Earnings Call: H1 2020

Jul 28, 2020

Ladies and gentlemen, a very warm welcome and thanks for connecting to Fronthopel Half Year Results Conference. Thank you also for taking the time in this quite special circumstances. I am here together with Martin Sieg, our CFO, who will move on to different things in life after today's conference. I will say a few words of appreciations at the end of our conference. I'm also here together with Thomas Heinzl, our new incoming CFO, who will take over after today's presentation. Despite the special circumstances, we will follow more or less the regular script. So I will kick off with the highlights about half year closing. I will then also comment the status of our transformation into a pure play buy side investment firm, where I will focus on the long term levers for growth. After that, as usually, Martin will share with you the details and all the numbers on half year closing, and then I will be back very quickly on targets and on outlook and how we have started into the second half year. After that, we will all be happy to have your questions. So let me kick off with the most important point of view from my point of view. Our transformation into a pure play buy side investment firm is, a, on track b, it has proven to be very resilient and robust during very unprecedented times and C, it landed itself very nicely to organic growth, and it will continue to do so going forward based on our 4 strategic levers. Now let us turn to the facts and figures that underpin this assessment, And let's turn to Page 4 of our presentation. So our advised client assets have rebounded nicely to CHF 218,600,000,000 in advised client assets. Assets under management are back to CHF193.1 billion. We have been we are very happy with the trust that clients have put in us. So our net new money is at SEK 7,400,000,000 which translate into an annual growth rate of 7.5%, above our own ambitious target range. Operating income is flat at EUR623,000,000 with a higher income quality and slightly up on a recurring and adjusted basis. Profit before tax is up by 4%, respectively, 6% on an adjusted basis. Group net profit due to an uptick on the tax side is flattish at CHF 129,200,000 translating into earnings per share of CHF2.18. Percent. Return on equity remains resilient and strong at 13.4%, a bit below our own target, but I would say at very decent level given the current environment and also against the backdrop of another step up in our capital position with CET1 at 13.8 and Tier 1 at 20.2. Let me list a few key points for the half year numbers. As I have stated in the introduction, the strategic realignment announced in December 2019 is largely implemented and completed. And I think the performance of H1 confirms the viability of this strategic direction. We have been resilient during the corona crisis. We have been fully available seamlessly at the disposition of our clients, both from a presence perspective as well as technically with all our processes on a global basis. And I want to extend a very big word of appreciation and thanks to all our team members and partners within Vontobel who have done a really remarkable job during lockdown and during COVID. We were also very happy on about the very strong technical platform in which we had invested consistently over the last years. So we could now leverage on some of the facts like that all our workstations are globally run on a Swiss private cloud. Our digital onboarding process is live and working. So the investments towards more technology have started to pay off as well during COVID. Strong net new money, as we already saw, with 7.5% growth, Worthwhile to mention positive across all asset classes. So net new money in both fixed income equity and multi asset class that obviously also contributes further to the diversification of our business, but obviously also implies a different business mix, but which is more stable and more resilient through the cycle. Good return on assets with a very large proportion of stable recurring commission income and Martin will shed a lot more light both on the levels as well as on the composition of our margins. Recurring revenues in our core businesses, even slightly up due to higher average assets under management. Transaction based revenues, obviously, positively impacted by market volatility, but to a lower degree than perhaps in some industry perspective as we have a higher much higher degree of assets under mandate and as also the Lombard loan penetration of our wealth management book is lower and therefore, there was less need for high transaction activities. On the risk side, we protected our conservative risk profile also during COVID. No credit losses, which is a strong proof point for both the conservative approach on Lombard lending as well as for the soundness of our operational processes. And also going forward, no exposure to corporate lending. We are not exposed to the looming impact on European and Swiss Banks due to the expected recession. Therefore, also risk weighted assets are in line with end December 2019 numbers. So much for the highlights on the half year numbers. Let me turn to the strategic levers going forward. First point I want to stress is our announcement of last December is not to be seen as a U-turn, but as a further though significant, but simply as a further sensible step on our journey towards becoming a pure play buy side investment manager. We have been successfully on this journey now for more than a decade delivering growth in advised client assets of 11% on an annualized compounding basis and therefore doubling the natural growth that was provided by the global market for wealth. We now turn to that next phase to become this pure play investment manager and we stress 4 strategic levers. We are both client centric and investment led. We see this as two sides of the same coin by truly understanding the needs and requirements of clients and answer their requirements with convincing investment propositions. We believe in technology. Technology enables us to be more relevant, to be more specific, to be more proactive in the client experience, and it helps us to distribute our content and our offering on platforms, ecosystems, which