BayernLB Group Investor Presentation. Munich, April 2018

Transcription

1 BayernLB Group Investor Presentation Munich, April 2018

2 Contents Earnings in 3 Outlook for High portfolio quality 22 Funding, liquidity and Pfandbriefs 31 Detailed charts 35 2 Rating & Investor Relations BayernLB Group Investor Presentation

3 Earnings in 3 Rating & Investor Relations BayernLB Group Investor Presentation

4 Very solid capital base: CET1 ratio (fully loaded) up significantly to 15.3 % Consolidated profit grows more than +24 % to EUR 677 m and net interest income increased by around +13 % EUR 1,659 m Administrative expenses down slightly despite higher regulatory costs and investment in digitalisation (-1.8 % / EUR 1,258 m) Bank plans to distribute EUR 50 m to owners High portfolio quality resulted in low risk provisions of EUR -94 m; NPL ratio of 1.5 % is a new best Cost/income ratio remained in the target range at 59.9 % 4 Investor Call Consolidated Earnings

5 Earnings remain stable and continue to perform well in the current tough market environment Profit before taxes EUR million Consolidated profit EUR million CIR in % RoE in % Investor Call Consolidated Earnings

6 Capital ratio performs very well despite repayment of state aid CET1 capital (fully loaded) EUR billion Total assets EUR billion CET1 capital ratio (fully loaded) in % Leverage ratio in % Investor Call Consolidated Earnings

7 Good growth in net interest income Net interest income EUR million Net commission income EUR million 1,612 1,475 1, Despite the tough environment, combined net interest income at BayernLB and DKB rose 12.5 % due to slightly higher business volume and lower interest expenses Net commission income down slightly year on year Lower income from the credit card business at DKB 7 Investor Call Consolidated Earnings

8 Administrative expenses fell and risk provisions were low due to good portfolio quality Administrative expenses EUR million Risk provisions EUR million -1,168-1,280-1, Administrative expenses down 1.8 % Major regulatory projects continued to drive administrative expenses Tight cost discipline completely offset the increase Risk provisions low once again due to good portfolio quality Releases of risk provisions and recoveries on written down loan exposures also contributed NPL ratio fell further from 1.6 % to 1.5 % 8 Investor Call Consolidated Earnings

9 Gains or losses on fair value measurement and hedge accounting Gains or losses on fair value measurement EUR million Gains or losses on hedge accounting EUR million Stable client-driven business with Financial Markets products Additional gains on fair value adjustments and swap positions of DKB Includes the mark-to-market value of underlying transactions and their hedges. The differences in value balance out over the terms of the instruments and are therefore only temporary There were opposite effects, particularly in gains or losses on fair value measurement 9 Investor Call Consolidated Earnings

10 Gains or losses on financial investments and Other income and expenses Gains or losses on financial investments EUR million Other income and expenses EUR million Year-before period boosted by sales of shareholdings, in particular the sale of the Visa and Deutsche Factoring Bank In, primarily gains or losses on sales of securities Income and expenses from the non-banking activities of subsidiaries, income from releasing provisions, a positive net interest position from tax refunds and additional tax payments at BayernLB 10 Investor Call Consolidated Earnings

11 Stable earnings overall thanks to the well diversified business model Profit before taxes EUR million Profit before taxes 2015-, by segment EUR million Corporates & Mittelstand Real Estate & Savings Banks/Association DKB Financial Markets Central Areas & Others Non-Core Unit Investor Call Consolidated Earnings

12 Corporates & Mittelstand segment EUR million 2016 Net interest income Risk provisions in the credit business Net commission income Other earnings components Administrative expenses Profit/loss before taxes Risk-weighted assets (RWA) 19,370 21,783 CIR in % RoE in % 8.0 Profit before taxes fell, mainly due to the creation of risk provisions Gross earnings declined to EUR 411 m (FY 2016: EUR 488 m), partly because of one-off income from the sale of a stake included in the previous year, low interest rates and low demand for capital market products Credit volumes in the Mittelstand division were higher year on year Administrative expenses remained stable despite higher costs for regulatory projects The segment has made a positive start to Investor Call Consolidated Earnings

