Ladies and gentlemen, welcome to the BCV Full Year 2020 Results Conference Call and live webcast. I am Paolo, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for question at any time by pressing star and one on your telephone. Webcast viewers may submit their questions in writing via the related field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. For the call today, the speakers will refer to the slides, which are available for viewing on the IR section of the BCV website since this morning. At this time, it's my pleasure to hand over to Mr. Pascal Kiener, CEO of BCV. Please go ahead, sir.
Thank you very much. Good afternoon, everybody. Let me go directly on page four. I would like to highlight only three main points that are going to be detailed later on by Thomas. The first point is the decrease in revenues is mostly only due to the COVID-19 crisis. Probably, you will see that other cantonal banks will not have this kind of decrease. It's quite clear because a big part of this decrease is due to trade finance, and many other cantonal banks do not have any trade finance business. Thomas will come back on that. The second point is the decrease in profits. I would like to stress here that despite the decrease with an ROE of 9.3%, we still are, I think, in terms of ranking, the first cantonal bank in terms of profitability based on ROE. I think that's important.
Last but not least, we carry on with our dividend policy this year. Let me put directly maybe to page six. In terms of business trends or mortgage loan in line with the market, roughly an increase of 4%. I will come back later on that. Deposits, when you have two other side deposits and other client deposits, because we had a change in accounting statements. If you add up the two, you see a significant increase here due to customer liquidity. Thomas will also give some more detail. Otherwise, loans to corporate are rather stable, but I will come back to that because you have different effects here. I'm going to comment page seven and eight. I think you saw that, and nine is the same. We had some announcement about that, so I don't think I need to comment that.
Let me go directly on page 10, retail banking. Basically, in terms of mortgage loans, very good year, steady increase. Nevertheless, we are very cautious on buy-to-let mortgages. We are also cautious in certain areas in Canton Vaud, because we have areas with a vacancy rate of 0.5%, and we have other regions with a vacancy rate of about 2%-3%. This is clear, we grow faster in those areas where the vacancy rate is low. In terms of customer deposit, several effects. I think some customers think BCV is a safe bank. Some customers think BCV probably is nicer with them as far as negative interest rates are concerned. This is also the effect of the lockdown in Switzerland, or semi-lockdown, and the restriction in traveling. People spend less, people travel less.
We had a clear decrease in customer transaction for payment transaction, being a credit card, debit card, ATMs, cash. This has an effect on the revenues. That explains part of the reduction, and it has also an effect on deposit on savings since people spend less, basically save money during 2020. I think that's going to be not the case if the vaccines work and everything is back to normal. It's in the second half of 2021, probably we will see a boost in spending. I hope so anyway. Revenue and profit, this is directly what I said. The consequences of what I said. Otherwise, I would say a good year for retail banking. Corporate banking, three business, as you know, three businesses, and really here, different dynamics.
For SMEs, let's say the credit line, as well as the utilization of credit line, without taking into account the COVID loans, are very stable. This is a good news. This shows that the SMEs, at least in Switzerland or in Canton Vaud, are very resilient to the pandemic. In terms of increase, the increase is mostly basically those COVID loans. 6,000 SMEs were granted a COVID loan for roughly CHF 700 million. You see that those loans are quite small. We talk here about very small SMEs. The customer deposits up because exactly when you get a loan, you get a credit on your cash account. I would also say that looking at the number of SMEs having troubles, this is exactly similar as 2019.
I'm talking SMEs which have credit with BCV, and roughly 60% of SMEs do not have credit, either with BCV or with other banks. I'm not saying in this call that all SMEs are in perfect shape. I'm seeing the SME we are seeing in our credit book. They are very resilient, and we don't have more issues than 2019 or 2017. In a way, this is normal. When you look at all measures taken by the government, basically, they were helped in this phase. There are certain sector where it's more difficult, travel, hotel, restaurants, but we don't have a very big exposure in those sector. Basically, my point is that here the credit book is still very good. Large corporates, this is a volatility usual, so nothing really to comment here.
