Lower profit in Q 1 despite volume growth

  • Assets under Administration increased in Q 1 by 6% to €320 billion; the volume of transactions recovered slightly
  • Turnover rose by 3% despite lagging interest income
  • Total profit fell by 4% to €4.7 million (2012: €4.9 million). Both the low interest rate and the excess supply of cheap liquidity put pressure on the operating profit margins
  • The central banks’ unchanged monetary policy of low interest rates combined with generous liquidity could put pressure on the 2013 goal for profit growth.

Commercially, KAS BANK achieved satisfactory results in the first quarter. The growth in asset services was 6%, a combination of higher stock market prices and new inflow. Commissions were under slight pressure due to the impact of the unnaturally high liquidity in the financial sector caused by the policy pursued by the monetary authorities in Western markets. Conservative banks with surplus liquidity, such as KAS BANK, are no longer being rewarded for this.

In the transaction market, it would appear volumes reached their lowest point at the end of last year and, in the first quarter, there was slight volume growth. However, this current recovery could be seriously impacted if the financial transaction tax is introduced in Europe. The tax will drive high volume parties out of Europe and private clients and pension funds will have to pick up the bill. The first experiences in Italy, where a local variation of the financial transaction tax was introduced at the beginning of March, are not very encouraging as the volume of transactions has fallen by more than 25 percent.

In respect of interest income, the market interest rate is so low KAS BANK is, in an increasing number of cases, unable to charge the full amount of its agreed margin over outstanding client balances without calculating a negative interest rate. This same situation also applies to certain short-term government bonds issued by Northern European countries and, if the current European monetary policy remains unchanged, will at any time manifest itself in the provision of services to the market.

On the income side in total there were two abnormal occurrences. A one-off income of approximately €2 million was realised on the 20% participation in Neonet. In February, this participation was approved by the Swedish regulatory authority and is now accounted for in the results. At the same time, the intangible assets were reduced by approximately the same amount.

The partnership with dwpbank is progressing according to plan. In March, the first services in the field of network management were introduced for the benefit of dwpbank’s clients.