Ladies and gentlemen, welcome to the Leonteq full year 2019 results conference call. I am Sandra, the conference call operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Dominik Ruggli, Head of Investor Relations and Communication of Leonteq. Please go ahead.
Good morning, everyone. Welcome to the press conference of Leonteq's full year 2019 results. The presentation material can be found in the Investor Relations section of our website since 7:00 A.M. of this morning. Today, we also publish our entire annual report, including the audited consolidated financial statements and the compensation report for 2019. A replay of this press conference will be available today in the afternoon. Here with me today are Chief Executive Officer, Lukas Ruflin, and Deputy CEO and Chief Financial Officer, Marco Amato. Lukas will start the presentation with an overview of our ongoing business transformation over the past 24 months and provide you with an update on the progress of Leonteq's key strategic initiatives. Marco Amato will take over and discuss the financial performance of the full year 2019.
Lukas will conclude today's presentation with a brief summary and outlook of Leonteq's positions stepping into the coming years. The presentation will last about 45 minutes, after which we are happy to take your questions. It's now my pleasure to give our CEO, Lukas Ruflin, the floor.
Thank you, Dominik. Morning, ladies and gentlemen, dear shareholders, analysts, and media representatives. I'm here in front of you today to share Leonteq's journey of the past two years. If you recall, in 2018, we shared with you our plans regarding the journey we were embarking on as a company. A journey to overcome certain limitations we faced, and to grow and transform our business.
At today's press conference, we will highlight to you the progress we have made through a clear and focused execution of our strategic priorities. We will, of course, also update you on how business is transforming and present to you how Leonteq performed financially during these two years, and in particular 2019. Let me start the presentation on page four by showing you our 24 months progress and how we have re-established a solid financial track record throughout 2018 and 2019.
As you can see illustrated in the top left chart, our revenue base increased on a half yearly basis in 2019 compared to 2016 and 2017. On a full year basis, this means that our annual revenue base has increased from CHF 217 million-CHF 215 million range in 2016 and 2017, to a CHF 256 million-CHF 282 million revenue range in 2018 and 2019. Looking at our profitability shown in the top right-hand chart, we have demonstrated our resilience also in difficult market environments over the past four half years. As I said one year ago, there will always be better half years and half years with reduced earnings. Our focus is clearly to manage Leonteq as a profitable business and to contain, in that regard, our cost basis.
This focus has also had a strong effect on our shareholders' equity, which increased by close to 60% to CHF 663 million at year-end 2019, compared to year-end 2017. Along with our solid financial track record, we have transformed as a company on many fronts over this time. I'd like to highlight a few of these accomplishments on page five. Firstly, our newly installed leadership team has extensive experience in the financial service sector and has successfully managed the company turnaround over the past years. We have also improved our corporate governance framework and strengthened the independence, skills, and diversity of our board of directors and its committees.
In this context, Leonteq announced today that Leonteq's Vice Chairman, Hans Isler, will not stand for re-election at the annual general meeting in March 2020, Leonteq also announced that the board of directors has proposed that Philippe Weber as new member of the board for election at the 2020 AGM, which will take place at the end of March. Philippe Weber is chairman and managing partner at Niederer Kraft Frey in Zurich, Subject to his election, the board intends to appoint him as Leonteq's new Vice Chairman.
It goes without saying that Hans Isler has been an outstanding member and contributor to Leonteq's progress and development in the last eight years. His step is, in terms of the long-term independence of the board to be seen, as you know, in particular with regard to U.S. representatives and proxy vote shareholdings.
Board members who are considered independent lose their independence after a maximum period of nine years. Hans, thereby, was now slightly above eight years, and his step in that regard, as said, has that background, and we at Leonteq are very grateful to his outstanding contributions in the last eight years. As our company has grown, we have addressed impending constraints and scalability of capital, platform, and partners in order to transform our business model and position Leonteq as a globally recognized counterparty for structured investment products. Despite the challenging market environment, increased competitive landscape, and targeted investments made by us, as I said before, we have established a solid and profitable performance. I mentioned it before, we have also strengthened our capital basis by 59% to CHF 663 million at the end of 2019 compared to two years ago.
Of course, this is also a function of our shareholder support, which was very clearly and strongly demonstrated in summer 2018 when we did a rights issue and had a pickup of the shareholder rights in excess of 99%. Over the same period of 24 months, the deferred fee income increased by 133% to CHF 107 million. This amount reflects revenues which we have already generated, but which, in line with our prudent accounting approach, we only recognize in future periods. Of course, it's our revenues generated, and we believe it is an important line item to look at in addition to our shareholder's equity when you assess the company's capital and solidity standing.
In 2019, we also obtained two investment-grade ratings from Fitch Ratings, who assigned us a rating of BBB minus with positive outlook, and from JCR, Japan Credit Rating, who assigned us a rating of BBB plus with a stable outlook, underlines Leonteq's position as a globally recognized counterparty for structured investment products. We also defined in 2019 our corporate culture and strengthened the framework with a new vision, mission statements, and corporate values. These achievements have been vital to Leonteq's transformation and lay an important basis, we believe, for our further developments in the coming years. On to the next slide. Our business scalability has four key impact areas. Scalability of platform, scalability of issuance, scalability of hedging, scalability of distribution. I'd like to briefly spend some time on each one of them.
Platform scalability is, of course, the starting point for further business growth for Leonteq, and accordingly will continue to center around the enablement of rapid and low-cost securitization through automation by continuing to upgrade our platform by using the latest technology. We have progressed with leading hard and software providers in that regard, so to eventually make our entire white label service offering, for example, available on the cloud. It's very important to some of our partners who, as you know, are often among too big to fail institutions in their respective countries and who obviously have very stringent contingency plan requirements and something we obviously want to proactively support them with. Issuance scalability. We are making efforts in that regard as we are expanding our issuance model by enhancing cooperation with existing platform partners.
We absolutely aim to increase the number of white label issuance partners in the foreseeable future. Finally, we have opened up in 2019 our platform to third-party issuers, which is enhancing our multi-issuer offering even further, very comparable to a typical brokerage model. On the hedging scalability, as you all have heard of us before, the implementation of our Smart Hedging Issuance Platform, in short, SHIP, is absolutely crucial with regards to our target to reduce our own volume of hedging exposure. I'll refer to that a bit later, but we are pleased about the progress. The fourth scalable pillar is the distribution part, where we target to service banks and asset managers to distribute into their own and captive channels. To do this, we have developed our new digital marketplace, which we call LynQs.