13 Real Estate & Savings Banks/Association segment EUR million 2016 Net interest income Risk provisions in the credit business Net commission income Other earnings components Administrative expenses Profit/loss before taxes Risk-weighted assets (RWA) 7,739 7,141 CIR in % RoE in % Net interest and net commission income grew to EUR 374 m (FY 2016: EUR 367 m) as new business performed well Earnings contribution from risk provisions of EUR 23 m (FY 2016: EUR 24 m) was once again positive Gains or losses on fair value measurement fell year-on-year to EUR 47 m (FY 2016: EUR 65 m) mainly due to measurement gains on derivatives transactions to hedge against interest rate risk at BayernLabo in the previous year Profit before taxes at Real I.S. rose to EUR 8 m (FY 2016: EUR 6 m) Profit before taxes at BayernLabo stable at EUR 45 m (FY 2016: EUR 77 m boosted by measurement gains) 13 Investor Call Consolidated Earnings

14 DKB segment EUR million 2016 Net interest income Risk provisions in the credit business Net commission income Other earnings components Administrative expenses Profit/loss before taxes Risk-weighted assets (RWA) 24,536 24,603 CIR in % RoE in % Net interest and net commission income climbed to EUR 929 m (FY 2016: EUR 818 m) due to good performance Other income and expenses in the year before was boosted significantly by proceeds of EUR 132 m from the sale of the stake in Visa Europe Ltd. Administrative expenses increased to EUR -477 m (FY 2016: EUR -450 m), largely as a result of implementing new regulatory requirements Number of retail customers increased further to 3.7 m Profit before taxes at Bayern Card Services: EUR 7 m (FY 2016: EUR 11 m); year-before period boosted by sale of a shareholding 14 Investor Call Consolidated Earnings

15 Financial Markets segment EUR million 2016 Net interest income Risk provisions in the credit business 0-1 Net commission income Other earnings components Administrative expenses Profit/loss before taxes Risk-weighted assets (RWA) 6,508 8,024 CIR in % RoE in % Contribution to earnings from much higher net interest income of EUR 142 m (FY 2016: EUR 40 m) due to optimised management in the current low interest environment Earnings benefited from measurement gains in existing business, e.g. on fair value adjustments to derivatives amounting to EUR 64 m (FY 2016: EUR -13 m) Administrative expenses increased to EUR -196 m (FY 2016: EUR -176 m), as a result of implementing regulatory projects Profit before taxes at BayernInvest stable at EUR 6 m (FY 2016: EUR 7 m) Investor Call Consolidated Earnings

16 Central Areas and Others segment EUR million 2016 Net interest income Risk provisions in the credit business Net commission income -4-2 Other earnings components Administrative expenses Profit/loss before taxes Risk-weighted assets (RWA) 3,268 3,655 CIR in % RoE in % Earnings from remaining non-core business surged to EUR 190 m (FY 2016: EUR 18 m) due to releases and recoveries on written down receivables amounting to EUR 175 m (FY 2016: EUR 12 m) The high expenses for the bank levy and deposit guarantee scheme of EUR 64 m (FY 2016: EUR 60 m) continued to weigh on other income and expenses The high administrative expenses in the previous year were inflated by high provisions and legal costs > Investor Call Consolidated Earnings

17 Annual net income (German Commercial Code - HGB), repayment of state aid, hybrid instruments, dividends State aid repayment Profit participation certificates Capital contributions of silent partners Distribution Last tranche repaid to the Free State of Bavaria Servicing of interest due for Servicing of interest due for to the owners EUR 1 bn EUR 23 m EUR 53 m EUR 50 m HGB annual net income was EUR 363 m 17

18 CET1 ratio fully loaded of 15.3 % well above SREP minimum ratios National, system-relevant buffer Countercyclical buffer Capital conservation buffer % CET1 ratio fully loaded Buffer 626 bp 9.04 % 0.66 % 1.88 % 0.00 % 2.00 % 4.50 % 2018 CET1 SREP Requirement Pillar 2 Requirement Pillar 1 Requirement % 1.00 % 0.00 % 2.50 % 2.00 % 4.50 % Estimate of 2019 CET1 SREP Requirement BayernLB s fully loaded CET1 ratio of 15.3 % on 31 Dec was well above the current SREP minimum ratio of 9.04 % The capital requirements are recalibrated as part of the annual SREP The minimum CET1 ratio set by CRR (Pillar 1 requirement) is 4.5 % On top of that is an individual premium (Pillar 2 requirement) of 2.00 % for 2018 Additional mandatory capital buffers: Capital conservation buffer for 2018: 1.88 % Countercyclical buffer for 2018: approx. 0 % Buffer for national, systemically important institutions for 2018: 0.66 % 18 Investor Call Consolidated Earnings

