 092 344
4 324
0
13 268
5
11 400
423 418
0
558 613
0
370 811
15 418 245
0
5 045 301
2 530 020
4 421 889
171 487
0
4 285
44
2 135
7 762
0
0
11 858
5 936
0
0
6
0
0
77 665
0
473 207
1
257 488
0
0
0
0
0
Off-balance sheet
Contingent liabilities
Commitments
Deposit and reserve liabilities
Add-ons
Securities
General allowance
-7 351
0
0
0
0
Total 2014
15 667 808
0
5 522 799
2 541 923
4 687 448
Total 2013
11 821 511
0
4 501 272
2 374 347
3 182 504
265
0
0
930
3 281
35
0
0
163
3 281
75%
100%
150%
≥ 200%
Total
Impaired loans
Impaired loans
Specific allowance
Loans and advances
Liquid assets
0
0
0
0
9 293 123
Loans and advances to banks
0
657
13 018
0
4 670 137
166 679
2 222 894
727
0
6 653 733
Mortgages
Loans and advances to customers
0
354 883
2 901
0
3 872 057
Securities
0
1 734 115
1 942 244
0
7 982 684
Other assets
0
181 707
0
0
210 704
1 121
188 372
0
0
1 542 335
167 800
4 682 628
1 958 890
0
34 224 773
Contingent liabilities
0
103 124
0
0
281 075
Commitments
0
117 508
0
0
143 064
Replacement value after netting
Total
Off-balance sheet
Deposit and reserve liabilities
0
206 552
0
0
206 558
131
272 229
0
0
1 080 721
Securities
0
0
-3 607
0
-3 607
General allowance
0
0
0
0
-7 351
Add-ons
Total 2014
167 931
5 382 041
1 955 283
0
35 925 233
Total 2013
145 516
2 885 634
2 790 362
0
27 701 146
Impaired loans
2 134
30 599
3 179
0
40 388
Specific allowance
1 096
12 174
0
0
16 749
Impaired loans
In certain cases, the Pillar III disclosures may differ from the way risks are managed at LGT and the way in which these risks are disclosed
in other sections of this annual report.
Notes to the consolidated financial statements
83
LGT Group Foundation
84
Notes to the consolidated financial statements
Report of the statutory auditors
LGT Group Foundation – report of the statutory auditors
85
Income statement
Income statement (TCHF)
Note
2014
2013
0
0
Interest and dividend income
Interest earned
Interest expense and similar charges
-1 139
-1 015
Net interest
-1 139
-1 015
Current income from participations
125 986
122 707
Total interest and dividend income
124 847
121 692
-49
-49
Commission expenses
Income from financial transactions (all from trading activities)
Other operating income
1
Total operating income
466
151
59 792
46 880
185 056
168 674
-15 201
-13 535
Administrative expenses
Personnel expenses
2
Business and office expenses
3
Total administrative expenses
Other operating expenses
-8 353
-8 462
-23 554
-21 997
-366
-744
Depreciation, allowances and provision on subsidiary undertakings,
affiliated companies and securities treated as current assets
-3 558
-7 217
157 578
138 716
Balance at the beginning of the period
219 840
181 124
Profit for the period
157 578
138 716
Total available Foundation earnings
377 418
319 840
-100 000
-100 000
277 418
219 840
Profit for the period
Appropriation of available Foundation earnings
The Foundation Board proposes to the Foundation meeting of 23 April 2015:
Distribution to the Prince of Liechtenstein Foundation
Balance to be carried forward
The accounting principles and the notes on pages 88 to 95 form part of these accounts.
The accounts on pages 86 to 95 were approved by the Foundation Board on 23 April 2015 and are signed
on its behalf by H.S.H. Prince Philipp von und zu Liechtenstein, Chairman, and Olivier de Perregaux, CFO of LGT.
86
LGT Group Foundation – income statement
Balance sheet
Balance sheet (TCHF)
Note
2014
2013
4
1 212
1 459
1 212
1 459
Participations (shares in associated companies)
5
1 247 978
1 173 538
Other assets
6
106 031
100 527
1 355 221
1 275 524
569 200
540 500
569 200
540 500
22 064
19 339
12 610
12 282
34 885
44 519
Foundation capital
339 044
339 044
Profit/loss to be carried forward
219 840
181 124
157 578
138 716
1 355 221
1 275 524
4 918
5 011
Guarantees and similar instruments
5 437 267
2 118 437
of which for affiliated companies
5 411 242
2 094 846
Assets
Loans and advances to banks (subsidiary undertakings)
of which on demand
Total assets
Liabilities
Amounts due to banks
7
of which other loans
Other liabilities
8
Accrued expenses and deferred income
Provisions
Profit for the period
Total liabilities
9
10
Off-balance sheet items (TCHF)
Collateralization guarantees and similar instruments
The guarantees and similar instruments are valued with the carrying amount.
