Substantial rise in savings balances; strong pressure on securities commission

Transcription

1 HOOGE ST EENWEG JN S-HERTOGENBOSCH POSTBUS HC S-HERTOGENBOSCH T + 31 (0) F +31 (0) vanlanschot@vanlanschot.com KVK S -HERTOGENBOSCH NR PRESS RELEASE VAN LANSCHOT: 2008 HALF-YEAR RESULTS Substantial rise in savings balances; strong pressure on securities commission As a private bank with a low risk profile, the bank has no write-offs due to the credit crisis Investor sentiment translates into a 36% decline in securities commission Income from operating activities totals million (-16%); net profit 60.2 million (-41%) Solid capital position; credit ratings reconfirmed in July; ready for growth opportunities Inflow of private banking clients (+2.7%) and savings accounts of private clients (+24%) continues Earnings per ordinary share 1.58 (-44%) Floris Deckers, chairman of Van Lanschot NV s Board of Managing Directors: The first half of 2008 saw exceptional developments in the financial markets and an inverted yield curve. The consequences of this included a marked reticence among investors and fierce competition on the savings market. I am extremely satisfied with the solidity of the bank; Van Lanschot was one of the few banks able to keep its capital position intact. Our private banking strategy has proven itself, even in this challenging market, judging from the robust inflow of new clients and funds entrusted. This inflow continued in July. The growth in the number of clients increased further in July to 3.5%. In addition, new clients brought over 300 million in savings accounts in July. The investment climate has still not shown any improvement, with a low level of securities transactions again in July. Our funding position is excellent. The funding ratio was above 95% at the end of June, and rose further in July to above 98%. KEY FIGURES (x million) H H H1 08 vs H1 07 (%) Income from operating activities Operating expenses Impairments Operating profit before tax Net profit from continuing operations Net profit from discontinued operations Net profit Earnings per ordinary share ( ) Efficiency ratio (%) Return on average shareholders' funds (%) Funding ratio BIS total capital ratio (%) * BIS Tier 1 ratio (%) * BIS Core Tier 1 ratio (%) * * BIS ratios at

2 DEVELOPMENTS IN THE FIRST HALF OF 2008 Van Lanschot is weathering the current crisis well. The bank s capital base is solid, with a Tier I ratio of 8.8% which is more than twice the minimum requirement of 4%. Van Lanschot s funding position improved further thanks to the inflow of deposits of private clients. The funding ratio (the extent to which the bank's total loans and advances are financed by funds entrusted by clients) climbed further from 91.2% at year-end 2007 to 95.4% at 30 June In July, the rating agencies Standard & Poor s and Fitch Ratings reconfirmed the bank s credit ratings (A, stable outlook). Thanks to its comfortable liquidity position, the bank made early and scheduled repayments of Floating Rate Notes for an amount of 1 billion in the first half of the year. Van Lanschot does not have any direct or indirect investments in the subprime sector or risky investments such as CDOs and SIVs. However, the credit crunch led to a crisis of confidence among investors, leading to a 29% decline in commission income on the previous year. In the first half of 2008, investors conducted over 15% fewer securities transactions than in the first half of 2007, with the average size of the transactions being 40% lower also. In addition, falling share prices resulted in lower management fees. On 30 June 2008, the AEX index stood at a level of 426, compared with 548 on 30 June Competition on savings accounts and deposits became more intense in the first half of the year. Despite this, the bank experienced an inflow of funds entrusted, thanks to new clients and clients conversions of investments into liquidities. Savings accounts and deposits of private clients were up 24% from 7.1 billion at year-end 2007 to 8.8 billion at the end of June The interest margin fell in the first half of 2008 from 1.37% to 1.34%, due to the higher credit interest rates coupled with slowly rising debit interest rates. On balance, the higher volumes were still good for an 11% increase in interest income. Private banking and asset management The bank particularly focuses on asset management and advice to high net worth individuals. In the first six months of 2008, the number of private target group clients was up 2.7%. This growth manifested itself in the higher net-worth segments. As the preferred alternative for the large banks, Van Lanschot is benefiting from the consolidation in the Dutch banking industry. Client assets (funds entrusted plus assets under management) of private clients on balance declined by 1.4% or 0.4 billion, from 28.4 billion at year-end 2007 to 28.0 billion at 30 June The increase in funds entrusted was not sufficient to offset the decline in assets under management, which was largely the result of negative market performance. On balance, total assets under management (inclusive of institutional clients and in-house funds) dropped 1.0 billion in the first half of 2008, from 29.2 billion to 28.2 billion. Assets under discretionary management posted a 0.3 billion decrease, consisting of a net inflow of 1.3 billion and a negative market performance of 1.6 billion. Assets under non-discretionary management were down 0.7 billion on balance. Business banking The business banking activities, focused on family businesses and their directors / majority shareholders, complement the private banking operations. Loans and advances to corporate clients were up 15% from 4.6 billion at year-end 2007 to 5.3 billion and deposits of corporate clients posted an 11% rise from 1.8 billion at year-end 2007 to 2.0 billion at 30 June

