NORD/LB expands profit in first half of the year
- Earnings before taxes at EUR 409 million
- Reduction of the ship finance portfolio faster than expected
- Capital ratio rises to 11.5 per cent
- Risk provisioning further burdened by shipping crisis
- Merger with BLB on 31 August
NORD/LB Norddeutsche Landesbank concluded the first half of 2017 with earnings before taxes of EUR 409 million. Consolidated profit stood at EUR 271 million. The Bank was therefore able to expand the earnings before taxes of EUR 255 million achieved in the first quarter. In the first half of the previous year, the Bank posted a pre-tax loss of minus EUR 364 million.
“The trend during the first half-year is satisfactory. As announced, we succeeded in increasing the common equity tier 1 capital ratio. It now stands at 11.5 per cent. In addition we were able to reduce the ship finance portfolio faster than planned. As things stand we will achieve our reduction goal in ship financing already by the end of 2017, and hence a year sooner than planned”, said Thomas Bürkle, Chairman of the Managing Board of NORD/LB. Originally, the Bank had intended to reduce its ship finance portfolio, starting from a value of EUR 19 billion in 2015, to EUR 12 to 14 billion by the end of 2018. By mid-2017 the Bank had already managed to bring it down to EUR 14.5 billion.
“Our half-year earnings demonstrate that NORD/LB is a strong bank with a functioning business model. All business areas apart from ship financing continue to be profitable. Notwithstanding the progress made in reducing the ship portfolio, risk provisioning continues to squeeze our earnings. There is still no long-term improvement discernible on the shipping markets. We therefore remain cautious, but are holding fast to our aim to generate a profit for 2017 again. Strengthening our capital ratios continues to be the top priority”, reports Bürkle.
After approval by the Owners’ Meetings between the two companies in mid-August, the subsidiary BLB will be fully merged with NORD/LB as planned on 31 August 2017. “We have succeeded in wrapping up the merger with BLB according to plan in a relatively short time frame”, reports Bürkle. “So we have completed our first important step in our group-wide transformation programme One Bank”. The programme, Bürkle explains, aims at an overlap-free line-up of business areas throughout the Group. However, the synergy effects aspired to in the process will only pay off in the medium to long term, Bürkle states. In the short term, Bürkle emphasised, increased restructuring costs will have to be invested for this purpose first.
Income statement for the first half of 2017
In the first half of 2017 net interest income stood at EUR 731 million (first half of the previous year: EUR 929 million). The decrease compared with the previous year’s figure can be attributed in particular to lower earnings from the ship finance portfolio, which the Bank is scaling back for strategic reasons, as well as to one-time effects. Net allocations to loan loss provisions declined considerably to EUR 446 million (EUR 1,003 million). Once again, they almost exclusively arose in ship financing.
Net commission income was at EUR 68 million, while the figure of EUR 117 million from the corresponding period in the previous year was overstated due to one-off effects. The fair value result (including hedge accounting) stood at EUR 164 million (EUR 277 million). Profit / loss from financial assets decreased from EUR 71 to 66 million, while profit / loss from investments accounted for using the equity method rose from EUR minus 7 million to EUR 27 million.
Administrative expenses increased to EUR 601 million (EUR 572 million), which is due, in particular, to increased regulatory requirements. This includes expenditure of EUR 13 million for the Landesbanks' deposit security reserve and the ECB provision. Other operating profit / loss jumped to EUR 404 million (EUR minus 168 million), having strongly benefited from non-recurring effects from securities transactions. It includes expenditure for the EU banking levy in the amount of the anticipated annual contribution of EUR 53 million. In accordance with IFRS, income taxes totalling EUR 138 million (minus EUR 42 million) are included on the income statement.
In the first half-year of 2017, the cost-income ratio was 43.1 per cent (49.8 per cent) and return on equity stood at 15.0 per cent (minus 8.9 per cent).
Total assets as at 30 June 2017 came to EUR 169.2 billion (year-end 2016: EUR 174.8 billion). The total risk exposure was further scaled back to EUR 53,207 million (EUR 59,896 million).
The common equity tier 1 capital ratio (CET 1 ratio) of NORD/LB rose as at 30 June 2017 to 11.5 (11.3) per cent. After falling to 10.5 per cent as at 31 March on account of a proportional consideration of loss for financial year 2016, it is now higher than the end-2016 figure. Positive effects from the outplacement announced in May of a further tranche of the Northvest transaction to institutional investors also contributed to this. 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 stood as at 30 June at 16.1 per cent (16.3 per cent), and fully loaded at 15.9 per cent (15.2 per cent).
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Dr. Thomas Klodt
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With total assets of EUR 169 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.
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