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Munich – BayernLB posted profit before taxes of EUR 644 million in the first nine months of 2021 (9M 2020: EUR 276 million). The results were driven by good operating earnings in all customer-serving segments, a positive contribution from risk provisions and reduced interest rates from the BayernLB Group's participation in ECB tenders. Consolidated profit (after taxes) was EUR 361 million (9M 2020: EUR 179 million).
“We’re pleased with the course of business in the first nine months of 2021 – especially as we can report good operating performance across all customer-serving segments. At the same time, we have made considerable progress in key aspects of our business model as a financier of progress, such as sustainability, sector expertise, expansion of the real estate business and the digital transformation at DKB. That shows that we are on the right path with our strategic agenda and the related Fokus 2024 transformation programme,” commented Stephan Winkelmeier, CEO of BayernLB. “However, our results benefited greatly from taking part in the ECB tenders and from net positive risk provisions. The high earnings therefore must not distract us from forging ahead with our transformation, which will run until 2024, as rigorously as we have been, so we can bolster our customer-serving business, implement IT modernisation and further improve our efficiency,” added Winkelmeier.
Net interest incomejumped to EUR 1,445 million (9M 2020: EUR 1,324 million), aided in particular by the BayernLB Group’s participation in the ECB tenders (TLTRO III). The Group produced net interest income of EUR 187 million in the first nine months of 2021 as a result of utilising the TLTRO III reduced interest rates. Net commission income at BayernLB climbed to EUR 267 million (9M 2020: EUR 224 million) despite the difficult market environment. The increase is largely the result of higher earnings contributions from the securities business and asset management activities at the Group's subsidiaries.
The risk provisions item significantly bolstered profit before taxes with net releases of EUR 52 million (9M 2020: net additions of EUR 175 million). In the same period of the previous year, the BayernLB Group posted additional risk provision expenses (post model adjustments) to cover the potential risks anticipated in connection with the coronavirus pandemic. The remainder of the post model adjustments as at 30 September 2021 amounted to EUR 292 million. The good quality of the credit portfolio is also evident in the low ratio of non-performing loans (NPL ratio) of 0.5 percent (9M 2020: 0.6 percent).
The BayernLB Group’s gains or losses on fair value measurement rose sharply to EUR 187 million (9M 2020: EUR 73 million). Earnings were mostly driven by good operating customer business in the Markets division and the precious metals business and by measurement gains resulting from market trends.
The DKB sustainability fund also performed well. Gains or losses on financial investments fell to EUR 8 million (9M 2020: EUR 62 million).
Despite DKB’s growth initiatives and the related strategic increase in headcount, the BayernLB Group held administrative expenses largely stable at EUR 1,148 million (9M 2020: EUR 1,135 million). Rising expenses at DKB were offset by cost cuts thanks to the successful implementation of a focusing strategy at BayernLB core Bank. Expenses for the bank levy and deposit guarantee scheme were up at EUR 182 million (9M 2020: EUR 150 million). The charge included EUR 75 million for the bank levy (9M 2020: EUR 67 million) and EUR 107 million for the deposit guarantee scheme (9M 2020: EUR 83 million). The increase for the deposit guarantee scheme stems from higher customer deposits at DKB.
BayernLB’stotal assets rose by 14.3 percent to EUR 292.9 billion (31 December 2020: EUR 256.3 billion). The increase was mainly due to BayernLB's participation in the ECB tender. Risk-weighted assets (RWAs) stood at EUR 64.3 billion (31 December 2020: EUR 65.0 billion).
The Group continues to enjoy a solid capital base, with a CET1 ratio as at 30 September 2021 of 16.4 percent (31 December 2020: 15.9 percent).
The cost/income ratio (CIR) was 59.8 percent (9M 2020: 65.4 percent). Return on equity (RoE) before taxes jumped to 8.4 percent (9M 2020: 3.7 percent).
BayernLB is forging rigorously ahead with its multi-year transformation programme Fokus 2024 launched in January 2020, despite persistent operational challenges posed by the coronavirus pandemic. Accordingly, the Bank achieved key milestones of the transformation in the first nine months of 2021 as it did in 2020.