19 CET1 ratio fully loaded also stable under IFRS 9 CET 1-Quote (fully loaded) in % 15.3 % 0.0 % Effect from IFRS % 01/2018 IFRS 9 pro forma The first-time application of IFRS 9 on 1 January 2018 will result in reporting and measurement differences compared to previous accounting under IAS 39. They must be recognised on first-time recognition directly under equity (retained earnings). From the first-time application of IFRS 9, the BayernLB Group is expecting an effect (excluding deferred taxes) on reported equity of between EUR -170 m and EUR -190 m. This is largely due to changes in risk provisions due to the new provisions on impairments. Since the reduction in reported equity and that of the supervisory shortfall almost offset each other, the CET1 ratio (fully loaded) remains unchanged. 19 Investor Call Consolidated Earnings

20 Outlook for Rating & Investor Relations BayernLB Group Investor Presentation

21 Outlook for 2018 Profit before taxes expected to be in the mid-triple-digit million range again After the compulsory part, it is time for freestyle Fine-tuning on the earnings side Our ambitions We will consolidate our position as one of the strongest regional banks in Europe 21

22 High portfolio quality 22 Rating & Investor Relations BayernLB Group Investor Presentation

23 Growing credit portfolio with excellent quality Gross credit volume EUR billion Growing credit portfolio Core business with target customers expanded despite tough market environment NPL ratio in % / not including HETA Rising quality Risk provisions were low once again at EUR -94 m (FY 2016: EUR -87 m) thanks to good portfolio quality. NPL ratio (not including HETA) fell again from 1.1 % to 1.0 % Rating & Investor Relations BayernLB Group Investor Presentation

24 Business increased in the Countries, Commercial Real Estate and Retail sub-portfolios Gross credit volume by region % as at 31 December CIS (EUR 0.9 bn, <1 %) Supranational organisations (EUR 1.8 bn, <1 %) Asia / Australia / Oceania (EUR 1.4 bn, <1 %) Eastern Europe North America Western Europe 5 % 1 % 11 % Middle East (EUR 1.4 bn, <1 %) Latin America / Caribbean (EUR 0.7 bn, <1 %) Africa (EUR 0.3 bn, <1 %) 80 % Germany Gross credit volume by sub-portfolio % as at 31 December Commercial Real Estate Corporates 18 % 26 % Retail 12 % 19 % 25 % 0 % Countries / Public Sector / Non-Profit Organisations Other (EUR 228 m, <1 %) Financial Institutions Germany + EUR 13.2 bn North America - EUR 1.8 bn Western Europe - EUR 1.1 bn Countries/Public Sec./Non-Profit Orgs + EUR 11.6 bn Commercial Real Estate + EUR 0.9 bn Retail + EUR 0.8 bn Financial Institutions - EUR 2.6 bn 24 Rating & Investor Relations BayernLB Group Investor Presentation

25 Improved portfolio quality Gross credit volume by rating category EUR billion / % as at 31 December 31 December 2016: Total EUR bn 31 December 2016: Total EUR bn 85 % Investmentgrade MR 0-7 MR 8-11 MR MR MR MR Core MR Non-core Investment grade Non-Investment grade Default categories 25 Rating & Investor Relations BayernLB Group Investor Presentation

26 High granularity Net credit volume EUR billion / % per 31 December 31 December 2016: Total EUR bn 31 December : Total EUR bn 80 % up to EUR 500 m > EUR 2.5 bn > EUR 1 bn > EUR 500 m > EUR 250 m > EUR 100 m > EUR 50 m to EUR 2.5 bn to EUR 1 bn to EUR 500 m to EUR 250 m to EUR 100 m Surge in the largest size category due to increase in funds held at central banks > EUR 5 m to EUR 50 m Lower volume in the size categories EUR 0.5 bn to EUR 2.5 bn as a result of the decline in volume in the Countries/Public Sector/Non-Profit Organisations and Financial Institutions sub-portfolios up to EUR 5 m 26 Rating & Investor Relations BayernLB Group Investor Presentation