would not be accessible without technology. And we are committed to our great people. We are powered by people. People will continue to make the difference in our industry. And actually the more investment led you are, the more client centric you are, the more technology driven you are, the more important people are, and we are aware of this fact. In order to reap the full benefit of this strategic direction, we have also adjusted our operational model as shown on Page 8. So we have moved away from the classic silos that our industry was used to and have built an organization where client needs meet our capabilities and investment propositions directly. Therefore, we have structured our distribution efforts in 4 client units, asset management and the other ones, and I will get back to them in more detail. And we have concentrated our expertise in centers of excellence. The most important and key one, obviously, our investment organization that rests and will rest anchored in our multi boutique approach, comprising more than 300 investment professionals located from New York to London to Zurich to the emerging Asian investment hubs. Structured Solutions and Treasury, which continues to provide risk management offering to our clients and the market leading offering in B2B Structured Investment Solutions and obviously, technology, which underpins all endeavors across our firm. We also strongly believe that this brings the benefit of giving every specialist an area where he can truly feel at home, but at the same time, a level of collaboration that makes it possible to produce the solutions our clients are looking for, and it's also a work environment that attracts the next generation of talent. All our client units tap into significant and growing pools of assets and fees. Asset Management obviously remains focused on the very well known client groups from pension funds to plans funders to insurance companies to the global banks and global buyers of investment funds. Our asset class specialization, our boutique approach and our global sales model has proven to be very successful and very robust. We continue to invest in regions, U. S, Asia, Japan and additional European countries, and we continuously develop the Global Bank client segment. On the platforms and services we focus on smaller intermediaries, IFAs, external asset managers in a selected number of markets to whom we bring the overall offering and for Fronthobel, and we continue to provide to be the leading B2B provider of structured products, including our market shaping platform territory. Wealth Management will continue to be an employer of choice for the best RMs in the industry. We continue to invest in our footprint. We continue to invest in selected focus markets. As an example, our recent announcement of our local advisory and service hub in Milan, and we have the breadth and the capabilities to address increasingly also ultrahigh net worth individuals with an investment led offering. In digital investing, we have pooled everything that touches the client digitally, Everything that reaches out directly to the self directed client, to the end investor on digital channels has been pulled in this client unit. We have a very strong public distribution footprint in Europe, Switzerland and in Hong Kong, and we will build from that position of strength. This position of strength is further underpinned by the current diversification of the book of business as shown on Page 10. So very strong international diversification when we look into client domicile with 90% of the business from our focus markets. And a true proof point to our positioning as an investment firm, over 86% of assets are under mandate, so either discretionary or advisory. So we have largely moved on from being solely an execution custody or leverage platform, which was the old banking model. Core for that journey going forward is obviously our ability to produce business Fontabel has ever displayed. So with a strong footprint on the equity side with 2 boutiques, fixed income, 2 boutiques and the large book of multi asset obviously also incorporating our offering for Wealth Management clients. On the behind this multi boutique approach are these 300 investment managers. And to give you a small example on the trust and the endorsement we get from clients, in H1, Vontobel has been number 2 in Pan European Fund Flow, so a very strong endorsement by our clients. Another key offering is our ability for structured products, both in Switzerland as well as in Europe and Asia, where we have been able during the crisis, during a crisis of extreme stress during COVID to expand market shares in each and every market where we are present. It's obviously not only the breadth and the diversification, but also the quality of the book of business we have. And we continue to enjoy strong medium and long term performance. We have all witnessed a phase of severe market stress, and we all remember days when gold, government bonds and equities all went south. So obviously, these phases of liquidity stress are not always the best to recognize and discern quality, but we're very happy that all our investment processes have proven to be robust, have proven to be repeatable and investment returns and performance quality is in line with our expectations going forward, and we will see through this phase of market dislocation. And I think the flows that were positive both in Q1 and Q2 are testimony to this conviction. On top of the performance quality, it's also important that your capabilities are anchored in areas of global capital markets where clients see future return potential and where client demand is. And we think we have a very well established capabilities in significant pockets of demand. Emerging markets, which is given global GDP and global demographies, very strong contender for mid term to long term growth. We are one of the most distinguished emerging market managers, both on the equity side as well as on the debt side, a fact we are very happy and proud about. ESG is increasingly becoming a global phenomena and is increasingly going mainstream. We have been ready for that since the early '90s when we started, and we are recognized as one of the