3 Investing in future growth The bank continues to invest both in its people and its systems. The employment market currently offers increased opportunities, which allowed the bank to hire tens of experienced private bankers in the first half of The bank now has approximately 475 private bankers offering high-quality services to the bank s growing client portfolio. In the first half year, approximately 100 employees completed an executive programme at INSEAD, which was tailor-made for Van Lanschot. In addition, the education and training programme for all staff was stepped up. In terms of IT, the focus in 2008 is, as planned, on the replacement of the core banking systems. The new applications are currently being tested, in order that they can be put into use in We are not satisfied with the progress and are analysing where improvements can be made. It remains our goal to complete the upgrade of the core banking systems in This is particularly challenging in view of the Payment Services Directive requirements, which are not yet known. Our intention to partially contract out the IT activities, as announced previously, is expected to take effect in the second half of the year. Despite these further investments, operating expenses for this half year were 4% below the level in the same period of OUTLOOK The bank continues to invest substantially in its private banking activities. Our strategy is based on the long-term trends, i.e. increasing level of prosperity, population ageing and more and more individual responsibility for the old age provision. In addition, many business transfers will take place in the coming years. Current market circumstances are extremely difficult and we therefore expect that the second six months of 2008, as in the first half of the year, will see a decline in revenue. We still do not see any signs of the private investors confidence returning, which will lead to a low level of securities commission in the second half of the year as well. We expect the competitive battle for savings accounts to become even fiercer, putting continued pressure on the margin. The quality of our loans portfolio is excellent; we therefore do not expect a sharp rise in impairments. In addition, we expect the increased market rates of interest to be gradually reflected in the debit rates, possibly triggering higher interest income levels in the second half of the year than in the first half of the year. 3

4 PROFIT FOR FIRST HALF OF 2008 A net profit of 60.2 million was recorded for the first half of 2008, representing a 41% decline compared with the same period of 2007 ( million). Based on continuing operations, the decrease was 39%. In the first half of 2007, Van Lanschot Assurantiën s net profit of 2.3 million was reported as discontinued operations. Earnings per ordinary share amounted to (x million) H H H1 08 against H1 07 (%) H H1 08 against H2 07 (%) Interest Income from securities and associates Commission Profit on financial transactions Income from operating activities Staff costs Other administrative expenses Depreciation and amortisation Operating expenses Impairments Total expenses Operating profit before tax Income tax NET PROFIT from continuing operations Discontinued operations 0, NET PROFIT

5 Income from operating activities dropped 52.4 million (16%), from million in the first half of 2007 to million in the same period in 2008, due to declining commission income and lower profit on financial transactions. Interest income and income from securities and associates posted an increase. Commission income shrank considerably (29%) from million in the first six months of 2007 to million in the same period of 2008, which is fully attributable to the lower securities commission. The bearish sentiment on the stock exchanges produced a sharp decrease in the level of investor activity, causing a drop in transaction commission. Furthermore, the falling share prices adversely affected management fees. On balance, securities commission went down by 36% from million in the first half of 2007 to 86.7 million in the first half of In the first half of 2007, securities commission included 10 million in performance fees, generated by several inhouse funds which performed extremely well compared with the benchmark defined in the prospectus. Other commission income (commission on payment transactions and other commission) rose 17% from 22.5 million to 26.4 million, which is attributable to the higher success fees at Corporate Finance. Interest income grew 11% from million to million due to the positive trend of the underlying volumes and a decline in the interest margin from 1.37% at year-end 2007 to 1.34% by mid Penalty interest received on account of the early repayment of loans was 1.1 million in the first half of 2008, representing a 1.5 million decline on the first half of 2007, which was brought about by the further rising interest rates. The amortisation of acquired surplus (resulting from the acquisition of CenE Bankiers) totalled 0.4 million in the first half of 2008 and 2.2 million in the first half of Private client savings accounts and deposits climbed 24% (a 1.7 billion increase) to 8.8 billion. New clients start by transferring liquidity and existing clients currently prefer to hold a larger part of their assets in the form of liquidity. Loans (mainly mortgage loans) granted to private clients diminished by 0.1 billion to 9.5 billion. In the corporate clients segment, deposits were up 0.2 billion (11%) to 2.0 billion and the volume of corporate loans grew 0.7 billion to 5.3 billion. The item income from securities and associates grew 16% compared with the first half of 2007, from 14.8 million to 17.1 million. This amount includes 4.5 million for the gain on the sale of available-for-sale investments (H1 2007: 5.8 million), 13.5 million in dividend payments (H1 2007: 7.0 million) and a negative revaluation result of 0.9 million (H1 2007: 2.0 million positive). Income from securities and associates also comprises 49% of the net profit of Van Lanschot Chabot for the first half of 2008 ( 0.2 million). Profit on financial transactions was down 23.5 million, dropping 78.1% from 30.1 million in the first half of 2007 to 6.6 million in the corresponding period of This item contains the realised and unrealised value changes on the trading portfolio, foreign exchange differences and realised and unrealised gains and losses on derivatives. Profit on financial transactions is volatile in nature and depends on the interest rate trend, the sentiment on the stock exchanges and exchange rate movements. 5

