An end to private market operations, closing unprofitable locations, and cutting jobs: VP Bank Group is taking drastic measures to redefine its strategy. However, the new approach comes with significant uncertainties.
The Liechtenstein-based private banking group VP Bank aimed for annual revenue growth of 4 to 6 percent by 2026, a net new money growth of at least 4 percent annually, a core capital ratio above 20 percent, and a cost-income ratio (CIR) below 75 percent.
However, the bank is far from achieving these goals, as demonstrated by the half-year results presented on Tuesday. The group’s net profit fell by 55 percent to 11.5 million Swiss francs ($13.5 million) in the first half of the year compared to the previous year, with net new money inflow at 2.2 percent and a cost-income ratio (CIR) of 91.5 percent. The only positive was the Tier 1 capital ratio, which stood at 26.1 percent.
Hong Kong Was Never profitable
Management and the board of directors still have a lot of work ahead of them, especially in shedding unprofitable segments. «We cannot be satisfied with the result, and we are not», said interim CEO Urs Monstein at the press conference.
Urs Monstein (Image: provided)
The bank needs to realign itself with customer needs, focusing on profitable areas that promise new growth:
- Liechtenstein: VP Bank aims to further expand its private and commercial banking sectors and strengthen its leadership in fiduciary services.
- Europe: The group plans to leverage its expertise in intermediary business to attract more private clients, especially at the specialist level, with promising developments in Zurich and Singapore. New markets, including Germany and the Nordics, are also on the radar. However, VP Bank will exit the Private Markets sector, which it attempted to enter with its «Orbit» strategy four years ago. «The market did not wait for us», Monstein commented during the press conference.
- Singapore: In Asia, the bank will focus on intermediary business and its Singapore location, while closing its operations in Hong Kong, where it has been active since 2006 but never achieved profitability.
- British Virgin Islands: VP Bank has been present there since 1995 and aims to maintain its market leadership in prime real estate financing.
VP Bank's management also has high hopes for the Asset Servicing division. This area is attracting new money.
100 Jobs to Be Cut, and Quickly
This restructuring will involve significant job cuts. Monstein stated that a net reduction of 100 positions is expected, from the current 1,000 employees. The process has already begun, with the bank aiming to complete it swiftly. The exact number of layoffs will depend on various factors, with many in Europe likely managed through natural attrition or internal transfers. However, the situation in Asia is different, where the job cuts will be more significant. VP Bank currently employs 14 people in Hong Kong.
Stephan Zimmermann (Image: provided)
New Strategy Carries Some Risks
The stock market responded positively to VP Bank's new strategy, with shares trading slightly higher at 75 francs (+0.81 percent; as of 2:45 PM). However, whether the plan will succeed remains uncertain, as there are several risks. One concern is whether VP Bank can establish a foothold in Germany and the Nordic countries, given that the bank plans to operate without a physical presence, relying instead on its Luxembourg base to connect with potential clients.
Private banking remains a work in progress. The bank is attempting to part ways with undesirable clients, including those under sanctions—not just Russian nationals. According to the interim CEO, the bank has also identified clients with inadequate documentation who have failed to address these issues despite warnings. This has led to 600 million francs being transferred to an «exit book».
It also remains to be seen whether these measures will be sufficient to achieve the bank's target of 4-6 percent annual growth. Monstein is optimistic, stating, «We achieved these figures between 2016 and 2019. There's no reason we can't do it again.»
Search for a New CEO
Another open question is whether the bank can soon appoint a new CEO. Since parting ways with Paul Arni in May, Urs Monstein has been serving as interim CEO. The search for a permanent replacement has been ongoing since then. According to Chairman Stephan Zimmermann, the bank is «in discussions with suitable candidates», but he provided no further details. Finding a CEO who can support the new strategy and restore confidence will be crucial.