The accounting principles and the notes on pages 88 to 95 form part of these accounts.
LGT Group Foundation – balance sheet
87
Notes to the financial statements
Accounting principles
Introduction
Loans and advances
The accounting principles are in accordance with the
These items are calculated at nominal values. Value
Liechtenstein Law on Persons and Companies (PGR)
adjustments for identifiable individual risks are set off
and the Liechtenstein Banking Law and its directives.
against the corresponding asset positions.
A summary of the most important accounting prin­
ciples, which have been applied consistently, is set
Financial liabilities and provisions
out below.
These items are shown at nominal values. Provisions
have been created for operational and other risks.
The terms “LGT Group”, “LGT” or “Group” mean
LGT Group Foundation together with its subsidiary
Derivative financial instruments
undertakings and the term “Company” refers to
Derivative financial instruments that are held for trad-
LGT Group Foundation.
ing purposes are valued at their fair market value with
changes in fair market value recognized in income from
Basis of accounting
trading activities. The related positive and negative
The accounts are prepared using the historical cost
replacement values are stated at gross values. Income
convention. All transactions are recorded on a trade
and expense arising on derivatives used in the context
date basis.
of asset and liability management, primarily interest
rate swaps and forward rate agreements, are recog-
Foreign currencies
nized on an accrual basis, as this reflects the Group’s
Revenue items denominated in foreign currencies
risk management.
are translated at the exchange rates prevailing on
the dates of the transactions. Assets and liabilities
Risk management
denominated in foreign currencies are translated at
Risks are defined by the adverse impact on profitability
the exchange rates prevailing on the balance sheet
of several distinct sources of uncertainty. LGT Group
date, except financial fixed assets, which are trans-
Foundation is exposed to market risks, credit risks,
lated at historical rates. Exchange differences are
liquidity risks, operational and business event risks.
entered in the income statement.
The Foundation Board is responsible for the risk policy
and its regular review. The risk policy comprises two
Participations
key elements:
Participations represent investments in subsidiary
n
undertakings and are stated at cost, less any provision
for permanent diminution in value.
risk strategy, which details the overall approach to
risk-taking desired by the Board; and
n
risk principles, which translate the risk strategy into
operating standards for both the risk organization
Debt instruments and shares
and required risk processes.
Realized gains or losses arising from the disposal of
securities are entered in the income statement.
Risk management on a daily basis is conducted by the
Securities held as current assets (short-term assets) are
line management. The overall responsibility lies within
shown at fair value. Other securities are stated at the
the executive management teams of each business
lower of cost or fair value.
unit. The risk controlling unit oversees the risk-taking
activities of LGT Group Foundation and reports directly
Dividends
Proposed dividends from subsidiary undertakings are
accrued as receivables in the accounts.
88
LGT Group Foundation – notes to the financial statements
to the Board.
Details on the income statement and balance sheet
Overview
LGT Group Foundation was established on 20 July 2001 and is the top holding company of LGT. Its purpose is the holding of the
majority of the subsidiaries of LGT. For a complete list of subsidiary undertakings see note 5 below.
The profit for the business year 2014 amounts to 157 578. The balance sheet total increased by 79 697 or 6.2% to 1 355 221.
1
Other operating income (TCHF)
2014
2013
Income from subsidiary undertakings (license fees, income from
2
service level agreements and service charge for comfort letters)
48 682
46 344
Other
11 110
536
Total other operating income
59 792
46 880
2014
2013
Personnel expenses (TCHF)
Personnel expenses before long-term incentive scheme
Salaries
3 635
3 605
Bonuses
5 739
5 301
Social security costs
522
376
Pension costs
399
400
Other personnel expenses
171
274
Personnel expenses before long-term incentive scheme
3
10 466
9 956
Long-term incentive scheme
4 735
3 579
Total personnel expenses
15 201
13 535
2014
2013
38
39
Business and office expenses (TCHF)
Information and communication expenses
788
784
Legal and professional expenses
Travel and entertainment expenses
2 720
3 454
Advertising expenses
4 807
3 920
0
265
8 353
8 462
Other expenses
Total business and office expenses
4
Loans and advances to banks (subsidiary undertakings) on demand
The loans and advances to banks are bank accounts with LGT Bank Ltd., Vaduz.
