NRW.BANK A Profile. Frank Richter

Transcription

1 NRW.BANK A Profile Frank Richter

2 NRW.BANK A Profile Executive Summary 1. North Rhine-Westphalia Our guarantor 2. NRW.BANK An introduction 3. Our added value Appendix Contact Disclaimer 2

3 Executive Summary NRW.BANK, as a state owned development bank has a clear public mission mandate does not focus on maximising profits is a tax-exempt institution is supervised by the ECB NRW.BANK is an integrated and modern development bank NRW.BANK is the second-largest development institution in Germany NRW.BANK is explicitly guaranteed by the State of North Rhine-Westphalia NRW.BANK has a zero risk weighting a first-class credit quality: Rating (Aa1/AA-/AAA/AA+) LCR status: level 1 asset Solvency II: 0% Stress i Factor AQR (Stress test) passed with flying colours Excellent levels remain stable (June 2015) CET1 ratio : 39.05% leverage ratio: 10.98% BRRD/SAG exempt institutional liability is EU conform no CACs are used ECB quantitative easing on initial ECB list for PSPP 3

4 1. North Rhine-Westphalia Our Guarantor Long-Term Rating Fitch AAA (stable) S&P AA- (stable) Moody s Aa1 (stable)

5 1. NRW German Economic Centre Population: 17.5 million inhabitants; 150 million within a radius of 500 km Economic base is well diversified, in addition: back bone is the Mittelstand (SMEs) 32 of the 100 rising stars 9 companies listed on the DAX30 represent 28% market cap 19 of the 50 largest German companies Nominal GDP in 2014: EUR 625 billion or 22% of German GDP EUR 35,022 per capita NRW produces 6% of total Euroland output 4 th highest contributor State to the German federal revenue equalization scheme NRW MÜNSTER DÜSSELDORF 5

6 1. NRW Financially Strong Donor German State Bavaria 36.8 Baden-Wurttemberg 28.2 Hesse 22.8 North Rhine-Westphalia 4.4 Hamburg Federal Revenue Allocation Transfer Payments (EUR billions) 1.1 Rhineland-Palatinate Schleswig-Holstein -0.2 Saarland -2.2 Bremen -4.3 Lower Saxony -6.8 Mecklenburg-W. Pomerania Brandenburg Thuringia Saxony-Anhalt Berlin Saxony Moody s Aaa Aaa Aa1 Aa1 Aa1 Aa1 S&P AAA AAA AA AA- AA+ AAA Fitch AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA Source: NRW Ministry of Finance 6

7 1. NRW Largest GDP in Germany GDP of German Länder (EUR billions) Bremen Saarland Mecklenburg-W. Pomerania Thuringia Saxony-Anhalt Brandenburg Schleswig-Holstein Hamburg Saxony Berlin Rhineland-Palatinate Hesse Lower Saxony Baden-Wurttemberg Bavaria North Rhine-Westphalia 7

8 2. NRW.BANK An Introduction Fitch S&P Moody s Dagong Europe Long-Term Rating AAA s AA- s Aa1 s AA+ Short-Term Rating F1+ A-1+ P-1 A-1 Sustainability imug oekom Sustainalytics Vigeo

9 2. Ownership & Explicit Guarantee Structure State of North Rhine-Westphalia the guarantor [is] directly liable ( ) for the bonds issued by the Bank... * * Extract from the Act on NRW.BANK (Art. 1, Sec. 4, Para. 3) Stable Explicit guarantee Expressed Unconditional Irrevocable First demand basis Unlimited Part of the executive (government) branch Proven, profitable business model Wide range of promotion products Strong capital base Explicit guarantee is fixed by law Debt is grandfathered Federal equalization 9

10 2. Refinancing Guarantee for NRW.BANK The guarantee is payable upon first demand. Thus, a timeliness of payment is warranted. 10

11 2. NRW.BANK No. 4 in Europe Total Assets in EUR billions (as of December, 2014) 550 total assets 200 equity capital