6 Operating expenses decreased 4% in the first half of 2008 compared with the corresponding period of 2007, from million to million, thanks to declining staff costs and depreciation and amortisation, while the other administrative expenses posted an increase. Staff costs were 11% lower (from million to million) which can be attributed to lower provisions for healthcare costs and pensions. Compared with the corresponding period in 2007, the number of employees increased 2% to 2,493 employees at 30 June Further investments were made in high-quality training and education courses. About 100 employees for instance completed an executive programme at INSEAD, which was tailor-made for Van Lanschot. Other administrative expenses increased 13% from 64.0 million to 72.4 million largely due to the rise in IT costs in connection with external staff hired. A major part of the external staff was hired specifically for the IT project. Within the scope of this IT project, 3.5 million was charged to profit in the first half of 2008, of which 1.5 million concerns, as planned, the depreciation of the modules put into use. Investments in marketing and communication also continued, causing an increase in marketing expenses compared with the first half of Depreciation and amortisation dropped 16% from 19.1 million to 16.0 million. This drop was largely the result of the amortisation of intangible assets due to the takeover of Kempen & Co: 8.2 million in H against 5.5 million in H The item impairments totalled 6.3 million, while a release of 2.3 million was posted in the first half of Even though the loans and advances portfolio continues to be of a high quality, an addition was recorded in the first half of 2008, on account of a loan granted to a company that was the victim of fraud. Loans written off totalled 9.1 million in H1 2008, i.e. 6 basis points of riskweighted assets (H1 2007: 5 basis points). The percentage of non-performing loans covered by the provision for impairments was 114.7% (30 June 2007: 146.5%). Income tax on operating profit for the first half of 2008 was 12.6 million, corresponding with a tax burden of 17.3%, against 20.7% in the first half of The efficiency ratio, representing the ratio of operating expenses to income from operating activities, rose to 72.1% from 63.3% in H This percentage is inclusive of the amortisation of intangible assets that arose on the acquisition of Kempen & Co. Exclusive of this amortisation, the efficiency ratio was 70.1% 6

7 EARNINGS PER SHARE Earnings per ordinary share were 1.58 for the first half of 2008, which is 44% lower than in the corresponding period in 2007 ( 2.80). (x million) H H Net profit Interest on perpetual loan Net profit for calculation of Earnings per or dinary share Earnings per ordinary share ( ) Average number of ordinary shares (x 1,000) 34,719 34,421 7

8 BALANCE SHEET (x million) % Public and private sector liabilities 15,941 14, savings accounts 5,822 5, deposits 4,817 3, other 5,302 5, Loans and advances to the public and private sectors 16,703 16, mortgage loans 7,971 8, loans to private clients 1,575 1, corporate loans 5,294 4, other 1,863 1, Shareholders funds 1,631 1, Total assets 21,768 21, BIS total capital ratio (%) * BIS Tier 1 ratio (%) * BIS Core Tier 1 ratio (%) * * For purposes of comparison, the BIS ratios at 31 December 2007 are in accordance with Basel II Total assets at 30 June 2008 came to 21.8 billion, against 21.7 billion at 31 December Total loans and advances were up 4% from 16.0 billion to 16.7 billion. The bank s funding ratio (the ratio of public and private sector liabilities to total loans and advances to the public and private sectors) grew from 91.2% at the end of December 2007 to 95.4% at 30 June Return on average shareholders funds declined from 16.9% at year-end 2007 to 8.2%, which decline was attributable to the lower net profit and more or less stable shareholders' funds. The BIS total capital ratio dropped from 11.8% to 11.3% due to an increase in risk-weighted assets and a decrease in qualifying capital. The 11.3% BIS ratio is well above the standard set by the regulators. Risk-weighted assets rose 0.5 billion from 13.8 billion at the end of 2007 to 14.3 billion at 30 June In the first six months of 2008 the qualifying capital declined since less lower Tier 2 capital could be allocated to the qualifying capital under the notional phase-out arrangement. 8

9 ASSETS UNDER MANAGEMENT (x 1 billion) * % Assets under management Assets under discretionary management Assets under non-discretionary management Assets under management Private clients Institutional clients In-house funds * Reconciliation of the assets under management of Kempen & Co with those of Van Lanschot showed that the assets under management at year-end 2007 ( 28.1 billion) were understated by 1.1 billion. Assets under management came to 28.2 billion at the end of June 2008, dropping 1.0 billion compared with year-end In the first half of 2008, assets under discretionary management fell by 0.3 billion, from 15.8 billion to 15.5 billion. Net inflow of new funds in assets under discretionary management totalled 1.3 billion in the first half of This inflow was however absorbed by a 1.6 billion negative market performance due to the gloomy mood on the stock exchanges. Assets under discretionary management for private clients were down 1.0 billion from 6.3 billion to 5.3 billion (-15.9%), as a result of a net outflow of 0.4 billion and a 0.6 billion negative market performance. Assets under discretionary management for institutions increased 0.9 billion from 4.9 billion to 5.8 billion. The net inflow was 1.5 billion against a negative market performance of 0.6 billion. Assets under discretionary management of the in-house funds dropped 0.2 billion from 4.6 billion to 4.4 billion, which decline was made up of a 0.2 billion net inflow and a 0.4 billion negative market performance. Assets under non-discretionary management dropped 5.2% from 13.4 billion at year-end 2007 to 12.7 billion at the end of June 2008, because clients currently prefer to hold a larger part of their assets in the form of liquidity, in particular deposits. 9

