BayernLB posts EUR 381 million in profit before taxes for the first nine months of 2022

  • Close to the customer even in challenging times: net interest and net commission income from all customer segments up at EUR 1.8 billion
  • Earnings impacted by measurement losses in interest rate hedges and the fund portfolio
  • Moderate growth in lending, with asset quality remaining good
  • Capital base still solid: CET1 ratio at 16.1 percent
  • Forecast revised upwards again: over EUR 600 million anticipated in profit before taxes – owing in part to one-off gains in the fourth quarter

Munich – BayernLB recorded EUR 381 million in profit before taxes for the first nine months of the year (9M 2021: EUR 644 million). The figure for the previous-year period was bolstered by a much larger bonus coming from the ECB tender, and by measurement gains. Consolidated profit (after taxes) stood at EUR 241 million (9M 2021: EUR 361 million).

“Especially in crisis-ridden times like these, being a reliable partner to our customers, being close at their side, is simply the right policy. In spite of all the major challenges and uncertainties from Russia’s war with Ukraine, the surge in interest rates and the weakening economy, BayernLB still managed to increase its operating earnings from net interest and net commission income,” said BayernLB CEO Stephan Winkelmeier.

Financial data for the first nine months of 2022

Net interest income for the BayernLB Group remained stable at EUR 1,445 million (9M 2021: EUR 1,445 million). Operating net interest income from customer transactions was higher than the previous nine-month figure, with the latter boosted by a much higher bonus from the BayernLB Group’s participation in the ECB tender. In the first nine months of 2021, this additional income amounted to EUR 187 million, whereas over the first nine months of 2022 it reached a mere EUR 69 million. Net commission income rose sharply, to EUR 313 million (9M 2021: EUR 267 million). The increase was due mostly to the successful credit operations in BayernLB’s Real Estate and Corporates Divisions and in DKB’s customer and credit card business.

The BayernLB Group posted a net release of risk provisions of EUR 13 million for the first nine months of 2022 (9M 2021: net release of EUR 52 million). This net positive result came chiefly from the release of a portion of the post-model adjustment (PMA) as at the end of the first half of the year. The NPL ratio, which reflects the share of non-performing loans in relation to the overall lending volume, stood at 0.6 percent (9M 2021: 0.5 percent).

Gains or losses on fair value measurement came in at EUR 0 million (9M 2021: EUR 187 million). Both the precious metals business and customer business with financial markets products put in a good performance. The plunge was driven by measurement losses, which were due in turn to the difficult market environment. Moreover, the first nine months of 2021 enjoyed a one-off gain of approximately EUR 60 million. In other earnings components the Bank posted a loss of EUR 116 million (9M 2021: a gain of EUR 23 million). The main cause of this steep decline were the temporary expenses associated with interest rate hedging transactions and emanating from the sharp rise in interest rates.

The BayernLB Group’s administrative expenses increased to EUR 1,176 million (9M 2021: EUR 1,148 million). While staff costs fell as a result of BayernLB Bank’s now-completed workforce reduction programme, expenses went up at DKB, most of which taking the form of strategic investments in the bank’s future. Expenses for the bank levy and deposit guarantee scheme dropped to EUR 128 million (9M 2021: EUR 182 million), with the former accounting for EUR 103 million (9M 2021: EUR 75 million) and the latter for EUR 25 million (9M 2021: EUR 107 million). The increase in the bank levy was due to an overall higher charge. The lower contribution to the deposit guarantee scheme came from DKB’s switch to the Compensation Scheme of German Private Banks (EdB).

The BayernLB Group’s total assets rose to EUR 303.1 billion (31 December 2021: EUR 266.6 billion). Risk-weighted assets (RWAs) climbed to EUR 66.5 billion (31 December 2021: EUR 63.3 billion) due to the increased business volume.

The Group continues to enjoy a solid capital base, with a CET1 ratio of 16.1 percent (31 December 2021: 17.3 percent).

The cost-income ratio (CIR) was 71.6 percent (9M 2021: 59.8 percent). Return on equity (RoE) stood at 4.8 percent (9M 2021: 8.4 percent)

Earnings in the customer-serving operating segments

The Real Estate & Savings Banks/Financial Institutions segment posted EUR 194 million in profit before taxes (9M 2021: EUR 225 million). These earnings continue to be impacted both by the expansion of the real estate business in accordance with strategy and by the success in the precious metals business.

Operating performance in the Corporates & Markets segment was in line with expectations, with  profit before taxes of EUR 77 million (9M 2021: EUR 137 million). The stark decline in earnings was largely the result of measurement losses stemming from the current environment. In addition, the previous-year figure was enhanced by one-off gains.

The DKB segment’s operating performance was also within expectations, with profit before taxes amounting to EUR 161 million (9M 2021: EUR 356 million). The plunge was due mostly to the adverse market conditions affecting financial instruments held by the bank and to temporary measurement losses associated with interest rate hedging transactions. The 2021 figure was furthermore boosted by the higher interest bonus generated from the BayernLB Group’s participation in the ECB tender and also by measurement gains. The number of DKB’s retail customers rose to around 5.3 million (9M 2021: approx. 4.9 million).

Outlook for full-year 2022

BayernLB is again revising its forecast upwards for full-year 2022 given the one-off proceeds in the fourth quarter. The Group now anticipates over EUR 600 million in profit before taxes. Given the profound uncertainties as to how the prevailing macro-economic situation is likely to pan out (e.g. the energy crisis, interest rates and inflation), this forecast is less reliable than past forecasts.

Additional details about the BayernLB Group’s financial figures in the first nine months of 2022 can be found in the supplemental IR presentation