12 2. Core Business Segments of NRW.BANK North Rhine-Westphalia Other Regions Seed & Growth Development & Protection Housing & Living Public Finance SME s Complete business life cycle microloans succession restructuring Equity and debt solutions Foreign investments Cooperation with Rentenbank Climate energy efficiency energy storage and networks renewable energy Environment Education Cooperation with KfW EIB NRW Municipalities budget project advisory services Housing municipal multi-storey residential Urban development Social Infrastructure Cooperation with CEB Domestic ex NRW Bund Federal States municipalities Countries & Regions no loans Europe other parts of the world 12

13 2. Focus on Core Business Seed & Growth 14% Development & Protection 7% Public sector and development business are dominating with roughly 93% of total assets Other 7% Housing & Living 24% More than 70% are Germany related Non-EU 5% More than 50% are NRW related Europe 18% Private Sector Public Finance Domestic ex NRW Municipalities 25% ¾ of the Non-EU public finance is of US origin Other breakdown ½ bank bonds (covered/senior) ½ corporate risk 13

14 3. Our Added Value

15 3. Our Added Value Funding Strategy Funding Volume Target 2015: EUR 10 billion Funding Volume 2015 ytd: EUR 6.4 billion EUR: 24%, USD: 52%, other: 24% Duration: 2.8 years 100% 90% 80% 70% Annual Funding Volume by Currency Debt Issuance Programme SSD/NSV GCP Programme 60% 50% 40% 30% 20% 10% 0% * NRW.BANK Green Bonds EUR USD Other** * expected ** CHF, GBP, YEN, CAD, NZD, NOK, TRY, HKD, AUD, ISK, DKK, SEK, HUF, PLN Benchmarks (EUR and USD) Green Bond Zeros Single/Multi Callables Multi-tranches Plain vanilla 15

16 3. Our Added Value Funding Characteristics Low-risk Reliable Performance Pick-up Explicit guarantee from the State of North Rhine-Westphalia Extremely well capitalised Zero risk weighting, Level 1 Asset Gilt-edged security All issues grandfathered Low-volatility Buy backs (to ensure secondary market liquidity) Frequent borrower; benchmarks with a volume of 1 billion EUR curve in place (3, 5, 7 and 10yr tenors), USD curve in place (3, 5yr) No issue without demand; no tapping of BMKs Pricing, which gives room for tightening Cooperation with strong investment banks Monitoring outstanding issues Attractive spreads to KfW or Bund 16

17 3. USD Benchmark#2-15 due 2018 Maturity: 3 years, Size: USD 1 billion Demand was solid and not price sensitive Order book grew steadily The issue was priced at Mid-swaps + 28 bps (IPTs +29 bps) 36.8 bps over CT3 Notable and well-diversified demand from Europe (71%) Order book was driven by central banks and bank treasuries Real money accounts dominated 28 individual orders MEA 15% Switzerland 5% Eastern Europe 18% Banks 46% Regional Breakdown Asia 14% Germany France 8% Sector Breakdown Nordics 9% Insurance 1% UK 31% ISIN: XS Coupon: 1.25% Maturity: 1 Oct 2018 Leads: BofA Merrill Lynch, Barclays, Commerzbank, HSBC Central Banks & Official Institutions 53% 17

18 3. USD Benchmark#1-15 due 2018 Maturity: long 3 years, Size: USD 1 billion The transaction met with solid demand Asia 25% Regional Breakdown Germany 17% Order book grew steadily The issue was priced at mid-swaps +6 bps 39.1 bps over UST (April 2018) Notable and well-diversified demand from Europe Order book was driven by central banks Real money accounts dominated 29 individual orders MEA 14% Banks 40% North America 10% Eastern Europe 5% Central Europe 2% Sector Breakdown Other 3% Nordics 7% UK 20% ISIN: XS Coupon: 1.375% Maturity: 20 August 2018 Leads: BofA Merrill Lynch, Deutsche Bank, J.P. Morgan and Royal Bank of Scotland Central Banks & Official Institutions 57% 18

