Lofty ambitions: VP Bank aims to play global pioneering role
At first glance, the past months appear to have been rather bumpy for VP Bank. An irritating loan write-off marred its 2020 annual results, personnel changes were the consequence, the outsourcing of IT caused a ruckus, lately a team of client advisors switched to a competitor – and Corona is anyway muddling up everything. And all the while, a new strategy named “Seize opportunities” is supposed to propel this private bank into the future. VP Bank has set itself the goal of achieving a consolidated net profit of CHF 100 million by the end of 2026. By comparison: last year’s bottom line came in at CHF 41.6 million (without valuation adjustments, that number would have been CHF 20 million higher) after having stood at CHF 73.5 million the year before. From this perspective, hitting the CHF 100 million mark in 2026 is not exactly indicative of breakneck growth, but rather sustainable, profitable growth, which is precisely the Bank’s objective.
Response to new developments
One thing is clear: the wealth management market has been in a state of flux for years now. Studies reveal that many banks are struggling to operate profitably. The increasingly dense jungle of regulations makes the going even tougher. What’s more, the technological landscape is different today than it was just a few years ago, and Covid-19 has added fuel to the development of digital possibilities. “The topic of digitalisation is more pressing than ever before, and it offers us the chance to take the right step, right now,” is how Paul Arni, CEO of VP Bank Group, puts it. Clients want more – and they should get more. That’s the goal VP Bank has set in its strategy. “There are apps for everyday payments, financing can be organised in digital marketplaces, investments can be made via a bank or a virtual advisor. We’re convinced that modularisation or, as it were, the ecosystem concept will take hold more and more, which is why we want to blaze this trail as an Open Wealth Service Provider for affluent private clients and financial intermediaries,” Arni explains. This is precisely where he thinks the greatest opportunity lies. And VP Bank is acting from a position of strength: Arni points out the Bank’s Liechtenstein roots, its long-standing stability as an institution and DNA in the intermediaries business, the clear regulatory framework in the Principality, and not least the Bank’s anchor shareholders who embrace the philosophy of thinking beyond strategy cycles – after all, bringing such a bold new venture to fruition takes time. “If we succeed in offering services in a way that makes us an attractive marketplace for wealth-related services, we can achieve a multiplier effect through our numerous intermediaries. As you know, VP Bank is also active internationally in important financial centres, which is why our vision is to be an international Open Wealth Service pioneer. And this is indeed a pioneering role since, as far as we can see, no other similarly positioned bank in the international market today is taking this step as resolutely as we are,” Arni emphasises.
This is indeed a pionieering role since, as far as we can see, no other similarly positioned bank in the international market today is taking this step as resolutely as we are.Paul H. Arni, Chief Executive Officer der VP Bank Gruppe
“We’re halfway there”
But how will this look in actual practice? Arni cites fintech companies as an example, which in the recent past have been sprouting up like mushrooms. Some of them offer specialised solutions for certain areas of the banking business, but the problem is that those products are not accessible for VP Bank’s clients. At least thus far. “I want to be able to integrate their services into our ecosystem without having to hire dozens of programmers each time just to establish the necessary technical connections.” For Arni, the advantages are obvious: instead of always having to reinvent the wheel, the Bank can modularly select specific offerings in the market and make the new services available to clients – even without requiring that they maintain the previously necessary account and custody relationship with VP Bank. “Thanks to our strong intermediaries business, we can bundle the interests of a wide range of clients and check whether we can create an offer that addresses those needs. This way, we can deliver solutions not only to our direct clients, but also to customers who are not booked with us and instead are part of the ecosystem of an intermediary – this is the truly revolutionary aspect,” Paul Arni explains. The marketplace notion would catch on and in turn make new business models feasible, thereby producing multiplier effects. Even the possibility to digitalise currently ‘non-bankable’ assets via blockchain technology will become reality at VP Bank as early as this autumn. “Combining the traditional wealth management business with new, flexible solutions that are only possible by means of digitalisation: that is actually the essence of our new strategy,” clarifies the VP Bank Group CEO. All of this will of course take its toll on margins. Here, however, Paul Arni is pragmatic. “Yes, that’s true. But every basis point we don’t have today will be one more in the future than it is today.” On the other hand, Arni doesn’t believe that this will ultimately also mean taking on more risk. “When a bank like ours, operating as we do in a regulated and licensed environment, enters into a service relationship with a partner firm, it is on a qualitatively different basis than it would be without those guardrails. But of course we will apply our standards, also in terms of the connectivity and cooperation with those external service providers.” A lot of work still lies ahead for VP Bank until that point is reached, but a sizeable portion of it has already been completed – and this in the face of difficult conditions. “We’ve mastered Corona, and although that was not a strategic undertaking, it demonstrates our ability to master even such unforeseen challenges – and it’s another thing that vouches for our stability,” Arni smiles. The Bank’s internal processes were also made more resilient following the “black eye”, as Arni calls it, referring to the write-off that became necessary last spring. “We’ve clearly defined our IT strategy whilst simultaneously acquiring a bank in Luxembourg that fits perfectly into our strategy; we’ve developed an appropriate plan for each location; in Asia, we’ve not only infused life into our strategic partnership with asset manager Hywin, we also recently managed to recruit a new head there who will bear responsibility for the entire region; and, we’ve decided to partner with Swisscom for outsourcing purposes,” Arni enumerates. “We’re halfway there when it comes to achieving ambitious goals.”
New services on the horizon
The Client Solutions business unit will be officially launched in the fall, and the first new services are to follow in the coming year. “Last year we laid the organisational foundations, now the technological groundwork. Starting next year, we’ll successively put this business model into actual practice,” Arni summarises, stressing though that the traditional banking business with private and intermediary clients will remain central. Combining a traditional wealth management bank with new digital services and a marketplace to facilitate them: “That is ultimately the strategy we aim to implement. And we’re right in the middle of doing so.”
Source: Volksblatt from Saturday, 29 May 2021