Conference Call group results for 2Q 2016

NORD/LB Group – H1 2016 Results
25 August 2016
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NORD/LB Group Results H1 2016
NORD/LB face a challenging first half year (1/2).
Consolidated loss increased significantly to €-406m: operating earnings remain stable
Net allocations to risk provisions of €1,003m (€210m)
Specific valuation allowances increased by €945m (€238m), general loan loss provisions nearly unchanged at €7m (€-9m). Provisions
mainly derive from the bank‘s shipping portfolio
Active management of reducing the shipping portfolio
Due to the negative sentiment in the shipping markets, the bank is going to further reduce its shipping lending business. In the midterm the portfolio should shrink to €12-14bn. As a first cornerstone, NORD/LB entered into an agreement to sell €1.3bn shipping loans
to investors with further sales to follow
Solid capital ratios
CET1 ratio is at 12.0 per cent and total capital ratio at 16.1 per cent. We significantly outperformed the required minimum ratios. The
ongoing strengthening of the capital ratios during recent years also had a positive impact on the results of the current stress test
Total assets nearly unchanged
Slight decrease by 1 per cent to €179.2bn. We are significantly below the EU target of €195bn at year-end 2016
(Previous year’s figures in brackets)
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NORD/LB Group Results H1 2016
NORD/LB face a challenging first half year (2/2).
1 Jan –
30 Jun 2016
1 Jan –
30 Jun 2015
929
1.000
1.003
210
Increase mainly due to specific valuation allowances for ships
Net commission income
117
111
Robust development
Profit/loss from financial instruments at fair value
incl. hedge accounting
277
95
Profit/loss from financial assets
71
26
Profit/loss from investments accounted for using the
equity method
-7
-59
Decrease in write-offs from companies at-equity
572
562
Staff expenses fell whereas service expenses for IT increased
Other operating profit/loss
-168
-80
Mainly due to the redemption of own issues and extraordinary
depreciations on shipping companies on the balance sheet
Earnings before reorganisation and taxes
-356
321
-8
-7
-364
314
42
24
-406
290
Income statement (in €m)
Net interest income
Loan loss provisions (llps)
Administrative expenses
Reorganisation expenses
Earnings before taxes
Income taxes
Consolidated profit
3
Moderate decrease due to low interest-rate levels and asset
reduction
Lower EUR interest-rate level resulted in an increase in trading
profits, compensating the inverse impact on the fair value option
Positive effects from lower impairments, reduced profit from the
sale of bonds
Net allocations to reorganisation expenses for severance
agreements previously agreed to
NORD/LB Group Results H1 2016
Total assets nearly unchanged.
Balance sheet (in €m)
30 Jun 2016
31 Dec 2015
Total assets
179,166
180,998
Total assets shrank slightly, EU requirements at year-end
2016 of €195bn already met
Loans and advances to customers
107,140
107,878
Still largest balance sheet item, decrease in loans to ship and
aircraft customers
Loans and advances to banks
21,137
21,194
Reduction of municipal loan portfolio
Financial assets
34,431
34,515
Slight reduction of afs financial assets
Customer deposits
57,188
60,597
Decrease especially from money market transactions and
savings deposits
7,762
8,513
Equity capital (balance sheet)
4
Reduction mainly based on consolidated results and
revaluation of pension plans
NORD/LB Group Results H1 2016
Capital ratio at solid level.
Important ratios and figures
31 Dec 2015
(CRR, transitional)
31 Dec 2015
(CRR, fully loaded)
30 Jun 2016
(CRR, transitional)
30 Jun 2016
(CRR, fully loaded)
Common equity tier 1 capital ratio
13.1%
12.2%
12.0%
11.2%
Total capital ratio
16.7%
16.7%
16.1%
15.6%
4.3%
-
4.1%
-
9.25%
(1 Jan 16)
-
9.75 %
(31 Dec 16)
-
100.7%
-
104.7%
-
€8,320m
-
€7,700m
-
Own funds
€10,647m
-
€10,353m
Total risk exposure amount (RWA)
€63.675m
-
€64,237m
Leverage Ratio
SREP ratio
Liquidity Coverage Ratio
Common equity tier 1 capital (CET1)
5
-
NORD/LB Group Results H1 2016
High quality of total portfolio: 75 per cent in the highest category.