19 3. USD Benchmark#2-14 due 2019 Maturity: 5 years, Size: USD 1 billion Second USD benchmark of 2014 Attracted global demand with the order book closing after a few hours single day execution The issue was priced tighter than initial price guidance mid-swaps +12 bps 28.8 bps over UST 1.625% Aug 2019 Broad geographic diversification with high quality accounts Real money accounts dominated the order book 48 individual orders Nordics 7% Asia 17% Central Banks & Official Institutions 31% Regional Breakdown Germany 7% MEA 11% Americas 8% Eastern Europe 4% Switzerland 10% other Europe 2% Sector Breakdown UK 34% Banks 47% ISIN: XS Coupon: 2% Maturity: 23 September 2019 Leads: BofA Merrill Lynch, Barclays, Commerzbank, Credit Suisse Asset Managers 22% 19

20 3. NRW.BANK.Green Bond# due 2018 Second NRW.BANK.Green Bond ¾ mitigation: Energy (focus on greenfield) ¼ adaption: River restoration 2 nd opinion: oekom research meets the Wind Energy Generation Standard of the CBI Maturity: 4 years, Size: EUR 500 million Half of the Investors are SRI driven IPT s were strong and in little less than 3 hrs the book almost doubled in size The issue was priced at the tight end of guidance midswaps 10 bps 23.5 bps over 1% OBL 167 ( ) High diversified order book: 35 individual orders The Netherlands 17% Asia 6% Africa 10% other Europe 8% Asset Managers 39% Regional Breakdown Scandinavia 8% Switzerland 16% Germany 35% Sector Breakdown Central Banks & Official Institutions 36% ISIN: DE000NWB0AB2 Coupon: 0.25% Maturity: 5 November 2018 Leads: DZ BANK, HSBC Banks 25% 20

21 Appendix

22 Appendix Refinancing Guarantee for NRW.BANK 22

23 Appendix AQR results ( ) Source: ECB 23

24 Appendix Regulation Roundup Zero risk weighting 24 Art 116 (4) Regulation (EU) Nr. 575/2013 (CRR) LCR status Issues from NRW.BANK are as public sector entity bonds (Art 10 1 (c) (v) DR) as well as bank bonds (Article 10 1 e (i) DR) are recognised as Level 1 assets without special conditions, limits or haircuts Solvency II Under Delegate Regulation of Solvency II dated , Chapters V-VI and Article 180 Abs. 2 issues from NRW.BANK shall be assigned a risk factor Stress i of 0% BRRD Implementation Act Restructuring and resolution law (SAG) paragraph 99, note 8 of the SAG stipulates that: The rights of creditors over surety and other third parties, who are responsible for the liabilities of the institute (i.e. guarantor) will be through the guarantee of the institutes debt not affected if instruments for creditor involvement are triggered.

25 Appendix Tasks Pursuant to the NRW.BANK Act Securing and improving the medium-sized business structure of the economy, in particular by financing start-ups and recently established businesses Measures within the framework of social housing programmes subsidized by the government Provision of risk capital Construction development for cities and municipalities Infrastructure support Measures for the protection of the environment Technology/innovation support Measures for purely social purposes Measures for cultural and scientific purposes Financing of public authorities and public-sector special purpose associations as well as co-financings with European institutions 25

26 Appendix The Many Facets of the German Federal System The federal equalization principle is firmly anchored in the Basic Law i.e. German constitution (Art. 104, 107) and can be broken down into various levels: two stage horizontal financial equalization: the tax capacity per capita is adjusted to a Länder average through a 1. VAT equalization transfer (daily) 2. state revenue equalization transfer (quarterly) Vertical equalization I: Federal grant (Bundesergänzungszuweisungen = BEZ) In 2014 the tax capacity of the State with the lowest tax receipts per capita was raised from 52.6% to 98.6% highest tax receipts per capita was lowered from 155.9% to 100.8% Vertical equalization II: Further payments in the form of a special grant (SoBEZ) to deal with extraordinary emergency fiscal situations Saarland and Bremen were recipients In 2006 Berlin was unable to prove that its financial situation was an extraordinary emergency fiscal situation 26