Through all of these measures, we are essentially addressing the reality of our industry, which is that we are active in a business which is more and more becoming a volume-driven market. As we have seen with many other industries before, higher volume is a reflection of maybe in general a bigger market, but usually goes hand in hand with increased pressures on margin, on the need for the market participants on the provider side to automate and to differentiate in the long term on costs and cost management. We believe it is an opportunity for us, this market environment, but it's very clearly a necessity for us to continue investing. I can now draw your attention to slide seven, where I'd like to detail more the market.
The left-hand chart shows that the global wealth showed by many statistics has continued to grow during the last two years. Progress in terms of growth has been quite impressive, with 12% increase of wealth globally since 2016. Of course, this has been tremendously helped, particularly last year, by generally benign market environment and to some extent, support from global central banks. It's obviously something which in a given year can also reduce, but I think the tendency there is clear. What we are also seeing is that market turnover on structured products is increasing in Switzerland. We show you the Swiss statistics because it's one of the best researched. We also have data available from the Swiss National Bank, which obviously gets central feed-in data from all the custodians in Switzerland. Again, we see a decent growth there.
What, however, is not said on any of the slides is that the provider of structured products, in the context of what I've just described before, are seeing a more severe market environment. It's something which we have expected for the last two years and which we have highlighted to you already in 2018. If you turn now to the next page, eight, you will see our illustrated equation for creating long-term shareholder value and sustainable growth in this sort of market environment. We have defined three areas which will help us to reach it. First, we will enhance our scalability on all levels mentioned before, which essentially addresses the development of the structured products business into a volume-driven market environment and should hopefully result for us in a growing revenue base.
Secondly, we will continue being very focused on improving our profitability through investing in key projects while optimizing our cost base, thereby positioning Leonteq as a leading marketplace for investment solutions, which should hopefully result in growing net profits. Thirdly, by continuing to strengthen our absolute capital base, we will position ourselves unquestionably such that with regard to any counterparty we face, be it the client, the partner, or hedging counterparty, we are in every regard a very serious counterparty they would be delighted to do business with.
My colleague, Marco Amato, will later show to you a change in the Swiss regulatory regime with regard to security firms. Our minimum capital expectations by regulators have changed significantly since the beginning of the year. We are now subject to a minimum capital level of CHF 20 million. That compares to shareholders' equity of CHF 663 million.
Despite all of this, we will continue to increase our absolute capital levels in the context of the necessity, as I just said, to become unquestionably the counterparty of choice for any of our clients. I'd like now to spend a few minutes on updating you on key initiatives where in aggregate in the last two years, we have spent about CHF 40 million in terms of hard cash investments. On page 10, you can see our marketplace for structured investment solutions as it's taking shape. Throughout 2019, this digital marketplace developed into what today we call LynQs and provides Leonteq clients digital access to one of the largest structured product universes available. This is represented in the center of the graphic.
LynQs was developed by Leonteq in-house to serve as a one-stop shop and provides Leonteq's clients external access to applications, services, and market and product data that were previously only available internally. Our clients can choose from a variety of issuers on our platform, which are represented on the left-hand side of the slide.
Those are our sell-side partners, which we can offer services along the entire value chain, from issuance to distribution to lifecycle management of their own white-labeled products. Importantly, as I said before, we further opened up our offering for third-party issuers 13 at the time. This is a very big service extension for our clients. Until the beginning of 2019, we could offer 10 credit party counterparty risks to a client who wanted to buy a structured product. Today, a client can choose from a selection of 23 counterparties.
On top of the slide in the gray area, you see how SHIP is connected to LynQs by providing best option prices for a selected number of products and issuers. Further development of this marketplace will continue to open up new opportunities for us, our partners, and our clients. If we just go back to the slide, please. 2019, probably in the future when we look back, will be the year of transformation for Leonteq.
I mentioned the white labeling issuance partner, which has more than doubled in terms of numbers. We today have, on the SHIP side, not just the opportunity to deliver for the future, but the proof that SHIP works. I'll come to that later. If you just look on the right-hand side and you imagine you are on the buy side, you are a representative of a private bank.
Through LynQs, through the Leonteq automated one-stop shop, you essentially can pick and choose from the issuer of your choice. We as Leonteq will give you the comfort that you will get the best option in the price, not because Leonteq has the best price, but because we will ask the market, and you then choose the options of your choice. On to the next slide, 11. Scalability is a big word. Many people use it, but how do you measure it? Hindsight, it's not that difficult. You actually look at a few key numerics, and we thought it, for the first time, relevant to show you some of the in-house management tracking statistics we look at very closely. First of all, the number of products we issue is obviously a very good and direct linkage to the client activity.
What we see here is that on average, the number of products issued has increased by 21% each single year. Turnover, again, a good metric, has increased by 13% on average per year and reached a new record of just above CHF 30 billion in 2019. In 2019, we performed roughly 164,000 transactions compared to only 67,000 in 2016.
It might not sound like a large number, but I assure you, processing 100,000 more transactions on our platform, and we talk here about often complex products, requires an entirely different IT and operating system than we had in 2016. The way we have invested in the last few years, I feel very confident that the numbers could easily double, triple, and with our current platform, we could stomach such further growth. That's obviously absolutely critical if we assume margin continues to decrease.
As a result, in order to increase the absolute revenue base, you therefore must increase the number of transactions. Finally, our platform assets, which is a certain indicator for future activity, have also solidly increased over the years, reaching a new record of CHF 15 billion at the end of 2019. As I said, this was all only possible through scaling our platform and implementing state-of-the-art infrastructure and development environment in-house that allows for the management of in-house and third-party solutions in a fast and resilient way. We have added two cloud solutions to our offering, which today already improves flexibility of our infrastructure capacity. Of course, we have made significant progress on SHIP, which you can see in more detail on the next page.
SHIP, as a recollection, stands for Smart Hedging Issuance Platform, which is designed to reduce hedging exposure by offering the Leonteq issuance partners the opportunity to enter into hedging transactions for their issued products with external hedging partners. Before I spoke briefly about the appeal of SHIP to the buy side. A private bank who wants to pick a certain issuer but wants to have the comfort that they get best price on the option element. What we talk here about is that SHIP, of course, also brings a lot of advantages to our white label partners. Concretely, as an example, Raiffeisen until about two months ago, whenever they issued a structured product, had only the choice to hedge with Leonteq.
Today, as we are speaking, Raiffeisen has on any hedge it does, as long as the underlying payoff is already on the SHIP platform, the choice to transact with Leonteq, but also the alternative to transact with another SHIP hedging counterparty. We commenced development in 2018. We immediately declared SHIP the by far highest priority project of the firm. Accordingly, I'm not entirely surprised to be able to say today that we have made good progress since then. What we simply did not know in 2018 was whether SHIP from a technology point of view would work. It is, again, a quite complex technology project in terms of execution. You have to imagine that the client who needs best option price wants that best option price within a matter of seconds.