NPL ratio
2.7%
4.7%
4.2%
3.7%
4.8%
in %
232.3
Total
exposure1
14.3
in €bn
default (=NPL)
very high risk
high risk
increased risk
reasonable/satisfactory
good/satisfactory
very good to good
6.3
5.1
4.5
10.2
20.0
171.9
2012
1
2
212.7
7.8
4.5
3.3
9.0
11.6
211.0
17.8
9.9
15.4
158.7
160.9
2013
2014²
Total differences are rounding differences
Figures were adjusted, see Interim Report as at 30 June 2015, page 28
6
8.8
4.1
3.3
8.6
193.7
9.9
13.9
9.1
3.7
3.2
7.7
194.7
8.6
15.8
146.3
147.0
2015
30 Jun 2016
9.3
5.0
2.2
6.8
NORD/LB Group Results H1 2016
Good operating earnings. High loan loss provisions for ships as planned.
Operating Earnings1 2
Loan Loss Provisions1 2
In €m
in €m
30 Jun 2015
37
30 Jun 2016
28
130
136
100
108
1 Jan - 30 Jun 2016
30 Jun 2015
Private and Commercial
Customers
30 Jun 2016
3
-2
Corporate Customers
1
Markets
1
0
87
Energy and Infrastructure
Customers
89
87
179
149
15
0
Ship Customers
210
954
55
45
89
84
679
637
Aircraft Customers
-1
-1
Real Estate Banking
Customers
-4
5
NORD/LB Group
234
Business development as scheduled
Strong deal pipeline in all business segments
Corporate Customers: Profit increased, loan loss provisions caused by one-off effects, no negative trend observed
Ship Customers: Loan loss provisions increased significantly, portfolio transformation burdens performance
1 The chart may include minor differences that occur in the reproduction of mathematical operations
2 Excluding Group Management / Others and Reconciliation
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1034
NORD/LB Group Results H1 2016
Market highlights.
Private and
Commercial
Customers
Corporate
Customers
Markets
Energy &
Infrastr.
Ture Customers
Enhancing the savings banks model towards digitisation; focus on core regions and improving our
customer presence online and by phone at the same time
Profit rose despite increasing margin pressure in SME business
Expanding the branches in Stuttgart and Munich
Funding fully on track at 30 June 2016
Successful issue of €750m senior unsecured bond
Profit for the first half year above previous year’s level; improved our position as covered-bond arranger
First outplacement of a project finance loan to an investor (Refinancing of an existing solar-park portfolio
of 39.8 MW in Brandenburg)
Earnings at previous year’s level despite intensified competition
Ship
Customers
Reduction of shipping portfolio to €12-14bn until year-end 2018 ; sale of a portfolio initiated
Selective new business in niche markets (tanker, cruises/ferries); decline in bulker/container ships
Aircraft
Customers
Based on our proven expertise we can offer complex structures to our long-standing core clients
Structuring and sale of loans to investors successfully started
Real Estate
Banking
Customers
Improved profit and new business volume despite strong competition
Enhanced portfolio quality
Strong investor demand for CREs; e.g. deals like: Marieninsel in Frankfurt/Main
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NORD/LB Group Results H1 2016
Industry outlook ships: Overcapacities burden ship prices and charter rates.
Planned shares of deliveries for
the resp. order books in 2016
Aug – Dec deliveries put pressure on
charter rates
Especially the prices for bulker
fell strongly again
Conclusion for NORD/LB:
Reduction and transformation of our shipping portfolio
Pressure from new deliveries will ease
in the years to come
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NORD/LB Group Results H1 2016
Transformation and reduction of shipping portfolio successfully started.