5
Participations (TCHF)
Acquisition cost
Accumulated depreciation
Opening balance
2014
2013
1 287 802
1 290 148
-114 264
-109 064
1 173 538
1 181 084
Investments
78 658
45
Depreciation
-3 558
-5 217
Disposals/capital decrease
Liquidation
Closing balance
0
-2 291
-660
-83
1 247 978
1 173 538
All participations of LGT Group Foundation are unlisted.
LGT Group Foundation – notes to the financial statements
89
Name
Principal activity
The subsidiary undertakings
LGT Bank Ltd.
of LGT Group Foundation
LGT Capital Invest AGmvK
at 31 December 2014 were:
LGT Capital Partners (FL) Ltd.
Banking
Asset management
1, 2
Asset management
(formerly LGT Capital Management Ltd.)
LGT Fondsleitung Ltd.
Asset management
LGT Funds SICAV
Asset management
2
LGT Portfolio Management AGmvK 1, 2
Asset management
LGT Premium Strategy AGmvK
Asset management
2
LGT Strategy Units (Lie) AGmvK 2
Asset management
LGT Capital Partners Advisers Ltd.
Investment advisers
LGT Private Equity Advisers Ltd.
Investment advisers
LGT Financial Services Ltd.
Services company
LGT Audit Revisions AG
LGT Bank (Singapore) Ltd.
Audit services
3
Investment advisers
LGT Investment Management (Asia) Ltd.
Investment advisers
LGT Holding (Malaysia) Ltd.
Holding company
LGT (Middle East) Ltd.
Investment advisers
5
LGT Bank (Cayman) Ltd.
Banking
LGT Certificates Ltd. 8
Holding company
LGT Finance Ltd.
Holding company
LGT Global Invest Ltd.
Holding company
LGT Participations Ltd.
Holding company
LGT (Uruguay) S.A. 9
Bank representation
1
Capitalization and redomiciliation from Grand Cayman to Vaduz on 31 October 2014.
2
Companies with variable share capital structure, only part of fund manager held by LGT Group Foundation.
3
Share capital increase of SGD 100 000 000 on 10 January 2014.
4
Partly held via LGT Global Invest Ltd., Grand Cayman.
5
Share capital increase of USD 8 000 000 on 18 August 2014.
6
Voting rights held via LGT Bank Ltd., Vaduz.
7
Partly held via LGT Bank Ltd., Vaduz.
8
Company with variable share capital structure, only founder’s shares held by LGT Group Foundation.
9
Share capital decrease of UYU 5 058 489 on 1 December 2014.
LGT Swiss Life Non Traditional Advisers Ltd. was liquidated on 24 June 2014.
90
Banking
LGT Capital Partners (Asia-Pacific) Ltd.
LGT Group Foundation – notes to the financial statements
Registered office
% of voting
% of capital
rights held
held
Share capital (paid in)
Net profit of the
Vaduz – Liechtenstein
100.0
100.0
CHF
291 200 800
CHF
492 145
Vaduz – Liechtenstein
100.0
100.0
CHF
50 000
CHF
0
Vaduz – Liechtenstein
100.0
100.0
CHF
1 000 000
CHF
-1 026
Vaduz – Liechtenstein
100.0
100.0
CHF
1 000 000
CHF
0
Vaduz – Liechtenstein
100.0
100.0
CHF
50 000
CHF
0
Vaduz – Liechtenstein
100.0
100.0
CHF
50 000
CHF
0
Vaduz – Liechtenstein
100.0
100.0
CHF
50 000
CHF
0
Vaduz – Liechtenstein
100.0
100.0
CHF
50 000
CHF
0
Vaduz – Liechtenstein
100.0
100.0
CHF
250 000
CHF
28
Vaduz – Liechtenstein
60.0
60.0
CHF
1 000 000
CHF
24
Vaduz – Liechtenstein
100.0
100.0
CHF
1 000 000
CHF
-3 001
Vaduz – Liechtenstein
100.0
100.0
CHF
100 000
CHF
-18
Singapore
100.0
100.0
SGD
470 000 000
CHF
9 012
Hong Kong – China
100.0
100.0
HKD
66 000 000
HKD
1 780
Hong Kong – China
100.0
HKD
24 000 000
HKD
-3 071
Labuan – Malaysia
100.0
CHF
90 100 000
CHF
-32
Dubai – United Arab Emirates
100.0
USD
25 000 000
USD
-5 129
Grand Cayman – Cayman Islands
100.0
USD
600 000
CHF
19 991
Grand Cayman – Cayman Islands
100.0
100.0
CHF
1
CHF
0
Grand Cayman – Cayman Islands
100.0
100.0
USD
50 001
CHF
760
Grand Cayman – Cayman Islands
100.0
100.0
CHF
4
CHF
43 796
Grand Cayman – Cayman Islands
100.0
100.0
CHF
7
CHF
235
Montevideo – Uruguay
100.0
100.0
UYU
4 589 127
USD
121
subsidiary in business
year 2014 (’000)
4
100.0
4
100.0
100.0
6
100.0
7
The book value of the participations in banks and investment firms is CHF 901 795 652.