I see two to three difficulties in large corporate in Switzerland, firms active in travel, in air transport, in freight, in cruise, those kind of things. This is probably more difficult, but I'm quite confident that if we can go back to normal, let's say at the end of June, in summer, I think those corporates will be in good shape. If there would be another lockdown, that would be more difficult. I'm not talking about, let's say, specific BCV large corporate. I'm talking about Swiss corporate, where banks like BCV might be part of a syndicated loan. Trade finance, that was in a way the big issue, 2020. In March, when we realized what was going on in China In February, actually, we decided to be very cautious and to decrease our exposure voluntary in order not to have some risk. Unfortunately, we nevertheless had some risk.
We discussed that last time in August during this call, basically, we are very cautious for the second part of the year, which is in a way positive. You saw the numbers this morning. It resulted basically in a reduction of volume of around 20%, and this has a direct effect on revenue. Trade finance, first point, it has reduced revenues, and second point, we took some provision. As you know, some parts of the provision are in the revenue lines. That explains this trade finance issue as well as, let's say, the fewer transaction from retail customer and private customer as far as forex, et cetera, are concerned. This explains a big part of the reduction of revenue. I think this is rather a temporary problem.
Credit risk, as I said, some new provisioning needs, not only trade finance, but a big part is the trade finance. Nothing new during the second half. Almost everything was taken in the first half. The rest of the portfolio, I believe is really good, is really resilient, and I don't expect today many issues going forward. Private banking and asset management, a large increase in assets under management, the performance of the markets, and also people bringing money to us from almost all segments. Mortgage loan, it's less than the market, 3%. Okay, the rest. We put some effort on bringing to market investment-responsible products. We established a partnership with Ethos, who is a leader in this field in Switzerland. Trading, that's in a way the good news. Bad news, the market will be difficult.
The good news, there was an increase in volatility, and we could, as usual, take advantage of this kind of situation with our revenue up roughly 10%. I hand over to Thomas for the financial part.
Thank you, Pascal. Hello, everybody. I'm on page 15, which once again summarizes the income statement with the key numbers and evolutions, which you know. I think it's more interesting to dive into the different elements and to start off with the revenues. On page 16, here we see that the main issue, if I can say it like that, comes from net interest income, which decreases by CHF 48 million with regard to the total decrease of CHF 57 million. What you see is on the bottom of the chart, you see that with regards to net interest income before loan impairment charges, minus CHF 23 million. Here, of course, almost half of it is the voluntary reduction in trade finance. The remainder of this is the negative interest environment.
Also, for example, they reduced the net interest income on dollars with regards to the decrease of the interest rate curve in dollars and the pressure on margin which resulted on the liability side. Obviously, the comparison is not in our favor with regard to 2019, which was a year of impairment reverses. Year on year, this is plus CHF 25 million in difference, which explains this big step in net interest income decrease of CHF 48 million. It's clear that the main part of this loan impairment charge comes from trade finance, as you already understood. With regard to commissions, again, which decreased by CHF 13 million, again here, the voluntary reduction of trade finance comes in with almost the same amount as in interest income. Overall, we talk about more or less CHF 20 million in decrease of interest income with regard to that decision.
The behavior of private clients, as mentioned, reduced commissions in the Bancomat, ATMs, FX, and credit cards. There was a positive trend in commissions from the wealth management business, be it private banking or asset management, in particular on the transactional side. The trading income is up. This is, of course, to one side, the trading desk, the trading floor with activities, which is based on the flow of commercial clients or private clients. In this number, you also have a part of the treasury income, which uses FX swaps to take advantage of the exemption at the Swiss National Bank. It's important that from economic perspective, actually, the net interest income or the interest income decrease is less than that because part of this is actually by accounting rules, taken into trading income.