leaders in ESG running more than €30,000,000,000 in ESG compliant assets, and we are also being recently nominated by 1 of the leading industry associations as one of the leading Swiss provider of ESG solutions. Fixed income, what COVID has shown, lower interest rates are here forever. They are here at least lower for longer. And obviously, in that environment, both multi strategy funds as well as credit linked strategies are key and the success of our 24 asset management boutique is testimony to that with strong results for investors, strong protection for our clients and also strong net new money. Multi asset, a key component already in our flows and also one going forward as obviously portfolio construction has become very demanding for clients as expected returns in all classic asset classes are lower. We have now crossed the 3 year benchmark in our 3 alpha proprietary investment approach that we offer exclusively to our wealth management clients. We're very happy with the track record and we're very happy with the level of endorsement, both on the advisory as well as on the discretionary side. So strong match between client demand and proven capabilities, which is a sound basis going forward. That's it from my side on an update on where we are transformation to this pure play investment firm and what the key levers for future growth are and will be. With that, I'm happy to hand over to Martin, our CFO, for the financial results in more detail. Thank you very much, Tena. Good morning, ladies and gentlemen. I would like to start my presentation by looking at the development of advised client assets on Slide 15. For Van Toebel, as a Wealth and Asset Manager, advised client assets form the basis for the continuous generation of fee income. Consequently, the volume and composition of those assets are important factors determining our success. Advise client assets were down significantly at the end of March compared to the level at the start of the year, but recovered during the remainder of the first half of twenty twenty. As of June 30, 2020, Advise client assets totaled DKK219 billion, coming close to the level at the start of the year of DKK226 billion, as you can see on the left hand side of this slide. The decrease of 3% or €5,500,000,000 in assets under management was driven by negative FX impacts of €4,500,000,000 as well as negative market performance of €8,400,000,000 This was, to a big part, offset by strong net new money generation of €7,400,000,000 corresponding to 7.5% growth annualized, exceeding our ambitious target range of 4% to 6%. Let's have a closer look at the net new money flows in the first half of twenty twenty on Slide 16. Confidence into the quality of our investment solution is reflected by the strong net inflow of new money. Our institutional clients, in particular, with their high demand for our investment products, demonstrated their trust in our long established stable investment processes and our investment expertise. In Asset Management, our expanded global sales network also had a positive impact on the growth of net new money, which totaled 11.5% on an annualized basis in the first half of twenty twenty, significantly exceeding our target range of 4% to 6%. Platforms and services. The second area serving institutional clients also achieved good inflows. It offers services for financial intermediaries, especially external asset managers and banks. At EUR 400,000,000 or 4.8 percent on an annualized basis, growth in net new money in platforms and services was within the target range of 4% to 6% in the first half of twenty twenty. At the same time, private clients around the globe adopted a mood of caution during the market crisis caused by the corona pandemic. In addition, health related measures as well as travel restrictions that were necessary due to corona significantly hampered the acquisition of new money from private clients, and this also impacted on growth in net new money. Therefore, total net new money in Wealth Management was SEK 300,000,000 corresponding to an annualized growth rate of 1%, which is below our defined target range. As you can see on the chart on the right hand side, net new money was well diversified with all asset classes recording positive flows, especially fixed income continued to attract very good inflows despite market flows in the industry generally being hit hard during the corona crisis. Please turn to Page 17. Assets under management comprised around 70% institutional assets and 30% private client assets at the end of June 2020. Compared to the end of 2019, assets under management declined by 3% as strong net new money partially offset FX effects as well as negative market performance in all asset clauses. Compared to June 30, 2019, AUM increased by 4%. The average assets under management in the first half of twenty twenty reached EUR 191,000,000,000, exceeding the average of EUR 180,000,000,000 in the first half of twenty nineteen by 6%. On the institutional side, assets under management declined by only 1% in the first 6 months of the year as the boutiques in asset management continued to attract strong inflow of new money. The development of private client assets of minus 5% compared to the end of 2019 not only reflected difficult markets, but also the general mood of caution among wealthy private clients. The chart on the right hand side gives you an overview of our well balanced asset base. In recent years, we successfully managed to broaden our asset base in terms of asset clauses. The assets under management are well diversified by asset clauses. At the end of June 2020, dollars 106,000,000,000 or 55 percent of assets under management were invested in multi asset clause products, 23% in fixed income products and 22% in equity products. Let's have a look at the gross margin development of the different client units on Slide 19. Overall, recurring commission income was very stable in all asset linked businesses, contributing 89% of commission income. This figure is testimony to the business model of Von Tobel as a wealth and asset manager. While contributing to the long term growth at low volatility of revenues in an absolutely exceptional semester like the first half of twenty twenty, a