BayernLB

16-Nov-2017

BayernLB on track with profit before taxes of EUR 554 million for first nine months of 2017

  • All operating business segments made positive contributions to earnings
  • Gain of EUR 96 million from risk provisions thanks to good portfolio quality and recoveries on written down receivables
  • Common Equity Tier 1 ratio (CET1 fully loaded) improved from 13.2 percent to 13.9 percent
  • Strategic initiatives launched to further boost profitability and improve efficiency
  • BayernLB reiterates its full-year 2017 forecast of profit before taxes in the mid triple-digit million range


Munich - BayernLB posted good profit before taxes of EUR 554 million in the first nine months of financial year 2017. This is only slightly lower (-6.0 percent) than the EUR 589 million before taxes in the year-before period, which was boosted considerably by proceeds from the sale of shareholdings.

“We performed well in the first nine months of 2017 and our operating performance is on track. A key positive factor here is that we have good customer relationships based on long-term cooperation. Our main focus under the persistently challenging economic conditions is on making the Bank even more agile and efficient in the next few months and years and improving profitability for the long term,” commented Dr Johannes-Jörg Riegler, BayernLB CEO.


Overview of figures

In a market and competitive environment that remains difficult, net interest income rose 14.7 percent to EUR 1,250 million (9M 2016: EUR 1,090 million). Net commission income of EUR 197 million was in line with the year-before period (9M 2016: EUR 203 million).

Thanks to Germany’s robust economy and the Bank’s good portfolio quality, only minor loan loss provisions were required. The Bank also benefited from recoveries on written down receivables, which together resulted in a gain on risk provisions of EUR 96 million.

The gains or losses on fair value measurement item surged from EUR 75 million in the year-before period to EUR 196 million. Gains or losses on financial investments amounted to EUR 19 million. The figure of EUR 268 million for the year-before period included approximately EUR 170 million in proceeds from the sale of shareholdings.

Administrative expenses grew slightly by 7.2 percent to EUR 953 million (9M 2016: EUR 889 million), driven higher mainly by major regulatory projects. This was compounded by higher expenses due to investment in digitalisation and further modernisation of the IT infrastructure. Ongoing efficiency measures mitigated the increase but could not offset it completely.

The BayernLB Group’s total assets were 4.8 percent higher than at the end of 2016, rising to EUR 222.4 billion. Risk-weighted assets (RWA) fell to EUR 63.9 billion (9M 2016: EUR 65.2 billion) despite an increase in loans and advances to customers.

BayernLB’s return on equity (RoE) at 30 September was 8.4 percent (9M 2016: 9.0 percent), while the cost/income ratio of 63.5 percent was within the target range (9M 2016: 54.9 percent).

The Bank's capital base improved further, with the CET1 ratio fully loaded now at a very solid 13.9 percent (9M 2016: 13.2 percent).


Initiatives developed to improve profitability

After taking targeted steps in recent years to expand its range of services through strategic partnerships in the field of capital measures and trade finance in Asia, BayernLB continues to systematically enhance its proven business model. With this in mind, the Bank has set in motion various strategic initiatives to further strengthen its performance in the long term, which will be launched as of next year. These primarily entail a moderate expansion of international activities in selected target markets, while leaving the Bank’s risk profile unchanged. BayernLB also sees business potential in green finance, such as financing climate protection projects and issuing green Schuldschein note loans and corporate bonds.


Earnings in the operating business segments

Corporates & Mittelstand

The Corporates & Mittelstand segment posted profit before taxes of EUR 117 million (9M 2016: EUR 182 million). Although operating earnings from net interest and net commission income remained stable at a combined EUR 296 million (9M 2016: EUR 310 million), they were below the year-before period due to low inter-est rates and a tough competitive environment. Recoveries on written down receivables contributed to the EUR 34 million gain on risk provisions (9M 2016: EUR 23 million). Weaker demand for capital market products weighed on the gains on fair value measurement item of EUR 23 million (9M 2016: EUR 34 million).

Real Estate & Savings Banks/Association

Profit before taxes in the Real Estate & Savings Banks/Association segment decreased to EUR 124 million (9M 2016: EUR 172 million), although earnings from net interest and net commission income, amounting to a combined EUR 273 million, were up on the year-before period (9M 2016: EUR 269 million). Risk provisions posted a gain of EUR 24 million (9M 2016: EUR 20 million). The gains on fair value measurement item fell to EUR 36 million (9M 2016: EUR 48 million), primarily due to lower mark-to-market gains on derivatives transactions to hedge against interest rate risks at BayernLabo.

DKB

DKB continued to perform well. Earnings before taxes in this segment fell to EUR 199 million, down from EUR 300 million in the year-before period. However, the decline in earnings mainly reflected the EUR 132 million extraordinary gain in the year-before period from the sale of the stake in Visa Europe Ltd. Net interest income rose year-on-year from EUR 588 million to EUR 681 million thanks to DKB’s good business performance. The rise in administrative expenses to EUR -348 million (9M 2016: EUR -323 million) is, as in all other operating segments, mainly due to the implementation of new regulatory requirements.

Financial Markets

Profit before taxes in the Financial Markets segment swung to EUR 108 million in the first nine months of 2017 (9M 2016: EUR -28 million). Net interest income jumped to EUR 115 million (9M 2016: EUR -8 million), primarily bolstered by successful measures to counteract the negative impact from low interest rates in the year-before period. In addition, earnings benefited from mark-to-market gains of EUR 65 million (9M 2016: EUR -57 million) from the release of fair value adjustments on the market value of derivatives; fair value adjustments as a result of falling interest rates weighed on the year-before period.


Outlook for full year 2017 remains unchanged

BayernLB reiterates its full-year 2017 forecast of profit before taxes in the mid-triple-digit million range.


Additional details about the BayernLB Group's financial figures in the first nine months of 2017 can be found in the supplemental presentation.