The Dutch bank reports a lower result from structured products in merchant banking while interest income shrunk six percent in the wake of persistently low interest rates as conditions in the first half of 2019 were ‘turbulent’ according to its chairman Karl Guha (pictured).
Van Lanschot Kempen has reported net profit of €83.6m for half-year 2019, up 113% from €39.3m in the prior year period. The bank’s underlying net result amounted to €92.5m (1H2018: €47.2m).
In merchant banking – the business which offers specialist services including, among others, equities research and trading, capital market transactions and structured investment activities – commission income declined by €3.5m to €27.4m (1H2018: €30.9m) while there was also a lower result from structured products.
Van Lanschot Kempen, via its Kempen & Co subsidiary, launched just four public offers worth an estimated €31.5m in the Netherlands during half-year 2019, level on issuance but up in sales from the four structures with sales of approximately €11m that were distributed during the same period last year.
Two of the bank’s products were issued on the paper of parent company Van Lanschot, with the remaining two products issued via Société Générale. The latter included the 95% capital-protected Positive Impact Finance Duurzame Garantie Note 19 25, a six-year medium-term note which participates 100% in the performance of the Eurostoxx Sustainability 40 Index, subject to a maximum capital return of 135%, and from which the amount collected is used by SG to finance projects that are funded to have a positive impact on the economy, society or the environment.
Private banking assets under management (AUM) invested in sustainable and impact investment rose to €1.6 billion 1H2019, from €1.4 billion in 2018. In the first half of 2019, the bank undertook 81 engagements for change and awareness, on track to reach its annual target of 80–100 cases. In 2018, it also started rating external fund managers on environmental, social and governance (ESG) criteria. In 1H2019, the bank rated 76 fund managers, an increase of 52% compared with year-end 2018.
The bank’s valuation model for structured products was found to contain an inaccuracy, with 1H2019 seeing a negative adjustment of €2.7m, recognised under ‘Other’ income which also includes the interest charges on medium-term notes.
Risk-weighted assets declined by three percent to €4.5 billion in the first half of 2019 as a result of the run-off of corporate banking loans and changes in market risk, which stem from improved netting of hedges related to structured products.
As of June 30 2019, the bank’s consolidated statement of financial position included financial liabilities at fair value through profit or loss of €972.6m (December 31 2018: €940.3m) of which €848.1m structured debt instruments (€798.3m) and €124.5m in unstructured debt instruments (€142m)
Issued debt securities stood at €1.56 billion at the end of June (year-end 2018: €1.52 billion).
Van Lanschot Kempen’s 1H2019 interest income of €84.7m was down six percent on the €90m recorded in 1H2018, mostly due to margin pressures and the run-off of corporate banking loans, according to the bank.
Click the link to read 2019 half-year results, presentation and performance report.