It's not just about getting a price from a hedging counterparties, say, a U.S. investment bank, but it's about getting the price instantly. We thought for many reasons it was possible, but as you all know, visions are not never reality. Today, I can tell you the vision is reality. SHIP works. We have by now tested the platform well, and we have six leading investment banks connected to the platform and actively contributing quotes. Whenever we onboard a counterparty, we put them for a certain period in a beta testing mode. Simply because when we go live, we do not want to have breakage in terms of OTC confirmations. SHIP is not just about getting a good price, but it's obviously about the entire value chain of the product.
Once hedged, you need a proper back office function, OTC confirmation that's fully automated, and of course, eventually the client might want to sell back the underlying structured product. You need a well-functioning secondary market activity. Again, we put new counterparties into a beta testing mode. Three of them are out of this mode and fully live. Three are in the beta testing mode. They are daily providing quotes, but we are not yet, if you want, actively trading with them until that test phase is over. We, however, expect that now to be a matter, in some instances, of weeks. Another instance of a couple of months, until the six counterparties are fully up and live.
In addition, we have Leonteq as a hedging counterparty on SHIP, and with then seven counterparties fully live, we will be able to declare at Leonteq that SHIP is now fully up and running. Timeline will bring us closer to summer. That's in line with the timeline we have guided you on during the last two years. Importantly, in 2019, and you would not see that in the SHIP statistics per se, but it's obviously very critical for our future development. We have now also enabled issuance partners, notably Raiffeisen, to become a direct SHIP counterparty. In December, we had the first trade where Raiffeisen entered into a SHIP transaction, did not hedge with Leonteq, and the OTC transaction and settlement happened directly between Raiffeisen and the third-party hedging partner.
This is very important for Leonteq because that was the first time in our history that we enabled a structured product issuance for a partner, but we did not use our balance sheet in between. Clearly, we will see much more of these transactions in the future. The bottom right chart shows you the progress SHIP has made throughout 2019, with both turnover and number of trades doubling from the first to the second half of the year. In the full year 2019, we recorded more than 2,600 transactions with a notional volume of approximately CHF 1 billion. The majority of the trades were still hedged by Leonteq as a function of Leonteq quoting the best option price for the respective transactions. Sometime asked whether that's a problem, the answer is absolutely not.
Management has been focused in the last 18 months on getting SHIP up and running. Leonteq can very easily increase the number of SHIP transaction not hedged by Leonteq. That's a direct function of Leonteq's competitiveness on the trading side. I could today decide that tomorrow all our SHIP-able transactions are no longer hedged by Leonteq. You decrease the pricing competitiveness of the Leonteq options, and you will base the way SHIP works. See always 100% of the trades hedged by that counterparty who shows the best price. It's however, for us, important in this early stage of the life of SHIP that we show to clients that SHIP generally also brings an added value to them.
For a certain transformation period, Leonteq on purpose is also quite aggressive on the SHIP platform because of course, you do not want to leave people the impression that SHIP, even though it's now a competitive marketplace, leads to less good pricing for clients. We also want to ensure that our SHIP hedging counterparties understand that they will only win a SHIP trade if they are very sharp on the pricing side.
In summary, I'm happy to reconfirm what we communicated earlier, which is that SHIP will be fully operational by mid-2020. Moving on to slide 13, I'd like to take a moment to underline Leonteq's local commitments to our clients. We are servicing, as you know, our clients along the entire life cycle of structured products, and we are geographically present where our clients are located. Far, we have a footprint in Europe and Asia.
We have, out of those local offerings, of course, certain regional growth which we can cover from ancillary offices. For example, we have a business in Italy, which has seen nice and good progress in the last 18 months. We have covered that business out of the U.K., which was until recently very easy to do, will be less so in the future. We have obviously also had a certain activity in the Middle East. In view of some macroeconomic changes, particularly Brexit in the U.K., but also in view of the good growth we have seen of our business in those locations. We have decided to open two new offices in both Milano and Dubai in the course of the year. We will accordingly expand our European onshore offering and also open up a presence in the Middle East.
Of course, this is all subject to regulatory approvals and, in terms of future reporting, for the time being, we would include Middle East under Asia. Once Middle East would be out of the new startup mode, we would possibly reconsider showing it separately. In transparency for now, we would show it within Asia.
We also have, as you know, a reality in Switzerland, which is facing as a constraint our clients every day, and that's the low interest rate environment we had now for 10 years, either zero or negative interest rates in Switzerland. In particular, in the long-term saving plan area, which we cover through our insurance and wealth planning solutions division. We are working on what we believe to be a very innovative new concept, which we believe would allow clients to address the low interest rate which clients face.
2018, with IWPS, we had mentioned to you that we are reassessing all our options. We have reassessed all our options. We are very positive about the future prospects of this business. As I said, we have a certain, a new product offering, which we will try to test in the market. We select the clients in the coming months, and as if and when we see that, again, addition could become reality, we would update you a bit more, probably the first time in the first half 2020. With that, I would like to ask our CFO to join. Marco?
Thank you, Lukas. Good morning and warm welcome to all participants from my side. I am pleased to present to you Leonteq's financial performance for 2019. Starting on page 15, I would like to give you a brief overview of our financial highlights for 2019. Following a subdued start to the year, we had a solid performance with a net profit of CHF 62.7 million in 2019 amidst the challenging market environment. This compares with the record results of CHF 91.5 million that Leonteq achieved in 2018. Our earnings per share was CHF 3.35, which was down from CHF 5.40 in 2018. Total operating income amounted to CHF 256.2 million. This was driven by a relatively stable net fee income of CHF 264.9 million and the absence of contributions from hedging activities.
We maintained a disciplined cost management with a cost base at CHF 191.1 million, despite making investments in headcount growth and key strategic initiatives throughout the year. We also maintained a strong capital position with a total BIS-eligible capital of CHF 648.1 million and a total capital ratio of 21.1%. Furthermore, the board of directors has decided to initiate a new phase of conservative dividend policy. For the financial year 2019, we will propose to shareholders a total distribution of CHF 0.50 per share. Let me now elaborate more on our top line on the next page of the presentation. Leonteq's total operating income is mainly driven by two line items. First, we have the net fee income, which results from issuing and distributing structured products. This is displayed as orange bar chart on the graph on page 16.
There is the net trading result, which derives from hedging structured product and our refinancing activities. This is marked as the dark gray bar chart. Let's now look at how these two items performed in the first and second half of 2019 compared to the prior year. As already mentioned during our half year 2019 announcement, Leonteq experienced a subdued start to 2019.
