notenstein la roche annual report 2015

2015

Annual Report

Translation notice: this document is a translation of the German original which can be obtained from Notenstein La Roche Private Bank Ltd at any time. While Notenstein La Roche makes every effort to

ensure translation accuracy, the German version prevails in the event of discrepancies in content or interpretation.

Contents

Introduction

Key figures

Organigram

Review of business results

Auditor’s report

Balance sheet

Income statement

Statement of changes in equity

Notes to the financial statements – part one

Notes to the financial statements – part two

1. Information on the balance sheet

2. Information on off-balance-sheet transactions

3. Information on the income statement

Contact

Page 2

Page 4

Page 6

Page 8

Page 10

Page 12

Page 14

Page 16

Page 18

Page 26

4

Page 46

Page 48

Page 52

1

Introduction

Key figures

Organigram


Auditor’s report

Balance sheet

Income statement







Contact

D E A R C L I E N T S

D E A R R E A D E R S

In 2015, economic conditions were once again very challenging, with expansive monetary policies from the cen-

tral banks, weak economic growth and major (geo)political uncertainty fuelling substantial volatility on the

fi nancial markets and making a combination of dexterity, expertise and prudence indispensable in wealth man-

agement. Switzerland’s fi nancial centre, too, continued to face a major process of adjustment, having to contend

with margins under pressure at the same time as increases in costs due to the growing complexity of regulatory

requirements. Many establishments are being forced to completely rethink their business models.

For Notenstein La Roche, 2015 was a very eventful year, and one in which the two themes of “focus” and

“growth” were very much in evidence. The spin-off of the asset management business into Vescore Ltd allowed

us to focus fully on our core competence, private banking. With regard to growth, the merger with La Roche &

Co Ltd, a Basel-based private bank with a long and rich history, was completed with effect from 1 November

2015. The increase in client assets resulting from this merger represents a signifi cant step in the expansion of our

bank.

The positive effect from these strategic initiatives is already making itself felt in our balance sheet. With a

broad earnings base of CHF 172 million and a cost-income ratio of 79.7 percent, we were able to signifi cant-

ly exceed the results achieved in the prior business period. Against this backdrop, we see ourselves as ideally

equipped for the future and look to the year ahead with confi dence.

D R PAT R I K G I S E L

Chairman of the Board

Notenstein La Roche Private Bank Ltd

Introduction

D R A D R I A N K Ü N Z I

CEO

Notenstein La Roche Private Bank Ltd

2

Dr Patrik Gisel (Chairman of the Board of Directors) and Dr Adrian Künzi (CEO)

3

Key figures

Amounts in CHF millions

NoteNsteiN La Roche at a gLaNce

1.1. – 31.12.2015 1.1. – 31.12.2014 1.1. – 31.12.2013

Income statement

Operating income 172 160 148

Operating expenses 137 154 135

Gross profit 35 7 14

Cost-income ratio 79.7% 95.7% 90.8%

31.12.2015 31.12.2014 31.12.2013

Balance sheet

Balance sheet total 6,804 5,218 4,324

Equity capital 481 417 395

Client assets

Assets under management 21,981 21,182 19,782

Custody assets 4,483 0 0

Total client assets 26,464 21,182 19,782

Resources

Number of staff 539 694 698

Number of full-time positions 478 629 628

Number of locations 13 12 12

Disclosure of capital adequacy and liquidity

Common equity tier 1 ratio 14.4% 8.5% 13.8%

Tier 1 ratio 19.0% 13.5% 13.8%

Total capital ratio 19.0% 13.7% 14.0%

Minimum total capital ratio target in accordance with FINMA Circular 11/2 plus requirement in respect of

anti-cyclical buffer 11.3% 11.3% 11.3%

Leverage ratio 6.0% 5.3%

Short-term liquidity coverage ratio (LCR) 114.5% 101.7%

The values for 2014 have been restated in line with the new accounting rules; key figures for 2013 are based on the former accounting rules.

4

All listed amounts are rounded. This can lead to a minimal difference in the total amounts.

Organigram

Private Banking

Switzerland *

* Excluding Basel

Private Banking

International

Investment

House Finance

Private Banking

Basel

BoaRd of diRectoRs

executive BoaRd

Audit Committee

Legal & Compliance

Communication

Corporate Development

Auditors

Internal Audit

6

executive BoaRd

Dr Adrian Künzi

Chief Executive Officer

Dr Ivan Adamovich

Head of Private Banking International

Deputy Chief Executive Officer

Fabian Dori

Head of Investment House

Christoph Gloor

Head of Private Banking Basel

Dr Basil Heeb

Chief Financial Officer

Dr Silvio Hutterli

General Counsel

Martin Liebi

Head of Private Banking Switzerland

Patrick Revey

Deputy Chief Executive Officer

BoaRd of diRectoRs

Dr Patrik Gisel

Chair of the Board of Directors

Michael Auer

Deputy-Chair of the Board of Directors, Member of the Audit Committee

Günter Haag *

President of the Audit Committee Heinz Karrer *

Maya Salzmann *

Member of the Audit Committee Thomas C. Weissmann *

* Independent members of the Board of Directors as defined by the provisions of the Swiss Financial Market Supervisory Authority (FINMA).

7

F O C U S O N P R I VAT E B A N K I N G

Notenstein La Roche can look back on a good year in

2015 – a year that saw the successful implementation

of the focus-and-grow strategy. With a view to sharp-

ening the focus on private banking, institutional client

business was integrated into sister company Vescore

Ltd. In addition, areas such as IT and parts of Services

were reassigned to the Raiffeisen Group. This enables

Notenstein La Roche to concentrate fully on its core

business, that of wealth management and investment

advisory services for the sophisticated client base with-

in private banking. The various steps were completed

on schedule and Notenstein La Roche thus achieved

the target set for 2015, that of securing a sharper pro-

file as private bank together with enhanced flexibility.

G R O W T H T H R O U G H M E R G E R W I T H B A N K L A R O C H E

The next important step in the development of our

bank was the merger with Bank La Roche, which was

successfully completed on 1 November 2015. Around

60 members of staff and just under CHF 6 billion in

client assets were taken over as a result of the merger .

In addition, our bank adopted the new name of

Notenstein La Roche. Thanks to the merger, which

is extremely promising thanks also to the common

values and shared traditions of the two predecessor

banks, we have been able to significantly expand our

position within the Swiss market.

P R O F I TA B I L I T Y E N H A N C E D B Y I N C R E A S I N G

E A R N I N G S A N D LO W E R C O S T S

The strategic focus and the merger with Bank La

Roche had a positive impact on client assets and prof-

it, with assets under management in private banking

business increasing to CHF 22.0 billion. Overall client

assets, which also include the assets held in custody for

Vescore Ltd, rose to CHF 26.5 billion.

Operating income was up 7.4 percent on the pre-

vious year, at CHF 172 million, despite the spin-off of

the asset management business. The contribution from

the merger with La Roche is still minimal here, and

will not work through fully to results until 2016. The

strength of Notenstein La Roche’s earnings power is

reflected in commission income, which was up 7.5 per-

cent year on year at CHF 121.5 million, as well as in

trading income (primarily foreign currency income

from client transactions), which increased by 22 per-

cent. In contrast, despite growth in lending business,

revenue from interest operations was significantly

lower year on year. This is attributable to the introduc-

tion of negative interest rates in January 2015 as well

as to the ongoing environment of low interest rates

and the related difficult situation for investments in

the bond market. Other ordinary income increased by

78 percent to CHF 16.4 million, due to a positive ef-

fect from the change in accounting method for finan-

cial investments as well as a high level of dividend in-

come from participating interests.

The positive impact from the reassignments is

clearly visible in operating expenses, which were down

almost 11 percent at CHF 137 million. Personnel ex-

penses were 18.5 percent lower due to the significant

reduction in staffing levels to 478 FTEs. General and

administrative expenses were slightly higher due to

the charging of costs for the contracted services.

As a direct consequence of the successful focus-

and-grow strategy, gross profit increased significantly

to CHF 35 million. Enhanced productivity is also re-

flected in the cost-income ratio, which – at 79.7 per-

cent – is substantially lower than in the previous year.


8

Notenstein La Roche’s profit for the year increased to

over CHF 80 million. This increase is attributable for

the most part to a gain on the realisation of the partial

sale of the participating interest in Leonteq Securities

Ltd. Thus, as at end-2015 and even after the acquisi-

tion of Bank La Roche, Notenstein La Roche had an

extremely solid core capital ratio (tier 1) of 19 percent.

S U C C E S S F U L I S S U I N G O F S T R U C T U R E D

I N V E S T M E N T P R O D U C T S

The issuance of the bank’s own structured investment

products, launched in 2013 and reinforced through the

foundation of Notenstein Finance (Guernsey) Limit-

ed, was expanded further in 2015. As at the end of the

year, there were over 2,600 structured products out-

standing, with a volume in excess of CHF 2 billion.

This development confirms that Notenstein La Roche

has established itself as an important contender in the

market and is attracting considerable interest thanks

to its innovative products.

LO O K I N G T O T H E F U T U R E W I T H C O N F I D E N C E

The 2015 business year was a year which confirmed

Notenstein La Roche’s focus-and-grow strategy: the

strategic initiatives launched over the past few years

are paying off. Our bank aims for organic growth,

but will also continue to consider select acquisitions

as and when suitable opportunities arise. Notenstein

La Roche is ideally equipped to remain successful

in the challenging private banking market and secure

further growth in earnings in the future.

