Journalists' telephone conference Half-year results for 2014

Transcription

1 Journalists' telephone conference Half-year results for 2014 Profit before taxes of EUR 527 m BayernLB s operating performance on track Dr Johannes-Jörg Riegler and Dr Markus Wiegelmann 21 August 2014, 10:00 a.m. CET

2 Agenda 1 Overview 3 Page 2 Financial performance 10 3 Capital 20 4 Management agenda & outlook 22 5 Appendix: detailed charts 25 BayernLB H August 2014 Page 2

3 Overview The first half of 2014 at a glance BayernLB posts good profit before taxes of EUR 527 m in H1 Customer business performs soundly in a tough market environment Cost-cutting programme bears fruit complexity reduced CET 1 ratio of 14.4%: BayernLB well prepared for the ECB stress test Reduction of holdings: with the sale of MKB, all major EU requirements met ahead of schedule BayernLB H August 2014 Page 3

4 Overview Adjusted profit before taxes up 14% Profit before taxes 1 EUR m Core business continues to post solid performance +14% Net interest income stable, net commission income up 11% Net releases from risk provisions, mainly in non-core business Administrative expenses cut by 7.3% 1 Jan 30 Jun Jan 30 Jun ) H figure adjusted for the EUR 351 m extraordinary gain from the sale of shares in GBW AG BayernLB H August 2014 Page 4

5 Overview Corporates, Mittelstand & FI: Good starting point potential for further growth Market position First half of 2014 Our goals 28 DAX companies BayernLB customers Top bank for Mittelstand customers in Bavaria Recognised expertise in structured finance products Profit before taxes of EUR 129 m Good performance e.g. in export & trade finance & asset finance Pressure on earnings in Corporates business: Companies holding back on capex, stiff competition, tough interest environment Grow income in the commission business Increase leverage of our excellent customer base & focus more intensely on gaining new customers Expand our market position with German corporates & establish a position as one of the top five Mittelstand banks BayernLB H August 2014 Page 5

6 Overview Real Estate & Savings Banks/Association: Net interest income and net commission income rise earnings higher Real estate incl. BayernLabo, Real I.S. Market position First half of 2014 Our goals Together with DKB, biggest commercial real estate book in Germany 1 Leading bank for residential property developers in the greater Munich area Profit before taxes of EUR 134 m Earnings growth e.g. from higher margins and better net commission income in the real estate business Position the Bank among top 5 for new business in Germany Act as innovation driver in selected product fields SB & Association 1) ) By number of customers Strong partnership with the savings banks Profit before taxes of EUR 20 m Successful cooperation with savings banks and public sector Expand market share with savings banks outside Bavaria BayernLB H August 2014 Page 6

7 Overview Markets: Realignment as its own Board of Management area of responsibility Market position First half of 2014 Our goals Top 3 rank in corporate bonds and Schuldschein note loans One of the top 5 Pfandbrief issuers in Germany Second-largest Landesbank in asset management Profit before taxes of EUR -38 m dampened by extraordinary impairment of a derivative Market-driven drop in demand for financial instruments to hedge currency and interest rate risks Implementation of changes to the organisational structure and appointment of a new member of the Board of Management Strengthen customerdriven Markets business Intensify cooperation with the Corporates, Real Estate and Savings Banks divisions Expand market position of Real I.S. and BayernInvest in asset management BayernLB H August 2014 Page 7

8 Overview DKB: Leverage the excellent customer base to increase profitability Market position First half of 2014 Our goals Currently around 3 m retail customers second largest internet bank in Germany Successful specialisation on corporates and infrastructure customers in selected sectors Lower cost base than competitors Profit before taxes of EUR 68 m Net interest income up slightly despite tough market environment 160,000 new customers won lending volume and customer deposits higher Leverage excellent customer base to increase profitability of the retail business Increase commission income Expand and strengthen market leadership with corporates and infrastructure customers in special sectors BayernLB H August 2014 Page 8

9 Agenda 1 Overview 3 Page 2 Financial performance 10 3 Capital 20 4 Management agenda & outlook 22 5 Appendix: detailed charts 25 BayernLB H August 2014 Page 9