Economic revenues saw a sharp decline to CHF 8.1 million in January 2019, compared to CHF 26.1 million in January 2018. The months following January 2019 saw a recovery in client demand, and overall, we were able to deliver a solid performance during the first six months of 2019. In the second half year 2019, we were able to grow Leonteq's net fee income by 14% to CHF 144 million, compared to the second half of 2018. This was driven by two effects.
First, we saw an increase of 19% in turnover in our investment solutions business line which compensated for the decrease in margin to 80 basis points. Second, also our insurance and wealth planning solutions segment had a positive contribution year-over-year, which was primarily driven by a one-off effect of CHF 9.7 million. On the trading income line, we distinguish the contribution from hedging activities on the one hand, and the contribution from the treasury result. As you know, our hedging strategy is to hold a structurally long volatility position. Especially in market shock scenarios, we tend to earn positive trading income, which we consider as a natural hedge to our client revenues. This was the case for the second half of 2018, where trading income amounted to CHF 25 million.
In the second half of 2019, market volatility was reduced and there was no major equity market disruptions leading to a CHF 13 million negative contribution from hedging activity in the second half of 2019, compared to a positive contribution of CHF 38 million in the prior year period. Analyzing the second element, the treasury result, Leonteq recorded an improvement of CHF 15.5 million from its investment activities in H2 2019. As a result of negative hedging and positive treasury result, the net trading result was negative CHF 11 million in the second half of 2019, compared to a positive result of CHF 35 million in the same period in 2018. Moving on to page 17, let's look at Leonteq's cost base.
Despite, as mentioned by Lukas, significant investment of approximately CHF 40 million into key initiatives such as LynQs, the SHIP platform, but also our AMC Gateway, Leonteq has continued to maintain a stable cost base over the past two years. Total operating expenses amounted to CHF 94 million in H1 and CHF 97 million in H2 2019.
For the full year, our cost base increased only by 1% to CHF 191 million, we were able to be below our guidance of CHF 200 million for the full year. The introduction of IFRS 16 leases resulted in a decrease of Leonteq's operating expenses of CHF 10.7 million, caused the increase in depreciation in the amount of CHF 9.6 million. In order to optimize our cost base, we have also started to assess options to nearshore certain processes and functions, also in light of future growth.
Let's look at page 18. Over the past years, Leonteq has built up a strong shareholders' equity with the successful completion of the capital increase in August 2018, obtaining net proceeds of CHF 118 million and retained earnings amounting to CHF 154 million from 2018 and 2019 retained earnings. Our shareholders' equity totaled CHF 662.5 million at the end of 2019, which is an increase of 58% compared to end of 2017. During the same period, we also built up our deferred fee income, which totals CHF 107 million at the end of 2019, compared to CHF 46 million at the end of 2017. These combined effects have allowed us to attain a total of CHF 769 million.
On the back of this, and in consideration of the strategic process achieved over the last two years, the board of directors has decided to launch a new phase of conservative dividend policy. As mentioned, for the financial year 2019, Leonteq will propose to its shareholders a total distribution of CHF 0.50 per share. In line with the new company law in Switzerland, which is effective as of January 2020, the distribution will be paid in equal amounts of the retained earnings and reserves from capital contribution. Looking now at page 19, you will see the composition of our balance sheet. Our balance sheet is driven by two factors. First, we issue Leonteq own structured products, which are recognized on the liability side.
To hedge these liabilities, we invest approximately half of the proceeds from the own issuance into a conservative investment portfolio, and the other half into hedging derivative positions such as equities and indices. Likewise, as a result of the issuance partner business, we mostly hedge for our partners their structured product exposure by purchasing into either the underlying securities of the product or options. In 2019, our total assets decreased by 15% to CHF 9.1 billion. The decrease in both assets and liabilities was primarily driven by reduction in positive and negative replacement values of derivative financial instruments coming out of calmer equity markets. To sum up, we have a solid balance sheet with a low-risk profile and a leverage ratio of 7.4%. Our regulatory capital on page 20 shows that Leonteq maintained its strong capital position.
You can see on the left chart that our platform assets increased significantly by 24%, from CHF 11.9 billion in December 2018 to CHF 14.7 billion in December 2019. Our risk-weighted assets also increased, but only by 10%, from CHF 2.8 billion to CHF 3.1 billion between December 2018 and December 2019. As a result of our strong capital position with total Tier 1 eligible capital of CHF 648 million, we reported a total capital ratio of 21.1% at year-end. As I wrap up the discussion of Leonteq's financial performance, let me give you a brief update on Leonteq's financial targets for 2020 on page 21. In light of the continued challenging trading environment, particularly with regards to market volatility, we expect to achieve total operating income in the range of CHF 270 million-CHF 300 million for 2020.
The main drivers for the targeted revenue growth will be LynQs, third-party issuers, fund derivatives, actively managed certificates, the European issuance program, as well as Leonteq's SIX listing. We expect total operating expenses of approximately CHF 200 million for the year 2020, similar to the last year. I would like to conclude my presentation with a regulatory update on slide 22, which Lukas already anticipated. As of 1st of January 2020, a new capital framework applies to Leonteq as a result of the Financial Institutions Act that entered into force. This act essentially regulates the licensing requirements for certain financial institutions, including security dealers, which are now newly labeled as securities firms. For the application of capital requirements, the new regime distinguishes between account holding and non-account holding securities firms.
Securities firms which do not hold accounts for clients are no longer subject to the Capital Adequacy Ordinance, but must permanently hold capital of at least one quarter of the fixed costs of the last annual financial statement, but no more than CHF 20 million. Leonteq does not hold client accounts and thus falls under the new regulatory regime. In this context, I would like to point out that since our inception in 2007, we have operated under a securities dealer's license and have significantly exceeded the capital requirements for each reporting year in the past. Since the 1st of January 2020, Leonteq is operating as a securities firm and adheres to the new capital framework. We will report capital figures under the new framework for the first time when we announce our half-year results 2020.
With regards to our capital planning in the future, Leonteq will continue to operate under the existing risk management framework. At the same time, we'll continue to reinforce our capital base and will pursue a conservative dividend policy for the foreseeable future. With that, I will hand back to Lukas.
Thank you, Marco. Let me conclude today's presentation with a brief summary and outlook on page 25. Leonteq's full-year 2019 results are evidence that we can deliver solid performance, also in the context of a difficult market environment and increased competitive landscape. Over the past years, we have increased our annual revenue base from roughly CHF 207 million-CHF 215 million to CHF 260 million-CHF 280 million during the last two years. We have increased the sum of our shareholders' equity and deferred income to approximately CHF 770 million at the end of 2019.