9

Auditor’s report

10

Balance sheet

Amounts in CHF

Amounts in CHF

assets

Before appropriation of profit

31.12.2015 31.12.2014

Liquid assets 520,740,108 295,510,026

Amounts due from banks 3,412,625,371 2,349,253,316

Amounts due from securities financing transactions 389,663,000 215,400,000

Amounts due from customers 321,045,502 224,914,695

Mortgage loans 473,216,800 421,597,900

Trading portfolio assets 26,059,716 233,013,466

Positive replacement values of derivative financial instruments 154,251,030 130,603,418

Financial investments 1,250,911,615 1,018,049,428

Accrued income and prepaid expenses 34,793,982 41,300,134

Participating interests 76,116,108 217,826,031

Tangible fixed assets 60,327,193 46,980,509

Intangible assets 66,095,534 1,763,034

Other assets 17,797,090 21,622,993

Total assets 6,803,643,048 5,217,834,950

Total subordinated claims 5,354,384 –

of which subject to mandatory conversion and/or debt waiver 1,814,654 –

LiaBiLities


31.12.2015 31.12.2014

Amounts due to banks 129,706,085 157,332,625

Liabilities from securities financing transactions 82,012,000 104,823,000

Amounts due in respect of customer deposits 4,602,855,221 3,235,824,623

Negative replacement values of derivative financial instruments 158,576,116 134,390,208

Bond issues and central mortgage institution loans 1,275,710,226 1,113,687,846

Accrued expenses and deferred income 31,228,970 23,589,315

Other liabilities 26,453,638 6,901,786

Provisions 16,575,733 23,921,442

Reserves for general banking risks 196,000,000 196,000,000

Bank’s capital 22,200,000 22,200,000

share capital 20,000,000 20,000,000

participation capital 2,200,000 2,200,000

Continued on page 13

12


31.12.2015 31.12.2014

Statutory capital reserves 56,787,474 56,787,474

of which tax-exempt capital contribution reserve 18,260,000 18,260,000

of which premium reserve from participation capital increase 38,527,474 38,527,474

Statutory retained earnings reserves 4,000,000 4,000,000

Voluntary retained earnings reserves 115,450,692 115,450,692

Profit carried forward 5,165,939 4,695,664

Profit for the year 80,920,954 18,230,275

Total liabilities 6,803,643,048 5,217,834,950

Total subordinated liabilities 101,577,778 100,000,000

of which subject to mandatory conversion and/or debt waiver 101,577,778 100,000,000

off-BaLaNce-sheet tRaNsactioNs


31.12.2015 31.12.2014

Contingent liabilities 24,093,664 37,695,904

Irrevocable commitments 64,982,080 34,683,240

Amounts in CHF


13


iNcome aNd expeNses fRom oRdiNaRy BaNkiNg opeRatioNs


2015 2014

Result from interest operations

Interest and discount income 16,201,698 19,153,852

Interest and dividend income from trading positions 2,732,873 3,069,496

Interest and dividend income from financial investments 3,737,666 7,275,918

Interest expense –3,018,805 –3,103,154

Gross result from interest operations 19,653,432 26,396,112

Changes in value adjustments for default risks and losses from interest operations 15,011 –402,141

Subtotal net result from interest operations 19,668,443 25,993,972

Result from commission business and services

Commission income from securities trading and investment activities 125,302,333 119,033,533

Commission income from lending activities 72,576 59,107

Commission income from other services 6,852,875 4,152,141

Commission expense –10,767,928 –10,223,860

Subtotal result from commission business and services 121,459,856 113,020,922

Result from trading activities and fair value option 14,408,180 11,810,235

Other result from ordinary activities

Result from the disposal of financial investments 11,319,209 –3,264,641

Income from participating interests 6,522,570 11,155,259

Result from real estate 95,997 45,581

Other ordinary income – 1,312,319

Other ordinary expenses –1,504,541 –

Subtotal other result from ordinary activities 16,433,235 9,248,518

Operating expenses

Personnel expenses –88,445,689 –108,514,355

General and administrative expenses –48,663,993 –45,029,263

Subtotal operating expenses –137,109,682 –153,543,618

Value adjustments on participating interests, and depreciation and amortisation of tangible fixed assets and intangible assets –4,048,252 –2,524,334

Changes to provisions and other value adjustments, and losses –853,315 –818,203

Operating result 29,958,464 3,187,492


Income statement

Amounts in CHF

14


2015 2014

Extraordinary income 62,609,750 35,148,151

Extraordinary expenses –852,190 –

Changes in reserves for general banking risks – –20,000,000

Taxes –10,795,070 –105,368


Amounts in CHF

appRopRiatioN of pRofit

2015 2014

Proposed appropriation of profit


Profit carried forward 5,165,939 4,695,664

Distributable profit 86,086,893 22,925,939

Appropriation of profit

Dividend distribution from distributable profit –19,980,000 –17,760,000

New amount carried forward 66,106,893 5,165,939

Amounts in CHF

15


statemeNt of chaNges iN equity

Bank’s capital

Capital

reserves

Retained

earnings

reserves

Reserves

for general

banking risks

Voluntary

retained earn-

ings reserves

and profit

carried forward

Result of the

period

Total

Equity capital at 1 January 2015 22,200 56,787 4,000 196,000 120,146 18,230 417,364

Appropriation of profit 2015

Dividend – – – – – –17,760 –17,760

Net change in profit carried

forward – – – – 470 –470 –

Profit 2015 – – – – – 80,921 80,921

Equity capital at

31 December 2015 22,200 56,787 4,000 196,000 120,616 80,921 480,525


Amounts in CHF thousands

16


expLaNatoRy Notes oN BusiNess activities

G E N E R A L

Notenstein La Roche Private Bank Ltd (hereinafter

“Notenstein La Roche”), a subsidiary of Raiffeisen

Switzerland Cooperative, specialises in investment

advisory and wealth management services for high-

net-worth private clients. Notenstein La Roche offers

its services at thirteen locations across Switzerland,

with around 540 members of staff. Notenstein La

Roche focuses on private banking services for private

investors in Switzerland and clients in other selected

international target markets.

Vescore Ltd (formerly Notenstein Asset Manage-

ment Ltd) commenced operations on 1 July 2015.

The spin-off of the former Notenstein Asset Manage-

ment Ltd into the newly founded Vescore Ltd was

implemented retroactively from 1 January 2015. This

new company combines Notenstein La Roche’s Insti-

tutional Clients and Asset Management divisions with

the boutiques of TCMG Asset Management AG, fo-

cusing the Raiffeisen Group’s expertise in sustainable

and quantitative investment strategies. The formation

of companies specialising in private banking and asset

management enhances strategic flexibility in both

these segments within the Raiffeisen Group.

Since March 2013, Notenstein La Roche has been

issuing a broad range of structured investment prod-

ucts in cooperation with Raiffeisen Switzerland Co-

operative as guarantor and Leonteq Securities Ltd.

as service provider. Since September 2014, the bank

has also been issuing withholding-tax-exempt struc-

tured investment products through the subsidiary

Notenstein Finance (Guernsey) Limited.

On 1 September 2015, Notenstein La Roche re-

assigned its IT division and large parts of its Services

division, including Facility Management, to companies

within the Raiffeisen Group. This enables Notenstein

La Roche to concentrate fully on its core business,

that of wealth management and investment advisory

services for the sophisticated private client segment.

E M P LO Y E E S

At the end of 2015, Notenstein La Roche employed

539 members of staff (previous year: 694). Adjusted

for part-time employees, this corresponds to 478 full-

time employees (previous year: 629).

E M P LO Y E E PA R T I C I PAT I O N P R O G R A M M E

In order to safeguard all eligible interests involved,

the employee participation programme was dissolved

in 2015, within the framework of the repositioning

of a strategic participating interest with Raiffeisen

Switzer land Cooperative.

B U S I N E S S D I V I S I O N S

The bank’s main activities fall into the following

categories:

– wealth management and investment advisory

services for private clients

– comprehensive financial planning for private

clients

– lending activities associated with private banking

– securities and currency trading

– support services for external asset managers

– issuing of structured products

– custodian bank services for private and institu-

tional clients

Two-thirds of the bank’s clients are domiciled in

Switzer land. Services to foreign clients are concentrat-

ed in selected target markets.


18

C O M M I S S I O N A N D S E R V I C E S B U S I N E S S

Our core activities in the commission and services

business fall under wealth management and advisory

services. Other components of our services business

include revenues from the issuing of structured prod-

ucts, support services for external asset managers and

custodian bank activities for institutional clients.

T R A D I N G

Notenstein La Roche offers its clients execution and

settlement of all standard bank trading transactions.

Moreover, Notenstein La Roche trades on its own ac-

count with the usual financial instruments. Pro-

prietary debt trading mainly involves bonds from first-

class issuers, while equity trading principally involves

Swiss and European shares. The bank trades in foreign

currencies on its own account mainly to ensure the

smooth functioning of its business activities. Such trad-

ing is limited to currencies for which there is a liquid

market. Proprietary trading was scaled back substan-

tially in the course of 2015 and is now limited to the

provision of support for client business.

L E N D I N G A C T I V I T I E S

Notenstein La Roche adheres to a restrictive credit

policy, providing lombard loans against liquid securi-

ties in diversified portfolios. Loan-to-value ratios are

conservative so as to minimise default risk. In addi-

tion, Notenstein La Roche grants mortgage loans to

clients in the wealth management and investment ad-

visory segment and to staff members. The loans dis-

closed as mortgage loans are secured exclusively by

Swiss real estate.

R I S K P O L I C Y

In the same way as other financial institutions, our

bank is exposed to various banking-specific risks: cred-

it, market and liquidity risks, as well as operational

and legal risks. A considered and careful approach to

such risks is key to the long-term success of a bank.

Notenstein La Roche attaches considerable value to

comprehensive risk management, for both the bank

itself and for the client assets entrusted to it. The risk

policy aims to limit the potential negative impact on

earnings, protect the bank against substantial extra-

ordinary losses and safeguard and strengthen the bank’s

good name. The Risk Controlling unit ensures com-

pliance with and the implementation of risk policy,

while Legal & Compliance ensures compliance with

regulatory requirements.

R I S K M A N A G E M E N T A N D C O N T R O L

The Board of Directors is the supreme body with-

in the risk management structure. It defines the risk

policy, setting out the information pertaining to risk

philosophy, risk measurement and risk management,

which it subjects to an annual review. Likewise on

an annual basis, it defines the level of willingness to

take risks, risk tolerance and overall limits in keeping

with risk capacity, and monitors compliance with such

as well as the implementation of risk policy. It deter-

mines the overall limits per risk category and business

activity and sets standards for risk management and

risk control processes.

To enable it to carry out its monitoring function,

the Board of Directors receives a comprehensive risk

report. This report provides information on the risk

situation, capitalisation, adherence to overall limits

and any measures necessary.

19

The Executive Board is responsible for implement-

ing the risk policy set by the Board of Directors and

ensures the establishment of an appropriate risk man-

agement structure as well as the implementation of

adequate risk monitoring systems. It gives concrete

form to the Board of Directors’ requirements for each

risk category and business activity.