more trading fee based model would have been more profitable. We are, however, convinced of the long term superiority of our model and envisage no changes at all in this respect. In Asset Management, the gross margin of 42 basis points was year on year due to minor shifts in asset class composition as well as due to lower performance fees. In the business with external asset management clients and wealth management clients, transaction based income increased and compensated for lower interest income related to lower United States dollar rates. Let's take a closer look at the development of operating income on Slide 19. Operating income was flat year on year. On an adjusted basis, when excluding the effects of the 1 off 6 dividend in the first half of twenty nineteen, operating income increased by 1%. Revenues of the divested brokerage business were fully compensated. If we adjusted operating income also for those revenues, it would have increased by 2%. Commission income representing the largest income component at 67% of total operating income was up by 2% or $6,900,000 89% of commission income is recurring, which, as mentioned before, demonstrates the high quality of Vontobel's revenues. In the first half of twenty twenty, interest income represented only 6% of total operating income. Interest income decreased by €8,000,000 reflecting the 1 off 6 dividend of €6,900,000 in the first half of twenty nineteen and lower United States dollars interest rates. Trading income was down by 1% as higher volumes could not fully compensate the increased hedging costs to maintain a cautious risk appetite. However, the different client units performed under the new positioning as a pure client centric investment manager? Please turn to Page 20. In Asset Management and in Wealth Management, the higher average asset base compared to the first half of twenty nineteen led to higher revenues. In Asset Management, the higher asset base, thanks to the quality of products, the robust investment performance and strong net inflows of new money, led to an increase of 4% in operating income compared to the prior year period. The systematic client focus and ongoing enhancement of the advisory process in Wealth Management are reflected by further growth of 2% in operating income to EUR216,000,000 despite the very difficult market conditions. Digital investing benefited from high demand in leveraged products, resulting in an increase in operating income by 4%. At the same time, Platforms and Services felt the risk awareness of clients related to structured investment products. Operating income, therefore, decreased by 5% to EUR 73,000,000. The positioning as a client centric investment manager becomes also visible by looking at operating income by centers of excellence. In the first half of twenty twenty, nearly 78% of revenues were generated in investments, up 4% year on year. 23% of operating income stems from Structured Solutions and Treasury. Operating income in this center of excellence was slightly down despite good trading volumes in leveraged products as it was negatively impacted by lower demand in structured investment products and increased hedging costs. Now let us turn to Vontobel's expense side on Slide 21. Operating expense declined by 2%, driven by lower direct expense in clients' units and centers of excellence. From a cost category perspective, lower operating expense was driven by reduced general expense and depreciation. The impacts of the lockdown were visible in this context with a 34% reduction in travel and representation costs, public relations and marketing expenses in the first half of twenty twenty. At the same time, technology costs rose slightly on the back of ongoing investments in technology. Personnel expense were down 1%, in line with the average FTE despite implementation costs of our new organization model recognized in the first half of twenty twenty. Looking at the development of pretax profit on Slide 22, you can see that it reached point 1,000,000 in the 1st 6 months 2020, up 4% year on year. The cost income ratio improved slightly driven by somewhat lower expenses. At 74.7%, it still stayed above the target of below 72%. The trade off between growth ambitions and cost efficiency remains a challenge. We have always emphasized that Vontobel would not forego long term opportunities for growth to achieve short term cost savings. Therefore, despite the difficult market environment, we are continuing to invest in all our businesses while, of course, pursuing an entrepreneurial approach to cost management. Adjusted for one off items, pretax profit increased by 6% compared to the prior year period. One off items in 2020 were limited to the €4,100,000 of costs for the realization of synergies in the different business areas from the new for the new strategic setup announced last December. Synergies are captured mainly in marketing and analytics. When taking constant currency rates, the pretax profit would have been up by 10% or by 12% even on an adjusted basis as the Swiss francs strengthened and 60% of revenues are generated in other currencies. Additionally, costs are more concentrated in Swiss francs. Slide 23 summarizes the financial performance of Vontobel in the first half of twenty twenty. Group net profit declined slightly to €129,200,000 In this context, it is worth mentioning that taxes were up by 46% year on year. In the first half of twenty nineteen, Bontal benefited from deferred tax assets in Germany and the U. S. Tax refund. These effects helped to drive the first half twenty nineteen tax rate down to 12.3%, while the first half twenty twenty is in the expected range with a 17.3 percent tax rate. Group net profit, excluding minority interest, was $121,600,000 minus 2%. Earnings per share were 2.18% minus 2% or flat on an adjusted basis. Return on equity decreased by 13.4% in the first half of twenty twenty excuse me, decreased to 13.4% in the first half of twenty twenty compared to 14.3% in the first half of twenty nineteen. Our midterm target is to achieve a return on equity of at least 14%. Let's now turn to Page 24. The CET1 capital ratio at the end of June 2020 was 13 0.8%, 0.3 percentage points above the CET ratio at the end of 2019. The