LBBW Investor Presentation Preliminary Figures 2011 March 15, 2012 Landesbank Baden-Wrttemberg 1
Agenda 1. LBBW at a glance 02 08 2. Preliminary Figures 2011 09 16 3. Capital 17 18 4. Summary and Outlook 19 22 2
LBBW at a glance GERMANY Rhineland- Palatinate Baden- Wrttemberg Saxony Fourth largest German bank (by total assets as of December 31, 2011*) Universal bank with over 200 branches/offices in Germany and abroad About 12,200 employees in the Group New York Mexiko City London Sao Paulo Moscow Delhi/ Gurgaon Beijing Tokyo Shanghai Seoul Dubai Mumbai Hanoi Singapore Jakarta LBBW returns to profit territory thanks to strong client business IFRS profit before tax of EUR 117 mln (2010: EUR -341 mln) Restructuring is taking effect: staff reduction making progress, operating expense lower, credit investment portfolio again sharply reduced Reduction in risk-weighted assets ahead of schedule, total capital ratio rises to 17.2% EUROPE: Prague, Vienna, Zurich LBBW locations abroad German Centre * Preliminary figures 3
200 years on duty for the customers Merger of the Wrttembergischen and Badischen Kommunalen Landesbank to SdwestLB Phase out of guarantee obligation Take-over LRP: Consolidation in the sector of the Landesbanks and regional growth Bail-out of SachsenLB 1818 1988 1999 2001 2005 Foundation of the Wrttembergischen Sparkasse (Savings Bank of Wrttemberg) Foundation of LBBW: First and biggest vertical fusion in the S-Finance Group Formation of a universal bank with focus on small- and midsized corporates and private customers in BW EU decision: Phase out of maintenance obligation / guarantee obligation Acquisition BW-Bank AG: Growth in corporate customer business and private banking 2008 2009 Capital increase and risk shield 15.12.2009 Final approval by EU Commission Implementation of the restructuring 4
Stability due to unchanged strong ownership structure State of Baden-Wrttemberg Savings Banks Association of Baden-Wrttemberg City of Stuttgart Unguaranteed Obligations Long-term rating Short-term rating Outlook A2 P-1 RWN A+ F1+ stable 40.534% (direct and indirect) 40.534% 18.932% Financial Strength Outlook Viability Rating D+ RWN bbb- Pfandbriefe Public Sector Pfandbriefe Mortgage Pfandbriefe Aaa Aaa AAA - Guaranteed Obligations Long-term rating Outlook Aaa stable AAA stable 5
LBBW s strategic realignment makes progress Reduction in risk-weighted assets Risk-weighted assets could be reduced from EUR 121 bn in the previous year to EUR 108 bn Effects of Basel 2.5 are already included Reduction of total assets Slight decrease to EUR 373.1 bn Reductions in the balance sheet exposures to clients and banks were offset by increased exposures from derivatives, due to the changes in interest rates Sale of investments Dekabank EEX energy exchange LBS Baden-Wrttemberg LBBW Immobilien GmbH with its 21,000 apartments in February 2012 Cost reductions Administrative expenses were down by 2.1% to EUR 1.727 bn Around 2,000 full time equivalent positions have been cut Increase in material costs due to the first-time introduction of the bank levy Excluding the bank levy, total administrative expenses would have been down by more than 5 percent 6
Economic strength of the region of Baden-Wrttemberg 6,0% 4,0% 2,0% 0,0% -2,0% -4,0% -6,0% Baden-Wrttemberg is one of Europe s wealthiest regions Per-capita Gross Domestic Product (GDP) in purchasing power standards in 2009: 126.2 / European Union (27 countries): 100.0 Growth forecast for GDP Germany in 2011: 3.0% (LBBW Research) Low unemployment rate (3.7% in December 2011) Baden-Wrttemberg is home to: -8,0% 2004 2005 2006 2007 2008 2009 2010 BIP (Y/Y) Baden-Wrttemberg BIP (Y/Y) Germany Insolvency per 10,000 companies (2009) Research expenditure of private companies in % of the GDP (2006) Baden-Wrttemberg Bavaria Hesse Thuringia Brandenburg Rhineland-Palatinate Mecklenburg-W. Pomerania Hamburg Lower Saxony Germany Schleswig-Holstein Bremen Berlin Saarland Saxony Saxony-Anhalt North Rhine-Westphalia Baden-Wrttemberg Bavaria Hesse Berlin Germany Lower Saxony Rhineland-Palatinate Hamburg North Rhine-Westphalia Saxony Thuringia Bremen Schleswig-Holstein Saxony-Anhalt Saarland Mecklenburg-W. Pomerania Brandenburg 0 20 40 60 80 100 120 140 160 180 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 7
