S-Group results 2009: Sparkassen-Finanzgruppe Hessen-Thüringen posts strongly improved profit

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1 S-Group results 2009: Sparkassen-Finanzgruppe Hessen-Thüringen posts strongly improved profit Sparkassen-Finanzgruppe Hessen-Thüringen was able to considerably improve its earning power in the past year, despite the continuing impact of the financial market crisis on the real economy. According to the 2009 results, the S-Group s operating profit before valuation rose to more than 1.7 bn its highest figure so far. This is a respectable result. Our S-Group has demonstrated its robustness in the face of the economy s extremely difficult overall environment. At the same time, of course, we have profited from the steep yield curve and the markedly lower need to write down our security holdings, stated Gerhard Grandke, Executive President of the Savings Bank and Giro Association Hesse-Thuringia (SGVHT), in summarizing the S-Group s past financial year. S-Group Hesse-Thuringia achieves its best result so far With its results for 2009, Sparkassen-Finanzgruppe Hessen-Thüringen has now submitted its annual accounts compiled on consolidated basis for the seventh time and in line with the German Commercial Code (HGB). S-Group accounting is an essential component of the S-Group Concept agreed upon in Through its accounts, Sparkassen- Finanzgruppe Hessen-Thüringen presents itself as an unit of economically and legally independent enterprises, with a common market and risk strategy, as well as a common risk management system and an additional reserve fund, which was increased considerably again in Sparkassen-Finanzgruppe Hessen- Thüringen has an S-Group rating of A+ (Fitch) and A (Standard & Poor s) that can be used on the capital market by all its members institutions. Accounting on consolidated basis an essential component of the S-Group Concept Seite 1

2 The S-Group consists primarily of the 49 savings banks in Hesse and Thuringia, the Landesbank Hessen-Thüringen Group, including Frankfurter Sparkasse and LBS Hessen-Thüringen, as well as the consolidated group of SV SparkassenVersicherung Holding AG, which in turn comprises life and non-life insurance business. The enterprises of the Sparkassen-Finanzgruppe Hessen-Thüringen have a combined balance sheet total of bn and with around 27,000 employees (excluding SV SparkassenVersicherung) are market leaders in many business fields. Around employees work in the Sparkassen- Finanzgruppe Hessen- Thüringen S-Group scales back its interbank business The balance sheet total of the S-Group fell in fiscal 2009 by 13.4 bn, or 5.2%, to bn. This minus figure is attributable to the marked reduction in interbank business and reflects concerns about risk. On the assets side of the balance sheet, the S-Group reduced its receivables from banks by 2.3 bn, or 12.6%, to 16.0 bn. On the liabilities side, liabilities to banks fell by 11.0 bn, or 17.7%, to 51.1 bn. Balance sheet total in the S-Group: bn Customer business weakened against the backdrop of the difficult economic environment. In lending business, the S-Group s receivables from banks, including building loans of LBS, declined by 4.3 bn, or 3.0%, to bn. In the fourth quarter of 2009, in particular, large corporate customers redeemed their short-term debt and replaced them with mid-to-long-term maturities through promissory notes placed on the capital market by Landesbank Hessen-Thüringen. Seite 2

3 The S-Group s security holdings was trimmed by 3.3 bn, or 4.1%, to 77.5 bn, in the process of which, reductions were made in listed bonds and debentures of non-public issuers, as well as money market instruments. On the liabilities side, liabilities to customers fell by 2.1 bn, or 1.7%, to bn. This amount also includes customer deposits at 1822direkt, which compared to last year rose more strongly again. Due to the low interest level and the preference of customers for high liquidity, overnight deposits were especially popular. The equity capital of the S-Group was increased in 2009 by 0.3 bn, or 3.3%, to 9.4 bn. Overnight deposits especially popular S-Group has very good risk diversification The S-Group balance sheet for 2009 is characterized by a broad mix of receivables and refinancing structures. Also in terms of risk spreading, the S-Group is well diversified. The combination of the somewhat smaller component representing the savings banks retail business with the Landesbank s large volume wholesale transactions ensures a very good risk profile, which in future, too, will constitute a decisive strength of our S-Group, emphasized Grandke. Broad mix of receivables and refinancing structures Operating profit before valuation rises by 47.8% In 2009, despite a difficult banking environment, Sparkassen- Finanzgruppe Hessen-Thüringen succeeded in raising its operating profit before valuation by 559 m, or 47.8%, to more than 1.7 bn. The main pillar of S-Group s earnings net interest income increased by 445 m, or 14.8%, to around 3.5 bn. Earnings from maturity transformations were above the average over many years. Steep yield curve has positive effect on net interest income Seite 3

4 On the other hand, net commission income was perceptibly curbed by the decline in securities brokerage business: It fell by 61 m, or 7.6 %, to 746 m. In contrast, a positive effect on the operating result was due to the distinctly lower negative result of financial transactions, which in 2009 amounted to only 37 m (2008: m). Administrative expense, as the total of personnel and operating expense, remained stable in 2009, at 2.5 bn (+ 8 m, or +0.3%). Risk provisions for securities fall, risk provisioning for lending business rises The valuation result for the S-Group declined in 2009 by 86 m to 679 m. Relief came from the considerably lower need of risk provisioning for securities, which, thanks to the good risk quality of the security holdings, was reduced from 501 m to 34 m. On the other hand, the economic recession had a negative impact on lending business. In this sector, risk provisioning amounted to 574 m; in the year before, this figure had been only 267 m. In all, the operating profit after valuation rose by 645 m, or 159.7%, to more than 1 bn. Operating profit after valuation improves by 160% Grandke expressed satisfaction with this result: We have not only removed the dent in earnings that occurred in the previous year and which arose from the massive disruptions on the financial markets. Compared with 2008, we have indeed succeeded in far more than doubling our operating profit after valuation. The cost-income ratio within the S-Group improved decidedly from 73.5% to 65.4%. At the same time, the pre-tax return on equity rose from 6.1% to 14.6%. Cost-income-ratio improves 2009 from 73.5% to 65.4% Seite 4

5 Grandke: Sparkassen-Finanzgruppe Hessen-Thüringen will keep to its conservative risk policy For 2010, Grandke is counting on a similar operating profit before valuation at the S-Group level. On the one hand, we will do all we can to safeguard and expand our good market position and further improve our competitiveness, and on the other hand, we will certainly adhere to our conservative risk policy, which has proved its great worth beyond any doubt in the financial market crisis, said Grandke, pointing the way forward for the current year. 2010: Operating profit before valuation targets the level of the previous year Frankfurt am Main / Erfurt, 16. July 2010 Information and Communication Department Dr. Michael Auge Phone: 069/ This press release has characters. Seite 5

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