10 DEVELOPMENTS BY SEGMENT 11% 13% 8% 51% 25% 34% 14% 9% 10% 56% 56% 57% Corporate Finance and Securities Business Banking Asset Management Private Banking Other activities -8% -7% -29% H H H The method for allocating the interest component to the segments was further improved compared with previous periods, and the comparative figures have been restated accordingly. 10

11 PRIVATE BANKING (x million) H H % H % Income from operating activities Total expenses Operating profit before tax Efficiency ratio 74% 61% 67% Number of staff (in FTEs) 1,424 1,374 1,385 (x billion) Assets under discretionary management inflow of new funds market performance Assets under non-discretionary management Assets under management Within the Private Banking segment, the number of private target group clients was up 2.7%. Savings accounts and deposits also posted a growth in the first half of 2008, rising 1.7 billion (24%) to 8.8 billion. On the other hand, assets under discretionary management fell by 1.0 billion, from 6.3 billion to 5.3 billion. Owing to the bearish sentiment on the stock exchange, clients are holding a larger part of their portfolio in the form of liquidity. Client assets (funds entrusted plus assets under management) on balance declined by 1.4% or 0.4 billion, from 28.4 billion at yearend 2007 to 28.0 billion. The increase in funds entrusted fell just short of absorbing the decrease in assets under management. Loans and advances to private clients diminished by 0.1 billion to 9.5 billion. Income from operating activities was down from million to million on account of lower securities commission, which dropped 25% (from 76.2 million to 57.1 million). Interest income rose, with the exception of penalty interest, which again declined. Total expenses were up from million to million, largely as a result of higher other administrative expenses. These grew 22% from 35.8 million to 43.6 million, mainly due to higher IT costs for external staff hired and higher marketing costs for the Private Banking segment. In addition, staff costs increased by 3% from 65.3 million to 67.0 million, directly attributable to the higher number of bankers. In the first half of 2008, 2.3 million was posted for impairments. Operating profit before tax of Private Banking was 41.7 million, representing a 40% decline on the corresponding period in

12 Van Lanschot Belgium Van Lanschot Belgium s gross operating profit for the first half of 2008 was down 2.0 million (50%), from 3.9 million in the first half of 2007 to 1.9 million, and income from operating activities decreased as well, by 12% from 15.8 million to 13.9 million. The decrease in funds entrusted and reticence on the part of our clients to execute securities transactions led to a 22% decline in commission income. Interest income remained stable. The volume of loans and advances in the first half of 2008 was up 3% from 362 million to 374 million. In this period, savings accounts and deposits were higher as well, posting a 9% increase from 639 million to 695 million. Operating expenses remained nearly stable; they increased slightly (1.0%) to 11.8 million. The number of target group clients of Van Lanschot Belgium increased 3% in the first half of 2008, with the number of Belgian private clients growing by 4%. International Private Banking Our International Private Banking clients are served from our foreign offices, i.e. Van Lanschot Bankiers Luxembourg, Van Lanschot Bankiers Curaçao and Van Lanschot Bankiers Schweiz, and the representative office in the South of France. Gross operating profit before tax of International Private Banking declined 25% from 7.5 million in the first half of 2007 to 5.6 million in the reporting period, largely as a result of lower securities commission. 12

13 ASSET MANAGEMENT (x million) H H % H % Income from operating activities Total expenses Operating profit before tax Efficiency ratio 65% 52% 62% Number of staff (in FTEs) (x billion) Assets under discretionary management inflow of new funds market performance Assets under non-discretionary management Assets under management Institutional clients Assets under discretionary management inflow of new funds market performance Assets under management In-house funds The Asset Management business segment comprises the asset management activities of Van Lanschot. This segment s income from operating activities, which is mainly made up of commission, dropped 39% from 35.6 million to 21.6 million. This decline is attributable to the negative sentiment on the stock exchanges. Assets under discretionary management for institutions moved up 0.9 billion from 4.9 billion to 5.8 billion. This rise was generated by a net inflow of 1.5 billion and negative market performance of 0.6 billion. Assets under discretionary management of the in-house funds dropped 0.2 billion from 4.6 billion to 4.4 billion due to a 0.2 billion net inflow and a 0.4 billion negative market performance. Total expenses dropped 24% from 18.5 million to 14.0 million. This decrease was due in particular to the staff costs, which went down 31% from 15.0 million to 10.3 million on account of the lower accruals for bonuses in this segment. The Asset Management segment posted an operating result before tax of 7.6 million, representing a 56% decline. 13

14 BUSINESS BANKING (x million) H H % H % Income from operating activities Total expenses Operating profit before tax Efficiency ratio 48% 57% 52% Number of staff (in FTEs) The Business Banking segment also comprises the activities of the Healthcare sub segment (CenE Bankiers). Income from operating activities rose 18% to 78.9 million. Compared with the first half of 2007, interest income moved up 20%. Loans and advances to corporate clients in the first half of 2008 increased by 0.6 billion to 5.3 billion. On the other hand growth in funds entrusted was limited. This volume increase, along with the higher interest rates, positively impacted interest income. The profits on sale and valuation gains on associates and the venture capital unit totalled 6.5 million. The number of business banking clients grew in particular in the family businesses segment, while in the healthcare segment the target group of medical professionals also increased. Total expenses increased 15% to 42.0 million, which increase was mainly driven by impairments. The addition to the provision was 4.0 million for Business Banking, mainly related to two large corporate clients, one of them being the victim of fraud. Other administrative expenses were up 17% to 15.0 million. The operating profit before tax of Business Banking was 36.9 million, representing a 20% rise on the corresponding period in

