NORD/LB presents figures for the first quarter
- Increasing loan loss provisions due to worsening of shipping crisis
- Capital ratios remain high
- Bank expecting negative result for the year as a whole
NORD/LB Norddeutsche Landesbank closed the first quarter of 2016 with earnings before taxes of minus € 98 million. This was largely due to the situation in the shipping markets deteriorating again and the bank making a significant increase to its risk provisioning of € 435 million as a result. Consolidated profit totalled minus € 84 million. In the first quarter of 2015 the bank had achieved earnings before taxes of € 229 million.
“The bank’s operating business again performed well in the first quarter of the current year as expected,” stated the Chairman of NORD/LB’s Managing Board, Dr. Gunter Dunkel. “Without the extraordinary expenses due to the shipping crisis worsening again, we would have seen a seamless continuation of the previous year’s good business results. As previously stated, we will continue to gradually reduce our ship finance portfolio. This will probably have a negative impact on our results in the coming quarters as well.”
Income statement for the first quarter of 2016
Net interest income across the Group totalled € 457 million in the first quarter (same quarter of the previous year: € 501 million). Net allocations to loan loss provisions rose significantly to € 435 million (€ 104 million). The Ship Customers segment accounts for most of this.
Net commission income remained stable at € 54 million (€ 55 million). The profit/loss from financial instruments at fair value (including hedge accounting) totalled € 266 million (€ 142 million), while the profit/loss from financial assets rose to € 7 million (€ 2 million). The profit/loss from investments accounted for using the equity method, which was in balance in the same quarter of the previous year, fell to minus € 7 million.
Administrative expenses rose by € 13 million to € 297 million (€ 284 million) in the first three months of the year. While staff expenses were reduced by € 5 million, the contribution to the security reserve for landesbanks increased by € 15 million. Other operating profit/loss totalled minus € 136 million (minus € 77 million). Income taxes in the amount of minus € 14 million (€ 73 million) are also reported in the income statement in accordance with IFRS.
Cost-income ratio was 46.9 per cent (45.7 per cent) in the first quarter of 2016, while return on equity was minus 4.8 per cent (13.5 per cent).
Total assets, which were reduced in the past three years by around € 45 billion, amounted to € 181.9 billion at the end of the first quarter (end of 2015: € 181.0 billion). The total risk exposure (formerly risk-weighted assets) remained unchanged at € 63.7 billion.
The Common Equity Tier 1 ratio amounted to 12.6 per cent as at 31 March 2016 (13.1 percent), while the total regulatory capital ratio was unchanged at 16.7 per cent. The leverage ratio slightly decreased to 4.2 per cent (4.3 per cent).
“We are not expecting any improvement in the shipping markets in the coming quarters. We are therefore also expecting a further significant increase in risk provisioning,” stated Dunkel. “As previously stated, we will continue to gradually reduce our ship finance portfolio, even though this reduction will have an additional negative impact on profit. In this difficult environment we are expecting NORD/LB to close the current year with a negative result.”
“With our proven business model and the good results that we have been able to achieve despite the shipping crisis, we have strengthened the bank’s capital base significantly in recent years. This is not least reflected in the significant rise of the capital ratios. NORD/LB can therefore also cope well with a year with a poor or even negative result and continue to meet all of the regulatory capital requirements comfortably. At the same time we will work with great commitment on the strategic development of the bank’s business segments, so that it is prepared in the future for the challenges of low and negative interest rates, regulatory requirements and digitalisation,” stated Dunkel.
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Dr. Thomas Klodt
Phone: +49 (0) 511 361-2758
With total assets of € 182 billion, NORD/LB Norddeutsche Landesbank is a leading German business bank. Its core business segments include structured financing in the energy and infrastructure sector, ship and aircraft financing, corporate customers business, commercial real estate financing, capital market business and private and commercial customers. The Bank has headquarters in Hanover, Braunschweig and Magdeburg as well as branches in Düsseldorf, Hamburg, Munich, Schwerin and Stuttgart. NORD/LB is represented outside of Germany by a Pfandbriefbank (NORD/LB Covered Bond Bank) in Luxembourg and branches in London, New York, Singapore and Shanghai.
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