Development of results Development of consolidated result 1,000 500 931 326 Start of the financial crisis High impairments on structured assets Distinct increase in risk provisioning, impairment of goodwill SLB, restructuring expenses, guarantee commission for the risk shield CDS volatility, restructuring expenses, guarantee commission for the risk shield 87 Charges on Greece exposure, commission for the risk shield and bank levy 0 EUR mln -500-1,000-363 -1,500-1,482-2,000-2,500-2,112 31.12.2006 31.12.2007 31.12.2008 31.12.2009 31.12.2010 31.12.2011 LBBW returns to profit territory thanks to strong client business 8
Agenda 1. LBBW at a glance 02 08 2. Preliminary Figures 2011 09 16 3. Capital 17 18 4. Summary and Outlook 19 22 9
Preliminary figures of LBBW Group as of December 31, 2011 1 Jan 31 Dec 2011 EUR mln 1 Jan 31 Dec 2010* EUR mln Change EUR mln % Net interest income 2 298 2 167 131 6.0 Net fee and commission income 536 630-94 -14.9 Net income/loss from financial assets at fair value -33-657 624-95.0 Other net operating income/loss 217 163 54 33.1 Net income/loss 3 018 2 303 715 31.0 Allowances for losses on loans and advances -152-471 319-67.7 Net income/loss from investments accounted for using the equity method and from profit/loss transfer agreements -716-36 -680 >100 Administrative expenses -1 727-1 764 37-2.1 Operating income/loss 423 32 391 >100 Guarantee commission state of Baden-Wrttemberg -306-306 0 0 Goodwill impairment -15 0-15 100 Restructuring result 15-67 82 --- Consolidated profit before tax 117-341 458 --- Tax expense -30-22 -8 36.4 Consolidated profit after tax 87-363 450 --- * After adjustment in accordance with IAS 8 10
Strict focus on sustained client business Net interest income Increased by 6% y-o-y to EUR 2.298 bn Due to solid earnings from the private and corporate clients businesses as well as non-recurring income from the restructuring of a major corporate exposure and to higher investment income Net fee and commission income Net income/loss from financial assets at fair value Came to EUR 536 mln after EUR 630 mln in the previous year Investor restraint in the securities business Income from lending and trust investment business declined Was at EUR -33 mln (2010: EUR -657 mln) Positive earnings contributions from the accelerated run-off of credit derivative positions, which had been reduced utilizing tightening spreads in H1 2011 Charges resulting from valuation adjustments to other financial instruments accounted for at fair value Other net operating income/loss Increased by EUR 54 mln y-o-y to EUR 217 mln Result of real estate held as investments recorded a marked improvement Allowances for losses on loans and advances Were perceptibly reduced y-o-y to EUR 152 mln Favorable performance of the economy, particularly in the core markets of LBBW Net result from investment securities Came to EUR -716 mln Exposures in southern European countries weighed on this result Income from the sale of equity holdings across the Group came to EUR 276 mln Consolidated profit after tax of EUR 87 mln (+ EUR 450 mln y-o-y) 11
LBBW s segments Customer business segments Corporates Retail / Savings Banks Financial Markets Credit Investment Corporate Items / Reconciliation / Consolidation Consolidated result before tax EUR mln 1,600 1,400 1,200 1,000 800 600 400 1,248 1,563 Encouraging core business with corporates, private clients and savings banks Lower allowances for losses on loans and advances due to the economy Restructuring measures are taking effect across the board Risks substantially reduced, capital ratios strengthened 200 0 31 December 2010 31 December 2011 Pronounced market turbulence cast a huge shadow over the successes in core business, especially in H2 2011 12