15 CORPORATE FINANCE AND SECURITIES (x million) H H % H % Income from operating activities Total expenses Operating profit before tax Efficiency ratio 71% 62% 71% Number of staff (in FTEs) This segment comprises the corporate finance activities and securities broking to professional investors in Europe and the United States. This segment s income from operating activities declined 37%, from 43.8 million in the first half of 2007 to 27.7 million in the first half of The operations included in this segment are volatile by nature and depend on stock exchange trends and the number of share issues, mergers and acquisitions led by the bank. Corporate Finance s commission income posted a solid increase thanks to their successful handling of a number of mergers and acquisitions. However, due to the turbulent behaviour of the stock exchanges, commission and trading income levels of the Securities department were under pressure. On balance, commission income dropped 35% compared with the first half of Total expenses were down 27% from 27.0 million to 19.8 million, mainly as a result of lower accruals for bonuses at Kempen & Co. Other administrative expenses declined 16% from 6.8 million to 5.7 million. Operating profit before tax decreased 53% compared with the first half of

16 OTHER ACTIVITIES (x million) H H % H % Income from operating activities Total expenses Operating profit before tax This segment comprises, among other things, proceeds and/or expenses that can at present not be allocated to other segments. We are constantly striving to refine this allocation. In addition, this segment comprises income and expenses arising from interest rate, market and liquidity risk management. Income from operating activities was down 169% at -8.3 million. Profit on financial transactions declined due to the negative mood on the stock exchanges and the impact of the inverted yield curve on the hedge accounting-related items. Total expenses dropped 38% from 20.9 million to 13.0 million. The amortisation item also comprises the amortisation of intangible assets in connection with the takeover of Kempen & Co of 5.5 million (H1 2007: 8.2 million). Operating profit before tax decreased 139% compared with the first half of

17 KEY DATES 2008/2009 Publication of 2008 full-year results 20 March 2009 Annual General Meeting of Shareholders 11 May 2009 Publication of 2009 half-year results 21 August 2009 s-hertogenbosch, the Netherlands, 15 August 2008 Van Lanschot press contacts: Etienne te Brake, Corporate Communication spokesperson. Telephone +31 (0) ; Mobile phone +31 (0) ; Van Lanschot Investor Relations: Geraldine Bakker-Grier, Investor Relations Manager. Telephone +31 (0) ; Mobile phone +31 (0) ; Van Lanschot NV is the holding company of F. van Lanschot Bankiers NV, the oldest independent bank in the Netherlands with a history dating back to Van Lanschot focuses on three target groups: high net-worth individuals, medium-sized businesses (including family businesses) and institutional investors. Van Lanschot stands for high-quality services founded on integrated advice, personal service and customised solutions. Van Lanschot NV is listed on the Euronext Amsterdam Stock Market. 17

18 APPENDICES: Risk management Half-year results 18

19 RISK MANAGEMENT CREDIT RISK Van Lanschot s policy on lending risks revolves primarily around the counterparty risks associated with lending to private banking and business banking clients. In addition, the counterparty risks associated with our cash management, payment transactions, investment activities, etc. are also addressed. On account of the credit crisis, more than usual attention was devoted to these additional areas in the first half of Limits on major counterparties were reviewed extremely frequently and in a large number of cases it was decided to reduce limits and spread risks further. Van Lanschot s loan acceptance policy is directed at maintaining the high quality of its loans portfolio. The non-retail loans and advances portfolio is given a rating based on certain rating models. For the first half of 2008, the quality of the loans and advances portfolio remained at a stable level. Internal rating class Description As a % of liability outstanding 30 June Dec 07 T Top class 2% 2% A1 - A3 Strong 11% 10% B1 - B3 Good 32% 34% C1 - C3 Adequate 45% 46% D1 - D3 Weak 8% 7% E Very weak 0% 0% F1 - F3 Default 1% 1% Balance Non-performing Provision (x million) loans Mortgage loans to private clients 7, Other loans and advances 8, Total 16, BASEL II FOUNDATION IRB Within the bank, further efforts were made in 2008 towards making the bank FIRB-compliant. The non-retail rating models are structurally used in the process and are also applied as input to fix the pricing of loans and advances to corporate clients. We are presently working on further completing and validating the models. The first segmentations of the retail portfolio have taken place in the meantime. An analysis has demonstrated that the models developed have a good predictive ability. Based on these first segmentations and analyses, estimates were also made of the impact on the required capital of the bank s transition to an FIRB approach. In line with our first estimates (the bank has a history of low write-offs on its loans and advances portfolio), the transition to FIRB will trigger a substantial decline in the capital required for our credit risks. In particular, a considerably lower amount of capital is expected to be required for the bank s mortgage loans portfolio. 19

