2019: Leveraging the European platform and creating new growth drivers

VP Securities (VP) has published its Annual Report for 2019.

During 2019, VP had two major issues on its agenda: restoring settlement efficiency after the migration of DKK to the T2S settlement platform in the autumn of 2018, and also initialising further harmonisation of the settlement model; and setting a new strategic direction for VP.

Since May 2019, and in close collaboration with market participants, VP has succeeded in bringing settlement efficiency back to the pre-migration level of around 97 per cent. By the end of 2019, 98 per cent of all transactions on the T2S platform were settled on time. This is a great accomplishment and very satisfactory.

Annual report 2019

“In recent years, the post-trade market and its participants have faced significant changes, primarily driven by the movement towards an integrated and harmonised European securities settlement market – fuelled by common EU regulation and settlement systems. At an early stage, VP and the Danish market decided to become part of the common European regime, and the Danish market has taken important steps to integrate with the European capital market infrastructure – bringing new business opportunities and making Denmark an attractive market for investors and issuers. Going forward, it is of vital importance for the Danish capital market and for VP to effectively exploit the potential of the European integration and the development of additional pan-European solutions,” says Niels Olsen, CEO at VP.

Towards a Harmonised Settlement Model

During 2019, VP initiated dialogue with market participants with the aim of identifying initiatives to further optimise and harmonise the T2S settlement model. Based on the market consultations, VP has identified a number of key design parameters that will improve the settlement processes, including the account structure, identification methods and communication standards. Most of the changes will be implemented in 2020 and in close cooperation with market participants. Other elements are still subject to discussion with the market prior to implementation in 2021.

New strategic direction: “Expanding beyond the core”

To take advantage of the opportunities emerging from the T2S platform investments and to create new business opportunities from the trends that are shaping our business environment, VP adopted a new strategic direction in 2019.

“The new direction will strengthen our core business and add new growth drivers – leading to greater efficiency and profitability, as well as increased value for our customers. The core business will be strengthened by, among other things, modernising our IT platform in close cooperation with the market and key stakeholders –to create a state-of-the-art secure, scalable and flexible CSD. In addition, we believe that VP can make a significant difference for our customers by offering new services, especially in three areas: utility services, scalable solutions handling regulatory-driven demands of the financial sector (RegTech solutions) and data-based services,” says Niels Olsen, CEO at VP.

Slightly lower trading activity but more assets held in custody accounts

The 2019 trading activity snapshot can be summarised as follows:

  • The total market value of securities book-entered at VP at the end of 2019 amounted to DKK 9,027 billion, which is DKK 1,108 billion higher than at the end of 2018, corresponding to an increase of 14 per cent.
  • The turnover, or market value, of securities settled in 2019 amounted to DKK 55,438 billion. This is DKK 13,090 billion higher than in 2018, equivalent to an increase of 31 per cent.
  • The number of settlement transactions completed was 16.6 million in 2019, which is 0.4 million lower than in 2018, and a decrease of 2 per cent.
  • The total number of issuances is 6,564, which is an increase of 20 per cent from 2018.
  • As at end-2019, the number of custody accounts was on a par with 2018, at 3.0 million accounts.

Lower financial results due to investments and depreciation

Net turnover in 2019 amounted to DKK 426 million, which is DKK 2 million higher than in 2018, corresponding to an increase of 1 per cent. The increase is primarily attributable to a slight increase in revenue from custody activities.

In 2019, we delivered lower financial results compared to the previous year. The operating result amounted to DKK 18.4 million, versus DKK 124.3 million last year. The lower result reflects a minor increase in revenue, combined with a number of unforeseen costs following the T2S migration in October 2018. The result is also affected by a number of extraordinary costs related to crafting VP’s new strategic direction, as well as significant investments in developing both our organisation and our platform. Finally, as a consequence of the new strategic direction, VP incurred an impairment loss related to the termination of the investor CSD link to Sweden. The extraordinary costs are expected to be non-recurring. We strongly believe that we in 2020 will normalise the financial result and the return to the shareholders.

Strong commitment to exploiting new business opportunities

“An integrated element of our strategy and future vision is to support an efficient European and Danish capital market – for the benefit of the market in general, and our customers, as well as the sustainability of VP’s business model. We enter 2020 with a strong commitment to deliver on our strategic priorities and to cooperate with our customers on the continued development of an efficient, scalable and stable platform – enabling VP and the Danish market to exploit new business opportunities in a liberalised and harmonised market, and to create new value,” Niels Olsen concludes.

Download the Annual Report here

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