LLB's Strategic Growth and Resilience Amid Macroeconomic Headwinds

In an era of macroeconomic uncertainty and persistently low interest rates, the LLB Group (LLB) stands out as a rare combination of stability and strategic agility. With a 11.6% year-over-year increase in client assets under management (AUM) to CHF 97.0 billion in 2024 and a diversified revenue model that reduced reliance on interest income, LLB has positioned itself as a resilient player in the premium banking sector. While near-term profit pressures from falling rates and integration costs are evident, the company's long-term value proposition—anchored in asset growth, disciplined cost management, and strategic expansion—makes it an attractive investment ahead of its 2026 earnings cycle.

Diversified Revenue Streams: A Shield Against Rate Volatility

LLB's ability to generate non-interest income is a critical strength in a low-rate environment. In the first half of 2025, fee and commission income surged by 23.4% year-over-year, driven by higher AUM and the successful integration of ZKB Österreich. This shift toward fee-based revenue—now a significant portion of operating income—reduces exposure to interest rate fluctuations. For context, while interest income declined by 6.8% in H1 2025 due to falling rates, the Group's trading business and advisory services offset these losses, demonstrating operational flexibility.

This diversification is not accidental. LLB's ACT-26 strategy explicitly prioritizes growth in wealth management, digital banking, and cross-border services. By expanding into Germany and Switzerland and acquiring ZKB Österreich, the Group has broadened its geographic footprint and client base, ensuring a steady flow of fee-driven revenue. These moves are particularly timely as global central banks signal prolonged low-rate environments, making fee-based models more critical than ever for banking sector resilience.

Asset Growth and Cost Discipline: The Twin Pillars of Resilience

LLB's 2024 results highlight its ability to scale assets while maintaining cost efficiency. Client AUM grew to CHF 97.0 billion, up 11.6% year-over-year, fueled by strong market performance and net inflows of CHF 2.8 billion. This asset base not only supports fee income but also enhances the Group's ability to offer tailored financial solutions, further solidifying client relationships.

Cost management remains a cornerstone of LLB's strategy. Despite a 6.1% rise in operating expenses to CHF 369.5 million in 2024—driven by workforce expansion in client advisory and digital transformation—the Group's cost-income ratio improved to 66.4% from 64.3% in 2023. This was achieved through a 1.5% reduction in general and administrative expenses, showcasing LLB's ability to balance growth with prudence. In H1 2025, the cost-income ratio stabilized at 65.7%, underscoring the effectiveness of its efficiency initiatives.

Strategic Expansion and Long-Term Positioning

LLB's ACT-26 strategy is a masterclass in proactive positioning. The Group's 2024 expansion into Germany and Switzerland, coupled with the ZKB Österreich acquisition, has created a diversified geographic footprint. These moves are not just about scale—they are about capturing growth in markets with strong demand for premium banking services. ZKB Österreich, in particular, has added CHF 1.1 billion in net new loans and CHF 2.8 billion in client assets, accelerating LLB's cross-border ambitions.

While the integration of ZKB Österreich has introduced one-time costs (CHF 7.1 million in H1 2025), these are viewed as investments in long-term value. The Group's 2025 guidance acknowledges near-term headwinds from falling interest rates and integration expenses but remains confident in its ability to offset these through asset growth and operational efficiency. By 2026, the full benefits of the ZKB acquisition and digital transformation initiatives are expected to materialize, driving earnings recovery.

Why Invest Now? A Compelling Case for 2026

The current environment presents a unique opportunity to invest in LLB ahead of its 2026 earnings cycle. With a dividend yield of 4.0% and a proposed increase to CHF 2.80 per share, the Group offers attractive shareholder returns even amid macroeconomic challenges. The State of Liechtenstein's stake and the Group's Aa2 rating from Moody's further reinforce its stability.

Moreover, LLB's strategic initiatives are already laying the groundwork for outperformance in 2026. The expansion into Germany and Switzerland, combined with the ZKB Österreich integration, is expected to unlock new revenue streams and cross-selling opportunities. Meanwhile, the Group's focus on digital transformation and client-centric services positions it to capture market share in a sector increasingly driven by technology and personalization.

Conclusion: A Resilient Play in a Shifting Landscape

LLB's strategic growth, asset diversification, and disciplined cost management make it a standout in the premium banking sector. While near-term profit pressures from low rates and integration costs are real, these are temporary hurdles in a long-term narrative of resilience and innovation. For investors seeking exposure to a bank with a proven ability to adapt to macroeconomic headwinds, LLB offers a compelling case. With its 2026 earnings cycle on the horizon, now is the time to position for a recovery driven by strategic execution and a robust balance sheet.

Investment Thesis: Buy LLB ahead of its 2026 earnings cycle, leveraging its diversified revenue model, asset growth, and strategic expansion to capitalize on a potential rebound in profitability and shareholder returns.