10 Financial performance Key figures Profit before taxes in the first half driven by stable net interest income, higher net commission income, lower risk provisions and reduced administrative expenses H figure boosted by gain of EUR 351 m on the sale of the stake in GBW AG Income and expense items and profit before taxes adjusted for the contribution of MKB (also for H1 2013), total assets and risk positions, however, still include MKB Sale of MKB results in a loss of EUR 311 m posted in gains or losses on discontinued operations Profit before taxes in EUR m Gains or losses on discontinued operations (MKB) in EUR m Profit after taxes in EUR m CIR in % % Jan - 30 Jun Jan - 30 Jun % pp Jan - 30 Jun Jan - 30 Jun 2014 >100.0% 1 Jan - 30 Jun Jan - 30 Jun Jan - 30 Jun Jan - 30 Jun 2014 Total assets in EUR bn Risik positions in EUR bn CET 1 ratio in % RoE in % -1.5% -3.7 pp Dec Jun Dec 2013 (KWG) 30 Jun 2014 (CRR / CRD IV) 31 Dec 2013 (KWG) 30 Jun 2014 (CRR / CRD IV) 1 Jan - 30 Jun Jan - 30 Jun 2014 Earnings adjusted for GBW AG shares BayernLB H August 2014 Page 10

11 Financial performance Solid earnings in core business despite persistent low interest rates and weak capital expenditures Core business (EUR m) Non-core business (EUR m) 1 Jan 30 Jun 2014 all items adjusted for MKB Total revenues ,034 Administrative expenses Profit before taxes Risik positions 68,630 13,103 81,733 BayernLB H August 2014 Page 11

12 Financial performance Net interest income steady, net commission income higher Item Earnings EUR m/% Comments Net interest income Net interest income stable despite an overall reduction in business volume 1 Jan 30 Jun Jan 30 Jun 2014 Net commission income % 116 Net commission income rises by EUR 12 m; mainly in the credit business 1 Jan 30 Jun Jan 30 Jun 2014 BayernLB H August 2014 Page 12

13 Financial performance Net releases of risk provisions Net releases of risk provisions in the credit business at BayernLB and Banque LBLux S.A. resulted in a gain of EUR 45 m (H1 2013: loss of EUR 40 m) DKB's risk provisions remained unchanged at EUR -67 m (H1 2013: EUR -68 m) Based on experience, risk provisions will rise in the second half of the year Non-performing loan ratio at around 3.9% Risik provisions in EUR m Breakdown by Group unit in EUR m 1 Jan 30 Jun Jan 30 Jun 2014 Core Non-core BayernLB DKB LBLux BayernLB H August 2014 Page 13

14 Financial performance Cost-cutting programme is beginning to bear fruit Administrative expenses 1 in EUR m -7.3% Administrative expenses cut 7.3% to EUR 537 m The cost-cutting programme initiated at the end of 2013 is beginning to have an impact Around three quarters of the 440 job cuts planned have already been contractually agreed or are in final stage of negotiation IT costs reduced 1 Jan 30 Jun Jan 30 Jun 2014 But: additional expenses for audit and consultancy services, notably in connection with the ECB's comprehensive assessment 1) Group not including MKB BayernLB H August 2014 Page 14

15 Financial performance Overview of segment earnings Core segments Non-Core Unit Corporates, Mittelstand & Financial Institutions Real Estate & Savings Banks/ Association DKB Markets Central Areas & Others RU LBLux Others Consolidation Profit before taxes in EUR m 1 Jan - 30 Jun Jan - 30 Jun BayernLB H August 2014 Page 15

16 Financial performance Net interest and net commission income up in the Corporates segment, DKB's retail customer base reaches almost 3 m Business area Corporates, Mittelstand & Financial Institutions Comments Profit before taxes of EUR 129 m (H1 2013: EUR 159 m), driven by normalised risk provisions and a market-related drop in demand for interest rate and currency hedging instruments (gains or losses on fair value) compared to the previous-year period Gross earnings of EUR 298 m almost unchanged: net interest income higher despite moderate demand for credit and low interest rates; net commission income up due to higher fee income (upfront-fees) in the credit business Good performers included in particular export & trade finance, leasing, securitisations and asset finance Market penetration increased again: around 70 new customers acquired Profit before taxes of EUR 68 m (H1 2013: EUR 80 m) includes a EUR 10 m charge on the deconsolidation of the stake in Stadtwerke Cottbus Net commission income up slightly, risk provisions down due to good portfolio quality Customer business performed well in all segments: lending volume edged up to almost EUR 57.9 bn (H1 2013: EUR 55.9 bn); customer deposits, a strategically important component of funding, climbed to EUR 46.8 bn (H1 2013: EUR 42 bn) DKB gained 160,000 new customers, taking its retail customer base to just under 3 m (H1 2013: 2.7 m customers) BayernLB H August 2014 Page 16