Maybe if there are questions on this, I'm happy to answer to that. Again, I want to insist on point that after the record year of 2019, had exceptional items. Under other incomes, we see one exceptional dividend from SIX, which obviously did not come in this year. That is why others are down by CHF 8 million. The page 17 gives us more details on the evolution of operational charges, and you know that this is one of our ongoing concern to keep firm control on operating expenses. You see that other operating expenses are down by CHF 9 million, be it on our efforts of managed IT costs. You remember, maybe I mentioned that we had initiatives underway to reduce this. This is happening. On the other hand, obviously, the COVID resulted in less events, less marketing.
I must also say that as a regional important actor, we have been nice with all kinds of suppliers, event organizers. When we ended the contract because an event could not take place, we also had social responsibility to leave some amount to the suppliers. Still we saved money. Okay, headcount is slightly down, but it's in the same order of size on page 18. With regard to assets, here, this is important. You see, of course, on the client side, despite the development of mortgages and loans and grants to customers, which I think Pascal Kiener explained already. You see also the effect of the increase in cash and equivalents.
Now, this is directly linked to the monetary policy of Swiss National Bank, which actually increased quite significantly the exemption limit up to which Swiss banks can put money at zero interest rate at the Swiss National Bank. It is actually the multiplier of the liquidity legal reserve, which this exemption was introduced in January 2015, but then was increased twice, the last time in April 2021 to the effect of up to 30, whereas it was initially 20 when introduced in January 2015. Now, it's obviously our aim to always make sure that this is fully filled up, because in this environment to have zero at Swiss National Bank obviously is a support that the Swiss National Bank provides to the Swiss banking system. Also the idea behind it, that universal banks like ours or retail banks cannot charge negative interest to small depositors.
Here, actually, the Swiss National Bank provides some support, we can call it like that. We use this professionally, and we fill it up, as you can see on the next chart, liabilities and equities. On one side, we've increased due to banks, and on the other hand side, maybe in a not such optimal way from a accounting perspective, with customer deposits, which increased, as Pascal mentioned, by more savings, also to some extent to the loans which were provided, and the money went directly into deposits, the COVID loans. With maybe some tendency to bring money to the BCV, and where we will change ourselves as we go further with regard to negative interest rate conditions. So far, significantly less than 1% of our clients have negative interest provisions, and over a total amount of about a quarter of the deposits.
While shareholder equity is slightly down with this new way of provisioning expected loss for healthy credits, which we actually created out of reserves in the equity. This takes me directly to page 21. How did we do? How did we create this provision for non-impaired loans? Actually, we took CHF 35 billion out of the Reserve for General Banking Risks under shareholders equity. Actually, this goes with different rubrics and different items of the balance sheet. For the balance sheet exposure, it's directly reduced from the balance sheet exposure, be it cash with interbank exposure, other loans, or mortgages. For the off-balance sheet exposure, because there is credit risk in off-balance sheet exposure, as you mentioned quite easily, on the right-hand side, it's a provision item. You can see that this CHF 23 million plus CHF 12 million are the CHF 35 million, which we created.
This is now an endogenous number, reflecting risk rates, expected losses, and will evolve, but marginally year by year. As you can understand, we mentioned we simulated this, we see that the amplitude of fluctuations year by year of this expected loss provision is at most CHF ±4 million year-on-year, or at most with a certain interval of confidence, obviously. Now, if you get to assets under management, while basically we have more information here of the CHF 4.5 billion of net new money. You see again, it's typically seasonality, which I always insist on in the third party when we talk about first half results. The net new money has been over all businesses, be it asset management, be it private banking, but also more a balance sheet business like personal or SME clients. The things has been already largely commented.
With regard to our capital ratio on page 23, now it's high and even higher, because by reducing an activity which has quite high-risk rates, it's obvious that our CET1 ratio is up to 70.7%, but also because, and this is already mentioned in August last year, because FINMA reduced some of the multipliers, because they think we are conservative in our internal models. On page 24, where you see this other effect of the time in which we live, with excess liquidity to some extent, our HQLA is far beyond the regulatory limits. HQLA is composed to three quarters of our cash deposits, Swiss National Bank, and one quarter out of our HQLAs, which are really top double A, triple A bonds.