That compares to CHF 10 million we had when we started the business 13 years ago. We have reinitiated a new dividend phase, clearly a conservative one, and accordingly, the board of directors will propose a payment of CHF 0.50 per share at the AGM taking place at the end of March.
With regards to our outlook, we expect SHIP to be fully operational by mid of this year. We are planning to open two new offices in the course of 2020 in Milano and Dubai. We target for 2020 a total operating income of between CHF 270 million to CHF 300 million. That's a reduction from our previous guidance of approximately CHF 300 million. We expect approximately CHF 200 million in total operating expenses, very much in line with what we expected before. Of course, as we have revised the range of the revenue guidance, the cost-income ratio, which you get by dividing total costs by total expected revenues, is also now more variable than it was before.
We will continue to focus on our cost management, and we are considering options to nearshore certain processes and functions to further optimize our cost base. Lastly, we will retain our priority of strengthening our absolute capital base and investing into future opportunities. Conclusion, I am pleased to be able to say that Leonteq has never stood stronger, and we feel that we are well-positioned for the future. Thank you very much for your attention. Monique? Yes, Daniel.
Hello, this is Daniel Regli from Octavian. Thank you for the presentation and for taking my questions. I have a couple of questions. First, maybe if you, Marco, could again explain me a little bit the moving parts on the trading income line, particularly, let's say, the difference between the investment solutions trading income, which was obviously very negative with minus CHF 21 million in H2, and the trading income in insurance and wealth planning solutions. How shall we think about this going forward? I think I recall or remember that you once said you have reduced your volatility exposure in your trading book. Now you have at least an investment solution, quite a strongly negative trading result. Yeah, if you just could explain how it came there and how shall we think about this going forward into 2020.
Particularly with regards to your 2020 targets, what were your assumptions when giving this range? I think the moving part between CHF 270 million and CHF 300 million is probably the trading income. The second question is about the capital and dividend policy. Obviously now the previous capital regime is more or less obsolete.
How shall we think about your capital, and what is your ideal capital, going forward? What is then triggering further dividend payments or maybe restricting further dividend payments? The third question is on SHIP. If you just could give me an indication, what are now the key bottlenecks for increasing the turnover on SHIP? Is it the number of issuance partners which are willing to allow their product for SHIP? Obviously now you have quite a decent number of hedging partners. What needs to happen now that the turnover increases on SHIP?
Respectively, what could happen that it will not increase? Yes. The fourth question is about this third-party issuance. What is there the difference between the modus, how you deal with these third-party issuers versus your partner or issuance partners? I think I'll leave it.
Yep. Thanks, Daniel. I'll probably take the first question regarding trading and then hand over to Lukas for the capital question, SHIP, and if you want to take also the third-party issue question. Thanks for the questions, Daniel. I think on the trading side, as we always stated, we have a structurally long volatility position on books. That's specifically true for our investment solutions division. We have seen a negative contribution from hedging contribution in the second half year 2019, which even though was not significantly worse than what we have seen in H1 2017. I would say given the low volatility environment in the second half year 2019, I would say the result doesn't surprise us. You correctly stated that we have obviously two different divisions. One is investment solutions, where we have a structurally long vol position.
With regards to trading results in the IWPS space, that's obviously more linked to interest rates and some opportunities that we have anticipated there. As such, we had a positive contribution from the trading results in the IWPS space. With regards to 2020 targets, as mentioned, we have specified targets from previously approximately CHF 300 million to CHF 270 million-CHF 300 million.
The reason is exactly the trading results and the market volatility environment, which we have seen in second half year 2019 and which we continue to see, especially now in January, February, with good environment for equity markets, but a low volatility environment. Anticipating that this could continue for the year 2020, we have been more specific and say, if we continue to have such an environment, we might not make a lot of money on the trading side.
It might be even a nil, it might be even a slight negative. As such, we would anticipate a top line of rather CHF 270 million-CHF 300 million. Should the environment be more favorable for our trading environment or for our trading books, we could still see the CHF 300 million as realistic target for the year 2020.
If I could maybe just add to what Marco said, and to your question, how do you need to think about this volatility position? First of all, we don't get this position by coincidence. Clients, when they typically buy from our structured products, are selling to us volatility. We could obviously then go and sell it into the market. Ultimately, the position is mainly on the books because we have now seen in the last 13 years that whenever volatility is very high, client activity decreases. Might have short-term effects, of course, you say the big crisis, then you have short-term a lot of activity, but then it comes down. This long volatility position, structurally speaking, is hedging an environment where clients will be much less active.
We have shown you clearly in the second half 2018 that it works, it comes at a price, the price is that when markets are like last year, you essentially have a position with hindsight benefit you should never have had. To take an analogy, we could have said our equity, say average CHF 650 million of the year, we should have put in the MSCI World Index, we would have had 20% return on equity. Hindsight, it's obviously easy to say that. We feel comfortable with that position. However, knowing, that's something investors need to understand, if you have a 2020, which on the volatility side is like 2019, we had many phases where volatility was at historic low. We will structurally lose money on that position. It will be offset by increased client activity.
It's not necessarily only bad news for us, but it explains the range, as Marco said. With regard to your second question, I was expecting that question to come as the first and I'm pleased to see that it wasn't the first. It's a very good question and I guess it's in the context of this new regulatory regime, an obvious one to ask.
What would trigger us or the board to become a little bit more proactive and change the dividend policy? Let me first start by saying we have already come with positive news. We had communicated that for the foreseeable future, we do not see any dividends at all, and that policy has been changed to a conservative dividend stance. In some way, that's the beginning, hopefully, of a certain journey, and I hope it is seen by our shareholders as a shareholder-friendly journey.
As I said before, we are not, as Leonteq, completely working in a vacuum. We are working with the largest counterparties in the financial industries you can think of, whether it's on the hedging side, whether it's on the client side. As you know, we do not bank with end clients. We do business with intermediaries, but these are the world's largest asset managers, private banks, pension funds, insurance companies. For them, a very solid counterparty in absolute terms is very important. Our journey to continue strengthening therefore our equity base has to have absolute priority. We also since a year are now rated by two rating agencies. Of course, for them, solidity of capital and also the absolute capital basis is an important factor when it comes to considerations of rating.
Finally, the highest good we have in the firm and the one we must always worry the most about is the fact that clients trusted us with their savings. From a client's point of view, you just need to be sure that Leonteq will always be very safe. It is a conservative approach. We recognize that, but it's very much in line with the traditions of Switzerland. Take any of the long-standing private banking partnerships. As a general rule, these institutions are all well, maybe over-capitalized, but in the long run, it has served them very well, and that's certainly a strategy Leonteq will continue. We started with 10 million shareholder equity in 2007. We saw the financial crisis coming. We didn't see it coming, but when it came, we saw the effects it can have.