17 Financial performance Real estate benefits from high margins and commission income, debt capital markets business performs well Business area Comments Real Estate & Savings Banks/ Association Markets Profit before taxes surged to EUR 154 m (H1 2013: EUR 110 m) due in large measure to good performance in the real estate business Real Estate division doubled its earnings to almost EUR 100 m (H1 2013: EUR 56 m) as a result of higher margins, better net commission income in new business and a net gain from risk provisions Business with savings banks and the public sector earned profit before taxes of EUR 20 m (H1 2013: EUR 14 m), driven in particular by higher net interest income due to increased Financial Markets earnings (such as brokering Schuldschein note loan tranches to savings banks) The earnings of the municipal and development bank BayernLabo, amounting to EUR 28 m (H1 2013: EUR 35 m) were dampened by a market-related drop in net interest income and higher administrative expenses for IT capital expenditures Profit before taxes of EUR -38 m (H1 2013: EUR 16 m) primarily due to an impairment charge taken on a derivative (credit value adjustment) Customer-driven business with Markets products slightly down year-on-year due to a market-related drop in demand, but debt capital markets business continued to perform well: for example the Bank acted as the joint lead on nine corporate bonds with a volume of EUR 7 bn BayernLB H August 2014 Page 17

18 Financial performance Non-Core Unit: Reduction of non-core activities well on schedule Business area Comments Non Core Unit (NCU) Profit before taxes of EUR 143 m down year-on-year from EUR 398 m, year-before contained one-time gains from the disposal of GBW AG Restructuring Unit (RU) boosts earnings to EUR 51 m (H1 2013: EUR 27 m) due to net releases of risk provisions and lower administrative expenses; total income fell as a result of contracting business volume Credit and securities portfolios in the RU reduced by a further EUR 2.5 bn to EUR 19.8 bn in the first half of the year through scheduled and early repayments and sales in conjunction with freeing up capital LBLux corporate banking portfolio transferred to the RU on 1 July 2014 MKB MKB successfully sold all major EU conditions to dispose of subsidiaries are therefore met MKB weighed on earnings to the tune of EUR 311 m in H1 2014, which is reported separately in the income statement under IFRS 5 A charge is expected under IFRS after the sale is closed in the second half of the year: deconsolidation loss of up to EUR 500 m and write-off on receivables of EUR 270 m BayernLB's capital ratio after deconsolidation only 0.3 p.p. lower; no further negative impact from MKB as from 2015 BayernLB H August 2014 Page 18

19 Agenda 1 Overview 3 Page 2 Financial performance 10 3 Capital 20 4 Management agenda & outlook 22 5 Appendix: detailed charts 25 BayernLB H August 2014 Page 19

20 Capital Very solid capital base acts as foundation for growth in the core business and risk buffer in the stress test BayernLB very well prepared for the ECB stress test Common equity tier 1 ratio (CET 1 ratio) according to CRR/CRD IV was 14.4% as at 30 June 2014 "Fully loaded" incl. silent partner contribution by the Free State of Bavaria, the CET 1 ratio is 13.0% As at 1 April, a purely supervisory capital charge of around EUR 637 m from CET 1 capital or EUR 1,061 m from fully loaded CET 1 capital had to be taken due to unrepaid loans of Hypo Alpe Adria CRR/CRD IV IFRS Risik positions in EUR bn (still incl. MKB) CET 1 capital/ratio in EUR bn / % CET 1 fully loaded capital/ratio in EUR bn / % % % 14.4% % 13.0% Mar Jun Mar Jun Mar Jun 2014 BayernLB H August 2014 Page 20

21 Agenda 1 Overview 3 Page 2 Financial performance 10 3 Capital 20 4 Management agenda & outlook 22 5 Appendix: detailed charts 25 BayernLB H August 2014 Page 21

22 Management agenda & outlook Our path: BayernLB's goals Our goals Focus Restructuring Reduce risks and redefine core business Realign business model Implement extensive restructuring measures Pursue (growth) campaigns in some business areas Optimise customer business and increase efficiency Increase penetration of customer base Improve processes; reduce costs/complexity Comply with EU conditions Grow and expand into strong Bavarian bank for the German economy Pursue long-term risk and cost discipline Maintain sustainable stability achieved Offer top level banking in our selected markets Strategic focus 2020 BayernLB H August 2014 Page 22