Coming to the key element, which is also we're certain proud always that we have this chart, and which is a clear confirmation that we walked the path now in our third horizon. We are in the third horizon now of 2018 of CHF 340- CHF 380. Given the current environment, we maintain the CHF 60 per share as proposed to the AGM, which will provide CHF 310 million in distribution, meaning 94% of payout. This is all for my part. Pascal?
Thank you. Going forward, I think I'm not going to be very long in my explanation. We have a relatively low visibility on the pandemic. My personal feeling is that not feeling, but see the vaccines are working. Maybe everybody would like that we could vaccine people faster. Nevertheless, I think till summer, I'm convinced that most of the elderly people as well as the vulnerable people will have got their vaccine. That means that I'm in a way optimistic that we can see the light at the end of the tunnel for H2. I suppose that 2021 will be better than 2020. You see on this chart the estimate of the GDP.
Now, whether it will increase by 2% or 3% or 1%, it's quite difficult, but I'm convinced it will be positive and there will be a rebound, because I'm convinced that people need to spend now, need to consume after those several months of difficult times. Interesting to see that the real estate market, the mortgage market, has not been at all affected by this pandemic. This is not only in Canton of Vaud, but in whole Switzerland. I expect the market will carry on like that. You see, in the last three years, I always told you that we want to be careful. We want to carry on being careful, but there is a small change in 2020. You see, in the last three to four years, houses were built at a rate which slowly was higher than the growth in population.
We could see this vacancy rate increasing. Now people carry on building houses, it is clear, but the growth of population increased in 2020. We had in the good year 1.2% to 1.3%, then it slew down to 0.7%, 0.6%, 0.8%, and now we are back at something like 1.1%. I don't know whether 2020 is an exception or whether this will carry on in 2021. In a way, this is a new element that supports, let's say, an increase in demand, and this is good in a way for the real estate market as well as for the mortgage market. We will see. This increase of population is of course driven by immigration, not by Swiss people or people around the Lake of Geneva having more babies during the lockdown. That might also happen.
Okay, I'm done with my presentation, and we are ready for your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to use only handsets and eventually turn off volume from the webcast. Webcast viewers may submit their questions via writing via the related field. Anyone who has a question may press star and one at this time. The first question comes from Stefan Stalmann from Autonomous Research. Please go ahead.
Yes. Good afternoon, gentlemen. Thank you very much for the presentation. I have two questions, please. The first one relates largely to net interest income and net interest margins, which were actually quite weak in the second half compared to the first half. I'm curious to understand whether we can actually look at the second half net interest income as something like a normal run rate going forward, or whether the second half of the year has actually seen a constant deterioration of net interest income, so that in December, the run rate of net interest income was even lower than what the average for the second half would suggest. Also, I'm curious to learn more going forward about what the pressure points are here for net interest income. For instance, is there still pressure from the runoff of swaps?
How does the situation look like, in terms of front book, back book margins, mortgages, and other loans? Maybe in this context, could you remind us what your SNB threshold actually is in absolute terms? I seem to remember something like CHF 8 billion, but I'm not quite sure. Thank you very much.
Thomas, maybe.
Okay, Stefan. Hello. Very good questions. First of all, in the second half of last year, on the treasury side, we did more FX swaps, to take opportunity to take in U.S. dollars or euros, for example, and to swap them into Swiss franc to fill up our exception limit at the Swiss National Bank. When we do that, precisely in that moment, we put pressure on the net interest income, and the gain is in trading income. It's precisely the point I mentioned, which of course, I apologize, makes it very difficult for you guys to follow what is really from economic perspective, going on with regard to what I mentioned. That is an element which you must be aware of. For more fundamentally speaking, what of which you mentioned.