20 OPERATIONAL RISK The bank s incident database allows losses from operational risks to be recorded and analysed systematically. In the first half of 2008, 223 incidents with a loss exceeding 1,000 were recorded in the central database (for the full year 2007: 398 incidents). MARKET RISK Van Lanschot holds trading portfolios mainly for the required market-making purposes and more particularly for the services to our clients. The average VAR for the first half of 2008 was 122,000, hardly deviating from the figure for the entire year 2007 ( 125,000), despite the turbulence on the stock markets during this period. The highest in 2007 was 543,000 and this was 570,000 in the first half of INTEREST RATE RISK Van Lanschot has various methods for managing interest rate risks including gap analysis, duration analysis and scenario analysis. In this way, Van Lanschot actively manages its balance sheet to limit the potential negative effect of interest rate risks. Sensitivity analysis interest income Parallel shift in the yield curve (impact) (x 1,000) /- 200 in basis points -27,700-60, in basis points 19,500 50,700 Duration, which is a measure of the sensitivity of our shareholders funds to interest rate?uctuations, is a key indicator of interest rate risk. The maximum acceptable duration of shareholders funds for Van Lanschot is ten years. Sensitivity analysis shareholders funds Duration (in years) Present value of shareholders' funds (x 1 million) 1,685 1,624 In case of a sudden upward parallel shift in the yield curve by 100 basis points, the present value of shareholders funds would decline by about 77 million. In the case of a downward shift, shareholders funds would rise by about 83 million. LIQUIDITY RISK Van Lanschot pursues a cautious policy on liquidity risks. The minimum liquidity position of the bank is sufficient to absorb any unexpected?uctuations in our cash position. Adherence to this minimum position ensures where possible that the bank maintains a substantial liquidity surplus that meets the standards set by the Dutch Central Bank. With a funding ratio of 98%, the current liquidity surplus is of course comfortably above the internal and external requirements. 20

21 Van Lanschot NV Consolidated Mid Year Report At 30 June 2008 's-hertogenbosch, August 2008 Unaudited 21

22 Table of Contents Mid-year report Key data Consolidated balance sheet at 30 June 2008 Consolidated income statement for the first half of 2008 Shareholders' funds at 30 June 2008 Consolidated cash flow statement at 30 June 2008 Accounting policies Notes to the consolidated balance sheet Notes to the consolidated income statement Additional notes Segment information Unaudited 22

23 KEY DATA Amounts in thousands of euros Consolidated income statement H1 H1 Movement H2 Movement Income from operating activities 283, , % 312, % Operating expenses 203, , % 202, % Impairments 6,254-2, % 2, % Operating profit before tax 72, , % 107, % Net profit 60, , % 113, % Consoldated balancesheet Movement Movement Shareholders' funds attributable to shareholders 1,318,814 1,366, % 1,300, % Shareholders' funds attributable to minority interests 312, , % 312, % Public and private sector liabilities 15,940,802 14,596, % 13,460, % Loans and advances to the public and private sectors 16,703,039 16,006, % 15,811, % Total assets 21,767,953 21,718, % 21,406, % Key figures Movement Movement Average number of ordinary shares 34,718,634 34,421, % 34,420, % Earnings per ordinary share based on average number % of ordinary shares (in euros) Efficiency ratio (%) % % Return on average shareholders' funds (%) % BIS total capital ratio (%)* BIS Tier 1 ratio (%)* BIS Core Tier 1 ratio (%)* * Per 1st januari 2008 BIS-ratio's are calculated based on Basel II requirements Unaudited 23

24 CONSOLIDATED BALANCE SHEET at 30 June 2008 In thousands of euros ASSETS Cash and cash equivalents 258, , ,806 Financial receivables from trading activities 147,094 83, ,097 Banks 2,370,367 2,884,995 2,721,730 Investments 1 938, , ,784 Loans and advances to the public and private sectors 2 16,703,039 16,006,235 15,811,224 Financial assets designated at fair value through profit or loss 3 63,037 63,468 66,070 Derivatives 4 383, , ,249 Investments in associates using the equity method 5 9,732 9,496 14,351 Property, plant and equipment 6 191, , ,972 Goodwill and other intangible assets 7 388, , ,074 Assets of operations held for sale ,885 Current tax assets 39,736 2,287 8,193 Deferred tax assets 7,117 7,120 14,901 Prepayments and accrued income 216, , ,131 Other assets 50,845 38,667 20,971 TOTAL ASSETS 21,767,953 21,718,834 21,406, EQUITY AND LIABILITIES Financial liabilities from trading activities 88,347 35,583 81,493 Banks 827, ,407 1,255,645 Public and private sectors liabilities 8 15,940,802 14,596,804 13,460,464 Financial liabilities at fair value through profit or loss 9 18,524 18,243 6,089 Derivatives , , ,524 Issued debt securities 11 1,916,016 3,015,960 3,518,841 Subordinated loans , , ,978 Provisions 13 26,315 34,910 31,853 Current tax liabilities 9,907 2,933 21,058 Deferred tax liabilities 49,088 55,754 44,091 Liabilities of operations held for sale ,431 Accruals and deferred income 495, , ,602 Other liabilities 54,085 64,529 15,989 Total liabilities 20,136,739 20,032,235 19,793,058 Share capital 35,183 34,921 34,884 Repurchased shares (23,965) (27,833) (27,897) Share premium 315, , ,862 Other reserves 937, , ,426 Undistribited profit attributable to shareholders of Van Lanschot NV 54, ,608 96,354 Shareholders' funds attributable to shareholders of Van Lanschot NV 1,318,814 1,366,721 1,300,629 Minority interests (perpetual loans) 305, , ,491 Undistribited profit attributable to minority interests (holders of perpetual loans) 5,462 10,740 5,260 Other minority interests 1,745 1,724 - Undistribited profit attributable to other minority interests Shareholders' funds attributable to minority interests 312, , ,751 Shareholders' funds 1,631,214 1,686,599 1,613,380 TOTAL EQUITY AND LIABILITIES 21,767,953 21,718,834 21,406,438 Contingent liabilities 467, , ,560 Irrevocable commitments 707, ,607 1,238,217 1,174, ,324 1,648,777 Unaudited 24