Corporates Best year since establishment of LBBW Consolidated result before tax Target customers: Medium-sized corporate customers in the core markets Baden-Wrttemberg, Saxony and Rhineland-Palatinate, large customers as well as customers of the public sector Customers of the commercial property financing Significant assigned subsidiaries: LBBW Immobilien, LBBW Immobilien Management, SdKB, SdLeasing, MKB und SdFactoring EUR mln 1400 1200 1000 800 600 850 1,259 Core competence: Sustainable customer relations: Reliable partner with main bank function, also at times of crisis 400 200 0 31 December 2010 31 December 2011 Strategic targets: Moderate growth to strengthen the activities in the core markets Intensify business with large corporates in German-speaking countries Profit before tax improved substantially to EUR 1.259 bn This reflects the strong position which the Bank holds with corporate clients particularly in its core markets Substantial reduction in allowances for losses on loans and advances thanks to favorable economic conditions Administrative expenses were lowered slightly 13
Retail / Savings Banks Increase in profit Target customers: Retail customers, private investors, private banking and wealth management customers in the core markets LBBW acts as a savings bank in the area of Stuttgart Additional: Business activities in the context of the central bank function for savings banks Core competence: Integrated advisory service for the customers Strategic target: Moderate growth in the business with high net-worth private clients Gradual expansion of wealth management Stable, attractive funding source for LBBW Group EUR mln 150 148 146 144 142 140 138 136 134 132 130 Consolidated result before tax 137 Increase in profit before tax to EUR 149 mln, up from EUR 137 mln in the previous year Growth in deposit-taking business as well as extensions to wealth management activities particularly exerted a favorable effect Reduction of administrative expenses by means of stringent cost management 149 31 December 2010 31 December 2011 TÜV SÜD-certified advisory service 14
Financial Markets Difficult market conditions Target customers: Credit institutions/savings banks, institutional investors, sovereigns, cross-selling support for private and corporate customers Significant assigned subsidiary: LBBW Asset Management Investmentgesellschaft mbh Core competence: Structuring, sale and trading of interest rate, money market, currency, credit and equity products Leading position in the market for borrower s note loans and the Pfandbrief business Strategic target: Concentration on customer oriented business activities Considerable reduction of the positions and risks in the trading books achieved EUR mln 300 250 200 150 100 50 0 Consolidated result before tax 261 155 31 December 2010 31 December 2011 mtn-i The Institutional Performance Award Euro MTN Execution Euroweek Covered Bond House 2009 LBBW, which proved more capable than any other bank at finding opportunities for issuance in the market s darkest days, came out on top as overall best bank for covered bonds (...) Profit before tax declined to EUR 155 mln after EUR 261 mln in the previous year This was chiefly due to difficult market conditions against the backdrop of the sovereign debt crisis and along with this an active reduction of risk positions especially in the interbanking business Despite the strain caused by the bank levy, administrative expenses were slightly lower due to systematic cost management Steps to align financial market activities towards client business were continued 15
