NORD/LB reports profit for first nine months
- Nine-month results before taxes and restructuring amount to € 195 million
- One Bank transformation programme bearing fruit: administrative expenses fall by 11 per cent
- Consolidated profit for the whole of 2018 likely to be negative
NORD/LB Norddeutsche Landesbank generated earnings before taxes and restructuring expenses of € 195 million in the first nine months of 2018. In the previous year, nine-month results were still dominated by extraordinary income from securities transactions and stood at € 436 million. Figures from the previous year can only be compared to a limited extent due to the introduction of the new IFRS 9 accounting standard. Consolidated profit after taxes stood at € 64 million after the first nine months.
“Business growth has been pleasing recently. All the bank’s segments presented positive operating results. This prooves that our broad-based business model is working”, said Thomas Bürkle, CEO of NORD/LB. “The figures also show that our One Bank transformation programme is bearing fruit. As announced, however, the provisions for this programme will have a negative impact on results for the year. This is one of the reasons why we will probably show negative consolidated results for the whole of 2018. However, the efforts we are making to transform the bank will pay off in the long run.”
With regard to the current tender procedure with potential investors, Bürkle said: “Talks on strengthening our capital ratios are now entering a very intensive phase. Together with our owners, we will thoroughly examine any offers received from external investors and decide on how to proceed as soon as possible.” NORD/LB had announced at the end of August that in terms of strengthening its capital, it would examine models providing for the participation of external investors in the bank. In this context, it had launched a call for bids from potential investors. In October, the circle of potential investors was cut to a short-list of fewer than ten bidders.
The bank continues to make strong progress in reducing the problematic part of its ship financing portfolio. As of 30 September 2018, the NPL portfolio still stood at € 7.3 billion. The Bank has already succeeded in reducing it by over € 2 billion since the end of 2016. NORD/LB had announced that the NPL portfolio would be cut back to under € 5 billion by the end of 2019 at the latest. The signs now are that this target will probably be reached much earlier. The entire volume of ship financing transactions fell from € 16.9 billion at the end of 2016 to € 10.8 billion as of 30 September 2018.
NORD/LB recently launched a start-up as part of its digitisation strategy. The newly founded company Finpair offers a digital platform for Schuldschein issues that does not require any arranging financial institutions. Finpair offers a solution that is independent of any bank and is explicitly open to further shareholders.
Income statement for the first nine months of 2018
Net interest income for the first nine months of the current year stood at € 921 million (comparative figure for the first nine months of 2017, IAS 39: € 1,065 million). The main reason for the year-on-year decline is the reduction in total assets of the past few years, particularly the significant cut in the ship financing portfolio. However, the introduction of IFRS 9 led to new classifications and changes in measurement regulations with regard to interest income as well as other components of the income statement with the result that comparability with figures from the previous year is limited.
Risk provisioning, which had amounted to minus € 666 million in the previous year, fell sharply to minus € 147 million. However, the indications are that risk provisioning for the ship financing portfolio will rise again in the final quarter of the year.
Net commission income in the first nine months of 2018 came to € 49 million (€ 89 million). Compared with the previous year, commission income from the banking business increased from € 182 million to € 195 million. However, this positive development is offset by a sharp year-on-year rise in commission expenses for securitisation transactions for strengthening capital ratios.
Profit/loss at fair value (including hedge accounting) stood at € 95 million (€ 297 million). The disposal profit/loss from financial assets that are not measured at fair value through profit or loss, anew item formed as part of the introduction of IFRS 9, amounted to € 32 million. The corresponding figure from the previous year of € 428 million benefited considerably from special effects in securities transactions.
Administrative expenses fell by 11 per cent compared to the previous year to € 771 million (€ 865 million). This is a further success of the One Bank Group-wide transformation programme launched in 2017. Other operating profit/loss came to minus € 8 million (€ 14 million) and includes expenses for the bank levy of € 56 million. Restructuring or reorganisation expenses nearly doubled by comparison with the previous year, totalling minus € 122 million (minus € 67 million). Income taxes calculated in accordance with IFRS amount to minus € 9 million (minus € 104 million).
The managed reduction of the total assets of the NORD/LB Group continued in the third quarter of 2018. As of 30 September 2018, they stood at € 154.8 billion (year-end 2017: € 163.8 billion). Total risk exposure amounted to € 47.2 billion (€ 46.8 billion).
The common equity tier 1 capital ratio stood at 11.8 per cent as of 30 September 2018 (year-end 2017: 12.4 per cent, adjusted figure). The total capital ratio amounted to 17.6 per cent (18.1 per cent). The volatility of the capital ratios throughout the year is due to measurement effects that have a direct impact on equity as well as to changes in the total risk exposure amount.
Outlook for the whole of 2018
As already announced in September, the NORD/LB Group will probably report negative annual earnings for 2018 as a whole. The level of the expected loss cannot be reliably estimated at this time.
With total assets of € 159 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 including private banking. The Bank has its head office in Hanover, Braunschweig and Magdeburg. NORD/LB also has branches in Bremen, Oldenburg, Hamburg, Schwerin, Düsseldorf, Munich 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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