Good annual accounts of the banks in Liechtenstein
Good results, high Tier 1 capital ratio, net new money inflow, and further expansion of the commitment to sustainability – this is how the year 2020 can be summarised from the perspective of the banks. The outlook remains difficult in light of the ongoing uncertainties, but optimism is definitely called for thanks to the banks’ crisis-tested business models.
Because of the coronavirus pandemic and its far-reaching impact on health, society, and the economy, the year 2020 will not soon be forgotten. National economies worldwide suffered growth losses, some of them substantial. It is therefore all the more positive that the Liechtenstein banking sector – measured in terms of the business results of the three major banks LGT, LLB, and VP Bank as well as Neue Bank – reported astonishingly good results at the end of this crisis year. It was also a positive sign that the banks were successfully able to perform their important credit and financing function for the Liechtenstein economy, in line with their respective business models.
Not only the pandemic, but also the persistently low interest rate environment made 2020 a very challenging year. The fact that, in light of these circumstances, all four of these banks were able to maintain their high Tier 1 capital ratio of over 20% underscores the fact that all of these banks have resilient business models and were able to adapt quickly to the new situation. In light of this, S&P recently placed the Liechtenstein banking centre in Group '2' of the Banking Industry Country Risk Assessment (BICRA), which is one of the best ratings among the 86 banking systems evaluated worldwide.
Asset management, both domestic and international, is central to the Liechtenstein banking centre. This is also where the banks mentioned above were able to play to their strengths. Each bank attracted more net new money in 2020 and, despite the stock market and currency turbulences, kept their total assets under management stable or even slightly increased them. Liechtenstein has accordingly remained attractive as an asset management centre.
In light of the great challenges, it is certainly positive that the net consolidated profit of these banks was only slightly lower than in the previous year. Only VP Bank reported a lower annual profit due to a one-off value adjustment on a credit position that had been known for some time.
In 2020, all banks further increased their sustainability efforts. This is also in line with the Bankers Association's strategy. It confirms that the banking sector is willing to play a significant role in the transformation of the economy and society towards greater sustainability.
Forecasts are always difficult. But this year, the uncertainties are especially high. How long will the pandemic last globally? How quickly can people and the economy get back to normal? Will deglobalisation trends continue to increase, or will the United States and China put aside their trade disputes? Will inflation increase on a sustained basis and even lead to further interest rate hikes? What room for manoeuvre do the Western economies still have in light of their massively higher public debt? As an open but very small national economy, Liechtenstein cannot influence the answers to these questions and is therefore unable to escape any negative developments. But the country and the banking centre can very well take the uncertainties into account in their actions. I am convinced that our banking sector will continue to be competitive in any environment. The strategic foundation has been laid. The business models are crisis-tested. Capital for targeted growth is available, so that the banking sector will make even better use of its good starting position over the coming years for the two long-term megatrends – digitalisation and sustainability.
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