Risk Controlling provides independent oversight

of the bank’s risk exposure. This department struc-

tures and implements appropriate risk monitoring sys-

tems, and supplies the information needed to monitor

risk policy, appetite and limits. Monitoring focuses pri-

marily on operational risks, market and credit risks,

as well as liquidity risks.

Notenstein La Roche Risk Controlling is incorpo-

rated in consolidated group risk management within

the Raiffeisen Group.

R I S K M A N A G E M E N T P R O C E S S

The risk management process applies to all risk cate-

gories; namely credit, market, operational and liqui-

dity risks. It comprises the following elements:

– risk identification

– risk measurement and assessment

– risk management

– risk limitation by means of appropriate limits

– risk monitoring

The aim of the bank’s risk management is:

– to guarantee effective controls at all levels and

ensure that any risks entered are in line with the

corresponding level of willingness to take on

risks;

– to establish the prerequisites for risks being en-

tered into consciously and in a targeted, con-

trolled manner and managed systematically;

– to ensure optimum use of risk appetite and

ensure that risks are only entered if suitable

returns are available.

C R E D I T R I S K

Credit risk refers to the risk that losses may be in-

curred when clients or other counterparties cannot ful-

fil their contractually agreed payment obligations to

the extent agreed. Loans, irrevocable credit commit-

ments and contingent liabilities entail credit risks, as

do instruments used for balance sheet management.

Notenstein La Roche identifies, assesses, manages

and monitors the following risk categories in lending

business:

– counterparty risks

– country risks

– collateral risks

– concentration risks

M A N A G E M E N T O F T H E B A N K ’ S B A L A N C E S H E E T

Notenstein La Roche accepts credit risks in particular

as consequential risks of business activities with coun-

terparties and in order to manage the balance sheet

within the framework of limits laid down by the Board

of Directors. The bank manages its own counterparty

and country risks within the centralised limit manage-

ment structure of the Raiffeisen Group.

Before entering into a business relationship with

a counterparty in interbank business, the bank carries

out a comprehensive assessment of the counterparty

risk. The Raiffeisen Group must also have issued prior

approval for the counterparty.

Notenstein La Roche restricts credit risk by setting

limits and through the approval required for counter-

parties and indirect counterparties (brokers, clearing

Notes to the financial statements – part one20

houses and custodians). Credit risk is measured and

evaluated according to appropriate and established

procedures. The risk measurement process and the

applicable parameters are binding. Credit risks are

measured according to value at risk. For the bank as

a whole and for individual business units, the Board

of Directors sets global or individual limits for coun-

terparty risk exposure.

The Executive Board is responsible for the more

detailed formulation of individual limits and invest-

ment guidelines.

Risk Controlling monitors credit risks on a daily

basis. In addition, the development of counterparty

ratings and CDS levels is monitored regularly. If ex-

treme market events occur, the situation is assessed

daily in order to allow the bank to react promptly to

any increases in risk levels.

LO A N S T O C L I E N T S

The bank grants loans to clients where top quality,

easily realisable collateral is available and against do-

mestic real estate. Unsecured loans or loans secured

by collateral that is not readily realisable are approved

in exceptional cases, if justified. The bank primarily

extends lombard loans (secured by account balances

and securities eligible for use as collateral in lombard

loans and deposited with the bank) and mortgage

loans (mortgage assignments or mortgage notes serv-

ing as collateral).

Notenstein La Roche grants lombard loans against

liquid securities in diversified portfolios as collateral.

Loan-to-value ratios are conservative so as to minimise

default risk. In addition, Notenstein La Roche grants

mortgage loans to clients in the wealth management

and investment advisory segment and to staff mem-

bers. The loans disclosed as mortgage loans are se-

cured exclusively by Swiss real estate.

Risk management involves careful selection, de-

tailed financial assessment and a close relationship

with our clients as well as prudence in structuring

business transactions and the close monitoring of

loans. In this regard, the bank does not enter into any

credit risk without first having subjected the transac-

tion to a thorough loan review. Mandatory elements of

this review are:

– creditworthiness; this involves an assessment of

the integrity, business sense, business conduct

and pasts of the parties involved in a transaction.

– solvency; this involves the financial situation, busi-

ness potential and overall economic environment.

– transaction structure; the structure and business

purpose of a transaction must be transparent

and in line with legal requirements; similarly, the

collateral must be able to retain its value and

be realised.

– repayment; the sources of repayments and the

possibilities for withdrawing from a credit com-

mitment must be ascertained when a transaction

is concluded.

The Credit unit is responsible for monitoring the cred-

it risks arising from loans to clients on a daily basis.

I N T E R E S T R AT E R I S K

The risk of a change in interest rates is of central im-

portance to Notenstein La Roche. Such risk arises pri-

marily through maturity mismatches on the asset and

liability sides of the balance sheet. Active manage-

ment is carried out by the bank’s Asset and Liability

Committee (ALCO), which is made up of an Execu-

tive Board committee and the head of Treasury.

21

Measurement is based on standard ALM systems

used within the industry. Value at risk, sensitivity and

gap data are used to determine the potential impact

of interest rate risk on the bank’s earnings and equity

capital situation. Positions with variable interest rates

are mapped using a replication model. The result-

ing data is reviewed at least once a year and adapted

where necessary.

Analysis of the economic environment and the for-

mulation of interest rate forecasts derived on the basis

of this analysis make regular analysis of the effects on

income and value possible. Depending on the assess-

ment of how interest rates will develop, ALCO puts in

place appropriate hedging measures within predefined

risk limits and defined hedging strategies. Derivative

financial instruments may be used to this end.

Risk Controlling monitors interest rate risks on a

daily basis.

C U R R E N C Y R I S K

Through its currency risk measures, the bank aims to

minimise the potentially negative impact of changes

in foreign currencies on its earnings situation. Essen-

tially, it seeks to offset liabilities in a foreign curren-

cy with assets in the same currency. Currency risks are

contained in the value at risk calculation and restrict-

ed with nominal exposure.

Proprietary trading in foreign currencies is primar-

ily to ensure the smooth functioning of business activ-

ities with clients and is limited to currencies for which

there is a liquid market.

R I S K S I N T R A D I N G B U S I N E S S

The bank does not undertake any active trading busi-

ness with a view to benefiting from short-term market

fluctuations. For accounting purposes, items are dis-

closed as trading positions for the settlement of indi-

vidual transactions or the hedging of balance sheet

items.

Trading in derivative financial instruments is car-

ried out primarily for clients; the bank limits its pro-

prietary activities to hedging transactions in connec-

tion with nostro positions and to transactions relating

to the management of the balance sheet structure. The

bank has no market maker activities. Trading is carried

out via standardised and OTC instruments.

Monitoring of the market risks that arise in trad-

ing business is carried out by Risk Controlling on a

daily basis.

L I Q U I D I T Y R I S K

Liquidity risks are administered using operational cri-

teria, managed by Treasury in accordance with the re-

quirements under banking law and monitored by Risk

Controlling. As part of the management of liquidity

risks, inflows and outflows of liquidity in particular are

simulated against the backdrop of various scenarios

and using different timeframes. These scenarios en-

compass, inter alia, the repercussions of refinancing

risks as well as general liquidity risks.

A solid liquidity position is targeted through li-

quidity management, so as to allow the bank to fulfil

its payment obligations on schedule at all times.

The basis for monitoring is formed by the statu-

tory limits as well as the limits defined by the bank’s

Board of Directors, which are based on the scenario

analyses.

Risk Controlling monitors liquidity risks on a daily

basis.


O P E R AT I O N A L R I S K

Operational risks refer to the the danger of losses

occurring due to the inadequacy or failure of internal

processes, employees, IT systems, buildings and instal-

lations, or due to external events or the effects of ac-

tions by third parties. This definition includes IT risks

and security risks. These comprise, in particular, IT

and security systems as well as their infrastructures.

Operational risks are accepted as consequential

risks of business activity and are avoided, mitigated,

transferred or borne by the bank on the basis of cost/

benefit considerations. The potential impact on com-

pliance and the bank’s reputation is also taken into

account here.

When the Board of Directors defines the business

strategy and business activities, it also determines the

appetite for operational risks. Risk tolerance is de-

fined in quantitative terms (value at risk limits) as part

of the risk budgeting process; the qualitative definition

of risk tolerance is based on the internal documents

that govern business activities (regulations, policies

and guidelines).

Action to avoid or mitigate operational risks must

primarily be taken wherever such risks arise, with the

objective of reducing risks to a manageable level. The

most critical processes are identified and their contin-

uation ensured with emergency and contingency plans.

Operational risks are identified and assessed annu-

ally by means of a top-down assessment by the Exec-

utive Board and a bottom-up assessment by line man-

agement process supervisors.

Risks are assessed before and after taking account

of risk-mitigation measures already in place as speci-

fied by the Executive Board and the group risk man-

agement structure. Risks are assigned to the various

risk assessment categories according to specific crite-

ria (threshold values) and submitted to the Board of

Directors each year for review and approval.

Operational risks are monitored both at individu-

al risk level and at corporate level. Line management

is responsible for monitoring at individual risk level,

while Risk Controlling handles risk monitoring at the

corporate level and is responsible for the bank-wide

register of operational risks as well as the analysis and

evaluation of operational risk data.

The results of risk assessments, material internal

operational risk events, relevant external events and

the development of the risk situation are reported

to the Executive Board and the Board of Directors

on a quarterly basis, together with information on

the implementation status of measures aimed at re-

ducing risk.

In addition to the standard risk management pro-

cess, Risk Controlling also conducts ad hoc risk ana-

lyses as required, analyses any loss events that have

arisen and maintains close links with other organi-

sational units that, as a result of their function, come

into contact with information on operational risks

within the Raiffeisen Group.

All measures to control operational risks are ele-

ments of the Internal Control System (ICS). The ICS

comprises all controlling structures and processes,

procedures, methods and measures at all levels of the

bank that provide the basis for the attainment of the

business policy objectives and for the proper opera-

tion of the bank’s business.

A review of the entire ICS is carried out each

year. The ICS is assessed at both corporate and pro-

cess level to determine the adequacy and effectiveness

of the risk management measures implemented. The

23

results of the ICS review are submitted to the Execu-

tive Board and Board of Directors quarterly.