We have seen a little bit of pressure on the asset side, with regard to the repricing of the mortgages. This is an ongoing issue of the existing mortgage book repricing. This is long decrease of interest rates in, I want to say in absolute terms, if you can say that. In front of this, of course, it's only partially compensated by, of course, yes, the reduction of the cost of our bonds, particularly over the Pfandbriefzentrale, the covered bonds, and with regards to the long leg of our swap book. It's only partially compensated. This provides some pressure, which is then partially offset by volume growth. If I take the building blocks together of repricing on the asset side.
In front of this, I put the repricing of the bond side of the long leg of the swap book and the volume growth. I almost set off the pressure, but it's a slight decrease still, but it's almost set off. Okay?
Right.
I think these are the key elements which I have in mind. Keep in mind, please, two other elements. Now, that the net interest income in 2020 had a non-market element. I mean, the voluntary reduction in trade finance is a contextual decision. For the moment, I dare to say that once we are out of this COVID-19 crisis, we get back to more or less 2019 levels and that activity. This obviously is a decrease in net interest income, which in proportion terms is stronger in the second half than the first half, because as Pascal mentioned, this reduction happened in February, was fully, let's say, March. This is another impact, on the second half of the year where it was fully loaded, if I could say that. I think these are the elements which we should put together.
To make a long story short, is that from economic perspective, we are quite able to stabilize our interest income if I take the part which is in the trading book and put it together with an interest income, which you can't see, I apologize. Obviously, this is a challenge for a universal bank like ours, because it's a lot of activity. It's still rising volumes in mortgages and loans to defend an interest income, which is the whole argument for efficiency, for cost control. Right? The good news is, from an economic perspective, we maintain it. Particularly of the current element, obviously, is this whole dependency on monetary policies. I don't want to get into this right now. The second key message I give is that we have a contextual particularity with the income effect from trade finance, which we stay in the market.
We obviously adapt, we learn, but there's no strategic structural change from our ambitions with regard to trade finance. Did this help?
Right. Thank you very much. Yes, very helpful. I was wondering regarding the SNB threshold, is it something that you could give a thought?
Yes. Well, let's put it that way, right? It's always quite close to the numbers which we publish. It is quite higher than the number you pronounced.
Right. It seemed like there were two different ways to read your SNB deposits from the material that you publish. I guess if I look at your balance sheet, I would guess it's a bit north of CHF 11 billion. If I look at your HQLA assets, I would get to maybe CHF 8.5 billion, because you say it's 75% of HQLA is SNB deposits.
Okay, let me be clear on that one. Okay, let me be clear on that one, because some people call HQLA, as I see it, and it's kind of balance sheet way of looking at things, is that my total liquidity at SNB and the total amount of my immobilisations financières, my bond book. The sum of my HQLAs. Right? Which means I have, grossly speaking, because this is how much I can take. Actually, I know, I see what you mean. The question to what rate I can take them into the account. Grossly speaking, right, from the account balance sheet point of view, I have the CHF 11 billion plus CHF 4 billion of HQLAs. I see your point on page 24, the way to which I can take them into account is a little bit less. From balance sheet perspective-
They are category 1? I see.
They are category 1 and category 2 HQLAs.
Right.
The important point to get to the core of your question. Look at the balance sheet, look at our total assets. The total cash and equivalents. In particular, if you take the cash, billets à l'escompte, what you see is almost slightly above the SNB threshold.
Right. All right.
It really grows with the SNB threshold.
That's all right. Thank you very much, Thomas.
Thank you for your questions.
The next question comes from the line of Andreas Brun from Credit Suisse. Please go ahead.
Hello. Thank you for your presentation. I've got four short questions. Firstly, could you comment on the current activity in trade finance? Secondly, is there more to come with regards to the decrease in operating expenses, or put it differently, can you reduce operating costs even further going forward? The third one, do you give any comment regarding the outlook? You left that out this time. Lastly, how much was the net interest income decreased due to trade finance? Can you be more specific there or give us a number? Thank you.
