2018 Staying relevant by investing in the future
VP Securities has published its Annual Report for 2018.
During 2018, VP achieved important milestones towards attaining the vision to be “the preferred CSD partner with European functionality”. At the beginning of 2018, VP gained a CSDR licence, and in October, DKK was launched on the European T2S platform.
In combination, these two projects constitute key business enablers for both VP and its customers, since they are the basis for two-way post-trade traffic services, providing single access to multiple markets and supporting easier, safer and more efficient cross-border issuance and investments.
Migration of DKK to T2S
29 October 2018 was an important day for both VP and the Danish financial community. On this day, the first settlement of DKK-denominated securities took place on the European T2S platform – and a new “post-trade highway” connecting the Nordics with Europe was established.
DKK was the first non-EUR currency to migrate to T2S, and making DKK available on the T2S platform was one of the largest and most complex projects ever undertaken by VP, both from an IT and a business perspective. The migration of DKK to T2S marked the end of a six-year project with the objective of ensuring that the Danish market becomes an integrated part of the pan-European infrastructure.
“During recent years, VP has continuously invested in the future – aiming to remain relevant for our customers and thereby capable of fulfilling their requirements in a marketplace under transformation. Common EU regulation, and the establishment of the European settlement platform, T2S, has intensified cross-border competition, since banks, and also issuers, can freely choose which CSD is to handle their securities. During recent years, we have been preparing for adjustment to the new market situation. After joining T2S and gaining a CSDR licence, VP is well-positioned to exploit new market opportunities and to play an active role in the future market integration – for the benefit of our shareholders, our customers and VP’s organisation,” says Niels Olsen, CEO at VP.
Higher trading activity
- In 2018, trading activity increased by 5 per cent from 2017, in terms of the number of trades.
- The year-end market value snapshot of the securities book-entered at VP decreased by 4 per cent in 2018, compared to 2017.
- The turnover, or market value, of securities traded in 2018 amounted to DKK 43,240 billion, corresponding to an increase of 6 per cent compared to 2017.
- The number of settlement transactions completed was 17.7 million in 2018, which is 0.9 million higher than in 2017, equivalent to an increase of 5 per cent.
- The total number of issuances was 5,488 at the end of 2018, which is an increase of 10 per cent from 2017.
“Issuances are a central aspect of our business. During 2018, we saw increased demand for EUR-based issuances, as well as issuances based on Nordic currencies. We will continue our dedicated work to improve our service offering and to attract more business within this area,” says Niels Olsen.
Lower financial results due to significant investments
In 2018, VP delivered lower financial results compared to the previous year.
Net turnover amounted to DKK 424 million, which is DKK 14 million below 2017, corresponding to a decrease of 3 per cent. The decrease is primarily attributable to extraordinary revenue recognised in 2017 relating to the implementation of the MiFID II directive, whereby VP assisted market participants in complying with the new legislation.
Also, a continued decrease in fees for issuing bonds affects the overall a turnover. The changes are a vital part of VP’s pricing strategy, which is successively implemented in the market.
The operating profit was DKK 124 million, which is DKK 37 million lower than the operating profit for 2017, while the profit after tax for 2018 was DKK 98 million, which is DKK 32 million lower than in 2017. The result reflects an underlying increase in activities on the one hand, and significant investments in developing the organisation and the business platform on the other. The result also includes a number of extraordinary expenses related to the T2S migration.
Solid platform to offer customers attractive services
“We enter 2019 with a solid business platform, a strong value proposition for our customers, and firm confidence in our ability to exploit new business opportunities in the wake of market liberalisation and harmonisation. Through T2S and our CSDR licence, VP offers full European functionality. We also have an excellent stepping stone to offer customers attractive services and to operate as an important distribution hub between issuers and investors into and out of the Nordic region – and thereby to develop and safeguard our business,” Niels Olsen concludes.