M E T H O D S U S E D T O I D E N T I F Y D E FA U LT R I S K S

A N D D E F I N E T H E N E E D F O R VA LU E A D J U S T M E N T S

Loans secured by mortgage

The property value of owner-occupied residential

property is determined on the basis of real value or

a hedonic estimation. Where a hedonic estimation is

carried out, the bank proceeds on the basis of real es-

tate price information specific to the region in ques-

tion. This information is supplied by an external pro-

vider and validated by the bank.

The bank updates the property values periodical-

ly using these valuations. In addition, arrears on pay-

ments of interest or principal are monitored on an

ongoing basis. The bank uses this to identify any mort-

gage loans that are associated with higher risk. Such

loans are then subject to a more detailed review by

credit specialists. Where necessary, further security is

requested or a corresponding value adjustment creat-

ed based on the collateral shortfall.

For multi-family units, commercial real estate and

special properties, the property value is determined

using the income method, which is based on the in-

come produced over the long term. The rental income

generated by investment properties is reviewed pe-

riodically and if there are any indications of material

changes to the level of rental income or vacancy rates.

Loans with securities as collateral

Exposure to loans with securities as collateral and the

value of the collateral attached to such loans are mon-

itored daily. Should the lending value of the securi-

ties provided as collateral fall below the amount of the

credit exposure, a possible reduction of the lending

amount is reviewed or additional collateral requested.

If the collateral shortfall increases or exceptional mar-

ket events occur, the collateral is realised and the loan

closed out.

Unsecured loans

Unsecured loans and loans secured by collateral that

is not readily realisable where it is not possible to

value the collateral are granted purely on an excep-

tional basis and must be approved by the Executive

Board.

Unsecured loans are reviewed, recorded and sub-

mitted to the Executive Board for approval annually,

or at shorter intervals where necessary.

If a higher level of risk is involved, the bank con-

ducts a more detailed assessment and defines appro-

priate measures together with the client. If it must be

assumed, at this stage, that the credit exposure is im-

paired, a corresponding value adjustment is carried out.

Procedure for determining value adjustments and

provisions

New requirements for value adjustments and/or pro-

visions are identified on the basis of the procedure

defined. In addition, known risk positions where im-

pairment has been identified previously are reassessed

quarterly and the correction in value adjusted as re-

quired.

VA LU AT I O N O F C O L L AT E R A L

Loans secured by mortgage

In the mortgage lending segment, a current valua-

tion of the collateral is carried out each time a mort-

gage loan is granted. The valuation method applied


depends on the type of property involved and how it

is used. Residential property is valued using a hedon-

ic valuation model, which analyses the price of the

property based on the internal characteristics of that

property in comparison with similar real estate trans-

actions. The bank applies the income method in val-

uations of multi-family units, commercial real estate

and special properties. If it is not possible to estimate

the value of a property, valuation reports are obtained

from external experts such as architects, building en-

gineers and property surveyors. A liquidation value

is also determined if there is a marked deterioration

in the credit rating and the exposure threatens to be-

come non-performing.

Loans with securities as collateral or other readily

realisable collateral

For lombard loans and other types of loans with se-

curities as collateral, it is primarily transferable finan-

cial instruments, such as bonds and equities, which are

liquid and actively traded that are accepted. Whether

and the extent to which a portfolio can serve as col-

lateral is geared to the investment method applied by

Notenstein La Roche. Discount factors (haircuts) ap-

plied in respect of lending values are generally applied

on the basis of the assignment of the instruments to

the defined risk/return classes. Other factors, such as

the ratings and terms of debt securities, are also con-

sidered. Lending against investment funds and struc-

tured products is governed by special rules.

The bank applies discounts to market values in

order to hedge the market risk associated with mar-

ketable and liquid securities and determine lend-

ing values. Highly diversified portfolios are awarded

add-ons in respect of lending values.

With life insurance policies and guarantees, discounts

are defined at product level.

B U S I N E S S P O L I C Y G O V E R N I N G T H E U S E

O F D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S A N D

H E D G E A C C O U N T I N G

Business policy governing the use of derivative

financial instruments

Derivative financial instruments are used for trading

and hedging purposes.

The bank has no market-maker activities. The

bank carries out trading for its own account and for

the account of its clients using both standardised and

OTC instruments, primarily instruments for interest

rates, currencies, equity securities/indices and, to a

lesser extent, commodities.

Derivative financial instruments are used by the

bank within the framework of risk management main-

ly in order to hedge interest rate and currency risks, as

well as the market risks arising in connection with the

issuing of structured products.

Hedging transactions are carried out solely with

external counterparties.

Use of hedge accounting

The bank does not use hedge accounting within the

framework of its financial statements.

25

compaNy, LegaL foRm aNd headquaRteRs of

the BaNk

Notenstein La Roche Private Bank Ltd is a limit-

ed company (“Aktiengesellschaft”) under Swiss law.

It offers services from its headquarters in St. Gallen

as well as from its branches in Basel, Berne, Chur,

Geneva, Lausanne, Locarno, Lucerne, Lugano, Olten,

Schaffhausen, Winterthur and Zurich. It has no offices

outside Switzerland.

accouNtiNg aNd vaLuatioN pRiNcipLes

G E N E R A L P R I N C I P L E S

The bookkeeping, accounting and valuation princi-

ples are based on the provisions stipulated by the

Swiss Code of Obligations, Swiss banking legislation

and other statutory provisions, as well as on the ac-

counting rules issued by the Swiss Financial Market

Supervisory Authority FINMA. These reliable assess-

ment statutory single-entity financial statements pres-

ent the bank’s economic situation in such a manner

as to allow third parties to form a reliable opinion.

Raiffeisen Switzerland, parent company of Noten-

stein La Roche, publishes the consolidated annual

financial statements of the Raiffeisen Group in a sep-

arate annual report. Unlike statements prepared in

accordance with the true and fair view principle, these

single-entity statements may be influenced by hidden

reserves.

G E N E R A L VA LU AT I O N P R I N C I P L E S

The annual financial statements are drawn up on the

assumption that the bank will continue as a going con-

cern. Items are recognised on a going-concern basis.

Items are recognised on the balance sheet as assets

if, due to past events, they may be disposed of, a cash

inflow is probable and their value can be reliably es-

timated. If no reliable estimate is possible, the item is

considered to be a contingent asset requiring explana-

tion in the notes. Items are recognised on the balance

sheet as liabilities if they have been caused by past

events, a cash outflow is probable and their value can

be reliably estimated. If no reliable estimate is possi-

ble, the item is considered to be a contingent liability

requiring explanation in the notes.

The positions stated within a balance sheet item

are valued individually.

There is no offsetting of assets and liabilities or of

income and expense items. Receivables and payables

are offset only in the following instances:

– Receivables and liabilities are offset where they

arise from transactions of the same type with the

same counterparty, in the same currency, with the

same maturity or earlier maturity of the receiva-

ble and cannot give rise to counterparty risks.

– Deduction of value adjustments from the corre-

sponding asset item.

– Offsetting of positive and negative changes in

book value with no income effect in the current

period in the compensation account.

The positive and negative replacement values of de-

rivative financial instruments with the same counter-

party may be offset where recognised and legally en-

forceable netting agreements are in place.

C O N S O L I D AT I O N

Notenstein La Roche is fully consolidated within

the Raiffeisen Group with the subsidiary companies,

Notenstein Finance (Guernsey) Limited, Notenstein

Financial Services GmbH and TCMG Asset Manage-

ment AG.


26

R E C O G N I T I O N O F B U S I N E S S T R A N S A C T I O N S

All business transactions concluded as of the balance

sheet date are recorded on a day-end basis and valued on

the balance sheet and in the income statement in accord-

ance with the defined valuation principles. Spot transac-

tions entered into but not yet settled are recognised in

accordance with the trade date accounting principle.

F O R E I G N C U R R E N C I E S

Receivables and payables as well as cash and cash

equivalents in foreign currencies are translated at the

exchange rate prevailing on the balance sheet date.

Price gains and losses resulting from such valuations

are recognised in “Result from trading activities”.

Transactions in foreign currencies during the year are

translated using the rate prevailing at the time of such

transactions. The main foreign currencies for balance

sheet purposes were translated at the following rates

on the balance sheet date:

L I Q U I D A S S E T S , D E P O S I T S

These items are recognised on the balance sheet at

nominal or acquisition value. As yet unearned discounts

on money market instruments, and premiums/discounts

on own bond issues, are accrued over the term.

A M O U N T S D U E F R O M A N D L I A B I L I T I E S F R O M

S E C U R I T I E S F I N A N C I N G T R A N S A C T I O N S

Securities lending and borrowing transactions are rec-

ognised at the value of the cash collateral received or

given, including accrued interest. Borrowed securities

or securities obtained as collateral are recognised on

the balance sheet only if Notenstein La Roche gains

control over the contractual rights encompassed with-

in these securities. Securities lent or provided as col-

lateral are derecognised from the balance sheet only if

Notenstein La Roche loses the contractual rights asso-

ciated with these securities. The market values of the

securities borrowed and lent are monitored on a daily

basis so that additional collateral may be provided or

requested as necessary. Fees received or paid in re-

spect of securities borrowing and lending transactions

are recognised as commission income or commission

expense on an accrual basis. Notenstein La Roche

does not engage in securities lending with instruments

held in clients’ safekeeping accounts.

Purchases of securities subject to an obligation

to resell (reverse repurchase transactions) and sales

of securities subject to an obligation to repurchase

(repurchase transactions) are treated as collateralised

financing transactions and are recognised at the value

of the cash collateral received or given, including ac-

cumulated interest. Securities received and delivered

are not recognised on/derecognised from the balance

sheet unless control of the contractual rights encom-

passed within such securities is relinquished. The mar-

ket values of the securities received or delivered are

monitored on a daily basis so that additional collateral

may be provided or requested as necessary. Interest

income from reverse repurchase transactions and in-

terest expense arising from repurchase transactions is

accrued in the corresponding periods over the terms

of the underlying transactions.

Currencies 31.12.15 31.12.14

EUR 1.0875 1.2024

GBP 1.4765 1.5482

USD 1.0012 0.9934

27

A M O U N T S D U E F R O M B A N K S A N D C U S T O M E R S ,

M O R T G A G E LO A N S

These items are recognised at nominal value, less any

value adjustments necessary. Interest income is ac-

crued in the corresponding period. Receivables are

deemed to be impaired where the bank considers it

unlikely that the debtor will be able to meet the con-

tractual obligations involved in full. Impaired receiv-

ables and collateral (if any) are valued at liquidation

value. Individual value adjustments are created for

impaired receivables. Such adjustments are based on

regular analyses of the individual credit exposures,

taking account of the debtor’s creditworthiness and/

or the counterparty risk, as well as the estimated net

realisable disposal value of the collateral. Where the

recovery of the receivable is dependent exclusively

on the realisation of the collateral, a value adjustment

must be created to cover the unsecured portion in full.