total capital ratio was 20.2%, up from 19.9%. Both ratios significantly exceed the minimum requirements defined by FINMA, which are a CET1 ratio of 7.8% and a total capital ratio for a Category 3 bank, including Vontobel of 12%. Vontobel will maintain its solid capital position that significantly exceeds regulatory minimum requirements. Vontobel's very solid capital position is also reflected by the equity ratio of 6.1 percent and the leverage ratio on the Basel III of 4.8%. With that, I'm at the end of my remarks. Thanks for your attention. I will hand back to Benno. Thank you, Martin. So I'm back with an update on targets and outlook. So as Page 26 shows, we are in line with our 2020 targets for net new money for capital and for the payout ratio. I think especially the net new money target within this current environment is a very solid and strong achievement. Obviously, we could not match the top line growth revenue target in a COVID semi half year, but we do not run this company for quarters or half years, but for the long run. Profitability wise, we are pretty close to target, especially on the return on equity side. We miss the increased target on cost income ratio as we continue to balance investments in future growth with our commitment to entrepreneurial cost management, and we will continue to do so. As we have shared with you in the past 3 year targets, we went into a thought process how to move on from here and we actually decided now to move to a 2 year cycle. That does not imply that Fronthorpe becomes more short term. The contrary of it, as we have now in a very clear and razor sharp level defined our long term ambition to become that pure play investment firm based on 4 strategic levers, we learned from the experiences that then we become more agile and more faster in implementation if we set ourselves 2 year intervals on the journey towards this unmovable, unshakable long term goal. And that's why we have implemented a 2 year planning cycle, and we will share more details with you on our Investor Day in September. So we decided to continue with the same level of ambitions in our targets despite the impact of COVID. So we come back and commit to the same growth ambitions both on the top line as well as on the net new money side. We also deliberately stick to a net new money target, and we also stick to the same profitability ambitions with a return on equity above 14% and a cost income ratio scaling below 72%. We also stick to capital and dividend policies. So we stick to our CET1 and total capital targets, which we comfortably match, and we also stick to a dividend policy that we will pay out under normal circumstances at least 50% of profit to you as our investors. How do we move on from here? Page 29 shows a very strong base, which is the current trust by our clients to us with the assets under management. We actually expect an environment, lower rates for longer, very complex risk and capital allocation decisions that the demand for high class investment advice and high class investment solutions will only grow. Saving as a method to move capital through time is dead. The only way to move capital through time is proper investing and that's what we are here for. We also believe that technology will further enable our journey in all the dimensions I have already discussed and described. So we will continue to invest in our footprint in distribution in asset management. We are now in a position to serve the important segment of global banks in all the 3 major theaters: Asia, Europe and the U. S. On the Wealth Management side, we will continue to grow into additional segments, and we will continue to hire experts in this area as we have just shown now with our move in Milano. And we will also update you further in H2 on how we further invest and deploy our ambitions on the digital investing side. How have we concretely started in July? We had a good start into the second half year. We continue to attract net new money. We continue to attract to generate organic growth. We see very similar patterns in our net new money generation ability as in H1. As usually at this time of the year, I like to remind every one of us that July August December usually happen in the second half year. I'm confident that it will be the case also this year. Nevertheless, we are happy with the 1st weeks of July and how von Tobel has performed. So ladies and gentlemen, that's it from our side with an update on strategy and half year numbers. Martin, Thomas and I are happy to take your questions. We will now begin the question and answer The first question comes from Nicolas Hermann from Citi. Please go ahead. Yes. Good morning, and thank you for taking my questions. Just to clarify, first of all, you can hear me all right? Yes, we can. Great. And before I start my questions, can I just offer my best wishes to Martin Sieg for the next chapter of his career? Just want to thank him for the clarity of vision and explanations over the last several years, and we've appreciated working with you. In terms of my questions, can I just start please with Wealth Management NetEumoney? I just want to understand what's going on there. I would have thought that in an environment with low rates and search for yield that would be incredibly conducive to advice and for wealth management. But if I look at peers, you've significantly underperformed them despite the same COVID impacts. So I'm just curious what clients what regions are you particularly subdued? And do you think you might be underperforming peers, please? That's question number 1. In terms of question number 2, asset management. Your performance if I look at the performance in equities, the 5 year track record is strong, but the 1 3 year records are weaker. And if your clients, is it the 5 year or the 3 year though is more important? And at what point do you think that could potentially start to impact your flows there? Question number 3 on digital investing. Are you happy with the results in structured products trading? I mean from the metrics I track, it looks like your structured products turnover in first half was much higher versus prior periods. But both the digital investing and the platforms and services revenues