27 Appendix The Many Facets of the German Federal System Taxes shared taxes dominate 70% of total tax receipts are derived from shared taxes (ie. income tax, withholding tax, sales tax, corporate tax) The Länder are responsible for imposing and collecting the general taxes The constitution Chapter II defines the relationship between the Bund and Länder The Federal Republic is a federal state (Art. 20) Federal law has precedence over State (Länder) law (Art. 31) The Länder s constitution should not conflict with that of the Federal Republic (Art. 28) Federal authority over the Länder used by the Federal government to discipline the Länder (Art. 37) Legislative The lower house and the upper house form a bicameral parliament Both chambers have the right to introduce bills (Art. 76) Approximately 40% of federal legislation require consent to become law All laws that affect the Länder budget require their assent 27

28 Appendix The Many Facets of the German Federal System Historical perspective The Länder form the Bund The Länder were established between and North Rhine-Westphalia was established on With the enactment of the German constitution on the the West German Länder created the German Federation; Saarland joined on The East German Länder joined the Federation on D-Mark the legal currency The Deutsche Mark was introduced on by the Bank deutscher Länder (BdL) Central bank system with 2 levels; autonomous Länder central banks hold the BdL s capital From on issuer: Deutsche Bundesbank Implementation of, as in the constitution defined (Art. 73) division of power The Länder central banks are converted into regional branches 28

29 Appendix The Many Facets of the German Federal System Principle of subsidiarity as a core philosophy it asserts the rights of the parts over the whole in that higher levels of government are only allowed to legislate in areas where the lower levels would be ineffective (Art. 72) The Bund is therefore responsible for all powers that are in the common interest and of common use of the whole (defence, freedom, currency and money, postal and telecommunication services, infrastructure) as defined in Art. 73 The Länder are allotted as listed in Art. 74 all tasks that are more appropriately handled at a regional level (culture, education, inner security, regional infrastructure) The principle of subsidiarity Allows for regional solutions Respects historical differences Encourages competition between regions Is citizen-oriented Avoids an inefficient centralised administration 29

30 Appendix Breakdown of Horizontal Equalisation Federal Revenue Allocation Transfer Payments (EUR billions) Saarland Bremen Lower Saxony Mecklenburg-W. Pomerania Brandenburg Thuringia Saxony-Anhalt Berlin Saxony Bavaria Baden-Wurttemberg Hesse North Rhine-Westphalia Hamburg Rhineland-Palatinate Schleswig-Holstein -40 Source: NRW Ministry of Finance 30 VAT reallocation Intra-Länder transfers

31 Appendix Federal Revenue Allocation 2019 et seq Sunset legislation negotiations to reform the federal fiscal equalization scheme from 2019 on Constitutional lawsuit filed by the donor Länder of Bavaria and Hesse (2013) Principle of solidarity is enshrined in the constitution But the problem of moral hazard exists Reforms with the aim of reducing the overburdening of donor Länder Potential compromises: Higher contributions by the Bund Assumption of costs for the capital city thereby easing the burden of the city state of Berlin Integration of the solidarity supplement charge (Bund) into the income tax tariff (Bund and Länder) Redefine the concept of Equivalent living conditions Up to 2019: tax revenues per capita -> Federal average equal (100%) From 2019: more divergence between Länder is desired (90% 110%) Donor Länder: higher apportionment of own VAT revenue Recipient Länder: different rates for the nation-wide uniform income tax Lower inhabitant supplement grant (city states and Mecklenburg-Vorpommern) 31