Interest and corresponding commissions that are

more than 90 days overdue are deemed to be past

due. In the case of current account overdrafts, interest

and commissions are considered past due where the

assigned overdraft limit has been exceeded for more

than 90 days. Receivables are derecognised at the lat-

est when a legal title confirms the conclusion of the

realisation process.

Impaired receivables are reinstated as fully per-

forming (i.e. the value adjustment is released) when

the outstanding principal amounts and interest are

again paid promptly as per contractual agreements,

and other creditworthiness criteria are met.

Individual value adjustments, collective individu-

al value adjustments and value adjustments for latent

default risks are deducted from the corresponding

asset items in the balance sheet.

A M O U N T S D U E T O B A N K S A N D A M O U N T S D U E I N

R E S P E C T O F C U S T O M E R D E P O S I T S

These items are recognised at nominal value. Amounts

due in respect of precious metals in metal accounts are

valued at fair value if the metals concerned are traded

on a price-efficient and liquid market.

T R A D I N G P O R T F O L I O A S S E T S A N D T R A D I N G

P O R T F O L I O L I A B I L I T I E S

Trading portfolio assets and trading portfolio liabili-

ties are valued and recognised at fair value. Positions

for which there is no representative market are valued

at the lower of cost or market. If, in exceptional cases,

no fair value is available, the principle of lower of cost

or market is applied to valuation.

Gains and losses resulting from this valuation, and

gains and losses realised during the period, are dis-

closed in “Result from trading activities and the fair

value option”. Interest on and dividends from trading

positions are booked to “Interest and dividend income

from trading portfolios”, in the item “Result from in-

terest operations”.

There is no offsetting of the refinancing result and

trading positions.

P O S I T I V E A N D N E G AT I V E R E P L A C E M E N T VA LU E S

O F D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S

All derivative financial instruments are valued at fair

value. Such instruments are recognised as positive

or negative replacement values in the corresponding

items. The fair value is based on market prices, price

quotations from brokers, and on discounted cashflow

and option price models.

For transactions involving derivative financial in-

struments entered into for trading purposes, the result

Notes to the financial statements – part two28

realised is recognised in “Result from trading activ-

ities and the fair value option”. The bank also uses

derivative financial instruments in connection with

asset and liability management in order to control in-

terest rate risks.

Hedging transactions for the Treasury division are

carried out via client trading. The Treasury division is

not itself active in the markets. Assets and liabilities as

well as income and expenses arising as a result of in-

ternal transactions are eliminated.

The bank may offset positive and negative replace-

ment values with the same counterparty within the

framework of recognised and legally enforceable net-

ting agreements.

O T H E R F I N A N C I A L I N S T R U M E N T S AT FA I R VA LU E

A N D L I A B I L I T I E S F R O M F I N A N C I A L I N S T R U M E N T S

AT FA I R VA LU E ( FA I R VA LU E O P T I O N )

Financial instruments that are not part of trading ac-

tivities are disclosed under these items and valued at

fair value if all of the following conditions are met:

– The financial instruments are valued at fair value

and are in line with the documented risk man-

agement and investment strategy, ensuring cor-

rect reporting, measurement and limitation of

the various risks.

– There is an economic hedging relationship between

the financial instruments on the asset side and

those on the liability side that is largely neutralised

in terms of income by the fair value valuation.

– Any impact of a change in own creditworthiness

on the fair value following first-time recogni-

tion is neutralised in the income statement and

booked via the compensation account.

S T R U C T U R E D P R O D U C T S I S S U E D B Y

N O T E N S T E I N L A R O C H E

Where structured products issued by Notenstein La

Roche comprise a debt instrument, the derivative com-

ponent is separated from the basic contract, and val-

ued and recognised separately. Debt instruments (basic

contracts) are recognised under “Bond issues and

central mortgage institution loans” at nominal value.

Discounts and premiums are recognised in “Accrued

expenses and deferred income” and “Accrued income

and prepaid expenses” and realised against the inter-

est result over the remaining maturity. Such structured

products without a debenture com ponent and deriva-

tive components of structured products with their own

debenture component are recognised in “Positive re-

placement values of derivative financial instruments”

and “Negative replacement values of derivative finan-

cial instruments” at fair value.

Income from the structuring of self-issued struc-

tured products is recognised in “Commission income

from securities trading and investment activities”.

Redemption of the structured products is guaranteed

by Raiffeisen Switzerland.

S T RU C T U R E D P R O D U C T S O F T H I R D - PA R T Y I S S U E R S

Income from the issuance of structured products on a

commission basis is recognised in “Commission income

from securities trading and investment activities”.

F I N A N C I A L I N V E S T M E N T S

Debt securities intended to be held to maturity are

valued at acquisition cost and the premium/discount

accrued over the remaining term (accrual method).

Discounts and premiums are accrued in “Accrued ex-

penses and deferred income” and “Accrued income

29

and prepaid expenses” over the remaining term to

maturity . Default-risk-related changes in book value

are recognised immediately by means of a charge to

“Changes in value adjustments for default risks and

losses from interest operations”. If financial invest-

ments intended to be held until maturity are sold or

repaid prior to maturity, the gains and losses realised

that correspond to the interest component are accrued

over the remaining term to maturity via “Other as-

sets” and “Other liabilities”.

Debt securities not intended to be held until ma-

turity are valued at lower of cost or market. Changes

in book value resulting from a subsequent valuation

are recognised net via “Other ordinary expenses”

or “Other ordinary income”, as appropriate. De-

fault-risk-related changes in book value are recog-

nised via “Changes in value adjustments for default

risks and losses from interest operations”.

Real estate and participating interests acquired

through lending activities and designated for resale

are recognised in financial investments and valued

at lower of cost or market. The lower of cost or mar-

ket value is deemed to be the lower of the acquisition

value or the liquidation value.

PA R T I C I PAT I N G I N T E R E S T S

Participating interests are equity securities owned by

the bank in companies, where those securities are held

with the intention of a permanent investment irrespec-

tive of the percentage of voting shares held.

Participating interests are valued individually

at acquisition cost, less any economically necessary

value adjustments. Testing is carried out on each bal-

ance sheet date to ascertain whether the value of indi-

vidual participating interests is impaired. This impair-

ment test is based on indications that could suggest

that individual assets have been affected by such im-

pairment. Recoverable amounts are determined in

the event of any such indications and are determined

for each individual asset. The recoverable amount is

the higher of the net market value and the value-in-

use. An asset is impaired if its book value exceeds its

recoverable amount. Where an impairment is present,

the book value is reduced to the recoverable value

and the impairment charged to “Value adjustments

on participating interests, and deprecia tion and am-

ortisation of tangible fixed assets and intangible as-

sets”.

Gains realised on the disposal of participating

interests are recognised via “Extraordinary income”;

realised losses via “Extraordinary expenses”.

TA N G I B L E F I X E D A S S E T S

Tangible fixed assets are recognised at acquisition cost

plus any investment that increases the value of the

asset, and depreciated using the straight-line method

over their estimated useful life as follows:

Minor investments are booked directly to operating

expenses. Comprehensive renovations which increase

the value of the property are capitalised, whereas

maintenance and repairs are reported as expenses.

Tangible fixed assets may include hidden reserves.

Properties and assets under construction are only

Bank properties, other real estate maximum 66 years

Conversions of and installations in rented premises maximum 15 years

Furnishings and fittings maximum 8 years

Other tangible fixed assets maximum 5 years

IT systems and other software maximum 3 years


depreciated from the date when they are brought

into use. Tangible fixed assets are reviewed for impair-

ment losses whenever events or changes in circum-

stances suggest that the book value may not be recov-

erable. Any impairments are charged to the income

statement, via “Value adjustments on participating in-

terests, and depreciation and amortisation of tangible

fixed assets and intangible assets”. If impairment test-

ing of a tangible fixed asset reveals a change in useful

life, the residual book value is depreciated as sched-

uled over the revised useful life of the asset.

Gains realised on the disposal of tangible fixed

assets are recognised via “Extraordinary income”;

realised losses via “Extraordinary expenses”.

I N TA N G I B L E A S S E T S

Acquired intangible assets are recognised in the bal-

ance sheet where they provide a measurable benefit

to the bank over several years. Intangible assets de-

veloped in-house are not recognised. Intangible assets

are valued and recognised at acquisition cost. Intan-

gible assets are amortised over a prudently estimated

useful life, on a straight-line basis, via “Value adjust-

ments on participating interests, and depreciation and

amortisation of tangible fixed assets and intangible

assets”. The estimated useful life for each individual

category of intangible asset amounts to:

Testing is carried out on each balance sheet date to

ascertain whether the value of intangible assets is

impaired. This impairment test is based on indications

that could suggest that individual assets have been

affected by such impairment. Recoverable amounts

are determined in the event of any such indications

and are determined for each in dividual asset. An asset

is impaired if its book value exceeds its recoverable

amount.

Where an impairment is present, the book value

is reduced to the recoverable value and the impair-

ment charged to “Value adjustments on participating

interests, and depreciation and amortisation of tangi-

ble fixed assets and intangible assets”. If impairment

testing of an intangible asset reveals a change in useful

life, the residual book value is depreciated as scheduled

over the revised useful life of the asset. Gains realised

on the disposal of intangible assets are recognised via

“Extraordinary income”; realised losses via “Extraor-

dinary expenses”.

P R O V I S I O N S

Legal and factual obligations are valued on a regu-

lar basis. Where a cash outflow is probable and can be

reliably estimated, a provision in the corresponding

amount is created.

Existing provisions are reassessed on each balance

sheet date, and subsequently either increased, left un-

changed or released. Provisions are recognised via the

individual items in the income statement as follows:

– Provisions for deferred taxes: “Taxes”

– Provisions for pension benefit obligations:

“Personnel expenses”

– Other provisions: “Changes to provisions and

other value adjustments, and losses”, with the

exception of any restructuring provisions

Provisions are released to income if they are no longer

economically necessary and cannot be simultaneously

used for other requirements of the same type.

