NORD/LB closes 2008 with a positive result  2009-04-29Go Back

> Increased operating income > Impacts of the financial crisis well cushioned

The NORD/LB Group closed fiscal 2008 with a positive pre-tax operating result of 22 million euros and a consolidated result of 151 million euros after tax. In spite of the difficult global economic environment, NORD/LB succeeded in achieving slightly increased earnings from its operative business. Thus the bank more than compensated for the enlarged loan loss provisions as well as temporary valuation effects arising in particular as result of the international financial crisis.

“NORD/LB has presented a healthy operating result. We have felt the impact of the financial crisis to no uncertain extent, but our earning power enables us to continue cushioning them well. The risk and valuation-related aspects are demanding our utmost attention and alertness, but we have them under control”, explained Dr. Gunter Dunkel, Chairman of the NORD/LB Management Board. The upshot is that in fiscal 2008 too, NORD/LB’s customer-oriented business model and conservative risk policy both proved themselves. “2008 was the hardest year yet in the history of our bank, and we are pleased to have been able to close it with a positive result. However, this is no reason to relax. There is still a lot to be done.”

>Earnings slightly up

Fiscal 2008 saw the NORD/LB Group achieve a slight increase in its operating income, with contributory factors being both the net interest income of 1,500 million euros (previous year: 1,487 million euros) and the net fee and commission income figure of 180 (162) million euros. Net income from trading activities (profit/loss from financial instruments stated at fair value, including hedge accounting) amounted to -346 (-457) million euros, a rise again already of 24 percent as against the previous year in spite of intensified turbulences in the markets. The position is in particular marked by the effects of the international financial crisis. The portfolio continues to be of a fundamentally high quality, with the result that the current distortions in terms of valuation are of a predominantly temporary nature and upward revaluations will be highly probable in the future. Profit from equity-accounted investments reached a level of 6 (89) million euros, while other operating income amounted to 96 (112) million euros.  

>Operating income more than compensates loan loss provisions and valuation

In sum, the Group’s earnings before loan loss provisions and valuation rose slightly from the previous year’s level of 1,384 million to 1,436 million euros. Administrative expenses totalled 898 (855) million euros. This produces an operating result (after costs, before loan loss provisions and valuation) of 538 (529) million euros.

The loan loss provisions for lending business item rose to -266 (-38) million euros. This is accounted for in part by settlement problems arising from an abortive equity transaction with a customer involving an amount of 150 million euros which made for a special effect. This transaction has thus been digested on the risk side. Income from financial assets dropped to -250 (12) million euros, being largely attributable to the impacts of the financial crisis. In sum, loan loss provisions and valuation of financial assets made a negative contribution of -516 (-26) million to the balance sheet but were able to be slightly more than compensated by the Bank’s healthy operating result. 

These overall figures produce a pre-tax operating result for the NORD/LB Group of 22 (503) million euros; the consolidated operating result after tax was 151 (305) million euros.

The Group’s balance sheet total rose to 244.3 (201.6) billion euros. In this context, it is to be taken into account that Deutsche Hypothekenbank was consolidated in the accounts for the first time in fiscal 2008. The credit volume rose to 189.4 (164.5) billion euros. TheGroup’s core capital increased to7.2 (6.8) billion euros, while, at 8.1 (6.9) percent, the core capital ratio was at a comfortable level. The cost-income ratio remained virtually steady at 62.5 (61.8) percent.

>Significant growth in loans and advances to customers and customers’ deposits

“NORD/LB will continue placing its trust in its proven customer-oriented business model”, stressed Dunkel. Last year saw lending business with customers grow by 27 percent to 112.2 (88.4) billion euros.  Even after adjustment for the special effect generated by the acquisition of Deutsche Hypothekenbank, the increase was nevertheless still 7.7 billion euros or 8.7 percent. Dr. Dunkel reported that by means of its Guaranteed Medium Term Note Programme (G-MTN) NORD/LB can continue its proven refinancing strategy and, even amid massive market distortions, secure the credit supply, in particular for corporate customers in the small-to-medium-sized company sector in the Bank’s core business area in Northern Germany. An initial issue with a volume of 2 billion euros was already floated successfully in February within the framework of the G-MTN programme.  

Customer’s deposits likewise rose in fiscal 2008, namely by 30 percent to 62 (48) billion euros. “This pleasing development illustrates the special trust our customers place in NORD/LB even in these uncertain times. We also see this mark of confidence as further endorsement of our customer-oriented business model”, added Dunkel.

>Good start in the 1st quarter

The new fiscal year 2009 has got off to a decidedly positive start, reported Dunkel. Whilst lending and income volumes in the first quarter were up in year-on-year comparison, with new business going better than budgeted for, costs have remained stable and the loan loss provisions remained close to the zero line at the current time. However, with the current macroeconomic imponderables in mind, Dunkel warned against taking this good first quarter as a sure indication that the year as a whole is going to be along the same lines. Nevertheless, he continued, this healthy start into the year is proof that the bank is going in the right direction.

NORD/LB was not willing to provide any forecast for fiscal 2009 yet. “This year will most certainly not be less difficult than 2008. The financial crisis is increasingly finding expression as economic crisis in the real economy. This constitutes a particular challenge for a customer-oriented bank like NORD/LB. However, our objective remains to close the current year too with a positive operating result”, emphasized Dr. Dunkel. He continued that the Bank has the earning power that is necessary from a present-day perspective to continue coping well with the constant market distortions arising from the financial crisis. The Bank is reckoning with rising value adjustments, which, given the high quality of the loan and securities portfolios and the Bank’s conservative risk policy, can however be expected to remain within a manageable framework. The fact that the further developments in the global financial markets are not predictable at present makes a reliable forecast for 2009 impossible at the current time.