32 Appendix Rating Agencies view on German Länder Fitch considers that the system under which the Länder operate carries an AAA risk, and has therefore assigned (implicitly) an AAA rating to each of the German Länder. Länder risk is equalized throughout the country and is similar to the sovereign rating. Fitch justifies its reasoning mainly on the basis of the historical structure of German federalism, provisions in the Constitution including the Bundestreuekonzept, and Länderfinanzausgleich (Federal equalisation system) Moody's establishes a new framework: The Joint Default Probability concept. The rating agencies look at the Bundestreuekonzept (solidarity principle) and Länderfinanzausgleich and use it as a kind of floor. No German Federal State is rated below Aa1 one notches below the federal level to underpin Länder ratings. Then Moody s differentiate between states' financial and economic fundamentals, putting states like Bavaria and Baden-Württemberg in the top tier of the most creditworthy of all German states. In the Moody s world the weakest rating for a German Land is a Aa1 Standard & Poor's ratings differentiate between states. S&P look at the Bundestreuekonzept (solidarity principle) and Länderfinanzausgleich, but use it not as an (implicit) floor to underpin Länder ratings. In a next step S&P differentiate between states' financial fundamentals, putting states like Bavaria and Saxony in the top tier of the most creditworthy of all German states. S&P Ratings for German Länder fluctuates between AAA and AA- 32

33 Appendix NRW: within the Top 20 35, : GDP in EUR billions and Current Prices 1,600 1,542 1,400 1,397 1,346 1,200 1,000 1,087 1,066 1, No. 1-8* India Russia Source: IMF 2015, World Economic Outlook Database * USA, China, Japan, Germany, United Kingdom, France, Brazil, Italy Canada Australia Korea Spain Mexico Indonesia Netherlands NRW Turkey Saudi Arabia Switzerland Nigeria Sweden No

34 Appendix Summary of 2014 Annual Report As expected, total assets decreased slightly to EUR billion Gross new promotion business remained strong (EUR 8.9 billion) Housing & Living: EUR 4.3 billion Seed & Growth: EUR 3.2 billion Develop & Protect: EUR 1.4 billion Moderate decline in the net interest income to EUR million from the previous EUR million in 2013 Net commission income increased due to a one-off effect* from EUR 69.0 million to EUR million NRW.BANK does not have a dividend pay-out policy Operating Income used to strengthen reserves (2014: EUR million) Fund for general banking risks was strengthened by EUR 80.0 million NRW.BANK is a tax-exempt institution. Income taxes have only to be paid for affiliated companies Cost income ratio remains low at 36.1% (2013: 33.0%) Exceptionally low ratio of non-performing loans (0.7%) Principle 1 ratio: 43.91% CET1: 40.09% *The reported period is effected by a change in accounting rules 34

35 Appendix 2014 Short-Form Balance Sheet, Income Statement Assets millions millions Changes millions Liabilities millions millions Changes millions Cash Liabilities to banks 39,688 40,727-1,039 Debt instruments issued by public institutions and bills of exchange Liabilities to customers 19,281 20,361-1,080 Receivables from banks 33,719 34, Certificated liabilities 58,608 58, Receivables from customers 60,246 60, Trust liabilities 1,687 1, Bonds and other interest-bearing securities 43,089 44,138-1,049 Other liabilities Equity investment in non-affiliated companies 2,280 2, Deferred items 1, Equity investment in affiliated companies Provisions 2,097 1, Trust assets 1,687 1, Subordinated liabilities 2,212 2, Intangible assets Capital with participation rights Tangible fixed assets Fund for general banking risks Other assets 1, ,022 Equity capital 17,933 17, Deferred items Total assets 143, ,350-1,507 Total liabilities 143, ,350-1,507 Income Statement in millions Jan. Dec Changes in millions in % Net interest income Net commission income Net result from trading operations Personnel expenses Operating expenditure Other operating result Operating income before risk provisions Fund for general banking risks (section 340g) provision reserves (section 340f) other risk provisions Income taxes (i.e. affiliated companies) Designated payout due to legal requirements (redemption to Bund) Profit for the year Contingent liabilities 15,676 15, Other commitments 2,884 3,

36 Appendix Income Statement (Period January 1 st - December 31 st, 2014) EUR millions Net interest income Net commission income Personnel expenses Operating expenditure 36