Goodwill maximum 10 years

Other intangible assets maximum 3 years

31

TA X E S

Taxes are calculated and booked on the basis of the

result for the reporting year.

C O N T I N G E N T L I A B I L I T I E S , I R R E V O C A B L E

C O M M I T M E N T S , O B L I G AT I O N S T O PAY U P S H A R E S

A N D M A K E F U R T H E R C O N T R I B U T I O N S

These items are recognised as off-balance-sheet trans-

actions at nominal value. Provisions are formed for

foreseeable risks.

R E S E R V E S F O R G E N E R A L B A N K I N G R I S K S

Reserves for general banking risks are reserves that

are established as a precaution to cover the bank’s

business risks. They are created and released via the

income statement item “Changes in reserves for gen-

eral banking risks”. The reserves for general banking

risks are not taxed in the main tax domicile.

O W N D E B T A N D E Q U I T I E S S E C U R I T I E S

The bank’s holdings of its own bonds and cash bonds

are offset with the corresponding liability items. Own

shares that have been acquired are recognised at ac-

quisition cost at the time of acquisition and deducted

from equity capital in “Own shares”. No subsequent

valuation is carried out. The result from the disposal of

own shares is booked via “Statutory retained earnings

reserves”. A reduction in the amount of the acquisi-

tion value corresponding to the disposal is made in the

item “Own shares”.

P E N S I O N B E N E F I T O B L I G AT I O N S

The pension fund for Notenstein La Roche employ-

ees is accommodated within a specific foundation

for this purpose – “Katharinen Pensionskasse I”. The

bank pays the costs of occupational pension provi-

sion for all employees and their survivors in accord-

ance with statutory provisions. The system in place is

a defined contribution system. The organisation, man-

agement and financing of the pension plans is based

on the statutory provisions, the foundation deed and

the pension rules that are in force. The employer’s

contributions are booked to personnel expenses. The

“Katharinen Pensionskasse II”, a supplementary, par-

tially autonomous extra-mandatory pension fund,

was set up in 2009. This enables individual investment

of that portion of the annual salary which is to be in-

sured on an extra-mandatory basis, with no need to

take account of a minimum interest rate. As well as

generating new options for purchase of benefits, this

gives insured persons the choice of a lump-sum pay-

ment or an annuity on retirement. Determination of

the actual economic effects of pension benefit obliga-

tions is based on the annual financial statements of the

employee benefit institutions, which are drawn up in

compliance with Swiss GAAP FER 26. An assessment

is made as to whether any underfunding or overfund-

ing of the pension funds could entail economic risks

or benefits from the bank’s viewpoint. Any econom-

ic benefit, or any employer’s contribution reserves in

existence, are not capitalised; however, provisions for

economic risks are included on the balance sheet.

C H A N G E S V E R S U S T H E P R E V I O U S Y E A R

Switzerland’s Federal Council changed the basis for

the accounting rules for banks with the revision of

the Banking Ordinance of 30 April 2014. FINMA set

out the accounting requirements in detail in its Cir-

cular 2015/1 Accounting – banks (ARB). Notenstein

La Roche’s annual financial statements as at


31 December 2015 are based, for the first time, on the

new accounting requirements. The following chang-

es apply in respect of the accounting and valuation

principles:

Changes in the balance sheet: Value adjustments

for default risks are deducted directly from loans to

customers and no longer recognised as liability items

in value adjustments and provisions. Repurchase

and reverse repurchase transactions with securities

(securities financing transactions) are disclosed in a

separate balance sheet item. Formerly, they were in-

cluded in amounts due from/to banks or customers.

The item “Amounts due arising from money market

instruments” no longer exists. Transactions are recog-

nised in financial investments. The replacement val-

ues of derivative financial instruments are disclosed

in a separate balance sheet item. Formerly, they were

contained in “Other assets” or “Other liabilities”.

The item “Liabilities from money market instru-

ments” no longer exists; the debenture components

(underlying contracts) from structured products are

now recognised in “Bond issues and central mort-

gage institution loans”. The former items “Amounts

due to customers in savings or deposit accounts” and

“Other amounts due to customers” are now grouped

together in the new item “Amounts due in respect

of customer deposits”. The new item “Trading port-

folio liabilities” includes short positions from trad-

ing portfolio transactions (formerly “Amounts due

to banks”). Amounts due from/to social insurance

and occupational pension contributions are now dis-

closed in “Accrued expenses and deferred income”

and “Accrued income and prepaid expenses”, as

appropriate (formerly “Other assets” and “Other

liabilities”).

Changes in the income statement: The result from

interest operations is disclosed on a gross and a net

basis. The net result from interest operations takes

account of changes in value adjustments for default

risks and losses from interest operations. The creation

and release of reserves for general banking risks are

disclosed in a separate item. The former operating in-

come and gross profit sub-totals are no longer used.

A new sub-total, the operating result, is disclosed. Pri-

or-year figures in the balance sheet and income state-

ment have been restated in line with the new account-

ing requirements.

In addition to these restatements, the valuation

principles underlying the balance sheet item “Finan-

cial investments” have also been amended. These have

been extended for debt securities intended to be held

to maturity so as to allow for recognition in accord-

ance with the accrual method. This change in valua-

tion method applied resulted in the realisation of a re-

valuation gain in the amount of CHF 12 million. This

amendment also brings the valuation methodology

we apply into line with the valuation principles of our

parent company, Raiffeisen Switzerland.

E V E N T S A F T E R T H E B A L A N C E S H E E T D AT E

Up to the date when the annual financial statements

were drawn up, no material events occurred which

would require mandatory disclosure on the balance

sheet or in the notes as at 31 December 2015.

33


1.1. BReakdowN of secuRities fiNaNciNg tRaNsactioNs (assets aNd LiaBiLities)

Current year Previous year

Book value of receivables from cash collateral delivered in connection with securities borrowing and reverse repurchase

transactions*

389,663

215,400

Book value of obligations from cash collateral received in connection with securities lending and repurchase transactions* 82,012 104,823

Book value of securities lent in connection with securities lending or delivered as collateral in connection with securities borrowing

as well as securities in own portfolio transferred in connection with repurchase agreements 1,244 32,470

of which with unrestricted right to resell or pledge 1,244 32,470

Fair value of securities received and serving as collateral in connection with securities lending or securities borrowed in connection

with securities borrowing as well as securities received in connection with reverse repurchase agreements with an unrestricted

right to sell or repledge 388,981 215,179

of which repledged securities 82,865 72,419

of which resold securities – –

* before consideration of any netting agreements



1.2. oveRview of coLLateRaL foR LoaNs/ReceivaBLes aNd off-BaLaNce-sheet tRaNsactioNs, as weLL as

impaiRed LoaNs/ReceivaBLes

1 . 2 . 1 . O V E R V I E W B Y T Y P E O F C O L L AT E R A L

Collateral type

Secured by

mortgage

Other

collateral

Unsecured Total

Loans (before and after netting with value adjustments)

Amounts due from customers – 312,169 10,146 322,315

Mortgage loans

Residential property 409,095 – – 409,095

Office and business premises 5,270 – – 5,270

Commercial and industrial premises 25,102 – – 25,102

Other 33,750 – – 33,750

Total loans in current year (before netting with value adjustments) 473,217 312,169 10,146 795,532

Total loans in previous year (before netting with value adjustments) 421,598 202,854 23,325 647,777

Total loans in current year (after netting with value adjustments) 473,217 312,169 8,876 794,262

Total loans in previous year (after netting with value adjustments) 421,598 202,854 22,060 646,513


34


Collateral type

Secured by

mortgage

Other

collateral

Unsecured Total

Off-balance-sheet

Contingent liabilities – 23,226 868 24,094

Irrevocable commitments 23,763 32,717 8,502 64,982

Total off-balance-sheet in current year 23,763 55,943 9,370 89,076

Total off-balance-sheet in previous year 20,845 41,832 9,702 72,379

1 . 2 . 2 . D E TA I L S O F I M PA I R E D LO A N S / R E C E I VA B L E S

Gross

debt amount

Estimated

liquidation

value

of collateral

Net

debt amount

Individual value

adjustment

Impaired loans/receivables in current year 1,270 – 1,270 1,270

Impaired loans/receivables in previous year 1,265 1 1,264 1,264



1.3. BReakdowN of tRadiNg poRtfoLios aNd otheR fiNaNciaL iNstRumeNts at faiR vaLue (assets aNd

LiaBiLities)

1.3.1. B R E A K D O W N O F T R A D I N G P O R T F O L I O P O S I T I O N S A N D OT H E R F I N A N C I A L I N S T RU M E N T S AT FA I R VA LU E ( A S S E T S )


Trading portfolio assets

Debt securities, money market securities/transactions 26,036 136,359

of which listed (traded on a recognised exchange) – 75,977

of which traded on a representative market 26,036 60,382

Equity securities – 90,689

Precious metals and commodities 10 5,965

Other trading portfolio assets 13 –

Total trading portfolios 26,060 233,013


35





Total assets 26,060 233,013

of which determined using a valuation model – –

of which securities eligible for repo transactions in accordance with liquidity requirements – 10,826

1 . 3 . 2 . B R E A K D O W N O F T R A D I N G P O R T F O L I O P O S I T I O N S A N D O T H E R F I N A N C I A L I N S T R U M E N T S AT FA I R VA LU E

( L I A B I L I T I E S )

As at the balance sheet date, there were no liabilities from trading portfolio positions or other financial instruments at fair value.