LGT Group Foundation – notes to the financial statements
91
6
Other assets (TCHF)
Dividend proposed
Receivables from subsidiary undertakings
Receivables from others
Total
7
8
Amounts due to banks (TCHF)
2 569
2 912
3 318
106 031
100 527
2013
540 500
Total
569 200
540 500
2014
2013
986
987
8 678
7 034
Other liabilities (TCHF)
Social security costs
Others
79
366
11 769
10 533
552
419
22 064
19 339
Provisions (TCHF)
2014
2013
Opening balance
44 519
45 175
366
744
-10 000
-478
Total
Current year expenses
Provisions released
Provisions utilized
0
-922
Closing balance
34 885
44 519
2014
2013
Statement of changes in equity (TCHF)
Equity at the beginning of the business year
Payment to the Prince of Liechtenstein Foundation
658 884
725 783
-100 000
-205 615
Profit for the period
157 578
138 716
Total equity at the end of the business year
716 462
658 884
2014
2013
9
9
Headcount
Headcount at 31 December
92
94 640
3 119
2014
Long-term incentive scheme
11
100 000
569 200
Bonuses
10
2013
Amounts due to LGT Bank Ltd., Vaduz
Salaries
9
2014
LGT Group Foundation – notes to the financial statements
12
Analysis of balance sheet by origin
Domestic
%
Foreign
%
Total
%
1 212
100.0
0
0.0
1 212
100.0
at 31 December 2014 (TCHF)
Assets
Loans and advances to banks
521 279
41.8
726 699
58.2
1 247 978
100.0
Other assets
Participations
2 788
2.6
103 243
97.4
106 031
100.0
Total assets
525 279
38.8
829 942
61.2
1 355 221
100.0
569 200
100.0
0
0.0
569 200
100.0
22 064
100.0
0
0.0
22 064
100.0
Liabilities
Amounts due to banks
Other liabilities
Accrued expenses and deferred income
12 243
97.1
367
2.9
12 610
100.0
Provisions
22 500
64.5
12 385
35.5
34 885
100.0
716 462
100.0
0
0.0
716 462
100.0
Total liabilities
Foundation capital
1 342 469
99.1
12 752
0.9
1 355 221
100.0
Analysis of balance sheet by origin
Domestic
%
Foreign
%
Total
%
1 459
100.0
0
0.0
1 459
100.0
521 839
44.5
651 699
55.5
1 173 538
100.0
at 31 December 2013 (TCHF)
Assets
Loans and advances to banks
Participations
Other assets
100 468
99.9
59
0.1
100 527
100.0
Total assets
623 766
48.9
651 758
51.1
1 275 524
100.0
540 500
100.0
0
0.0
540 500
100.0
19 339
100.0
0
0.0
19 339
100.0
150
1.2
12 132
98.8
12 282
100.0
Liabilities
Amounts due to banks
Other liabilities
Accrued expenses and deferred income
Provisions
Foundation capital
Total liabilities
32 500
73.0
12 019
27.0
44 519
100.0
658 884
100.0
0
0.0
658 884
100.0
1 251 373
98.1
24 151
1.9
1 275 524
100.0
LGT Group Foundation – notes to the financial statements
93
13
Breakdown of assets according to
2014
%
2013
%
Liechtenstein
525 279
38.8
623 766
48.9
Other Europe
37
0.0
47
0.0
country/country group (TCHF)
Americas
355 495
26.2
255 224
20.0
Asia
474 410
35.0
396 487
31.1
1 355 221
100.0
1 275 524
100.0
EUR
USD
Other
Total
Total assets
14
Foreign exchange exposure
CHF
at 31 December 2014 (TCHF)
Assets
1 212
0
0
0
1 212
Participations
Loans and advances to banks
872 352
0
13 724
361 902
1 247 978
Other assets
105 869
0
0
162
106 031
Total assets
979 433
0
13 724
362 064
1 355 221
569 200
0
0
0
569 200
Liabilities
Amounts due to banks
Other liabilities
22 064
0
0
0
22 064
Accrued expenses and deferred income
12 428
56
83
43
12 610
Provisions
Foundation capital
Total liabilities
Foreign exchange exposure
22 500
12 385
0
0
34 885
716 462
0
0
0
716 462
1 342 654
12 441
83
43
1 355 221
CHF
EUR
USD
Other
Total
1 459
0
0
0
1 459
872 913
0
10 024
290 601
1 173 538
at 31 December 2013 (TCHF)
Assets
Loans and advances to banks
Participations
Other assets
100 527
0
0
0
100 527
Total assets
974 899
0
10 024
290 601
1 275 524
Liabilities
Amounts due to banks
Other liabilities
0
0
0
540 500
19 339
0
0
0
19 339
Accrued expenses and deferred income
12 217
21
44
0
12 282
Provisions
32 500
12 019
0
0
44 519
Foundation capital