27 Corporates & Mittelstand Gross credit volume by region EUR billion Western Europe North America Middle East Eastern Europe CIS Other regions Highlights Still the largest sub-portfolio at 26 % Germany: 73 %, Western Europe: 87 % Investment grade share: 72 % High granularity, share of customers with gross credit volume of up to EUR 100 m: 69 % Outlook Diversify by expanding internationally in countries that are either covered by foreign branches or in which the Bank has many years of experience: northern, western and southern Europe, the Americas, as well as selectively in eastern Europe, the Middle East and Asia Expand the Mittelstand portfolio in the Germanspeaking countries Switzerland and Austria 27 Rating & Investor Relations BayernLB Group Investor Presentation

28 Project and aircraft financing Project financing Highlights Gross business volume : EUR 15.5 bn 2/3 in Germany 4/5 renewable energy, of which approx. EUR 10 bn under the German Renewable Energy Act (EEG) Granular portfolio: Ø 8 Mio. EUR Ø residual term: 12 years Investment grade share just under 60 % Outlook Focus on renewable energy and infrastructure projects in Europe and North America Increase cooperation with institutional investors Regain foreign target customers following conclusion of the EU proceedings Aircraft financing BayernLB re-enters commercial aircraft financing: The aviation industry is a non-substitutable, global transport sector with long-term growth of 4.7 % p.a. until 2035 The Bank will gradually build up a commercial credit portfolio with a focus on high value aircraft and aircraft engines in mint condition, state-of-the-art technology and a broad customer/operator base Re-entering commercial aircraft financing opens up profitable business opportunities with a balanced risk/earnings profile and cross-selling potential 28 Rating & Investor Relations BayernLB Group Investor Presentation

29 Commercial real estate finance Gross credit volume by asset category / unit EUR billion BayernLB Residential DKB 7.6 Office BayernLabo Managed real estate 4.0 Retail Highlights Granular portfolio with 90 % share in Germany ticket size of new transactions at BayernLB has fallen slightly from EUR 35 m to EUR 30 m Residential asset category includes around EUR 18 bn of low-risk business due to local authority/ government relationship or guarantees and housing associations 83 % investment grade share 77 % of the current cash flow generating gross exposure (GEX) has a debt service capacity of > 8 % p.a. Average NPL ratio of 2.2 % Outlook Gradually grow business activities in Germany and abroad while maintaining a conservative risk policy Broaden focus abroad to support international customers from Munich, London, Paris, Milan and New York Strengthen market position in syndicated loans 29 Rating & Investor Relations BayernLB Group Investor Presentation

30 Private residential construction term loans Gross credit volume by unit EUR billion DKB BayernLB BayernLabo Distribution in Germany Granular portfolio with focus on Bavaria, mainly due to BayernLabo , Volume (EUR bn) Highlights DKB-Portfolio Ø ticket size: EUR 132,000 Ø nominal interest rate: 3.47% Outlook for DKB Largely stabilise credit volume by High redemptions offset by new business 30 Rating & Investor Relations BayernLB Group Investor Presentation

31 Funding, liquidity and Pfandbriefs 31 Rating & Investor Relations BayernLB Group Investor Presentation

32 Comfortable liquidity levels Funding strategy Balanced funding mix of secured and unsecured bonds with a focus on euro Diversified funding sources, particularly via the savings banks, institutional investors, retail customers and the international debt issuance programme High retail funding via the savings banks (B custody accounts, : approx. EUR 1.4 bn) The Bank ensures access to capital markets by regularly issuing benchmark secured bonds Liquidity Coverage Ratio (LCR): 159 % Capital market funding EUR bn / BayernLB core Bank not including BayernLabo Secured Unsecured Issued Planned up to e 32 Rating & Investor Relations BayernLB Group Investor Presentation

33 Investor-friendly structure on the liabilities side Liabilities structure EUR bn Liabilities to banks Liabilities to customers Securitised liabilities Balance sheet 2 29 Other liabilities Subordinated capital Equity Of which Pfandbriefs Of which unsecured debt instruments under section 46f of the German Banking Act (KWG) Of which structured debt instruments under section 46f of the German Banking Act (KWG) Funding via Pfandbriefs BayernLB uses a total of four funding programmes based on the German Pfandbrief Act (PfandBG) as a low-cost, long-term source of funding, two each at BayernLB and DKB Broad base of unsecured liabilities BayernLB has an investor-friendly structure on the liabilities side with sufficient unsecured bonds in relation to total assets. The Bank actively monitors and plans the proportion of unsecured bonds in accordance with Moody s Loss Given Failure analysis 33 Rating & Investor Relations BayernLB Group Investor Presentation

