NORD/LB starts the year well
- Q1 pre-tax earnings of € 65 million
- Administrative expenses further reduced
- Total assets under € 150 billion for the first time
NORD/LB Norddeutsche Landesbank achieved earnings before taxes of € 65 million in the first three months of 2019, thus approximately equalling the previous year's result (€ 68 million). Consolidated profit after taxes was € 54 million, thereby exceeding the previous year's quarterly result of € 43 million.
“We have started the year well, both in terms of new business with customers and the repositioning of the Bank,” said Thomas Bürkle, NORD/LB’s CEO. “Against the sector trend, we have continued to reduce our costs significantly. We are also continuing to systematically reduce total assets. However, this has not been at the expense of our customers, who are always our priority and who will benefit from the Bank's having a leaner structure. We are also on track regarding the implementation of the agreed capital measures.”
Among the strongest segments contributing to Q1 earnings were Corporate Customers business, project financing for Energy and Infrastructure Customers, together with Real Estate Banking Customers business. While net interest income was lower year-on-year at € 258 million, principally due to the reduction in total assets and the downsizing of the shipping loan portfolio (Q1 2018: € 353 million), net commission income was increased from € 17 to 34 million.
Loan loss provisions in the first three months of the year generated earnings of € 38 million, as it was possible to eliminate net valuation allowances (previous year: € 28 million). In many cases it was possible to eliminate specific valuation allowances for ship financing in the course of reducing the portfolio, as the proceeds thereby achieved exceeded the loan loss provisions created. Profit/loss at fair value (including hedge accounting) stood at € 43 million (€ 3 million).
Compared with the previous year, administrative expenses fell by 9% to € 265 million (€291 million), with both staff expenses and other administrative expenses dropping.
The other operating profit/loss of minus € 41 million (minus € 38 million) was considerably affected by the complete payment of the banking levy of € 54 million for the whole year 2019. Expenses for restructuring or reorganisation measures amounted to € 10 million; in the previous year's quarter there was no corresponding expenditure.
The targeted reduction of the total assets of the NORD/LB Group was continued in the first quarter of 2019. As at 31 March 2019, they stood at € 148.2 billion (year-end 2018: € 154.0 billion) and thus were less than €150 billion for the first time. Total risk exposure was € 45.3 billion (€ 45.5 billion).
The Common Equity Tier 1 capital ratio (CET1 ratio) stood at 6.75 per cent as at 31 March 2019 and the total capital ratio was 12.65%. As at the end of 2018, the capital ratios were significantly down due to the steady reduction of the NPL portfolio and the additional risk provision created in this respect. NORD/LB has agreed a capital boost and the Bank's new business model with the former owners and the Savings Bank Finance Group and submitted a corresponding capital plan to the supervisory authority. In this respect, NORD/LB is in close communication with the supervisory authority and the EU Commission. The target capital ratio of 14 per cent (CET1) should be achieved by the end of 2019 at the latest.
As part of the Bank's repositioning, total assets are to be reduced to about € 95 billion and administrative costs cut back to € 625 million by 2024. In the next five years, staff numbers should fall to between 2,800 and 3,000 full-time equivalents.
“The current restructuring of NORD/LB represents a great challenge. With our One Bank transformation programme, we have already initiated a considerable part of the downsizing faced by the Bank. We shall be systematically continuing this process through our new, recently-launched NORD/LB 2024 programme. This being so, we are planning for high restructuring costs for the second half of the year. The year's positive beginning therefore in no way changes our forecast for the whole year. As announced, we are still expecting to close the full year 2019 with a loss. The successful repositioning of the Bank is currently a higher priority than the 2019 annual results,” said Bürkle.
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