NORD/LB welcomes DSGV model
- NPL portfolio is set to be almost completely run off by year-end
- Charges on 2018 annual earnings
The owners and Managing Board of NORD/LB Norddeutsche Landesbank welcome the decision of the German Savings Banks Association (Deutscher Sparkassen- und Giroverband (DSGV)) to contribute to a solution for strengthening NORD/LB’s capital. At today’s Owners’ Meeting, they considered the proposed decision, which was discussed at the meeting with the DSGV and banking supervisory authority on Friday, to be a suitable basis for NORD/LB’s realignment and for the further development of its business model. In further discussions with the DSGV and in coordination with the banking supervisory authority and the EU Commission, the outstanding issues are to be clarified quickly so that these measures can be implemented as soon as possible.
After in-depth assessment of a joint offer by two financial investors submitted as part of a bidding process, the bank and its owners are turning down this option for the moment to focus on a joint solution with the DSGV under public law.
At the same time, NORD/LB is making decisive progress in running off its ship financing portfolio. Thomas Bürkle, Chairman of NORD/LB, today announced that the Non Performing Loan (NPL) portfolio, which groups together the legacy problem assets from ship financing, should be almost completely run off by the end of 2019. As an important first step in this process, the bank’s responsible committees today decided to carry out a transaction where one of the bank’s ship financing portfolios will be transferred to an external investor for around EUR 2.7 billion. The portfolio comprises 263 ships with an NPL portion of some 90%. The transaction was preceded by a confidential bidding process which was carried out separately and independently from the bidding process for a minority stake in NORD/LB. The parties have agreed to maintain confidentiality about the conditions of the transaction.
With this transaction, the bank is taking a decisive step towards running off its NPL portfolio of EUR 7.3 billion in total (figure as at 30 September 2018). The bank is also working hard on further measures aimed at swiftly reducing this portfolio. In 2017, NORD/LB announced that it would be reducing its NPL portfolio to below EUR 5 billion by end 2019. This runoff is now taking place much more quickly and more comprehensively. In this regard, NORD/LB will now set aside additional risk provisioning in the consolidated financial statements for the 2018 financial year covering the whole of the NPL portfolio, so that we expect total risk provisioning for full year 2018 up to EUR 2.5 billion.
Due to the additional risk provisioning, the already announced consolidated loss for NORD/LB Group will sum up to roughly EUR 2.7 billion. This will also impact on the bank’s capital ratios. The banking supervisory authority was informed that NORD/LB’s capital ratios will temporarily drop below the minimum requirements and therefore requests a detailed capital plan in the following weeks.
With the model decided upon on Thursday, we now have a concrete solution for a joint capital strengthening of the bank by the DSGV and the owners of the bank. When this solution is implemented, the bank’s capital ratios will rise again tangibly, thus meeting all requirements under supervisory law.
Thomas Bürkle, Chairman of NORD/LB, sees the decisions taken by the Owners’ Meeting as an important step for the bank: “With the bank carefully extricating itself from legacy transactions and reinforcing the capital base on a sustainable basis, we will preserve and strengthen NORD/LB as a bank that has firm roots in its local region of Northern Germany and the Savings Bank organisation as well as international expertise. Braunschweigische Landessparkasse will also remain part of the Savings Bank organisation. That’s good news for the bank’s customers who continue to be our priority.”
With total assets of € 155 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 headquarters 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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