were kind of flat year on year. So I just want to understand what's going on there? And finally on capital, could you just explain market risk, please? I'm surprised that particularly market risk RWA fell in the first half versus December and despite the significantly higher volatility that we've seen this year, not just in equities but also sick buses? Thank you. Can you quickly repeat the last questions? I'm not sure we got it all. Just on market risk dynamics, I'm surprised that market risk RWA fell in the first half, 1st December despite significantly higher volatility in asset classes, not just equity. Sorry. Was that clear? No. Okay. I'll try one more time. Yes. I was surprised that market risk, RWA, fell in the first half versus December despite significantly higher volatility across asset classes, not only equities. Okay. I got the question. Yes. Sorry for our stubbornness. Now we are fully with you. So I will kick off with Wealth Management, Asset Management and a quick remark on the digital side, but then I will hand over to Martin to shed more light on the factors behind the revenues in digital investing and also the general comment on market risk. So Wealth Management and New Money, yes, we are below our own ambitions. That's fair. We are aware of that. We are confident that lack of ability to interact broadly. I mean, we had trading bands to many of our focus markets outside of Switzerland. We had severe restrictions in visiting and executing touch points with private clients. We also learned that actually the institutional B2B marketplace has already moved heavily to digital touch points anyway. So web conferences, web calls are there already very, very common. That's not so much the fact on the private investor side, especially on the higher end also of the spectrum where our core activities are. So we lost pipeline and momentum as we could not execute on some of the usual client touch points and client interaction platforms that we are used to have. So that was one of the fact that obviously impacted also heavily some of the emerging markets where we are active. So travel restrictions into these country limited growth. That was the main reason from our reading on the facts and figures. So going forward, we should move into more benign and more broader based going forward. We benchmark client service and we benchmark performance. So we have no issue on the client service side. We got very strong feedback from clients. We did a survey also now deliberately during COVID. So we got very strong endorsement, very strong quality feedback from clients. And when we benchmark performance on the advisory and on the discretionary side, we are very we're doing very well as well. So we should not only should, we do have all the ingredients to underpin growth going forward. So let's turn to Asset Management. We show obviously the average number across all equity products. What we have seen and we are very happy and also to a certain degree proud about that, Clients really look at long term performance and they also really look at the consistency of the performance quality with the promised investment style and the promised investment approach. And as we are very style consistent, people understand and follow us through the cycle. So we do not see broad or significant money at risk. We have also a very when we look at the main growth products, especially MTX emerging markets equity to cite one example or then global equities from the global quality growth side, Performance wise, we are very fine. So when you look at the details of the book of business, we are fine on the core growth products. And second, we have the understanding of our clients to look through the cycle. Nevertheless, obviously, I mean, you've seen the growth in asset management, 11.5%. Perhaps a linear extrapolation to the second half year is a little bit bullish, but we have a very strong pipeline. We're very confident we will continue to be able to deliver growth given all the informations and the circumstances we have today. So digital investing, yes, there was a demand, but there was also increased hedging costs to underpin unchanged risk profile. And as you have seen, it even certain risk metrics even fell. But I would like to hand over to Martin Sieg why we were willing and happy with incurring higher hedging costs that were eating up some of the increased volumes. Yes. We've had slightly higher hedging costs during the first half of twenty twenty due to the fact that we wanted to reduce positions to remain within our conservative risk appetite. This is normal in such a business environment, and it is also the explanation for your last questions on the risk weighted assets. Obviously, our market risk weighted assets risk weighted assets for market risks went down from €1,700,000,000 at the end of last year to €1,500,000,000 by mid this year. Remember, we are using the standard approach under Basel III to measure these risk weighted assets. And in this approach, the risk weighted assets are purely a function of positions that we have on the balance sheet. The volatilities that you see in the market data do not enter our risk weighted assets calculations. Therefore, the lower market risk weighted assets are testimony to the fact that we reduced our risk positions in the first half of twenty twenty. If you look at the value at risk, which is on Page 18 of our half year report, you see that it increased in the first half of twenty twenty. There, you have positions as well as market volatilities entering the formula for the value at risk. And therefore, you have this discrepancy between the 2. Got it. And then just a follow-up on the wealth management net new money point, please. I think your point that the client service advice and discretionary is all looks to be fine. Can I just confirm then that it was no lack of technical ability functionality, I guess? Because as I said, I'm just surprised if I look at what your peers have managed to deliver in terms of net new money despite the same headwinds or obstacles to clients' interaction, it's just a bit of a surprise to see such low net new money. And I guess it does kind of what can you say to convince the market that your investments are