Okay. First question, situation in trade finance. You saw the number, minus 20% in exposure. For the time being, we're still careful, but definitely we will again increase our exposure, our risk appetite during 2020, if everything goes correct. Whether we will be back at the level of 2019, that I don't know. We will go step by step. Let's say we should have, during 2021, probably more revenue than 2020. You see, it takes time to slow down. It takes time also to speed up. We decided to slow down in March 2020, but till you get really the effect, it takes a couple of months. It's the same when you want to go back. Probably I could imagine that the revenue will be.
Roughly similar, maybe a bit more, nevertheless, in 2021. It will not be 20% more. Let us be clear on that. Unless we increase significantly our exposure, things that we don't want to do, at least as of today. The decrease in net interest income, we don't give out the number very specifically, but it's a number, with two figures. Between something like I'm talking about revenue, not provision here. Something between 10 and 20. That's the first question. The outlook. Look, it's quite difficult. The best guess I can do is that I think 2021 will be better than 2020. It depends on the provision. That's the main point always. In terms of operating expense, the second question, I don't think we will go further down, because we had this effect on IT cost, and this is mostly, though not totally.
You have to think also that in 2020, we had a decrease also in operating cost due to marketing cost. Many events were canceled. The customer event, the general meeting, et cetera. That helps. Now, for the time being, I think everything will be concerned till probably the end of the first half. We might also see something similar. I hope that in a way, everything will be better as of the second half, because if things go better, that means we should also get more revenues. I don't think that we can think that operating costs will see a decrease in the same proportion. They'd rather be something like stable, I would say, between 2021 and 2020.
Okay. Thank you.
The next question comes from the line of Javier Lodeiro from ZKB. Please go ahead.
Yes. Hello, everybody. This is Javier. Maybe three questions from my side. The first one is on trade finance. Sorry to returning to that area. I would have curiosity, just if you could give us a little bit of flavor, what kind of business you are actually financing. Is it soft or hard commodities? Maybe as well the geographical exposure so that we can guess where the credit risk is actually in trade finance. An additional leg on that question would be, under what conditions would you actually increase this exposure? Is it just international trade increase or whatever? Another question I have is actually on the funding side. Bond yields are quite low. If you would issue bonds right now, you would ensure you low coupon for several years.
If you are now entering with deposits or engaging in more deposits, you never know what kind of deposits you are going to pay in two years' time. Did you think, is that an opportunity for you just to increase the bond funding? In 2020, the actual bonds have decreased. The third question would be on the net new money. The second half was much, much better than in the first half. I would like to know about the profitability of this net new money. Did the net new money enter then actually? Was it the clients engaged then afterwards in investment products, or remained that money on the balance sheet? These were my three questions.
Okay. I'm going to take the first one. Thomas the second one and the third one. Trade finance. Trade finance is built roughly on three pillars. Metal business, steel, et cetera. Agro. Agro is a diversity of different raw material. What we call energy. We don't finance crude oil. We finance derivatives, we finance gas, those kind of things. I would say something like 35%-40% metal, 35%-40% agro, and the rest, 20%-25%, basically energy. It's quite diversified. Roughly, we have something like 40- 50 different raw materials. There are detail of raw materials. It's quite an infinite world, if I may say so. Basically, I would say a bit more than 50% of our customers are traders around Geneva and Lausanne. Maybe another 10%-20% in Switzerland. The rest abroad.
Mostly Europe. We don't have that many customers outside Europe. We used to have, we stopped. We decided to refocus certain parts of the business, certain countries, but I don't want to go into more details, or certain raw materials, depending on geopolitical issue and also on long-term customer relationship. We will have probably a more focused portfolio. A big issue, a big question in this business is: Should you be diversified and have as many customers as possible really to mitigate your risk, or should you focus on selected customers that you know very well? The answer to that question is not that simple. It depends probably on the geographical region, and it depends on the kind of material. We're not going to change competitive business. You see that some banks stopped. BNP in Geneva, they stopped. ING, I think.