For example, fundamental structural and infrastructural developments were driven forward, including the new teamwork model comprising dedicated teams to serve the focus sectors of energy, mobility, technology, manufacturing & engineering, and construction & basic resources in the Corporates Business Area and the implementation project to modernise the Bank's IT governance. In the project to consolidate and modernise trading IT, the new trading system was launched successfully for the first product groups. As a result, various former systems can be retired going forward. In addition, BayernLB further streamlined processes as part of its efficiency measures, which meant that the Groups administrative expenses remained almost stable overall, despite investments in growth at DKB.
Under the auspices of its transformation, BayernLB is focusing its business activities more firmly than ever on sustainability. This applies to its own operations, which have been climate neutral at all its German sites since 2015, and to BayernLB’s customer business. The Bank issued a new sustainability strategy in September 2021 to further its ambitions in this area.
BayernLB aims to have a climate-neutral portfolio before 2050. To this end, the Bank joined the Partnership for Carbon Accounting Financials (PCAF) in June 2021. The PCAF brings a standardised methodology to the table which BayernLB and DKB will use to calculate the emissions in their lending portfolios. Measuring greenhouse gas emissions is essential for managing the risk and sustainability aspects of the portfolio and gradually decarbonising it.
In addition, BayernLB has set up an ESG Assessment system. This enables sustainability risks and the positive impact of financing on the achievement of climate and sustainability goals in the portfolio to be identified at an advanced level. The Bank expects the ESG Assessment to provide information to help manage and develop the portfolio and dynamically develop sustainable capital market business.
BayernLB serves its customers as a strategic partner for sustainable finance. The Bank’s main focus is on helping its customers finance the transformation of their business models, processes and products with a view to decarbonisation and on refining its range of products and services.
The BayernLB Group has already successfully expanded its portfolio of sustainable funding instruments. Following several ESG issues by DKB and BayernLabo’s social bond, BayernLB has also added to the Group’s range of sustainable products. In the first half of the year, BayernLB launched the green commercial paper programme and placed its first green benchmark bond, followed by a green subordinated benchmark (Tier 2) bond, each with a volume of EUR 500 million. BayernLB is a pioneer of green Schuldscheine in Germany.
Profit before taxes in the Real Estate & Savings Banks/Association segment rose to EUR 225 million (9M 2020: EUR 148 million).
The Real Estate Division, whose profit before taxes climbed to EUR 134 million (9M 2020: EUR 84 million), in particular due to an increase in net interest income, played a key role in this.
Profit before taxes in the Savings Banks & Financial Institutions Division also surged to EUR 38 million as at 30 September 2021 (9M 2020: EUR 22 million). The division continues to benefit from high fair value gains in the precious metals business and good commission income, including in state-subsidised business. BayermLabo, BayernLB’s development bank for residential construction, and the asset management companies Real I.S. and BayernInvest also posted good operating performance.
In the Corporates & Markets segment, which bundles BayernLB’s business with corporate customers and capital market activities,profit before taxes soared to EUR 137 million (9M 2020: a loss of EUR 64 million). The segment’s earnings are mainly due to the streamlined customer-serving business and changes in risk provisions. Risk provisions buoyed the segment’s profit before taxes with net releases of EUR 7 million. In the year-before period, which was dominated by the coronavirus, net additions of EUR 165 million were required. Administrative expenses fell back significantly to EUR 214 million (9M 2020: EUR 254 million) as a result of streamlining.
The DKB segment also posted a sharp rise in earnings, with profit before taxes jumping to EUR 356 million (9M 2020: EUR 234 million). The higher earnings were largely owing to the EUR 128 million bonus from tender participation. The segment also benefited from good performance in business with retail and corporate customers. DKB expanded its retail customer base to around 4.9 million (H1 2020: approximately 4.5 million), thereby further consolidating its position as Germany’s second-largest online bank and one of the country’s market leaders in digital banking. Profit before taxes at Bayern Card-Services (BCS), a subsidiary belonging to the segment, stood at EUR 6.9 million (9M 2020: EUR 2.0 million).
BayernLB expects to post a positive profit before taxes for full-year 2021 that is higher than the revised forecast of EUR 500 to 700 million in the half-yearly financial report.
Additional details about the BayernLB Group's financial figures in the first nine months of 2021 can be found in the supplemental IR presentation.