NORD/LB achieves earnings of EUR 131 million for the first half of the year
- Rise in net interest income
- Shipping crisis impacting on loan loss provisions
NORD/LB Norddeutsche Landesbank achieved earnings before taxes of EUR 131 million in the first half of 2012. Consolidated profit totalled EUR 67 million. In the first six months of 2011 earnings before taxes totalled EUR 273 million and consolidated profit EUR 199 million.
“We have generated a respectable profit in the first half of the year,” said Dr. Gunter Dunkel, Chairman of the Managing Board of NORD/LB. “The fall compared to the previous year's profit, which included a few one-off effects, is in line with our expectations as well as our announcements. We remain in a very good position operationally, but also exercise caution in view of the slowdown in economic growth and the ongoing shipping crisis. In line with our conservative risk strategy, we have again significantly increased our loan less provisions. Our business model, which has also been recognised as sustainable by the EU Commission, is robust enough though to generate a respectable profit even in difficult times.”
The successful business performance is reflected in particular in net interest income, which in the first six months of the year was, at EUR 973 million, around 14 per cent up on the previous year's figure (EUR 855 million). Net commission income remained stable at EUR 83 million (EUR 84 million).
Against the background of a weaker economic environment, loan loss provisions were more than quadrupled to EUR 146 million (EUR 34 million). “On the risk side, we are feeling in particular the effects of the crisis in the shipping market. Thanks to our cautious risk policy and our good customer structure, we have also generated a profit in this segment in the first half of the year. Ship financing will remain a core business segment of NORD/LB in the future," Dunkel explained further.
As a result of the increasing tension in the financial markets and the weak euro in the first half of the year, some types of securities also experienced valuation losses, in particular currency derivatives held for hedging purposes. As a result the profit/loss from financial instruments at fair value including hedge accounting fell to EUR - 168 million (EUR - 89 million).
The profit/loss from financial assets, which included profit from the sale of investments in the previous year, totalled EUR 11 million (EUR 18 million). The profit/loss from investments accounted for using the equity method was EUR - 8 million (EUR 16 million).
Administrative expenses stable
Administrative expenses were stable at EUR 554 million (EUR 553 million). Other operating profit/loss was EUR 35 million (EUR 24 million) and, as in the previous year, was influenced significantly by the provision made for the bank levy. The reorganisation expenses of EUR - 25 million reported for the first time consist entirely of provisions for voluntary separation agreements which were made as part of the efficiency improvement programme launched last year.
“Despite tighter regulatory requirements and an increase in standard salaries, we have managed to keep administrative expenses stable. Here our efficiency improvement programme, which we will continue to pursue resolutely in future, is starting to bear fruit. We owe this not least of all to our owners, who have made great efforts to support us in our capital-boosting programme,” said Dunkel.
NORD/LB's capital ratios improved again as at 30 June 2012. The regulatory core capital ratio rose from 9.4 per cent at the end of 2011 to 10.4 per cent, while the total capital ratio rose from 12.6 to 13.5 per cent.
Based on current estimates, NORD/LB would be able to pay a dividend for the whole of 2012 to its owners, Dunkel explained further. It has been agreed with the EU Commission that this will be distributed at a later date, if the bank continues to develop according to plan.
Success through innovation
“Despite the difficult market environment, we have recently been able to complete many successful transactions. We are particularly pleased with the first issue worldwide of an aircraft Pfandbrief with a volume of EUR 500 million; the bond was over-subscribed several times.” This is also proof of the innovative capacity of NORD/LB, which has decades of experience in aircraft financing and is a well-known issuer of covered bonds. “The strong demand for our aircraft Pfandbrief is also confirmation of NORD/LB’s good standing in the capital markets," said Dunkel.
“Earnings for the first half of the year are in line with our expectations. In view of the turbulence in the markets, our figures are satisfactory. Thanks to our sustainable business model we are continuing to achieve respectable results. However, given the economic uncertainties, we remain alert and cautious. Overall we are sticking to our forecast that we will generate a good profit in 2012 as a whole, but are unlikely to repeat the previous year's exceptionally good profit given the external circumstances," explained Dunkel.
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