1.4. pReseNtatioN of deRivative fiNaNciaL iNstRumeNts (assets aNd LiaBiLities)

1 . 4 . 1 . O U T S TA N D I N G D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S B Y C O N T R A C T T Y P E

Trading instruments Hedging instruments

Positive

replacement

values

Negative

replacement

values

Contract

volume

Positive

replacement

values

Negative

replacement

values

Contract

volume

Interest rate instruments

Forward contracts including FRAs – – – – – –

Swaps 932 5,560 140,800 – – –

Futures – – 8,069 – – –

Options (OTC) 3,436 3,436 50,565 – – –

Options (exchange-traded) – – – – – –

Total interest rate instruments 4,368 8,995 199,434 – – –

Foreign exchange/precious metals

Forward contracts 9,333 9,408 691,450 – – –

Swaps 2,929 2,555 166,595 – – –

Futures – – 1,508 – – –

Options (OTC) 339 339 5,390 – – –


Total foreign exchange/precious metals 12,601 12,301 864,943 – – –


1. Information on the balance sheet36



Trading instruments Hedging instruments

Positive

replacement

values

Negative

replacement

values

Contract

volume

Positive

replacement

values

Negative

replacement

values

Contract

volume

Equity securities/indices

Forward contracts – – – – – –

Swaps – – – – – –

Futures – – 28,590 – – –

Options (OTC) 127,337 127,335 2,107,706 – – –


Total equity securities/indices 127,337 127,335 2,136,296 – – –

Credit derivatives

Credit default swaps 8,531 8,531 231,646 – – –

Total return swaps – – – – – –

First-to-default swaps – – – – – –

Other credit derivatives – – – – – –

Total credit derivatives 8,531 8,531 231,646 – – –

Other

Forward contracts – – – – – –

Swaps – – – – – –

Futures – – 217 – – –

Options (OTC) 1,414 1,414 3,716 – – –


Total Other 1,414 1,414 3,933 – – –

Total before consideration of netting agreements 154,251 158,576 3,436,252 – – –

of which determined using a valuation model 140,833 145,458 2,396,181 – – –

Previous year 130,603 134,390 3,220,276 – – –

of which determined using a valuation model 112,071 114,999 2,188,467 – – –

37


1.5. BReakdowN of fiNaNciaL iNvestmeNts

1 . 5 . 1 . B R E A K D O W N O F F I N A N C I A L I N V E S T M E N T S

Book value Fair value

Current year Previous year Current year Previous year

Debt securities 1,239,649 968,756 1,238,643 975,179

of which intended to be held until maturity 1,090,659 165,856 1,089,390 165,812

of which not intended to be held to maturity (available for sale) 148,990 802,900 149,253 809,367

Equity securities 10,858 48,846 10,985 52,085

of which qualified participating interests (at least 10% of capital or votes) – – – –

Precious metals 405 448 405 448

Total financial investments 1,250,912 1,018,049 1,250,033 1,027,712

of which securities eligible for repo transactions in accordance with liquidity requirements 689,813 513,566 688,462 519,678

1 . 4 . 2 . O U T S TA N D I N G D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S B Y C O U N T E R PA R T Y A N D A F T E R C O N S I D E R AT I O N O F

N E T T I N G A G R E E M E N T S

Positive

replacement

values

Negative

replacement

values

Banks/securities dealers 6,270 n.a.

Central clearing houses – n.a.

Other counterparties/clients 107,575 n.a.

Total after consideration of netting agreements 113,845 118,170

Previous year 83,832 87,619





1 . 5 . 2 . B R E A K D O W N O F D E B T S E C U R I T I E S B Y R AT I N G

Book value

AAA to AA3 A1 to A3 Baa1 to Baa3 Ba1 to Ba3 Below Ba3 Unrated

Current year 773,249 191,425 50,662 14,594 – 209,719

Previous year 517,225 203,973 15,945 14,412 – 217,201

In the year under review, Notenstein La Roche adjusted the valuation guidelines for “Financial investments” in line with the accounting and valuation principles applied

by the parent company. Debt securities with a book value of CHF 828.3 million were reclassified to the category “intended to be held to maturity” from the category “not

intended to be held to maturity”. This led to the realisation of compulsory reserves in the amount of CHF 12 million in “Result from the disposal of financial investments”.

Ratings assigned on the basis of the rating classes applied by Moody’s and Standard & Poor’s.



1.6. BReakdowN of otheR assets aNd otheR LiaBiLities


Other assets

Indirect taxes 1,492 2,122

Clearing accounts 15,425 18,617

Remaining other assets 880 884

Total Other assets 17,797 21,623

Other liabilities

Indirect taxes 3,861 4,770

Clearing accounts 22,490 2,028

Remaining other liabilities 103 104

Total Other liabilities 26,454 6,902

39


1.7. discLosuRe of assets pLedged oR assigNed to secuRe owN commitmeNts aNd of assets uNdeR

ReseRvatioN of owNeRship


Book value

Effective

commitments Book value

Effective

commitments

Pledged or assigned assets

Amounts due from banks 2,200,047 60,283 1,718,340 90,889

Trading portfolios 25,278 – 22,684 –

Financial investments 362,474 – 418,117 –

Other assets (guarantees) 880 – 884 –

Total pledged or assigned assets 2,588,680 60,283 2,160,026 90,889

of which assets under reservation of ownership – – – –

1.8. discLosuRe of LiaBiLities ReLatiNg to owN peNsioN schemes, aNd NumBeR aNd NatuRe

of equity iNstRumeNts of the BaNk heLd By owN peNsioN schemes

General: The personnel of Notenstein La Roche Private Bank Ltd are insured in the “Katharinen Pensionenskasse I” and “Katharinen Pensionenskasse II” pension funds.

The benefits paid are calculated on the basis of contributions made (defined contribution plan). All employees are insured from the minimum annual wage defined in the

Swiss federal law on occupational pension schemes and therefore entitled to benefits. More than half of the occupational pension premiums are covered by the employer.

The employer has no further obligations to provide benefits. The “Katharinen Pensionskasse II” fund provides for extra-mandatory pensions in which a personal investment

strategy can be implemented. The former staff of Bank La Roche & Co. Ltd who transferred to Notenstein La Roche on 1 November 2015 were insured under their former

pension scheme for the full twelve months of 2015 and were incorporated into the “Katharinen Pensionskasse I”/“Katharinen Pensionskasse II” as of 1 January 2016.

Equity capital instruments of the bank: As in the previous year, “Katharinen Pensionskasse I” and “Katharinen Pensionskasse II” continue to hold no equity instruments

of the bank.


Liabilities relating to own pension schemes

Amounts due in respect of customer deposits 9,253 8,596

Economic benefit/economic obligation and pension expenses: According to the provisional annual financial statements (under Swiss GAAP FER 26) of the “Katharinen

Pensionskasse”, the funding ratio is: (no recognition of overfunding; underfunding, where applicable, is recognised in the balance sheet)

31.12.2015

(provisional) 31.12.2014

Pension fund “Katharinen Pensionskasse I” 111.2% 116.9%

Pension fund “Katharinen Pensionskasse II” 118.8% 121.7%






Employer contribution reserves for “Katharinen Pensionskasse I” and “Katharinen Pensionskasse II”: As at 31.12.2015, Notenstein La Roche Private Bank Ltd held no

employer contribution reserves.

1.9. stRuctuRed pRoducts issued

Book value

Total

Valued as a whole Valued separately

Booked in trading

portfolio

Booked in

other financial

instruments at

fair value

Value of the host

instrument

Value of the

derivative

Underlying risk of the embedded derivative – – – – –

Interest rate instruments – – 99,464 –8,571 90,893

With own debenture component – – 99,464 –8,571 90,893

Without own debenture component – – – – –

Equity securities – – 1,171,154 –49,699 1,121,455

With own debenture component – 1,171,154 –73,139 1,098,015

Without own debenture component – 23,440 23,440

Foreign currencies – – 2,350 –337 2,013

With own debenture component – 2,350 –337 2,013


Commodities/precious metals – – 2,742 –1,414 1,329

With own debenture component – 2,742 –1,414 1,329


Total – – 1,275,710 –60,021 1,215,690

In the case of issued structured products containing a debenture component, the derivative is separated from the structured product and valued and disclosed

separately. The host instruments are recognised at nominal value in “Bond issues and central mortgage institution loans”. The derivative components of the products are

disclosed at market value in “Positive replacement values of derivative financial instruments” and “Negative replacement values of derivative financial instruments”.


41


1.10. vaLue adjustmeNts, pRovisioNs aNd ReseRves foR geNeRaL BaNkiNg Risks

As at end of

previous year

2015

Balance at

current year

end

Use in confor-

mity with

designated

purpose

Reclassifi-

cations

Currency

differences

Past due

interest,

recoveries

New creations

charged to

income

Releases to

income

Provisions

Provisions for other business

risks

23,921

–7,763

–

–

–

418 –

16’576

Total provisions 23,921 –7,763 – – – 418 – 16’576

Reserves for general

banking risks (untaxed)

196,000 – – – – 196’000

Value adjustments

Value adjustments for

default risks in respect of

impaired loans/receivables 1,264 – – – 21 5 –20 1’270

Total value adjustments

for default risks and

country risks 1,264 – – – 21 5 –20 1’270



1.11. BaNk’s capitaL


Total

par value No. of shares

Capital

eligible for

dividend

Total

par value No. of shares

Capital

eligible for

dividend

Share capital 20,000 20,000,000 20,000 20,000 20,000,000 20,000

of which paid up 20,000 20,000,000 20,000 20,000 20,000,000 20,000

Participation capital 2,200 22,000,000 2,200 2,200 22,000,000 2,200

of which paid up 2,200 22,000,000 2,200 2,200 22,000,000 2,200

Total bank’s capital 22,200 42,000,000 22,200 22,200 42,000,000 22,200

All components of the bank’s capital are fully paid up. There are no restrictions in respect of shareholders’ voting rights.





1.12. ReLated paRties

Amounts due from Amounts due to

Current year Previous year Current year Previous year

Holders of qualified participating interests 2,760,324 1,722,647 125,584 105,168

Group companies 132,256 22,501 204,638 20,364

Linked companies 452 – 2,225 10,000

Transactions with members of governing bodies 5,242 6,625 7,905 2,360

Transactions with related parties: The same standard banking assessment criteria as for third parties apply to loans to members of governing bodies. For related parties and

members of the Board of Directors, the same conditions are applied as for other clients. For Executive Board members, the same preferential conditions as are applied to other

staff apply for standard transactions.

1.13. hoLdeRs of sigNificaNt paRticipatiNg iNteRests aNd gRoups of hoLdeRs of paRticipatiNg iNteRests

with pooLed votiNg Rights

The following holders of participating interests have interests with more than 5% of voting rights


Nominal

Percentage of

equity

Nominal

Percentage of

equity

With voting rights

Raiffeisen Switzerland Cooperative 20,000 100.0% 20,000 100.0%

Without voting rights

Raiffeisen Switzerland Cooperative 2,200 100.0% 1,800 81.8%

43



1.14. owN shaRes aNd compositioN of equity capitaL

Equity capital at beginning of current year

Paid-up capital 22,200

Distributable profit/accumulated loss 22,926

Capital reserves 56,787

Retained earnings reserves 119,451

Reserves for general banking risks 196,000

Total equity capital at beginning of current year (before appropriation of profit) 417,364

Dividend 2014 –17,760

Profit for the current year 80,921

Total equity capital at end of current year (before appropriation of profit) 480,525

Own shares: As in the previous year, the bank did not hold any of its own shares in the year under review.