25 CONSOLIDATED INCOME STATEMENT for the first half of 2008 H1 H2 H1 In thousands of euros INCOME FROM OPERATING ACTIVITIES Interest income 625, , ,066 Interest expense 479, , ,568 Interest , , ,498 Income from associates using the equity method 237 1,291 2,403 Other income from securities and associates 16,831 11,348 12,447 Income from securities and associates 15 17,068 12,639 14,850 Commission income 118, , ,039 Commission expense 5,115 6,522 7,050 Commission , , ,989 Profit on financial transactions 17 6,582 18,686 30,073 INCOME FROM OPERATING ACTIVITIES 283, , ,410 EXPENSES Staff costs , , ,369 Other administrative expenses 19 72,383 65,703 64,059 Staff costs and other administrative expenses 187, , ,428 Depreciation and amortisation 16,057 17,313 19,098 Operating expenses 203, , ,526 Impairments 6,254 2,399 (2,328) TOTAL EXPENSES 210, , ,198 Operating profit before tax 72, , ,212 Income tax 12,634 17,979 25,849 Net profit from continuing operations 60,206 89,988 99,363 Discontinued operations - 23,767 2,251 NET PROFIT 60, , ,614 Of which attributable to shareholders of Van Lanschot NV 54, ,254 96,354 Of which attributable to holders of perpetual loans 5,462 5,480 5,260 Of which attributable to other minority interests Earnings per ordinary share in euros Diluted earnings per ordinary share in euros Earnings per ordinary share in euros from continuing operations Diluted earnings per ordinary share in euros from continuing operations Unaudited 25

26 SHAREHOLDERS' FUNDS AT 30 JUNE 2008 Consolidated statement of changes in shareholders' funds H1 H1 In thousands of euros Issued share capital Opening balance 34,921 32,411 Share issue 262 2,473 Closing balance 35,183 34,884 Repurchased shares Opening balance (27,833) (28,228) Repurchased shares for stock option rights (350) - Options exercised 4, Closing balance (23,965) (27,897) Share permium Opening balance 310, ,763 Share issue 4, ,099 Closing balance 315, ,862 Revaluation reserve Opening balance 34,974 26,000 Changes during the period (310) 23,888 Closing balance 34,664 49,888 Currency translation differences Opening balance 193 (98) Changes during the period (160) 104 Closing balance 33 6 Other equity components Opening balance 18,810 11,135 Increase in value of derivatives added directly to shareholders' funds 57,483 42,480 Decrease in value of derivatives charged directly against shareholders' funds (66,408) (7,539) Tax on value changes 2,276 - Closing balance 12,161 46,076 Other reserves Opening balance 790, ,089 Net profit 2006/ , ,757 Dividend 2006/2005 to shareholders (104,484) (94,743) Employee stock options ,135 Other changes (467) (2,782) Closing balance 890, ,456 Undistributed profit attributable to shareholders of Van Lanschot NV Opening balance 204, ,756 To other reserves (204,608) (174,756) Profit for the period 54,744 96,354 Closing balance 54,744 96,354 Shareholders' funds attributable to shareholders of Van Lanschot NV 1,318,814 1,300,629 Minority interests (perpetual loans) Opening balance 307, ,807 Change in own position (2,200) (5,316) Closing balance 305, ,491 Undistributed profit attributable to minority interests Opening balance 10,740 9,732 Dividend 2007 to third parties (holders of perpetual loans) (10,740) (9,732) Profit for the period 5,462 5,260 Closing balance 5,462 5,260 Other minority interests Opening balance 1,724 - Profit Closing balance 1,745 - Undistributed profit attributable to minority interests Opening balance 21 - To other minority interests (21) - Closing balance - - Shareholders' funds attributable to third parties 312, ,751 Total shareholders' funds 1,631,214 1,613,380 Unaudited 26

27 CONSOLIDATED CASH FLOW STATEMENT H1 H1 In thousands of euros Net profit before tax Adjustments for: - Depreciation and amortisation Impairments (2.328) - Income from securities and associates (17.068) (14.850) Cash flows from operating activities Net increase/ (decrease) in operating assets and liabilities - Movement in financial receivables/liabilities from trading activities (10.664) Movement in financial receivables/liabilities at fair value Movement in banks Movement in public and private sectors Movement in derivatives (30.672) (88.787) - Movement in provisions (8.595) (4.488) - Movement in other assets and liabilities (22.622) Movement in accrued and deferred assets and liabilities Movement in deferred taxes payable (6.663) 133 Total movement in assets and liabilities Income taxes paid (43.109) (27.977) Net cash flow from operating activities Cash flow from discontinued operations Cash flow from investing activities Investments and acquisitions - Investments in capital instruments (79.472) (1.208) - Investments in shares ( ) (34.611) - Investments in group companies (exclusive of cash acquired) - ( ) - Investments in associates (236) (1.441) - Property, plant and equipment (6.053) (19.643) - Intangible assets (15.658) (6.985) Divestments, repayments and sales - Investments in capital instruments Investments in shares Property, plant and equipment Intangible assets - (3.402) Dividends received from associates and shareholdings Share of profit of associates/shareholdings and investment portfolio shares Net cash flow from investing activities ( ) ( ) Cash flow from financing activities Increase in share capital Other reserves (14.094) Perpetual loan (2.200) (5.316) Minority interests 21 - Repayments on subordinated loans (23.520) (3.715) Repayments on debt securities ( ) ( ) Dividends paid ( ) (94.743) Net cash from financing activities ( ) ( ) Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 30 June Additional disclosure Cash flow from interest income Cash flow from interest expense Unaudited 27