We know how important it is to save in good times for more volatile times, and that conservative management and board approach will continue. What could trigger, nevertheless, maybe one day an approach, I would say first, even more strengthened absolute equity basis than we have today. Secondly, certainly also progress on the strategic projects, including in particular SHIP. We obviously should always look at the absolute capital base in the context of our risk profile on the balance sheet and to the extent we do less trades, maintaining our balance sheet for those trades. To that extent, we also need less equity. I'd nevertheless like to say it's a beginning of a new journey, and it's a clear message to shareholders that we will continue pursuing a conservative dividend policy.
Please do not factor in now some dividend ratios which we wouldn't see as a board and management. SHIP, what is the bottleneck? I would say only one thing, and that's time. Half a year ago, I would have said final proof of technology working. For me, that proof is behind us. It's now time. It's getting the three additional beta testing SHIP counterparties on board. It's letting time make sure that all the market participants show the sort of competitive prices we expect them to see. It's something we see as a very gradually improving picture. I believe more or less, I would almost say every week, but maybe given some weekly volatility, I should say every month. Every month we see progress, and every month we see the progress being at least at our expectations, if not above.
We'll give you an update in six months and can then tell you what the first half year holds. What is the difference, as the final question, about third-party issuers and our white label partners? In terms of Leonteq service, there is a big difference, because white label partners are enabled by Leonteq. They would outsource to us part of the full value chain of issuing, settling, trading, and market making a structured product.
Whereas a third-party issuer essentially connects to the platform but does everything by himself. For clients, to the extent we onboard solid third-party issuers who are at our levels and standards in terms of the servicing, ideally, there is no difference. That's obviously very much in line with our vision to make Leonteq a one-stop shop and the central marketplace for our clients when it comes to structured product purchases.
In the room, Nicholas.
About your two offices opening. I guess it's a mix of both. Maybe I would like to have some kind of colors. Are you more following your existing clients, or are you conquering new markets?
Thank you for the question. It's definitely more of the second part. We believe we have a big market opportunity in these markets to the extent we are local. In Italy, I think proximity to clients is a very good thing. That generally, obviously true for all the markets. I think Italy as a structured product market when it comes to certain payoffs, to certain clients' behavior is a bit particular, and it's certainly easier if you are local also when it comes to being day-to-day in touch with the large distribution houses. In terms of Dubai, we are not just opening office, but we are already now working on a Sharia-compliant offering, and that would open entirely new distribution channels.
We, however, go into these markets with the comfort of knowing that our current client base would probably offset the increased investments we have to do in order to become local.
Okay. There's one more question in the room, and then we move on to the participants on the phone.
Thank you very much. Guido Fasano from Independent Credit View. One question concerning SHIP, please. Going beyond the three banks currently in the beta period, what are your aspirations, your plan for attracting even more counterparties? With a view to enabling more diversity and diversification opportunities for your clients. The second question with regard to page 19, the liability side of your balance sheet. Could you briefly comment on how you manage the liquidity requirements that go with the CHF 2.9 billion in derivatives liabilities?
Thank you. I'll take the first question and pass on to Marco for the balance sheet related questions. It's a very good question. We need to find, as Leonteq, as the provider of the SHIP marketplace, the right balance between getting good prices but also ensuring that the market participants consider this an attractive market to be present in. We had communicated from the very beginning that we would see up to eight counterparties on SHIP. Plus, in addition, Leonteq. The interest is higher than that. It took a bit of time to convince people, but we were very clear and transparent to potential market participants at the beginning that it's a pre-investment into something a bit unknown, but it would come at the benefit of a certain market participant protection once we have filled up the position.
Essentially, once we are at eight positions, we would probably not add on additional counterparties unless they brought us, for example, hedging possibilities in a market where we wouldn't have access through the existing eight counterparties. I just take an example. You would have a counterparty who has, for specific in-house reasons, an angle to hedge a specific market. In Asia, you would probably take them on for that specific market, but not necessarily for the entire marketplace. Again, that's driven by our belief, but also understanding that SHIP must not only be attractive for our buy-side clients but also for our sell-side SHIP hedging counterparties. They all need to be able to make a decent revenue stream out of that marketplace in order to invest, et cetera. Marco?
With regards to the pension item, you obviously know that the net defined pension liability is a function of basically FT, the conversion rate, the provider of the pension side, and we have seen a sharp decrease.
Sorry, not pensions, the liquidity requirement that goes with the negative market value of your derivatives. That is the question. How do you manage these liquidity requirements? The CHF 2.9 billion you show on the liability side.
You would need to post collateral.
Yeah.
When we look at the assets, how much of these assets are earmarked as collateral for liabilities, negative market values?
It's a very good question. It goes into the variations of our structure product offering. First of all, you need to differentiate if we now really look at the mathematics of it and who the issuer is. If Leonteq is the issuer, you obviously get liquidity up fronts from your clients, and you use some of the liquidity to then do the hedging, respectively, if you hedge through options to provide collateral to the counterparties.
If, however, the issuer is a third party, so say, and they would hedge with Leonteq, that's now the pre-SHIP world. Leonteq hedges in the market. There, technically speaking, what happens is that obviously you get collateral from your counterparty, white label partner, and that collateral then would be available to, for example, pass on to an OTC clearer with regard to clearing positions at the OTC market.
We, in terms therefore of the liquidity profiles, feel very confident. Our problem from a balance sheet point of view is the reverse. We are sitting on too much liquidity. We are swimming in liquidity. We have committed in context of what I said before, to run this business on a very conservative risk profile. Historically, the excess liquidity was put into a government bond portfolio, mainly of Germany and France as issuers. That was a very expensive conservative approach. We have changed that insofar that we now do a diversified investment portfolio where we are either investing government, subnationals in corporate issuers or financial issuers, target rating is A or higher. We would occasionally have a BBB bond, but I guess the weighted average rating currently of those issuers is somewhere between A+ and AA-.
You would find more disclosure in the annual report and the notes.
Hello, this is again Daniel Regli from Octavian AG. Apologies, I have to ask a couple of follow-on questions on my previous questions. Maybe again on your 2020 revenue target. Sorry to maybe annoy you with this question, I struggle a bit with this range on one hand, you're saying, of course, the trading income is the swinging factor giving this range, on the other hand, you're saying that basically trading should, in a normal environment, offset eventual swings on the fee income side, we still have a CHF 30 million range of your operating income. Can you just give me a little bit more sense what exactly needs to happen that you only reach CHF 217 million and what needs to happen that you reach the CHF 300 million on the trading and on the fee income side?
