NORD/LB has achieved a respectable first half-year result
- Earnings before taxes grew to € 180 million in the first half-year
- Administrative expenses were reduced considerably
- Total assets continued to shrink
- Implementation of capital measures by the end of the year
NORD/LB Norddeutsche Landesbank realised earnings before taxes of € 180 million in the first half-year of 2019. The consolidated profit after taxes was € 149 million. The bank was able to further improve the consolidated profit of € 54 million earned in the first quarter. There was also a significant increase in profit as compared to the first half-year of 2018 (1H 2018: € 54 million).
“We are rather satisfied with the business developments in the first half of the year,” said Thomas Bürkle, CEO of NORD/LB. "In a challenging environment we were able to increase earnings compared with the same period of the previous year. At the same time, we have further reduced our total assets and our costs, continuing the gradual streamlining process within the bank.”
Income statement for the first half-year of 2019
In the first two quarters, the net interest income sank to € 496 million (€ 618 million). This development is directly related to the reduction in total assets and the repayment of the ship financing portfolio. In the same period, the net commission income rose to € 50 million (€ 28 Million).
Risk provisioning during the first six months of the current year was with € -1 million almost balanced (€ -31 million). Despite a gloomy outlook concerning the overall economic situation, the bank expects only manageable charges for risk provisioning in the second half of the year. The half-year result benefited from the fair value result (including hedge accounting), which amounted to € 209 million (€ -48 million).
Administrative expenses totalled € 487 million in the first half-year of 2019. This represents a reduction of 7% as compared to the previous year (€ 522 million). The bank was thus able to significantly reduce its costs. There was a reduction in staff expenses as well as in other administrative expenses.
The other operating profit/loss results, to the amount of € -39 million (€ -29 million), were influenced primarily by the Bank’s contributions to the EU banking resolution funds and the bank levy to the amount of
€ 74 million. The restructuring and reorganisation result increased in the first half-year of 2019 to € 71 million (€ 16 million) in line with the ongoing realignment of the bank.
The NORD/LB Group’s total assets continued to shrink in the first half of 2019. They stood at € 145.3 billion as at 30 June 2019 (year-end of 2018: € 154.0 billion). The Bank is thus consistently continuing its course of step-by-step targeted downsizing.
The Common Equity Tier 1 ratio (CET 1 Capital Ratio) was 6.63% as at 30 June 2019. The total capital ratio amounted to 12.51% on the same reporting date. The capital ratios had been significantly reduced by the end of 2018 as a result of the systematic reduction of the NPL portfolio and the risk provisioning created in this context.
The present owners of NORD/LB and the Savings Banks Finance Group agreed in the spring of 2019 to comprehensive capital measures to strengthen the bank and, together with NORD/LB, notarized a comprehensive agreement in June of 2019 that lays out the most important framework conditions for the intended capital-boosting programme. The bank and its owners are still in close contact with the EU Commission and supervisory authorities regarding the planned capital measures. These measures should be implemented by the end of the year at the latest, resulting in a capital ratio of around 14%.
The associated realignment of the bank will lead to noticeable downsizing at NORD/LB. By 2024, the total assets will shrink to around € 95 billion. This also means that the number of employees will be significantly reduced, to between 2,800 and 3,000 full-time positions within the next five years. To meet this ambitious goal, the new transformation programme NORD/LB 2024 was launched in the spring. Over the course of the first half-year, the number of employees has already been reduced from 5,850 to around 5,600.
“In connection with the realignment of NORD/LB, we are planning high restructuring costs for the second half-year. Accordingly, we are sticking to our forecast that the Bank will close the full year 2019 with a loss. The restructuring of NORD/LB will require all hands on deck and will likely continue to have a dampening effect on the bank’s result next year. However, it is essential to ensure sustainable success for the bank – for our customers, owners and employees,” says Bürkle.
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NORD/LB Norddeutsche Landesbank is, with total assets of € 145 billion, one of the leading German commercial banks. Its core business areas include transactions with corporate customers, private and commercial customers including private banking, as well as structured financing in the energy and infrastructure sector, for aircraft and for commercial real estate. The bank is based in Hanover, Braunschweig and Magdeburg and also has offices in Bremen, Oldenburg, Hamburg, Schwerin, Düsseldorf, Munich and Stuttgart. Outside of Germany, NORD/LB is represented as a mortgage bank (NORD/LB Covered Bond Bank) in Luxembourg and also has offices in London, New York, Singapore and Shanghai.
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