LATEST NORD/LB NEWS
Precautionary strengthening of the risk buffer
NORD/LB Norddeutsche Landesbank closed the first three quarters of fiscal 2009 in the profit zone, with consolidated pre-tax earnings of 140 million euros, and hence 30 percent up on the previous year's figure of 108 million euros for the same period. Consolidated income after taxes rose by 31 percent from last year's figure of 89 million to 117 million euros.
"Given the state of the market, we can be satisfied with this result", commented Dr. Gunter Dunkel, Chairman of the NORD/LB Management Board. "Earnings have risen considerably, in particular as result of the recovery in the financial markets. However, there are still no grounds for sounding the all-clear, especially on the credit markets. Against this background we have increased our risk provisions significantly and created a risk buffer for the purposes of remaining well equipped for handling the impacts of the financial crisis on the real economy. We are prepared and remaining vigilant", added Dr. Dunkel.
Significant rise in overall earnings
The first nine months of the year saw earnings before risk provisions and valuation rise significantly to 1,531 (2008: 1,061) million euros in year-on-year comparison, equating to growth of 44 percent. Consolidated net interest income for the period amounted to 962 million euros as against last year's figure of 1,088 million euros; the net interest income generated by the operative units rose to 1,233 (2008: 1,171) million euros. However, interest income from derivatives is in some cases reported in the fair value result under IFRS accounting rules. Net commission income amounted to 124 (2008: 131) million euros. Trading profit/loss (from financial instruments at fair value through profit or loss including hedge accounting) achieved a turnaround to 485 million euros from last year's figure of -319 million euros, with in particular the current trends towards normalisation in the financial markets having a positive effect in this respect.
Profit/loss from investments accounted for using the equity method fell to -148 (2008: 39) million euros, with a crucial role in this development being played by the losses incurred by the DnB NORD joint venture as a result of the recession in the Baltic States. This affected the nine-month result for NORD/LB to an amount of -158 (2008: 13) million euros. Other operating profit/loss amounted to 108 (2008: 122) million euros. Operative earnings (after costs and before risk provisions and valuation) of 804 million euros – and hence almost 100 percent up on the previous year's figure of 422 million euros – were achieved after deduction of administrative expenses amounting to 727 (2008: 639) million euros.
Loan loss provisions were driven up considerably to -549 (2008: -225) million euros. This position is to a large extent affected by portfolio-based provisions established to provide for expectable future rating migrations and specific loan losses to the amount of 221 million euros. None of the business divisions are disproportionately burdened by risk provisions to date. Profit/loss from financial assets fell to -115 (2008: -89) million euros, due in particular to writedowns and sales in the securities portfolio.
The result is an earnings before taxes figure of 140 (2008: 108) million euros, 30 percent up on the previous year's level. Consolidated income after taxes rose on a similar scale to 117 (2008: 89) million euros. The cost-income ratio rose to 47.5 percent as against a level of 62.5 percent as at year-end 2008, while the return on equity figure was 2.8 percent. Consolidated total assets remained virtually stable with a figure of 246.6 billion euros as against 244.3 billion euros as at year-end 2008. The core capital figure rose to 7.7 (year-end 2008: 7.2) billion euros, with the core capital ratio rising slightly to a comfortable level of 8.2 (year-end 2008: 8.1) percent.
Outlook
The business figures show that "NORD/LB is robustly positioned", remarked Dr. Dunkel. The customer-oriented business model is continuing to prove its worth in a difficult market environment. He added that the bank "is also pre-pared for the coming challenges in the markets and can master the conse-quences of the crisis on its own strength." The increased risk provisions serve as "shock absorbers on a bumpy stretch of road." He continued that a hybrid bond issue in October with a volume of 500 million US dollars further in-creased the bank's capital for the long term and reflected the confidence the institutional investors have in the NORD/LB business model.
The bank remains cautious as to the outlook for fiscal 2009 as a whole. "On the basis of all our experiences, we can reckon with the fourth quarter leading to negative impacts on the annual result", stressed Dr. Dunkel. "From today's point of view and given the current state of the market, we are anticipating be-ing able to close the fiscal year with a positive result again."