Total liabilities
94
540 500
LGT Group Foundation – notes to the financial statements
658 884
0
0
0
658 884
1 263 440
12 040
44
0
1 275 524
15
Analysis of current assets and liabilities
On demand
by maturity at 31 December 2014 (TCHF)
Within
More than
More than
3 months
3 and less
12 months
Total
than 12
months
Current assets
Loans and advances to banks
1 212
0
0
0
1 212
0
3 259
102 772
0
106 031
1 212
3 259
102 772
0
107 243
Amounts due to banks
0
569 200
0
0
569 200
Other liabilities
0
631
21 433
0
22 064
Other assets
Total current assets
Current liabilities
Accrued expenses and deferred income
0
5 610
3 000
4 000
12 610
Total current liabilities
0
575 441
24 433
4 000
603 874
Within
More than
More than
Total
3 months
3 and less
12 months
Analysis of current assets and liabilities
On demand
by maturity at 31 December 2013 (TCHF)
than 12
months
Current assets
Loans and advances to banks
Other assets
Total current assets
1 459
0
0
0
1 459
0
5 286
95 241
0
100 527
1 459
5 286
95 241
0
101 986
0
540 500
0
0
540 500
Current liabilities
Amounts due to banks
16
Other liabilities
0
785
18 554
0
19 339
Accrued expenses and deferred income
0
1 189
3 093
8 000
12 282
Total current liabilities
0
542 474
21 647
8 000
572 121
Emoluments to members of the management
The emoluments to the members of the Foundation Board and to the Group and business unit executives employed by the
Foundation are disclosed under note 39 in the consolidated financial statements of LGT Group Foundation.
LGT Group Foundation – notes to the financial statements
95
International presence
AustraliaSydney
AustriaSalzburg
Vienna
BahrainManama
ChinaBeijing
Hong Kong
Hong Kong
IrelandDublin
JapanTokyo
Principality of LiechtensteinVaduz
SingaporeSingapore
SwitzerlandBasel
Berne
Chur
Davos
Geneva
Lugano
Pfäffikon
Zurich
United Arab Emirates
Dubai
United KingdomLondon
United States of America
New York
UruguayMontevideo
Media relations
Christof Buri
Phone +423 235 23 03
christof.buri@lgt.com
Dispatch
Daniela Schaefle
Phone +423 235 20 51
daniela.schaefle@lgt.com
96
International presence
Prince Carl Theodor of Bavaria (1795–1875)
Even in the 19th century, Princess Melanie von Metternich, (third) wife
of the legendary State Chancellor, had already made a name for herself
as a first-rate autograph hunter. Over the years, she built up a collection
of portraits of the main figures involved in the political developments
of the Vormärz period, which ultimately led to the revolutions of 1848
and the collapse of the European universalism so desired by Metternich.
The Princess’s collection began in the fall of 1836, when the British peer
and bon viveur Lord Alvanley presented her with a portrait of himself
by Moritz Michael Daffinger together with his autograph. Monarchs,
members of royal families and the upper nobility, European diplomats,
and ambassadors from Parma, Lucca and the Electorate of Hesse would
come to have their portraits painted by acclaimed artists, before dating
and signing the small watercolors – as here in the case of Prince Carl
Theodor of Bavaria. The Princess had chosen as her preferred portraitist
Moritz Michael Daffinger, who had created no fewer than 146 such
autographed miniatures by the fall of 1847. In the end, her approximately
250 miniature portraits filled five albums bound in dark red leather.
© LIECHTENSTEIN. The Princely Collections, Vaduz–Vienna
The illustrations in this brochure are details from Eduard de Ron,
“Prince Carl Theodor of Bavaria (1795–1875),” 1843
www.lgt.com
LGT is represented in more than 20 locations in Europe, Asia and the Middle East.
A complete address list can be seen at www.lgt.com
50027en 0515 1.2T BVD
LGT Group Foundation
Herrengasse 12
FL-9490 Vaduz
Phone +423 235 11 22
lgt@lgt.com
UID: CHE-208.624.214