Minister Söder: EU state aid proceeding against BayernLB completed early

Press release of Bavarian State Ministry of Finance, Regional Development and Regional Identity: BayernLB pays back another billion to the Free State of Bavaria // All EU conditions have now been fulfilled ahead of time

Bavarian Minister of Finance Dr. Markus Söder and Bayerische Landesbank CEO Dr. Johannes-Jörg Riegler signed an agreement today in Munich for BayernLB to repay one billion euro to the Free State of Bavaria. “BayernLB is paying back the last outstanding billion to the Free State. The agreement signed today means that the EU state-aid proceeding against BayernLB has been concluded ahead of time. This is a big day. In a herculean effort unprecedented in Germany we have managed to successfully overcome the biggest economic and financial challenge faced by the Free State of Bavaria since the end of the Second World War. Bavaria has a top bank that can once again act freely but still with common sense and a sense of proportion,” rejoiced Söder. At the same time, he made it clear that a sale of BayernLB is out of the question, “We need a strong bank for business and industry in Bavaria and Germany.”

Under a ruling by the EU in 2012, Bayerische Landesbank was required to pay a total of EUR 4.96 billion to the Free State of Bavaria by 2019 at the latest. Including the billion today, which represents both principal and interest payments, Bayerische Landesbank has paid a total of nearly EUR 5.5 billion to the Free State of Bavaria.

Dr. Johannes-Jörg Riegler, CEO of BayernLB, added, “This means we have been able to close the most difficult chapter in BayernLB’s history two and a half years ahead of time and, effective immediately, are officially able to compete in the market again like any other normal bank. In addition to ridding ourselves of our major legacy issues, we have also forged ahead in the past three years with implementing our customer-focused business model and are now again one of the leading banks in Germany. The rating agencies have also endorsed our comeback with their good ratings. We will continue to implement our risk-conscious business model in the future even after the end of the state-aid process. My particular thanks today go to our owners, the Free State of Bavaria and the Bavarian savings banks, which have stood solidly behind us over the past few years. Without their support the future of BayernLB would have been highly uncertain. The valuable trust and loyalty of our customers and hard work of our employees and governing boards were also a tremendous help”, Riegler concluded.

Supervisory board chairman Gerd Haeusler, who took part in the state-aid negotiations as former CEO of BayernLB and assisted in implementing it over the years, said, “Looking back, it was absolutely vital in 2012 that the European Commission put its seal of approval on Bayerische Landesbank’s viability. This was anything but self-evident back then. The radical restructuring and dynamic downsizing of the Bank, not least of all through disposing of major shareholdings, laid the foundation for today’s early repayment of EUR 5.5 billion in core tier 1 capital, the lifeblood of a bank. This is unprecedented for an unlisted bank in Europe. That’s another reason for everyone involved to be particularly proud of this outcome today.”

Söder once again ticked off the major milestones of the past few years: “In 2011 we were still faced with a huge mountain of problems that were nearly impossible to solve. A breakup of the bank with additional billions in liabilities for the budget threatened. Today we have successfully met these challenges,” Söder commented. The end of the EU state aid proceeding represents the last milestone. In addition to disposing of the major legacy issues through the sale of the toxic ABS assets, the disposal of the Hungarian bank MKB and the general settlement with Austria over HypoAlpeAdria, BayernLB has also successfully completed a full-scale restructuring. Moreover, total assets have been cut nearly in half, risk assets slashed, numerous shareholdings sold off and branch offices abroad closed since 2008.

Counting today’s payment of one billion, the Free State of Bavaria has received a total of EUR 5.5 billion from Bayerische Landesbank. This means that the requirements of the EU’s repayment plan (just under EUR 5 billion) have even been overfulfilled. BayernLB has also steadily fulfilled all the other conditions set by the EU Commission. The early repayment of the last outstanding state-aid money was made possible by BayernLB’s strong business performance in the past few years and the solid capital base that goes with it. BayernLB’s financial stability has also been acknowledged by the approval from the competent authorities (the European Central Bank (ECB), the German Bundesbank, The German Financial Supervisory Authority (Bafin) and the EU Commission) to repay the silent partner contribution. Today, Bayerische Landesbank is more stable than ever before as proven by its core tier 1 ratio of 13.1 per cent as at 31 March 2017.

BayernLB is thus well positioned for the future. Business and industry in Bavaria and Germany have need of a strong and reliable financial partner like BayernLB. Accordingly, a long-term interest in BayernLB continues to exist, concluded Söder in Munich.

Bavarian State Ministry of Finance, Regional Development and Regional Identity