One of Liechtenstein's banks has warned that half-year figures will be hit by the impact of falling interest rates.

Liechtenstein’s VP Bank today warned of “significantly lower net income” in the first half of this year from a year ago due to falling interest rates. It is due to report figures on 26 August.

The bank said that because it doesn’t apply hedge accounting, any value adjustments on interest rate hedging transactions which affect net income will also affect these semi-annual results.

“The declining interest rate environment in the first half of 2014 is putting pressure on the valuation of interest rate hedging transactions,” it said in a statement.

“Since VP Bank does not apply hedge accounting and changes in value therefore affect net income, this has had a negative impact on the income statement. In the first half of 2013, however, this impact was positive. Based on current information, it should be assumed that, for the first half of 2014, the group net income of VP Bank Group will be significantly below the prior-year level on account of this influence. If this reporting date valuation is not taken into account, the group’s operating performance in the first half of 2014 is in line with the prior year,” it said.

Last year, VP Bank logged consolidated net income for 2013 of SFr38.7 million ($44.3 million); compared to 2012, net operating income rose 1.8 per cent to SFr239.4 million. Total income from commission businesses and services for the year increased by 5.6 per cent to SFr114.1 million as a result of the improved sentiment in the financial markets, while income from trading activities fell from SFr21.1 million to SFr19.5 million.