H1 2013: DZ BANK Group increases profit before taxes to EUR 1.34 billion
– A good operating performance throughout the DZ BANK Group – focus on cooperative financial network remains successful
– DZ BANK Group‘s profit before taxes reaches EUR 1.34 billion
– Positive contribution to profits from all major group companies
– Abating debt crisis leads to significant reversals of impairment losses on bonds issued by euro-area periphery states
– On a pro-forma basis the core tier 1 capital ratio is 8.2 per cent and thus exceeds the minimum requirements of Basel III
– Wolfgang Kirsch: “It is realistic to expect that earnings for full year 2013 will be well above the year-earlier figure“
Despite a challenging economic setting in Europe, the DZ BANK Group reported very good earnings in the first half of FY 2013. Profit before taxes increased to EUR 1.34 billion compared to EUR 515 million in the year-earlier period. This was based on the good operating performance throughout the entire DZ BANK Group, which is also reflected in a positive contribution to profits from all major group companies. At the same time, earnings were also marked by the fact that the European sovereign debt crisis abated temporarily. Especially DG HYP reported substantial reversals of impairments in its holdings of bonds from the euro-area periphery states and was thus able to recoup its previous impairment losses.
“The strength of our business model is based on its clear orientation to the cooperative financial network. The successes scored in corporate banking and the positive response from customers to our retail banking offering provides exemplary proof of the trust customers place in our joint positioning,” said Wolfgang Kirsch, CEO of DZ BANK AG. “At the same time, the debt crisis in Europe eased in the first half of 2013 due primarily to the intervention of the European Central Bank. Although the European economy had not yet recovered from the recession in this period, there are increasing signs of a recovery in the second half of the year. In this environment the semi-annual earnings that we have achieved as well as the operating profitability of the DZ BANK Group that is reflected in them are gratifying“, added Kirsch.
DZ BANK Group: (IFRS) earnings as at 30 June 2013
The DZ BANK Group’s net interest income declined compared to the year-earlier period by 5.2 per cent to EUR 1,571 million (year-earlier period: EUR 1,657 million). This decline was mainly the result of a market-driven reduction in money market funding at DZ BANK AG. By contrast, the operating net interest income in DZ BANK AG’s lending business with corporate customers increased significantly. Notable growth was achieved in funding for the agricultural and renewables sectors. In addition, net interest income increased at DG HYP thanks to good operating business in the commercial real-estate finance segment and at TeamBank in its consumer finance business
Allowances for losses on loans and advances increased from -EUR 208 million to -EUR 248 million and thus remained at a negligible level.
Net fee and commission income increased by 11.9 per cent to EUR 498 million (year-earlier period: EUR 445 million). A good part of this was due to the significantly increased net fee and commission income reported by the Union Investment group, where assets under management reached a new all-time high at EUR 197.7 billion.
Gains and losses on trading activities declined from EUR 496 million in H1 2012 to EUR 154 million. This significant decline was mainly the result of the unusually high contribution to profits made by DZ BANK AG in the year-earlier period, which was primarily due to market-induced spread tightenings and the increased valuation of securities held for dealing purposes that was associated with this.
Gains and losses on investments improved from -EUR 185 million in the year-earlier period to -EUR 71 million.
Other gains and losses on valuation of financial instruments amounted to EUR 738 million following a minus of EUR 540 million in the first half of 2012. This result was driven mainly by credit spread tightenings with respect to bonds issued by euro-area periphery states held in the portfolio of DG HYP.
Net income from insurance activities came in at EUR 82 million after EUR 193 million in the year-earlier period. The operating performance was gratifying thanks to the increase in premiums earned in the non-life and life/health segments. But this contrasted among other things with additional claims expenses due to storms in Germany amounting to around EUR 120 million.
Administrative expenses also increased due mainly to higher regulatory requirements by 3.1 per cent to -EUR 1,419 million (year-earlier period: -EUR 1,376 million).
The cost-income ratio in the DZ BANK Group at the end of the first half was 47.1 per cent (year-earlier period: 65.6 per cent).
The DZ BANK Group’s profit before taxes reached EUR 1,343 million compared to EUR 515 million in the first half of 2012.
The tier 1 capital ratio as at 30 June 2013 stood at 16.1 per cent and was thus 1.2 percentage points above the ratio at the end of FY 2012 (14.9 per cent).
Thanks to a continuing concentration of its business activities and the effective management of risk weighted assets the DZ BANK Group was able to increase its tier 1 capital ratio according to Basel 2.5 to 16.1 per cent in the first half of 2013. However, the conversion of the regulatory capital definition from HGB to IFRS and the introduction of the Capital Requirements Regulation (CRR) at the beginning of 2014 will have an appreciable and negative impact on the capital base. The pro-forma core tier 1 capital ratio under the new requirements that is to be introduced as of the beginning of 2014 was 8.2 per cent at the end of the first half year and was thus significantly above the minimum regulatory ratio of 4.5 per cent according to Basel III. This ratio also reflects the DZ BANK’s strong ability to accumulate funds. “It is hard to tell what further repercussions the ECB’s Asset Quality Review and the stress test planned by the EBA for 2014 will have on the capital base. Besides improving our capital adequacy from our own resources and further reducing our risk weighted assets we are preparing for this with a capital increase among our shareholders. We are convinced that the DZ BANK Group is a strategically and economically attractive investment for its owners and expect to be able to complete the capital increase by mid-2014. The feedback received so far from among our shareholders confirms this assessment“, said Kirsch.
Despite the temporary easing of the debt crisis, Europe continues to face major structural policy measures. By contrast, the economic recovery that is expected in Germany will probably have a positive impact on our business performance in the second half of 2013. What’s more, there are signs that the momentum of economic growth is also accelerating slightly in the euro area as a whole. “The tailwind from the economy also leads us to expect that our operating performance will remain good in the second half of the year. But we shall not be able to sustain the earnings momentum of the first half of the year unabated – also because of one-off valuation effects. “Barring renewed turmoil in the financial markets, we believe it is realistic to expect that earnings for full year 2013 will be well above the year-earlier figure”, said Wolfgang Kirsch.
DZ BANK Group’s semi-annual results (IFRS) as at 30.06.2013 compared to 2012
|in EUR m||01.01.-30.06.2013||01.01.-30.06.2012||% change|
|Net interest income||1,571||1,657||-5.2|
|Allowances for losses on loans and advances||-248||-208||19.2|
|Net fee and commission income||498||445||11.9|
|Gains and losses on trading activities||154||496||-69.0|
|Gains and losses on investments||-71||-185||-61.6|
|Other gains and losses on valuation of financial instruments||738||-540||>100.0|
|Net income from insurance activities||82||193||-57.5|
|Other net operating income||38||33||15.2|
|Profit before taxes||1,343||515||>100.0|
|Cost-income ratio (in %)||47.1||65.6||-18.5 % points|
The complete interim report for H1 2013 is available on the DZ BANK website starting from 18 September 2013 under www.reports.dzbank.com
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