NORD/LB Group – planned reduction of shipping portfolio¹
in €bn
1.5
0.4
1.3
14.0
2.0
19.0
17.9
12.0
EaD
shipping loans
Dec 2015
Redemptions
New business
EaD
shipping loans
Jun 2016
Securitisation
Shipping loans
considered for
divestiture
Target
portfolio
Dec 2018
Net reduction in the first half of already €1.1bn; new business (approx. €370m) nearly
compensated by development of the USD (ca. €400m)
Available loans
Scheduled decline in weak segments bulker and container ships (no new business)
Dynamic management of assets
depending on market conditions etc.
Reduction is achieved by: decrease of balloon financing, cancellation of commitments, extraordinary repayments, acceleration of
ship sales and syndication/outplacements
Agreement for outplacement of a part of the portfolio of roughly €1.3bn has just been signed
Additional ships will be sold, resp. ready for divestiture until year-end 2016
Target exposure is €12-14bn until end of 2018
¹ Incl. USD development
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NORD/LB Group Results H1 2016
Systematic reduction of ships. Significant increase of loan loss provisions.
NPL portfolio and coverage ratio
Initial success in the transformation of the portfolio:
in €m
14,0
42.8%
39.0%
12,0
Number of ships
Net reduction by 29 ships in H1
40,0%
33.1%
10,0
7,7
7,0
7,0
8,0
50,0%
Selective new business
10 ships were financed in the segments cruises, ferries,
tanker and special tonnage at the expense of merchant
shipping
30,0%
6,0
20,0%
4,0
10,0%
2,0
0,0
0,0%
30 Jun 2015
2015
NPL portfolio
Loan loss provisions (llps)
Coverage of NPL portfolio (€7.7bn) at 42.8 per cent:
Single llps (€2.9bn and portfolio llps (€347m) sum up to
18.3 per cent as coverage for the total exposure (€17.9m)
30 Jun 2016
coverage ratio
Risk provisions in the shipping portfolio
Transformation
Business strategy develops by a further diversification in
segments and regions as well as by the expansion of the
product range
Amount in €m
3.280
2.714
347
345
2.318
Reduction
Further reduction by the sale of parts of the portfolio
(€1.3bn) and first asset distributions expected by the new
business unit Ship Asset Trading during this year
410
2.933
2.369
1.908
30.6.2015
Single loan loss provisions
2015
30.6.2016
portfolio loan loss provisions
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NORD/LB Group Results H1 2016
Our challenges. Outlook.
Shipping portfolio
Reduction to €12-14bn until end of 2018; an important step will already be done in 2016
Transformation of portfolio; Further diversification concerning regions and type of ships
Group consolidation
Situation at Bremer Landesbank
Capital
Management of RWAs: Sales and placements by business unit „Kredit-Asset Management“ (KAM)
Technology
Cyber- resp. IT risks
Mega trend digitisation
More competition from technology companies, e.g. granting of loans or payment transactions
Cost management &
efficiency
Managing costs while regulatory requirements increase remains challenging
Increasing commission income due to transactions underwritten by KAM
Regulation
Increasing data requirements by supervisory authorities
Capital requirements (SREP, D-SIB (national buffer))
IFRS 9
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Contact.
NORD/LB
Norddeutsche Landesbank Girozentrale
Investor Relations
Georgsplatz 1
30159 Hannover
Germany
[email protected]
www.nordlb.com
Gabriele Bödeker (Head of Investor Relations)
[email protected]
Tel.: +49 511 361-4338
Thomas Breit
[email protected]
Tel.: +49 511 361-5382
Carsten Halbe
[email protected]
Tel.: +49 511 361-4318
Marcel Mock
[email protected]
Tel.: +49 511 361-8914
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Svenja Pohlmann
[email protected]
Tel.: +49 511 361-4683
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