Yeah. Maybe I just quickly answer that one. First of all, the way we manage the business is that we don't differentiate internally. Okay? We don't think one side of the revenues is good and the other is bad. Ultimately, we are measured against our performance, top line costs and net profit. How it then breaks down with hindsight benefit, we can show you, but it's not against what we measure ourselves. Very simply put, you have in specific times, obviously, an over effect of one or the other, and that part that we control the least is the macroeconomic volatility environment.
It's very visible when you go on to page, where we see the half year number development of the. If you go on to page 16, you might have half a year where the long volatility position, and mind you, it's not only that, you have other effects. Okay? That's by far the biggest driver, brings you CHF 25 million, and you might have a half year, like the second half last year, where it costs you CHF 11 million. You could obviously have two half years like that. What we would probably not do, even though we have a bad half year, is change completely our approach to the risk methodology.
Simply put, is it very smart when you had a low volatility environment in second half 2019 to then say, "I think markets have forever changed, and now I sell my volatility position, and therefore, I will not have again." Probably the more logical thing to do is to say, "No. I was unlucky, but it's definitely not now the time to change it." Having said so, you could have the effect twice. In a best case scenario, if you have twice a second half 2018 scenario, you have CHF 50 million more.
Worst case scenario, you have, I just take the four years. By the way, there were other half years where the effect was even larger in the past 13 years. If you take that as a benchmark, you could say, worst case, I lose CHF 22 million. The CHF 30 million range is a 10% difference, okay?
That wasn't a mathematically derived range. We just said within a 10% range, we believe we get there. We as a management are benchmarked ideally against the CHF 300 million, but we owe you fullest transparency. If we have three weeks as we had at the beginning of the year with historically low volatilities for the rest of the year, CHF 300 million will be very challenging to reach. Never impossible, because we will do whatever we can on the client-serving side to offset it, but it will be very challenging. If you have a week like the last week of January, in the context of the coronavirus market-led volatility increase, it's much easier. Volatility has since then come back again. To be very honest, I've given up as a CEO to predict the market environment.
Because to me at least, equity markets in particular are behaving to a pattern I don't understand. We are sharing with you a bit that uncertainty by giving you a range. It's a 10% range. It's not a mathematically derived number.
Yeah, I fully understand about the trading income, and you talked about trading income was obviously negative in the first three weeks of January, now a bit more positive in the last week. How was the behavior of your clients from the fee income side in this period? Can you give us a little bit of sense how it?
Yeah, I think as you know, last year we came to you, we said after a difficult starting to the year. 6 months later, we could give you the exact numbers. We have not given you any such message, which essentially means that business is doing the way it should behave. With regard to the trading, there is also not really a point of discussing weeks, because this can all change, and it can change within a matter of days. The message here clearly to you is, our guidance is now a range. If you want to budget the numbers on a conservative side, please use CHF 270. If you want to be a little bit more bullish, you can go up to CHF 300.
We will, as a management team, try to deliver within that range. I assure you, if we could, we would prefer being above CHF 300. If we are below, it's not because we have not tried hard enough, but because we had some things which we couldn't control, maybe ourselves directly.
Daniel, if you don't mind, also in the interest of time of all the participants, we'd like to go with a couple of questions from the call. Thank you.
The first question from the phone comes from Andreas Brun from Credit Suisse. Please go ahead.
Thanks for taking my questions. I've also a couple of them. First one, could you share any news regarding new corporations with partners? One year ago, I remember that you stated that you are in late-stage talks. My second question refers to page eight of the presentation. You write about investments in key projects resulting in growth or in growing net profits. Could you share any details? My third question, how much is hedged at the moment by third parties on SHIP? If it is only 1%, as is my best guess, what ratio do you expect within the next 12 months? My last question, how do you assure that third party hedgers will price the hedges on SHIP more attractively going forward in order that the Leonteq share decreases? Thanks.
Thank you very much. I was expecting the question on the partners as question number two. I'm not at the 100% lottery game this morning, but not entirely off. It's a very good question on the new partners, and we debated whether we should give you some sentence there, but then thought that we probably then create even more questions.
We gave you, as you correctly said, the update a year ago that we are in late stage discussions, and then six months ago, we said that the late stage discussions are advanced. The absence of any communication today is not that those discussions have fallen off. They are even more advanced. When we are ready, you will be informed. Okay. I said to a journalist a year ago, we will announce new partners, and I reassure you, we will announce new partners.
Bear with us a little bit. Sometimes our timing does not entirely meet the timing of our future partners, and we will have news, but we don't have news today. New projects, we have a variety of new projects. I maybe just give you one example. We have historically not offered structured products on fund derivatives. Obviously, from a client point of view, this is a huge sector clients invest money into. We have hired a very good and promising team with a long-standing experience from a friendly competitor. They joined us about three months ago, and we have already early signs which are very positive and which suggest to us, as we had assumed, that we will see a good increase in business flow around fund derivatives. There are many more projects that we have now launched.
LynQs is another good example, but of course, some of them show immediate impact, like selling a structured product on a fund to a client shows you immediately the revenues, and other more strategic and take a bit more time, like the LynQs platform. Marco, would you like to add to any on that?
I think there it's very important that over the last two years, we have significantly invested in our technology and platform, and as we expect now in 2020 to recapitalize and take profits out of these investments, particularly in LynQs, which will be rolled out or is being rolled out to our clients, the AMC Gateway, where we hopefully have really now a leading platform in the market, but also the European issuance program and obviously the opening of Milano and Dubai. These are all additional elements which will bring us our top line to the CHF 270 million-CHF 300 million.
On SHIP, we have given you the number. We said about CHF 1 billion of turnover was done on SHIP. You know the other number, about CHF 30 billion. You divide one by the other, you get 2%-3%. That's obviously not entirely reflective of the reality because SHIP was not up and running on January 1st, 2019.
If you want to run those sort of statistics, I would never still recommend you do that from summer 2020 onwards, because it's only when SHIP is up and running. I'll nevertheless answer your question. Let's take as a rough assumption that a bit unclean approximation, you divide SHIP turnover by global turnover over the year, you add 3%. We say the majority is hedged by Leonteq. We don't go to that level of disclosure, but if you were to say two-thirds, one-third, you will not be completely off.
Therefore, you could say within the vicinity, plus, minus of 1% was hedged externally. It's, for me, not the relevant number. What is relevant is the 3%. Any trade being on SHIP, I can easily make sure Leonteq doesn't win it. We obviously see where our SHIP counterparts come in. With hindsight benefits, it's something we also share with them and on an obviously anonymized basis. You can therefore, when you provide hedging prices, more or less assume what you have to do in order to win or lose SHIP trades. At this stage, for us, what was critical is make the technology work. That, for me, was not an obvious thing.