actually going into the right areas to be able to support digital interactions with your clients? Yes. Perhaps one general comment. We, for many years, give you separate numbers for the actual end client business as well as for the B2B intermediary business that the whole industry is reporting as one wealth management business. And when you then blend the growth rates, I think we're not beating the industry, but we are much closer to what you have seen in the industry on a general level as our B2B intermediary business, which everybody else reports as Welf mentioned too, is actually growing at 4.8%. So if you blend that together, I think we are keeping up with the industry, but that's not our ambition level. We want to beat the industry. So just that as a point that I would recommend considering because we have just seen very different behaviors from institutional business partners than from private partners. And we I can happily confirm there is capabilities that we think we are missing in order to unleash more robust and more diversified growth. Okay, fine. Thank you. The next question comes from Daniel Reglijs from Octavian. Please go ahead. Hello, good morning and thank you for the presentation and thank you for taking my questions. I have five questions, if I may. So the first is a little bit of follow-up on net new money in Wealth Management. Obviously, your net new money number has been a little bit lower in Wealth Management over the last couple of semesters. Now obviously, this time, last year, it was mainly driven by acquisition related outflows. Now this year, it's obviously related to COVID-nineteen. Is it fair to assume that we should see now, let's say, an improvement in the net new money number in H2 20, given or assuming everything stays, let's say, quotation marks normal? Then the second question is on the gross margin in Asset Management. Obviously, you have well explained the year on year move on the gross margin. However, I wonder about the move versus the second half year in 2019. Could you remind me of what was the driver of, let's say, the exceptionally high gross margin in H2 2019? Then third, the H2 and how shall we think about the costs in H2, particularly also since we had quite a bit of special moves on the cost line in H1, driven by the COVID-nineteen pandemic, particularly on travel expense as well as on IT investments. And then 4th, capital. You're now well above your capital targets, both on total ratio and CET1 capital ratio. How do you think about using this excess capital either for investing or for, let's say, higher payout to shareholders? And then, please and last, just a quick one. I'm not sure whether I understood you right, but I think you only commented on net new money trends having been relatively positive in H2 with similar patterns. So first, I assume that net new money into asset management has again been relatively strong. And let's say net new money into Wealth Management relatively muted? And then secondly, can you also comment on the client activity into H2? Have clients remained active? Or has this dropped off from the levels we have seen in H1? Thanks. Good. With Martin and I, we'll struggle to get through all your questions, but we will give the best. So net new money in Wealth Management, yes, it is our clear conviction that we have everything in place that we should rebound from where we are. It is fair to say that we had to digest the last few semesters, we were digesting integration efforts, which took more effort in onboarding all the clients to our platforms and our offerings and our products. And now we were hit and limited by COVID restrictions. Going forward, now obviously, we all do not know what governments will enforce in terms of further restrictions on travel or marketing activities. But given the set of information we have today, we would expect a stronger development of net new money in H2 and going forward. Gross Margin Asset Management, I think it's a combination of things. I'll start with a few points. Then Martin, I'll ask you if you have additional points to add. But two points, one is performance fee, which we collected strongly. I mean performance fees at Frontobla are always a very small part of overall revenues, but nevertheless, we miss 1.6 basis points from performance fees. And the other big driver is actually the business mix. As we have stated here several times, we have deliberately broadened the business mix to be more stable through the cycle. And we also were always very clear that both fixed income as well as multi asset class does not come at the margin levels of equity. And we had both in H2 2019 as well as in H1 2020 significant inflows on the fixed income as well as on the multi asset class side and that obviously contributed to that margin development. And thirdly, another small point is we have seen quite a rollercoaster on asset basis, and obviously, fees were also calculated and collected at lowest at levels in March, which then obviously impacts then the rest of the year in terms of margin. I think that's what we have to say on gross margin AM. What I can happily confirm, when we win new business, we are happy with the price points. We can enforce both on the equity as on the fixed income as on the multi asset cost side going forward. Anything to add from your perspective? Nothing to add, no. Nothing to add, no. Yes. Then I will cover capital, and then I will hand over to you in terms of H2 cost. So capital, you will be disappointed and bored, but that we are actually happy with the capital ratio. So you should not expect any pressure on our side from feeling pressed, pressured to hand back capital beyond our standard patterns. Do not forget that we have a main and controlling shareholder that has a very long term commitment to this firm and that obviously would pay taxes between taking back capital and then if we would need it for an acquisition of a future growth, that is not very efficient. So you have to entrust us with slightly higher capital ratio than perhaps some of our more broadly listed peers. But I think we have proven historically that we do not burn capital. We have also an unchanged M and A policy. We continue to look at M and A. We are happy to buy both