We're going to carry on this business because it is a good business with an attractive return on equity over time. Now, if you don't accept spikes, problem peaks in provision sometimes, then you should not on this business. We believe we have the muscle, we have the equity to absorb some losses when they occur. Overall, this is a profitable business. For us, it's a trusting business because if you think of a balance sheet of a cantonal bank, what do we have? We have credit, SME credits, large corporate, and mortgage. It is very sticky. I cannot reduce the mortgage book in six months. We have many contracts that go well over five years. The average duration probably is between four and five.
If you take SMEs, I don't see myself asking all SMEs in this region, "Please, we would like to be reimbursed." That doesn't work. When you have a business like trade finance, when the average transaction is three to six months, it's interesting because you can accelerate, you can speed up, you can use your equity if you have excessive equity, and when necessary, you can slow down in a couple of months, either because you see risk or because you need some equity for any reason. I think this is a joker in a balance sheet of a bank like BCV. We're going to stick to that business. Now this is a business where you have to be very flexible.
You see, you have probably in this business 15%-20% new customer every year because those traders, they appear, they disappear, they merge. It's a very strange business. What we will focus on Swiss and European traders or companies. We're not going to follow maybe some large bank that went to Singapore. This is too big for us. This is too far. I think one key success factor in the business is the knowledge of the customer. Because, again, there are two kinds of businesses in trade finance. One is corporate. Basically, you fund the balance sheet of a trader, and we are not really in this business. Maybe it's 5%-10% of our overall business. You finance transaction. We finance transaction for more than 90% of our exposure.
That means there is a product, there is a seller, there is a buyer, there is a boat usually. From point A to point B. This is what we do. If we want to mitigate risk, because risk is thrown in this business, you have to understand very well your transaction. This is why I think we will maybe focus more on selective countries, selective clients going forward. The overall exposure will remain probably the same because we are a tiny player in this market. We could probably double, triple the business within the next 24 months. It's no issue. It's just a matter of risk appetite. Thomas.
I will start off, start with your question on funding, which is quite an amazing question. Remember 15 years ago, basically, when you looked at the bank and you saw a balance sheet which has almost no client deposits, it was a risk factor and probably also an issue with regard to rental profitability. Your question, and I think correctly, is a question that would not be interesting to substitute the deposits by bonds. From a pure economic perspective, obviously, this would be a high impact on profitability, or at least from a short-term view. This is not our vision. We believe in the structure of a universal bank, and we think it's much more resilient, sustainable, if we have client money, client deposits, and we fully serve our clients with regard to liability products, asset products, and other services like business private banking mandates.
Basically, we will keep the same financial strategy, and obviously now it is obviously quite interesting to have the refinancing, be it our own bonds or be it with the Pfandbriefzentrale, which obviously is a very low interest rate, and as I mentioned before, which is one of these elements which compensate for the low interest rates on mortgages. With regard to net new money, your question, first of all, is the first half against second half. If you look at Alice's presentation in Chart 22, and as already mentioned, different opportunities. There is a kind of seasonality in our net new money for different reasons.
One reason at least is with regard to, there's one large client who also is our main shareholder who basically perceives taxes and more or less more in the second half of the year because a lot of people don't want to have them in their deposits because there is a tax on fortune in this canton. These taxes which are perceived, they are sent to the federal government, at least a significant part of it in the first half of the year. That is already one element of seasonality which we typically see year after year. We really should look at net new money numbers on an annual level. Now, the dynamics we mentioned before, right? They are in all businesses, but I want to underline the strong contribution by our asset management activity.
Now, with regard to margins, if I answer your question, you also were kind of questioning how does it evolve with regard to margins in our wealth management activity. Well, I think the key element here is that probably the dynamics in asset management are quite clear, right? There is an ongoing margin pressure and it's definitely a need to have new volumes and net new money in front of us to defend the earnings which we are able to do. Without going into more detail with regard to this, I hope I answered your question.
Yes. Thank you. Thank you very much.
There are no more questions at this time.
Okay, guys. Thank you very much.
Thank you, guys.
Have also a nice afternoon. Bye.
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