28 Accounting policies Basis of preparation The Van Lanschot consolidated mid-year report was prepared in accordance with IAS 34, Interim Financial Reporting. The consolidated mid-year report does not contain all financial information as disclosed in the financial statements. The consolidated midyear report should therefore be read in conjunction with the financial statements of Van Lanschot at 31 December 2007, as audited by the external auditor. This mid-year report has not been audited. All amounts are denominated in thousands of euros, unless stated otherwise. Valuation policies The accounting policies applied in this consolidated mid-year report are in accordance with those applied in the financial statements of Van Lanschot at 31 December Estimation uncertainty In the process of applying Van Lanschot's accounting policies, estimates and assumptions are made which have significant impact on the amounts shown in the mid-year report. The estimates and assumptions are based on the most recent information available. Actual amounts in the future may differ from the estimates and assumptions. Unaudited 28

29 NOTES TO THE CONSOLIDATED BALANCE SHEET In thousands of euros 1 Available-for-sale investments Investments by type Fair value Face value Fair value Face value Total 938, , , ,114 Capital instruments Government paper and government guaranteed paper Banks listed Banks unlisted Corporates listed 403, , , , , ,900 87,143 88, , , , ,000 Share premium capital instruments (215) - (296) - Total capital instruments 716, , , ,114 Shares Listed 62, Unlisted 52, ,777 Shareholdings 108,018 71,884 Total shares 222, ,777 Specification available-for-sale investments by rating % % Triple-A 552,066 59% 553,685 66% Double-A 224,650 24% 78,804 9% Single-A 791 0% 4,217 1% Other 161,275 17% 202,806 24% Total 938, % 839, % The item 'Available-for-sale investments' includes an investment of million in Darts Finance. Darts Finance invests solely in mortgages covered by the National Mortgage Guarantee Scheme (Nationale Hypotheek Garantie). Hedge accounting is not applied to this investment. 2 Loans and advances to the public and private sectors Loans and advances to the public and private sectors by counterparty Total 16,703,039 16,006,235 Private 9,899,191 9,950,296 Corporate 6,943,531 6,149,650 Government - - Value adjustments hedge accounting (48,531) 261 Impairments (91,152) (93,972) Impairments Specific Collective Total Balance at 1 January ,535 8,437 93,972 Loans written off (9,074) - (9,074) Additions to or release of provision 5, ,254 Balance at 30 June ,737 9,415 91,152 Non-performing loans by type of loan Total 71,261 61,700 Mortgages to private individuals 24,352 21,859 Other loans 46,909 39,841 Unaudited 29

30 Lancelot 2006 (Commercial Mortgage-Backed Security) Through its securitisation transaction Lancelot 2006, Van Lanschot securitised part of its loan portfolio to the private sector secured on commercial property. Receivables relating to these loans are transferred to a separate entity. Lancelot 2006 has an 'amortising structure', meaning the amount of bonds issued declines in accordance with the underlying loan portfolio. For the financing of these loans, Lancelot 2006 has issued five classes of debt instruments. Van Lanschot does not hold any of the debt instruments issued by Lancelot Entity Date of securitisation Rating Original principal Principal at Spread Total 600, ,271 Lancelot AAA 528, , % Lancelot AA 21,000 21, % Lancelot A 19,500 19, % Lancelot BBB 19,500 19, % Lancelot BB 12,000 12,000 privately placed The first call option date of all these debt instruments is 26 January 2012 and the contractual date of maturity is 1 January The breakdown into types of collateral is as follows: 2% 7% Industrial (31%) 2% 2% 10% 2% 11% 31% Office (20%) Residential (13%) Retail (11%) Commercial Property (2%) Recreational (10%) Land (2%) Garage (2%) 13% 20% Hotel (2%) Mixed (7%) Lancelot is fully consolidated. Mezzanine loans Mezzanine loans refer to a subordinated debt that represents a claim on a company's assets which is senior only to that of a company's common shareholders. In a leveraged buyouts, mezzanine loans are often used in conjunction with senior loans and equity to fund the purchase price of the company being acquired. Movements in Mezzanine loans Balance at 1 January 51,539 Redemptions (8,239) New issued loans 17,250 Balance at 30 June 60,550 The breakdown into sectors is as follows: 5% Retail (5%) 28% Services (39%) Healthcare (4%) 39% Industry (22%) 1% 1% Food, beverage & tobacco (1%) Wholesale (1%) 22% 4% Other (28%) Unaudited 30