I thought it was possible, it was a risky project because it's one of these IT investments where you spend a lot of money, and you only know that it works when the machine actually shows you a screen which is not stuck anymore. The second priority we have now is to make SHIP a very good platform, and we certainly want everyone to be competitive on it. We, as the sponsor of the SHIP platform, obviously need to start by also having very good prices there as Leonteq. The weekly and monthly developments, as I said before, Andreas, absolutely go into the direction. New counterparties test it. They want to see that everything they have promised works, and they actually see it works. They start making money, and you know how this industry works.
You see more flow, then you are willing to commit more, therefore you are maybe also on average, a bit more price-friendly. Accordingly, the turnover of external parties increases. Leonteq would be very happy if we had, I'd say a number 20%-25% SHIP ratio, heat ratio, and 75%-80% is hedged by external parties. We are very happy for them to win SHIP trades, accordingly, then also make the money, which is inherent in the assumption that when you hedge, you can also make a bit of money.
We have one more question from Mate.
The next question comes from Mate Nemes from UBS. Please go ahead.
Yes, good morning, and thank you for taking my questions. I have three of them, please. Firstly, on the new capital framework, predictable, I suppose, the question. What does exactly mean that you continue operating under the current risk management framework? Does that mean trading and position limits significantly unchanged? Similarly, also counterparty credit risk approach unchanged. Also, does this mean actually you continue reporting your capital ratios and RWAs? I hear you regarding expectations from rating agencies and clients to show solid stance in terms of balance sheet and capital, and your willingness to keep increasing the absolute level of capital in the business. I'm just wondering, what is the minimum level of capital ratio you would aim to maintain or you think clients would like you to maintain in this new regime?
If you could be a little bit more specific in terms of how you see shareholder equity evolving going forward. That is the first question, a bit long-winded. Second one is on dividend policy. Can you clarify what exactly you mean under conservative dividend policy? Is that a progressive dividend policy or what is it exactly? Thirdly, the CHF 200 million cost target for 2020. It's approximately 5% growth, if I'm not mistaken.
Is that mainly hiring or is that like for like higher budgeted compensation, driven by expected revenue growth, or is it G&A cost perhaps further investments? Also in the context of the CHF 270 million, CHF 300 million revenue target. If you end up at the lower end of the revenue targets at CHF 270 million, that would be around 5% growth in revenues. That would also mean not much in terms of positive operating jaws.
Would you be aiming for a below CHF 200 million number on the cost side then? A bit of savings? Thank you.
Thank you very much, Mate. It's a lot of difficult questions you're asking this morning. First of all, let me just clarify. The new capital framework requires you to forget about most of the points you highlighted in your question. Capital as a term we all got used to in the last 20 years when we looked at the security dealer in Switzerland, is no longer a mention. This is aligning, if you want a Swiss framework to the international standards. There are, under the new capital regime, no risk-weighted assets. There is no capital ratio. You have seen on the page 22 what the new standards are. Therefore, we will of course also not report along those lines because it's just not something that as a notion is relevant for security firms going forward.
You probably also have noted that in Switzerland, the banking regulation has changed as far as small banks are concerned. In German, it's called the small banks regime, and those who have applied and will be or have been accepted by FINMA to report under the small banks regime are, for example, also not going to report risk-weighted assets. It's not just that the framework for Leonteq has changed, but the regulatory framework in Switzerland has changed. When you assess Leonteq as a security firm without client accounts, most of the questions you asked, capital ratio, risk-weighted assets, minimum capital ratio, et cetera, are not notions we can use any longer. They do not exist anymore.
What obviously does not change at all, there is also very clear expectations from the regulator in that regard, is that the business needs to continue to be managed prudently, conservatively and in view of any risk the firm might face, be it liquidity risk, be it reputational risk, et cetera. Our communication there is very clear that both risk limits are not changing. If we have, for example, a certain risk limit appetite on volatility risk, to come back to a point we discussed before, then you will not now see Leonteq changing its risk limits in that regard. When it comes to our risk appetite, say about liquidity risk, how we invest our bond portfolio, you will again not see a material change at all.
As the business evolves, you will obviously need to adjust certain of your underlying risk parameters, but that, I would say, is not anything else to what we would have done before. I mentioned it, we will put in the center of our attention a very solid balance sheet, and we will continue with a conservative dividend policy. Now what does that mean? We could have come to you and given you hard, tangible numbers. We could have said our equity base needs to be X, and our dividend ratio for the foreseeable future is a certain % of retained earnings, for example. We have not done that on purpose. First, on the equity base, the message is clear.
It needs to strengthen, but it's today difficult in an abstract to tell you what the right number is because, for example, it very much also depends on how SHIP comes along. I would say the absolute capital level can be a bit lower if SHIP develops very well and should probably be a bit higher if SHIP doesn't develop well, because essentially you are using more of your balance sheet, and therefore you want the solidity and strength of the balance sheet to be higher. On the dividend side, again, it's very much obviously a function of absolute net profit, but it's also a function of the wish to get to a certain absolute capital level faster or slower.
I think the benchmark and the assumption you should take is you have a board and a management team which wants this company to become unquestionably the reference counterparty when it comes to structured product. Probably not the only one, but one of the top three reference counterparties. What would you want to see as a counterparty in terms of Leonteq's capitalization? That's probably the starting number. We think that number is higher than today. We, however, also highlighted to you that it's not only shareholders' equity we are looking at, but also the defferred income. We are now taking the two together, CHF 770 million. We started the business with CHF 10 million.
We are telling you CHF 770 million is maybe not yet quite enough, but we are certainly also saying we are very well capitalized, and it's not exactly that we will need to have one day CHF 10 billion of shareholder equity. As if and when we reach the levels where we feel confident that we have answers to the satisfaction of all the counterparties, the question of what they would like to see, we will, of course, then also be able to eventually look at a more progressive dividend. As always, I need to make in my function a disclaimer here. This is a decision that the board takes and a decision that shareholders finally have the last say on in the annual meetings.
Mate, with regards to the question to the CHF 200 million cost. In 2019, we have anticipated there or given a cost guidance of CHF 200 million. We always said that we would have some flexibility, assuming top line would not development to our satisfaction. That's exactly what you see now in the full year 2019 results with a cost base of CHF 191 million.
We have meanwhile increased the number of full-time employees from 486 at the end of 2018 to 508 at the end of 2019, which implicitly also increases the fixed costs in terms of personal expenses. We have taken this into account. We feel comfortable with the guidance of CHF 200 million, and yes, we would have some flexibility obviously, and we would manage costs based out also on the development of our top line for 2020 as well.
Excellent. Thank you both. That was helpful.
Thank you very much. With that, we thank you for your attention and close today's press conference.