• Thomas Bürkle: “Want to improve the bank’s profitability, discussing various capitalisation models”

NORD/LB Norddeutsche Landesbank concluded the first half of 2018 with earnings before taxes and restructuring expenses of € 68 million. In the previous year, the corresponding half-year results were characterised by extraordinary income from securities transactions and stood at € 468 million. However, figures from the previous year can only be compared to a limited extent due to the introduction of the new IFRS 9 accounting standard.

“The underlying conditions in which we are operating remain very challenging. Viewed against this background, this is an acceptable result. However, our aspirations are of course much higher. Through our One Bank transformation programme, we are working systematically to improve the bank’s profitability”, said Thomas Bürkle, CEO of NORD/LB.

“Work on strengthening our capital ratios is also progressing. We are exploring various capitalisation models and are in close contact to the EU Commission as well as the bank regulatory authority. The courses of action under review include the possible participation of external investors and a possible change to the legal form of the bank. We have also started on first talks with potential investors in order to assess market expectations. By the end of the year, we want to present a comprehensive, viable concept together with our owners.”

At the same time, the bank is continuing its efforts to reduce its NPL portfolio. The non-performing loans in the ship financing portfolio were reduced to € 7.7 billion (30 June 2017: € 9.1 billion). NORD/LB had announced that such loans would be cut back to under € 5 billion by the end of 2019 at the latest. The bank’s entire ship financing portfolio has already been slashed by € 7.5 billion since the end of 2015. The NPL ratio, calculated in accordance with IFRS 9, in relation to the bank’s total exposure, fell to 4.0 per cent as of 30 June 2018. As of mid-2017, it was still at 5.5 per cent.

Income statement for the first half of 2018

For the first time, NORD/LB is presenting half-year results on the basis of the new accounting standard IFRS 9, which replaces the previous standard IAS 39 and has been binding since the beginning of the year. Therefore, because of new classifications and amended measurement requirements, there is only limited comparability with the prior-year figures. According to IFRS 9, net interest income for the first six months of the current year was € 618 million (comparative figure for the first half of 2017 under IAS 39: € 731 million). The year-on-year decline in interest income is mainly due to the reduction in total assets in recent years, particularly the significant cutback in the ship financing portfolio.

Risk provisioning, which was minus € 437 million in the previous year, fell sharply to minus € 31 million. As announced, the bank expects to form new risk provisions during the further course of the year.

Net commission income in the first half of 2018 came to € 28 million (€ 68 million). Commission expenses for securitisation transactions to strengthen the capital ratio had a negative impact on earnings. Profit/loss at fair value (including hedge accounting) stood at minus € 48 million (€ 206 million).

The new item disposal profit/loss from financial assets that are not measured at fair value through profit or loss, recognised due to the introduction of IFRS 9, amounted to € 30 million. The corresponding figure from the previous year of € 451 million benefited considerably from special effects in securities transactions.

Administrative expenses fell by 10 per cent compared to the previous year to € 531 million (€ 588 million). This reflects the initial successes of the One Bank transformation programme. Other operating profit/loss came in at minus € 20 million (€ 8 million) and also comprises expenses for the bank levy of € 56 million. Restructuring or reorganisation expenses totalled minus € 16 million (minus € 17 million) in the first half of the year. Due to the reversal of tax provisions, income taxes calculated in accordance with IFRS show a positive figure of € 2 million (minus € 149 million).

Total assets of the NORD/LB Group were reduced again and stood at € 158.7 billion as of 30 June 2018 (year-end 2017: € 163.8 billion). Risk assets amounted to € 46.1 billion (€ 46.8 billion).

The common equity tier 1 capital ratio stood at 12.4 per cent as of 30 June 2018 (2017 year-end: 12.4 per cent, adjusted figure). The total capital ratio increased from 18.1 to 18.7 per cent.

“We are still looking to post positive results for financial year 2018”, said Thomas Bürkle. “However, priority is being given to measures to systematically reduce the NPL portfolio and further strengthen the capital ratios to, among others, be prepared for future regulatory requirements. These measures may have a negative impact on earnings. It is therefore not possible to give a reliable forecast for the year-end results at this stage of the year and in a market environment which remains challenging.”

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Consolidated Financial Statements Q2 2018

About NORD/LB
With total assets of € 159 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 its head office 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.