Non-distributable reserves

Non-distributable statutory capital reserves 56,787 56,787

Non-distributable statutory retained earnings reserves 4,000 4,000

Total non-distributable reserves 60,787 60,787

The rights and restrictions relating to the holdings of the bank’s capital are set out in Note 1.11 Bank’s capital.



1.15. assets By cRedit RatiNg of couNtRy gRoups

Net foreign exposure


Bank’s own country rating Standard & Poor’s Moody’s Amount Share Amount Share

1 – first-class AAA to AA– Aaa – Aa3 1,681,793 93.6% 1 ,665,812 92.9%

2 – good A+ to A– A1 – A3 16,405 0.9% 61,921 3.5%

3 – medium BBB+ to BBB– Baa1 – Baa3 79,029 4.4% 27,663 1.5%

4 – speculative BB+ to B– Ba1 – B3 7,428 0.4% 11,318 0.6%

5 – risk CCC+ and below Caa1 – C 3,851 0.2% 304 0.0%

6 – unrated No rating No rating 8,722 0.5% 27,063 1.5%

1,797,227 100.0% 1,794,081 100%

The statement of net foreign exposure is carried out on the basis of the risk of the underlying position and not based on the domicile of the borrower. With secured

receivables, the security involved is taken into account when the risk domicile is defined.

Notenstein La Roche bases its ratings on those of Standard & Poor’s and Moody’s.


45



2.1. fiduciaRy tRaNsactioNs


Fiduciary investments with third-party banks 130,828 119,836

Fiduciary loans 900 –

Total fiduciary transactions 131,728 119,836


2.2. assets uNdeR maNagemeNt

2 . 2 . 1 . B R E A K D O W N O F A S S E T S U N D E R M A N A G E M E N T


Type of assets under management

Assets in collective investment schemes managed by the bank 509,826 336,884

Assets under discretionary asset management agreements 7,366,845 8,058,111

Other client assets under management 14,104,152 12,787,172

Total assets under management (including double counting) * 21,980,823 21,182,166

of which double-counted 507,322 548,431

* excluding subsidiaries

2 . 2 . 2 . P R E S E N TAT I O N O F D E V E LO P M E N T O F A S S E T S U N D E R M A N A G E M E N T


Total assets under management (including double counting) at beginning 21,182,166 19,781,865

Net new money inflow/outflow –428,357 –70,061

Price gains/losses, interest, dividends and currency gains/losses 104,138 1,261,106

Other effects 1,122,876 209,256

of which acquisitions1 5,967,362 209,256

of which spin-offs2 –4,336,497 –

of which reclassifications3 –507,989 –

Total assets under management (including double counting) at end 21,980,823 21,182,166

1 Year under review: the bank acquired the business activities of Bank La Roche & Co Ltd with effect from 1 November 2015.

Previous year: the bank acquired the business activities of LBBW (Switzerland) Ltd. with effect from 1 December 2014.2 On 1 July 2015, the bank spun off business activities to sister company Vescore Ltd. From the assets spun off, CHF 3.182 billion continues to be counted among client assets in the form of custody assets.3 Reclassification of assets not held for investment purposes in custody assets.


46



2 . 2 . 3 . B R E A K D O W N O F C L I E N T A S S E T S


Assets under management 21,980,823 21,182,166

Custody assets 4,483,017 –

Total client assets 26,463,841 21,182,166

Assets under management include all assets of private, corporate and institutional clients managed or held for investment purposes as well as assets in funds managed

by the bank. This essentially includes all amounts due to customers, fixed-term deposits and fiduciary deposits, as well as all valued assets including net values from

outstanding derivative financial instruments. Assets deposited with third parties are included in so far as they are managed by the bank.

Client assets are defined more broadly than assets under management and also include assets held solely for transaction and safekeeping purposes (custody assets).

Other banks’ assets deposited with Notenstein La Roche Private Bank (on a “custody-only” basis) are not included in client assets.

Fund units of funds managed by the bank in clients’ safekeeping accounts held with the bank and in clients’ safekeeping accounts with third parties managed by the

bank are recognised under “double counting”. Each of these services generates added value and, hence, additional income for the bank.

Net new money is calculated on the basis of new clients acquired, existing clients’ inflows or outflows and the outflow of assets due to the termination of client rela-

tionships; this figure indicates the result from the acquisition of assets under management. The volume of net new money is determined at client level using the direct

method, on the basis of cash payments and deliveries of securities, and of cash flows related to loans taken out and repaid. Interest and dividend income from assets

under management, interest charged to clients, fees, commissions and market or exchange rate fluctuations are not regarded as net new money.

47



3.1. ResuLt fRom tRadiNg activities

3 . 1 . 1 . B R E A K D O W N B Y B U S I N E S S A R E A


Trading activities with clients (foreign currency income) 14,762 12,922

Proprietary trading –354 –1,112

Total result from trading activities 14,408 11,810

3 . 1 . 2 . B R E A K D O W N B Y R I S K A N D B A S E D O N T H E U S E O F T H E FA I R VA LU E O P T I O N


Interest rate instruments (including funds) –158 –1,950

Equity instruments (including funds) –34 –383

Foreign currencies 14,762 12,922

Commodities/precious metals –162 1,221

Total result from trading activities 14,408 11,810

of which from fair value option – –

3.2. iNcome fRom RefiNaNciNg of tRadiNg positioNs aNd fRom Negative iNteRest

3 . 2 . 1 . R E F I N A N C I N G I N C O M E I N I N T E R E S T A N D D I S C O U N T I N C O M E

No refinancing costs for trading positions are credited to interest and discount income.

3 . 2 . 2 . N E G AT I V E I N T E R E S T


Negative interest on lending business (reduction of interest and discount income) 1,962 –

Negative interest on borrowing business (reduction of interest expense) 1,680 –



48


3.3. peRsoNNeL expeNses


Salaries (meeting attendance fees and fixed compensation for the members of the bank’s governing bodies, salaries and benefits) 69,830 88,762

Social insurance benefits 12,668 14,752

Other personnel expenses 5,948 5,000

Total personnel expenses 88,446 108,514

3.4. geNeRaL aNd admiNistRative expeNses


Office space expenses 4,245 9,302

Expenses for information and communications technology 6,546 11,082

Expenses for vehicles, equipment, furniture and other fixtures, as well as operating lease expenses 434 523

Fees of audit firms 529 543

of which for financial and regulatory audits 423 413

of which for other services 106 130

Other operating expenses 36,910 23,578

Total general and administrative expenses 48,664 45,029




3.5. cuRReNt aNd defeRRed taxes


Expenses for current capital and income taxes 10,795 105

Creation of provisions for deferred taxes – –

Total taxes 10,795 105

Weighted average tax rate based on operating result 36.0% 3.3%

There are no tax loss carryforwards that impact income taxes. The weighted average tax rate based on the operating result is not representative to the extent that, in the

year under review as in the previous year, actual taxable profit contains certain tax corrections.

49




3.6. mateRiaL Losses, extRaoRdiNaRy iNcome aNd expeNses, as weLL as mateRiaL ReLeases of hiddeN

ReseRves, ReseRves foR geNeRaL BaNkiNg Risks, aNd vaLue adjustmeNts aNd pRovisioNs No LoNgeR RequiRed

Current year: Extraordinary income includes the realisation of a gain of CHF 62.5 million from the partial disposal to a third party of the participating interest in Leonteq Securi-

ties Ltd. Extraordinary expenses includes a charge of CHF 0.85 million in the form of a restructuring subsidy for our subsidiary Notenstein Financial Services GmbH in Munich.

Previous year: Extraordinary income includes the realisation of a gain of CHF 15 million from the sale of 1741 Asset Management Ltd to TCMG AG. Further, shares in a participat-

ing interest were sold to our parent company, Raiffeisen Switzerland Cooperative. A sum of approximately CHF 20 million was realised from this sale, in “Extraordinary income –

profit from sale of participating interests”. Reserves for general banking risks in an amount of CHF 20 million were created against “Changes in reserves for general banking risks”.

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B A S E L , 4 0 0 1

Rittergasse 25

Telephone +41 (0)61 976 62 62

[email protected]

B E R N E , 3 0 0 1

Spitalgasse 3

Telephone +41 (0)31 321 14 14

[email protected]

C H U R , 7 0 0 1

Aquasanastrasse 8

Telephone +41 (0)81 287 15 15

[email protected]

G E N E VA , 1 2 1 1

Bd. Georges-Favon 5

Telephone +41 (0)22 307 21 21

[email protected]

L A U S A N N E , 1 0 0 1

Av. du Théâtre 1

Telephone +41 (0)21 313 26 26

[email protected]

LO C A R N O, 6 6 0 0

Lungolago Motta 2

Telephone +41 (0)91 756 12 12

[email protected]

N O T E N S T E I N L A R O C H E P R I VAT E B A N K LT D

Bohl 17, 9004 St.Gallen, telephone +41 (0)71 242 50 00, fax +41 (0)71 242 50 50

[email protected], www.notenstein-laroche.ch

LU G A N O, 6 9 0 0

Via Canova 12

Telephone +41 (0)91 912 11 11

[email protected]

LU C E R N E , 6 0 0 4

Mühlenplatz 9

Telephone +41 (0)41 227 16 16

[email protected]

O LT E N , 4 6 0 0

Baslerstrasse 30

Telephone +41 (0)62 211 28 28

[email protected]

S C H A F F H A U S E N , 8 2 0 1

Fronwagplatz 22

Telephone +41 (0)52 630 18 18

[email protected]

W I N T E R T H U R , 8 4 0 1

Turnerstrasse 1

Telephone +41 (0)52 742 24 24

[email protected]

Z U R I C H , 8 0 2 2

Rennweg 57 / Fraumünsterstrasse 27

Telephone +41 (0)44 218 13 13

[email protected]

Contact

52

notenstein la roche annual report 2015

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