37 Appendix Income Statement (Period January 1 st - December 31 st, 2014) EUR millions Other operating result Operating income before risk provisions Risk provisions/ provision reserves Fund for general banking risks 37

38 Appendix 2013 Short-Form Balance Sheet, Income Statement Assets millions millions Changes millions Liabilities millions millions Changes millions Cash Liabilities to banks 40,727 40, Debt instruments issued by public institutions and bills of exchange Liabilities to customers 20,361 21, Receivables from banks 34,287 33,014 1,273 Certificated liabilities 58,215 62,080-3,865 Receivables from customers 60,898 63,452-2,554 Trust liabilities 1,749 1, Bonds and other interest-bearing securities 44,138 45,899-1,761 Other liabilities Equity investment in non-affiliated companies 2,268 2,262 6 Deferred items Equity investment in affiliated companies Provisions 1,970 1,963 7 Trust assets 1,749 1, Subordinated liabilities 2,387 2, Intangible assets Capital with participation rights Tangible fixed assets Fund for general banking risks Other assets 968 1, Equity capital 17,883 17, Deferred items Total assets 145, ,836-3,486 Total liabilities 145, ,836-3,486 Income Statement in millions Jan. Dec Changes in millions in % Net interest income Net commission income Net result from trading operations Personnel expenses Operating expenditure Other operating result Operating income before risk provisions Fund for general banking risks (section 340g) provision reserves (section 340f) other risk provisions >100 Income taxes (affiliated companies) >100 Designated payout due to legal requirements (redemption to Bund) Profit for the year Contingent liabilities 15,388 17,051-1,663 Other commitments 3,105 3,

39 Appendix NRW.BANK Programmes Debt Issuance Programme BNP PARIBAS DEUTSCHE BANK EUR 25,000,000,000 Global Commercial Paper Programme BARCLAYS BNP PARIBAS BofA MERRILL LYNCH CITIGROUP COMMERZBANK CREDIT SUISSE DAIWA CAPITAL MARKETS EUROPE DEUTSCHE BANK DZ BANK AG HSBC J.P.MORGAN LANDESBANK BADEN-WÜRTTEMBERG MORGAN STANLEY NRW.BANK RBC CAPITAL MARKETS THE ROYAL BANK OF SCOTLAND UNICREDIT BANK WGZ BANK ECP Dealers BofA MERRILL LYNCH CITIGROUP MORGAN STANLEY THE ROYAL BANK OF SCOTLAND BARCLAYS ING NRW.BANK UBS INVESTMENT BANK USCP Dealers BARCLAYS CITIGROUP J.P.MORGAN MORGAN STANLEY 39

40 Appendix Liabilities by Currency Volume Coupon Launch Maturity USD 500 million 0.875% 20 March years USD 500 million FRN 22 January years AUD 10 million 5.0% 21 May years USD 400 million FRN 13 February years USD 1.1 billion FRN 16 October years USD 500 million FRN 11 July years AUD 15 million 5.04% 14 June years NOK 500 million 2.25% 24 May years GBP 700 million 0.875% 7 May years USD 1 billion FRN 31 January years EUR 1.25 billion 0.625% 30 January years GBP 200 million FRN 17 January years GBP 400 million FRN 21 March years EUR 700 million FRN 9 November years SEK 500 million 3.25% 5 November years CAD 250 million 4.5% 21 February years CAD 300 million 4.5% 9 March years 40

41 Contacts Klaus Rupprath Andreas Berning Dr Frank Richter Capital Markets Treasury Investor Relations Bloomberg NRWB#10 <GO> Reuters NRWB10 NRW.BANK Capital Markets Kavalleriestrasse Duesseldorf 41

42 Disclaimer The information contained in this presentation has been thoroughly researched. Nevertheless, it does not claim to be complete and the information contained therein may be subject to changes. We shall not be liable for any information provided herein. The presentation constitutes neither an offer nor an invitation to buy securities. It must not be viewed as personal or general advice on the basis of which investment decisions can be made. 42