Settlement Of Tax Dispute With US Hits Liechtenstein Bank's Results

Tom Burroughes

29 August 2013

Liechtensteinische Landesbank, the latest private bank in the tiny Alpine jurisdiction to report half-year results, said one-off costs such as resolving a big tax dispute with the US hit its net profit, although underlying performance improved.

Adjusted for one-off effects, operating income rose by 8.2 per cent year-on-year and operating expenses fell by 6.9 per cent. Group net profit amounted to SFr13.6 million ($14.7 million), a year-on-year fall of 77.7 per cent. Without the one-off effects, group net profit would have been SFr72.0 million, and therefore above the previous year’s figure.

“Extraordinary factors tarnished the group result which stood at SFr13.6 million. The implementation of the strategic initiatives is progressing as planned,” LLB said in a statement today.

Several banks in Liechtenstein, such as LGT and VP Bank Group, have announced half-year figures this week.

As market rose, client assets increased by 1.2 per cent over the period to SFr50.5 billion, the bank said. Net new money outflows amounted to SFr210 million. Loans to clients climbed by 0.8 per cent to SFr10.7 billion. Net fee and commission income rose by 3.5 per cent to SFr106.7 million, LLB said.

The bank has been in a dispute with the US tax authorities for allegedly aiding US tax evaders; LLB has made provision for this and, combined with a net goodwill value adjustment for its swisspartners business and the closure of LLB (Switzerland) and restructuring provisions, these factors cut the interim result by around SFr58.4 million.

LLB Group allocated further provisions amounting to SFr31.2 million for a possible outflow of assets in connection with payments to the US authorities.

On 30 July, LLB agreed with the US authorities in finding a definitive solution to a tax dispute over allegations that the Liechtenstein bank assisted tax dodgers. The LLB Vaduz, the US Department of Justice and the District Attorney for the Southern District of New York signed a non-prosecution agreement. LLB Vaduz will make a payment of $23.8 million.

“Under the terms of the non-prosecution agreement the US authorities explicitly undertake not to impose a fine or penalty on the LLB Vaduz. In this manner they acknowledge the bank’s willingness to cooperate with them and the fact that, even before the investigation commenced, the bank had voluntarily implemented measures to terminate US client relationships that did not have the appropriate documentation," the bank said.

Other details

Personnel expenses rose by 19.0 per cent to SFr90.1 million.

LLB had a tier 1 capital ratio of 17.4 per cent at the end of June, the bank said.

"For the LLB Group the key priority in 2013 is the Focus2015 strategy. Its implementation is progressing according to plan and the positive development of our operative performance is in line with our expectations. At the same time, however, one-off effects in connection with restructuring measures at the LLB Group, as well as the US taxation issue weighed on our interim result,” Roland Matt, chief executive of LLB, said in a statement today.

Elaborating on the details of its asset under management, LLB said that in the onshore markets of Liechtenstein, Switzerland and Austria, as well as in the strategic growth markets of Central and Eastern Europe, as well as in the Near and Middle East, the group posted “solid net new money inflows”. As expected, asset outflows were registered in the traditional cross-border markets and due to the planned closure of LLB (Switzerland) Ltd. In total a net new money outflow of SFr210 million was recorded for the first half year of 2013.