23 Management agenda & outlook Outlook: 2014 will be a year of transition Low interest rate environment, stiff competition and geopolitical risks: earnings in the German banking market will remain under pressure Nevertheless, we expect earnings in our core business to be well in the black Consolidated net income in 2014 will be negative as expected, due to the extraordinary charge from the sale of MKB Our focus: systematically implement our growth initiatives in customer-driven business and our cost-cutting measures BayernLB H August 2014 Page 23

24 Agenda 1 Overview 3 Page 2 Financial performance 10 3 Capital 20 4 Management agenda & outlook 22 5 Appendix: detailed charts 25 BayernLB H August 2014 Page 24

25 Appendix Year-on-year earnings comparison in EUR m 1 Jan - 30 Jun Jan - 30 Jun 2013 Change in %/pp Net interest income Risk provisions in the credit business Net interest income after risk provisions Net commission income Gains or losses on fair value measurement Gains or losses on hedge accounting Gains or losses on financial investments Income from interests in companies measured at equity Administrative expenses Expenses for bank levies Other income and expenses Gains or losses on restructuring Earnings before taxes Income taxes Gains or losses on continuing operations Gains or losses on discontinued operations >100.0 Profit after taxes Cost/income ratio (CIR) 51.9% 40.1% 11.8 pp 1) Return on equity (RoE) 7.1% 10.8% -3.7 pp 2) 1) CIR = administrative expenses/(net interest income + net commission income + gains or losses on fair value measurement + gains or losses on hedge accounting + gains or losses on financial investments + income from interests in companies measured at equity + other income and expenses) 2) Profit before taxes/actual allocated economic capital BayernLB H August 2014 Page 25

26 Appendix Quarterly earnings comparison in EUR m Q Q Change in % in Mio. EUR 2. Quartal Quartal 2014 Veränderung in % Net interest income Zinsüberschuss Risk provisions in the credit business , Risikovorsorge im Kreditgeschäft Net interest income after risk provisions , Zinsüberschuss nach Risikovorsorge Net commission income , Provisionsüberschuss Gains or losses on fair value measurement Ergebnis aus der Fair Value-Bewertung Gains or losses on hedge accounting ,6 >100.0 Ergebnis aus Sicherungsgeschäften (Hedge Accounting) Gains or losses on financial investments >100, Ergebnis aus Finanzanlagen Income from interests in companies measured at equity ,8 - Ergebnis aus at-equity bewerteten Unternehmen Administrative expenses Verwaltungsaufwand Expenses for bank levies ,9 - Aufwand für Bankenabgaben Other income and expenses Sonstiges Ergebnis Gains or losses on restructuring ,3 >100.0 Restrukturierungsergebnis Earnings before taxes >100, Ergebnis vor Steuern Income taxes >100,0 >100.0 Gains or losses on continuing operations Gains or losses on discontinued operations >100.0 Profit after taxes BayernLB H August 2014 Page 26

27 Appendix Segment overview in EUR m 1 Jan - 30 Jun 2014 Corporates, Mittelstand & Financial Institutions Real Estate & Savings Banks/ Association DKB Markets Central Areas & Others Non-Core Unit Consolidation Group Net interest income Risk provisions in the credit business Net commission income Gains or losses on fair value measurement Gains or losses on hedge accounting Gains or losses on financial investments Income from interests in companies measured at equity Administrative expenses Expenses for bank levies Other income and expenses Gains or losses on restructuring Earnings before taxes Return on equity (RoE) (%) Cost/income ratio (CIR) (%) > BayernLB H August 2014 Page 27

28 Appendix Balance sheet overview in EUR bn 30 Jun Dec 2013 Change in % Loans and advances to banks Loans and advances to customers Assets held for trading Financial investments including interests in companies valued at equity Total assets Liabilities to banks Liabilities to customers Securitised liabilities Liabilities held for trading Equity Subordinated capital BayernLB H August 2014 Page 28

29 Disclaimer The information in this presentation constitutes neither an offer nor an invitation to subscribe to or purchase securities or a recommendation to buy. It is solely intended for informational purposes and does not serve as a basis for any kind of obligation, contractual or otherwise. Rounding differences may occur in the presentation. BayernLB H August 2014 Page 29

30 BayernLB Investor BayernLB Relations Communicatiosn & Press Telephone: +49 (0)89/2171/ Telephone: +49 (0)89/2171/ Rating & Investor Relations Oktober September Seite Seite 30 30