Since we started this turnaround project, there has been no doubt in our minds that the path ahead would be as challenging as it would be rewarding. Now, a full eight months into this project, we have not only seen encouraging progress but also a path to growth.
Since the beginning of our mandate, our objective has been to restore the credibility of this Bank with the Regulators, Clients and the Shareholder. The first step was to put the house in order. That involved cutting costs to a sustainable level, developing a China-related strategy, ensuring capital support from the Shareholder and addressing key governance issues. That initial work has been generally completed with positive results during this first half of 2018.
We now have a stronger balance sheet available to invest in new assets. We run at half of the cost-base compared to last year. We succeeded in reaching the targeted operating profit in the first half of the year. We have a new Board of Directors supported by a functioning governance structure. We have put in place new internal procedures and ultimately started to instil a corporate culture that follows the best standards in the industry.
Group connectivity has been crucial for the Bank’s turnaround in terms of revenues and in terms of capital support, namely through the issuance of a USD 130 million subordinated additional TIER 1 instrument. Regarding the legacy credit portfolio and although there were some improvements, this is still holding back the results of the Bank and is taking significant Management attention.
The Governance structure was one of the priorities of our turnaround process. We have created four Board committees chaired by Independent Directors that have provided constructive oversight of our business. At the Executive Committee level, we have created four business-related committees that have empowered our middle management and have given them more responsibilities as they participate in the decision-making process.
From a business perspective, by the end of the first 6 months of the year, total banking income reached EUR 49 million, 40% above the same period last year. On the costs side, we have delivered operating costs 44% lower compared to the first half of 2017, allowing the Bank to return to operating profitability, which has been our main goal for this year.
We expect the second half of 2018 to be more balance sheet driven through new credit transactions and trading activities as we start expanding the balance sheet and using the comfortable liquidity position. We also expect to see further pipeline conversion into actual transactions in investment banking.
Thinking of our future, we will keep a dynamic and innovative mind as we adapt our business model to a changing industry.
Chief Executive Officer
Chairman of the Board of Directors