- Merger with BLB completed
- Thomas Bürkle: “The Bank is profitable again, but it has to prepare itself for increasing requirements by the supervisory authorities”
- Ship finance portfolio expected to fall to € 10 billion, sharper reduction of NPL portfolio
- Capital ratio (CET 1) expected to rise to around 12 per cent by the end of the year
NORD/LB Norddeutsche Landesbank achieved earnings before taxes of € 326 million in the first nine months of the current year. Consolidated profit after taxes totalled € 228 million. In the corresponding period of the previous year, the Bank posted a pre-tax loss of minus € 624 million.
“This is a solid result that we can be satisfied with,” said Thomas Bürkle, Chairman of the Management Board of NORD/LB. “It is becoming evident that we will also achieve all the goals that we set ourselves for 2017. We integrated Bremer Landesbank into NORD/LB in record time, are reducing the ship finance portfolio considerably faster than expected, and were able to raise our capital ratios. The Bank is profitable again. These are the first successes of our One Bank transformation programme.”
Bremer Landesbank was fully merged with NORD/LB on 31 August, allowing the latter to concentrate its business with North German corporate customers, domestic wind energy financing, and private banking at BLB’s previous locations in Bremen and Oldenburg. The operating results as at 30 September also comprise provisions in connection with the merger, which total € 49 million. NORD/LB is anticipating considerable synergy effects from the merger in the medium to long term.
In the ship financing segment, which will be managed exclusively at the Hanover location in the future, NORD/LB was able to continue to scale back its portfolio up to the end of September. It now totals € 13.3 billion and is anticipated to fall below € 13 billion by the end of the year. The focus here lies on continued quality improvement of the portfolio, which is also achieved through targeted and low-risk new business. In the medium term, the portfolio is expected to amount to around € 10 billion, whereby the proportion of problematic financings (NPL) is to be considerably reduced. NORD/LB has set itself the goal of reducing the NPL portfolio in ship financing from today’s € 9.1 billion to € 5 billion by the end of 2019.
“We are also making progress in strengthening the capital ratios,” continued Bürkle. “By year’s end, our CET 1 ratio is anticipated to rise to around 12 per cent.” Not only will the annual profit to date contribute to this, he said, but also a large-volume securitisation transaction, which is to be implemented and with which the Bank can further reduce its risk-weighted assets. “We were already quite successful with strengthening our capital ratios. Continuing to do so remains our top priority. The requirements of the supervisory authorities concerning the capital resources of system-relevant banks in Europe will continue to increase, and we have to prepare ourselves for that,” said Bürkle.
“We are delighted that we were recently able to complete a series of remarkable deals in our main business segments. The fact that we are among Europe’s leading banks in this context is demonstrated not least by our role in financing the biggest wind farm in Europe,” said Bürkle. As recently announced, NORD/LB takes a leading role in co-financing the 650 megawatt Markbygden wind farm in northern Sweden, which after its completion will be Europe’s biggest continuous wind park.
“Despite these successes, basic conditions will also continue to be difficult for banks in the immediate future. The low-interest environment, digitalisation, and the many regulatory reforms are just some of the challenges we are facing,” said Bürkle.
Income statement for the first nine moments of 2017
In the first nine months of 2017, the Bank’s net interest income amounted to € 1,065 million (corresponding previous-year period: € 1,357 million). Particularly responsible for the decrease compared with the previous year’s figure are lower earnings from the ship finance portfolio, which the Bank is scaling back for strategic reasons, as well as extraordinary effects. Net allocations to loan loss provisions, which continue almost exclusively to concern the ship financing area, decreased considerably to € 683 million (€ 1,651 million).
Net commission income was at € 89 million, while the figure of € 164 million achieved during the period in the previous year was overstated due to extraordinary effects. The profit/loss from financial instruments at fair value through profit or loss including hedge accounting amounted to € 253 million (€ 354 million), while the profit/loss from financial investments rose from € 61 to € 133 million. The profit/loss from investments accounted for using the equity method rose from minus € 18 million to € 29 million.
Administrative expenses rose to € 883 million (€ 835 million); the increase was particularly driven by investments in IT infrastructure due to continuously expanded regulatory requirements. Administrative expenses also comprise expenditures of € 17 million for the Landesbanks’ deposit security reserve and the ECB provision. Other operating profit/loss rose considerably to € 372 million (minus € 47 million) due to the positive extraordinary effects from securities transactions. It includes expenditures for the EU banking levy in the amount of the anticipated annual contribution of € 53 million.
The reorganisation expenses position encompasses provisions for the One Bank transformation programme, launched by Bürkle at the start of the year. They total € 49 million and concern HR management measures in connection with the merger of Bremer Landesbank with NORD/LB.
In accordance with IFRS, income taxes totalling € 98 million (€ 112 million) are included in the income statement.
In the first nine months of 2017, the cost-income ratio was 48.8 percent (46.1 percent) and the return-on-equity was 7.6 percent (minus 10.4 percent).
Total assets as at 30 September 2017 totalled € 165.2 billion (year-end 2016: € 174.8 billion). The total risk exposure was systematically steered back further and totals € 51,776 million (€ 59,896 million).
The common equity tier 1 capital ratio (CET 1 ratio) of NORD/LB was at 11.5 per cent on 30 September 2017. After falling to 10.5 per cent in the interim on account of a proportional consideration of loss for financial year 2016, it is now higher than the end-2016 figure (11.3 per cent). Fully loaded (after full application of the Basel III rules to be implemented by 2019), the CET 1 ratio rose from 9.9 to 11.2 per cent. The total regulatory capital ratio as at 30 September 2017 stood at 16.9 per cent (16.3 per cent), and fully loaded at 16.6 per cent (15.2 per cent).
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Consolidated Financial Statements Q3 2017
With total assets of EUR 165 billion, NORD/LB Norddeutsche Landesbank is one of Germany’s leading merchant banks. Its core business segments include structured finance in the energy and infrastructure sector, ship and aircraft finance, corporate client business, commercial real estate finance, capital market business and private and commercial client business. The Bank has its head office in Hanover, Braunschweig and Magdeburg. In Bremen and Oldenburg, under the brand BLB, its focus is on business with North German corporate customers, domestic wind energy financing and private banking. NORD/LB also has branches in Düsseldorf, Hamburg, Munich, Schwerin and Stuttgart. Outside Germany, NORD/LB is active in Luxembourg with a covered bond bank (NORD/LB Covered Bond Bank) and also has offices in London, New York, Singapore and Shanghai.