Private banking group, KBL European Private Bankers, had a tough year last year according to their financial results published today, with difficulties in maintaining operating profitability that the bank attributed to financial market volatility. 

The bank said that, corrected for changes to the scope of the group’s business related to the 2015 divestment of KBL (Switzerland) Ltd and Vitis Life, interest margins declined by 15% in 2016 compared to the previous year. Commission fee income likewise declined by 7.7% due to challenging market conditions for pure-play private banks. 

With a reported group core operating profit, including bond capital gains, of €37.1 million for 2016, pre-tax profits came to €16.1 million, while group revenues stood at €465.9 million for the same period.

At the end of the year, the bank had private banking assets under management of €50.8 billion, up €2.1 billion on the year before, and a Basel III core tier-1 capital ratio at 16%.

“In 2016, our group made immense strides towards realising our ambition to become a European private banking leader – supported by the launch of a best-in-class IT platform, strategic acquisitions and growth in assets under management,” said Yves Stein, group CEO, KBL epb

“The same period nevertheless proved extremely challenging for us and our sector, as historically low interest rates put pressure on our cash-rich group,” he said. “While we successfully managed operating expenses, profitability also declined due to volatile market conditions, negative investor sentiment and consequently lower transaction levels and reduced fee income.”

Profitability was further impacted by a series of significant investments, including a new IT platform intended to support the streamlining of back-office activities. That platform has now been introduced at the group’s French operations and will be launched shortly at KBL epb Luxembourg.  

Additionally, the group acquired Insinger de Beaufort, the Amsterdam-headquartered private bank, which it intends to merge with Theodoor Gilissen, KBL epb’s wholly owned Dutch private banking unit. Combined, the two businesses will manage over €20 billion in client assets. 

Following that acquisiition – which was finalised on 1 January this year – group private banking assets under management rose to €60.5 billion as of that date.

KBL epb also expanded its UK business last year through the acquisition of The Roberts Partnership, a financial planning and wealth management firm with 20 staff and over €500 million in assets under management. That team has now been integrated into Brown Shipley, KBL epb’s wholly owned UK private banking unit.

“Our business, like that of our peers, is by nature cyclical,”  said Stein. “KBL epb’s long-term mission and vision remain fixed, however, as does our commitment to client satisfaction.”

Last year, KBL epb was named the best private bank in Luxembourg 2016 at the PWM/The Banker Global Private Banking Awards. The group was also recognised among the “Outstanding Private Banks in Europe” at the 2016 Private Banker International Global Wealth Awards.

Image: KBL epb CEO, Yves Stein