Credit Investment Portfolio (CIP) Development of the volume of the credit investment portfolio (CIP)* EUR 95 bn EUR bn 100 90 80 70 60 50 40 30 20 10 0 42 29 24 EUR 59 bn 28 10 21-74 % EUR 41 bn 17 7 17 EUR 25 bn 31.12.2008 31.12.2009 31.12.2010 31.12.2011 14 4 7 Credit derivatives Securitizations Bonds Especially in the first half-year 2011 the CIP was reduced substantially and is now at about EUR 25 bn The run-down mainly concentrated on CDS positions, which were reduced by EUR 10 bn The spread-tightening, especially in Sovereigns at the beginning of the year, was used consequently for reductions and restructurings Spread-widening in sovereign CDS lead to charges of EUR 200 mln in Q3 CIP reduction well ahead of plan * Figures since 2009 excluding risk from securitizations of currently about EUR 11 bn, covered by the risk shield of the State of Baden-Wrttemberg 16
Agenda 1. LBBW at a glance 02 08 2. Preliminary Figures 2011 09 16 3. Capital 17 18 4. Summary and Outlook 19 22 17
RWA reduction and Group s capital ratios Risk-weighted assets Tier 1 ratio EUR bn 180 160 140 120 100 80 60 40 20 178 154 121 108 in percent 14 12 10 8 6 4 2 6.9 9.8 11.4 12.9 0 31.12.2008 31.12.2009 31.12.2010 31.12.2011 0 31.12.2008 31.12.2009 31.12.2010 31.12.2011 Reduction of risk-weighted assets to EUR 108 bn after EUR 121 bn in the previous year Effects of Basel 2.5 already included Further reduction of risk-weighted assets in non-strategic operations Tier 1 capital ratio stood at 12.9% as of December 31, 2011 (Dec. 31, 2010: 11.4%) Total capital ratio came to 17.2% as of the balance sheet date after 15.3% in the previous year LBBW fulfilled EBA requirements in the fall 2011 without need for additional capital Currently negotiations with the Bank s owners concerning the strengthening of LBBW s core capital. The conversion or reinforcement of the silent partners contributions is scheduled until summer 2012 Capital ratios of the Group distinctly improved, appropriate capital resources 18
Agenda 1. LBBW at a glance 02 08 2. Preliminary Figures 2011 09 16 3. Capital 17 18 4. Summary and Outlook 19 22 19
Summary and Outlook Consolidated profit of EUR 117 mln before tax (in accordance with IFRS) based on the preliminary figures Return to profit territory succeeded thanks to strong client business Operating result showed a marked improvement to EUR 423 mln (2010: EUR 32 mln) due to Encouraging core business with corporates, private clients and savings banks Lower allowances for losses on loans and advances due to the economy Overall, charges arising in connection with the sovereign debt crisis and totaling around EUR 940 mln were absorbed Including write-downs on Greek sovereign bonds, which were written down to their market value of around 21% as of December 31, 2011 In the separate financial statements prepared in accordance with the German Commercial Code (HGB), LBBW expects a profit after tax of around EUR 400 mln Due to the profit reported under HGB, the Bank assumes that it will be able to fully replenish the profit participation certificates and silent partners contributions In the absence of any dramatic turmoil in the financial markets, LBBW expects to be able to report an improved profit in 2012 compared with 2011 in accordance with IFRS 20
Contact details Jörg Huber Managing Director Head of Funding & Investor Relations Phone: +49 711-127-78741 Fax: +49 711-127-6678741 Email: Joerg.Huber@LBBW.de Landesbank Baden-Wrttemberg Am Hauptbahnhof 2 70173 Stuttgart Germany Peter Kammerer Head of Investor Relations Phone: +49 711-127-75270 Fax: +49 711-127-6675270 Email: Peter.A.Kammerer@LBBW.de Landesbank Baden-Wrttemberg Am Hauptbahnhof 2 70173 Stuttgart Germany Karl W. Haeling Head of Strategic Debt Distribution Phone: +1 212-584-1736 Fax: +1 212-584-1739 Email: Karl.Haeling@LBBWus.de LBBW Branch New York 280 Park Avenue, 31st Floor West New York 10017 U.S.A. Sabine Weilbach Investor Relations Phone: +49 711-127-75103 Fax: +49 711-127-6675103 Email: Sabine.Weilbach@LBBW.de Landesbank Baden-Wrttemberg Am Hauptbahnhof 2 70173 Stuttgart Germany 21
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