34 BayernLB Pfandbriefs Mortgage Pfandbriefs Cover mainly includes commercial real estate, primarily residential, office and retail with a focus on Germany. High overcollateralisation provides latitude for issuing mortgage Pfandbriefs across all maturities Public Pfandbriefe The majority of the cover (>90 %) consists of German municipal finance and receivables guaranteed by German states with a focus on Bavaria. Tap issues and jumbolinos are issued on a regular basis to maintain a liquid Pfandbrief curve Key figures Outstanding volume EUR 3.4 bn Moody s rating Aaa Over-Collateralisation 122 % Cover pool Germany EUR 4.4 bn Cover pool international EUR 1.4 bn Key figures Outstanding volume EUR 16.2 bn Moody s rating Aaa/AAA Over-Collateralisation 39 % Cover pool Germany EUR 21.4 bn Cover pool international EUR 1.4 bn 34 Rating & Investor Relations BayernLB Group Investor Presentation

35 Detailed charts 35 Rating & Investor Relations BayernLB Group Investor Presentation

36 Year-on-year earnings comparison EUR million 2016 Change in % Net interest income 1,659 1, Risk provisions in the credit business Net interest income after risk provisions 1,565 1, Net commission income Gains or losses on fair value measurement Gains or losses on hedge accounting Gains or losses on financial investments Administrative expenses -1,258-1, Expenses for bank levy and deposit guarantee scheme Other income and expenses Gains or losses on restructuring Profit/loss before taxes Income taxes Profit/loss after taxes Profit/loss attributable to non-controlling interests Consolidated profit/loss Investor Call Consolidated Earnings

37 Quarterly earnings comparison EUR million Q4 Q3 Q2 Q1 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 Administrative expenses Expenses for bank levy and deposit guarantee scheme Other income and expenses Gains or losses on restructuring Profit/loss before taxes Income taxes Profit/loss after taxes Profit/loss attributable to non-controlling interests Consolidated profit/loss Investor Call Consolidated Earnings

38 Segment overview EUR million Corporates & Mittelstand Real Estate & Savings Banks/ Association DKB Financial Markets Central Area & Other Net interest income ,659 Risk provisions in the credit business Net interest income after risk provisions ,565 Net commission income Gains or losses on fair value measurement Group Gains or losses on hedge accounting Gains or losses on financial investments Administrative expenses ,258 Expenses for bank levy and deposit guarantee scheme Other income and expenses Gains or losses on restructuring Profit/loss before taxes Return on equity (RoE) (%) Cost/income ratio (CIR) (%) Investor Call Consolidated Earnings

39 Segment overview 2016 EUR million Corporates & Mittelstand Real Estate & Savings Banks/ Association DKB Financial Markets Central Area & Other Net interest income ,475 Risk provisions in the credit business Net interest income after risk provisions ,388 Net commission income Gains or losses on fair value measurement Group Gains or losses on hedge accounting Gains or losses on financial investments Administrative expenses ,280 Expenses for bank levy and deposit guarantee scheme Other income and expenses Gains or losses on restructuring Profit/loss before taxes Return on equity (RoE) (%) Cost/income ratio (CIR) (%) Investor Call Consolidated Earnings

40 Balance sheet overview EUR billion 2016 Change in % Loans and advances to banks Loans and advances to customers Assets held for trading Financial investments Total assets Liabilities to banks Liabilities to customers Securitised liabilities Liabilities held for trading Subordinated capital Equity Investor Call Consolidated Earnings

41 Key capital figures fully loaded 2016 CET1 capital (EUR bn) CET1 ratio (%) Total capital (EUR bn) Total capital ratio (%) RWA (EUR bn) Leverage ratio (%) LCR (%) Investor Call Consolidated Earnings

42 Contact Volker Karioth Senior Manager Ariane Boldt Manager Rating & Investor Relations BayernLB Group Investor Presentation

43 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. 43 Rating & Investor Relations BayernLB Group Investor Presentation

44 44 The Bavarian bank for the German economy.