on the asset management or on the wealth management side. We would also be happy to buy skills or platforms that could help us on our digital journey. But what I can surely say, we have become we have always been selective in the past, and we have become even more selective going forward. And we will be cautious stewards of the capital position. I think the capital position is also a very sound underpinning of our dividend commitment, especially in times when there is a very significant regulatory pressure on abundance of capital and liquidity. Martin, may I quickly hand over to you for H2 costs? Yes. Thank you for your question, Daniel. The costs are down €12,000,000 in the first half of twenty twenty relative to the second half of twenty nineteen. There's no real special one big story explaining these EUR 12,000,000. It's just a number of components. Personnel expense is down on lower FTEs by roughly 1%. FTEs are lower. General expense is, as explained before, down by COVID. We were not traveling. We were not having many events for the benefit of our clients. And then depreciation is also down slightly as depreciation tends to decrease when you invest a little less than you invested in the past. So these are the main drivers, nothing really special. May I quickly come back to the question on the capital maybe? I don't know if I want to press or push for a higher payout, but obviously, you're giving capital targets of 16% relative 12% total capital ratio, respectively CET1 ratio. And I'm just wondering, at what level do you plan to go with I'm just yes, I'm just wondering if you can comment on this. Yes. I think it's a fair question. It's surely a point that we will have to take with us and think about it as we move through time. We also have seen in the last years strong growth on more capital light business models, and that's also where deliberately invest and stress. So that should help our ability to deliver return on equity also against the very strong capital positions. But as you have seen, we maintain our commitments to a return on equity against the capital ratio. So you can assume that we are aware of that trade off, but there is at this point in time, no more no further guidance on this. So let me move to your revenue question. Perhaps 2 aspects of it. You asked about client behavior in H1 versus H2. So H1 client behavior, transactional wise, only relevant is obviously wealth management and client trading activities, strongest actually, client trading activities, strongest actually on the digital investing side. That's where we show a lot of the revenues from structured products that we generate by selling these products directly to self guided investors who interact with us through digital channels. You see that we have grown there year over year. So in that business, we had a very strong demand and we profited from that trading environment. And that has contributed also to the fact that you have seen that our trading income is flat year over year, robust, stable and delivering very, very strong also returns on allocated equity. In terms of wealth management, there we have moved 3 years ago, 4 years ago to a pricing model that has shifted towards recurring fees and away from transactional pricing. I remember the discussions at that point where in this very room here at the time when we happened to meet physically, we got challenged, do you not miss upside in very trading intensive environments? And we were arguing, yes, we are aware of that, but we think that recurring fee schemes are better in interest alignment between clients and us. And I think now we have where who says A has to say B. We are actually very happy with saying B because the interest alignment and the income quality of 90% recurring is more worth in our minds than 3 or 4 month miss in a very special trading environment such as COVID. And then in platforms and services in Q2, the demand for structured product was a little bit lower than in Q1, but not to relevant levels as you've seen with the very stable revenue development. What do we see now? It's not to use your words in July, it's not a drop off. So it's not a drop off from activity levels that we have seen in H1, but it is summer lull. But it is sensible patterns in terms of client activity, but also the clients have realized that summertime has arrived, but no drop off. Okay. Thank you very much, Gentlemen, so far, there are no more questions. Good. I get no more questions from the conference. Then it is time to say goodbye, Martin. Thank you for your 12 years with Vontobel and for 10 years, the 2 of us together reporting to our esteemed investors and shareholders and analysts and to the public. I think both the visitors on this conference as well as me always appreciated your very rare combination of an academic sharp mind with a very strong practical background. And actually, you have done everything in your life yourself, what we do here at Vontobel in almost each and every business line and this combination has been very, very helpful for the journey of Vontobel to make you a challenging and pushing but always very reliable sparring partner and friend now in your next phase in life. We wish you all the best. We are happy that you stay in the broader universe of the Von Tobel family. And I do already, to a certain degree, look forward to your challenges as a continuing personal shareholder and as a representative of our main shareholder going forward. Thank you for all what you've done. Thank you very much, Tenno. I'm grateful for an excellent time at Von Tobel. It's been almost 12 years in which we achieved enormous growth and at the same time had no accidents, neither in the financial crisis nor in the COVID crisis. I'm happy now to remain committed to Van Thobel in a new environment, working for Hans Dieter Van Thobel from 2021. And I'm happy to hand over to Thomas. And with that, I'd like to take the opportunity to thank all of you on this call for the professional and fair coverage over the course of the last 12 years. Thank you very much. We'll meet again. Thank you. Good. Then that's it from our side. Thank you for your time. Thank you for your continued interest in Vontobel and we wish you all a successful day.