KAS BANK achieved a satisfactory result in the first half of 2014.
28 Aug 2014
- Operational profit growth of 15% to € 6.9 million (H1 2013: € 6.0 million)
- Compensation from dwpbank of € 15 million net will be mostly reinvested in IT and Operations in the institutional market
- Growth in Asset under Administration with 16% to € 360 billion; strongest growth in core segment pension funds
- Decrease of 13% in operating expenses due to restructuring and lower housing expenses
- Capital ratio strong at an average of 25%
|In EUR||H1 2014||H1 2013||Movement|
|Profit||21.2 million||8.5 million||149%|
|Result from operations||6.9 million||6.0 million||15%|
|Income||73.6 million||60.3 million||22%|
|Assets under Administration||360 billion||311 billion||16%|
|Total earnings per share||1.44||0.58||148%|
|Dividend per share||0.33||0.33||0%|
|Capital ratio (average)||25%||21%*|
|* Based on Basel II|
KAS BANK achieved a satisfactory result in the first half of 2014. Market conditions deteriorated in the second quarter, resulting in negative interest rates from the ECB and volatile securities markets, with volumes a long way from the levels before the credit crisis. The interest rate and liquidity policies of the ECB aim to stimulate lending. This also leads to the (unintended) effect that institutional investors with a low risk profile, such as pension funds and insurance companies, are hardly able to make a return on their exposures.
We are also affected as the bank manages the liquidity positions of its customers. The lower income from Treasury is caused by the abundance of (centrally directed) liquidity in the market, because parties are unable to generate additional return on their liquidity surplus. However, by means of an active policy within the strict risk framework, we have been able to increase its interest income in 2014. Moreover, as a result of declining interest rates, the revaluation reserve of the bank’s AFS portfolio increased by more than € 4 million this half year.
At the end of 2013 KAS BANK refocused on four institutional core segments, which are pension funds, insurance companies, funds and wealth (private banks, asset managers, charities). It is positive that the bank has realised a healthy increase in activity mainly in the pension fund core segment, resulting in revenue growth and a significant increase of the Assets under Administration. This growth has been achieved mainly in the Netherlands and the United Kingdom. We expect to expand our role in the pension market in the coming years by offering additional services to pension funds, such as collateral management, derivatives services, order execution, cost management and other forms of fiduciary management. Our independent and neutral business model offers institutional parties transparency and insight into the overall cost of managing assets, which can lead to substantial savings.
As an active player in the Netherlands, Germany and the United Kingdom, KAS BANK is increasingly involved in complex infrastructural services such as the management of broadly diversified investment administrations. Despite far-reaching harmonisation being pursued in Europe, knowledge of local reporting requirements, local regulations and systems is an important advantage for KAS BANK. We now manage approximately € 110 billion of assets on its central platform and expects continuing growth.
In Germany in 2013, we shifted our focus to the institutional market for self-administered pension funds. Unlike other countries in Europe companies in Germany may administer their accrued pension commitments in-house. This custodian bank market, which especially focuses on the middle and large companies in Germany, fits well with the services that we are also offering in the Netherlands and the United Kingdom and uses the same systems. In this way, from 2014 onwards, the bank can also reuse its investments in systems in Germany. This will in particular benefit the product range and services offered.
The intensive collaboration with dwpbank, which would have commenced from mid-2015 onwards, has been scaled down on request of dwpbank to a modest support in the German market by KAS BANK. The one-off result of € 15 million after tax (€ 20 million before tax) that has consequently been paid to KAS BANK at the end of June, will to a large extent be reinvested in the further development of the service offered to our institutional core segments. KAS BANK has been operating as a network bank for many years, this strategy will continue unchanged. This implies that we will either provide an excellent service on our own platform or outsource parts of the business operations to partners.
At the end of 2013, we announced a targeted reduction of operational costs by 15% by the end of 2015. In the first six months of 2014, compared to the same period in 2013, operating expenses have decreased by 13%, slightly ahead of targets. The savings have been primarily achieved through lower personnel and housing expenses.
The interim dividend will remain at € 0.33, in line with prior years.
The compensation received from dwpbank will be reinvested for 80% in improving the operational environment. Barring unforeseen circumstances, for the remaining part the regular dividend policy with a pay-out ratio of 60-80% will apply.
Market perspectives in Europe are volatile. The expectation that interest levels will increase is low. Unrest due to political instability, as has been the case over the past few months, usually leads to lower transaction volumes.
On 22 July 2014 the AIFM Directive entered into force in Europe. This directive requires fund managers not regulated by UCITS-4 to appoint a separate custodian. For KAS BANK the impact of this directive will result in a few percentage points of additional revenue growth in the second half of 2014.
Read our full press release Profit Increase and growth in pension segment including our consolidated balance sheet and consolidated income statement here (PDF, opens in new window).
The figures from this press release have not been audited by the external auditor.