H1 2015: DZ BANK Group reports profit before taxes of EUR 1.28 billion
- Full-year target of EUR 1.5 billion already almost reached in H1. Wolfgang Kirsch: “Full-year earnings target is built on stable foundations – with upside potential”
- Positive business performance at all group companies in the first six months
- Net fee and commission income increases by around ten percent – allowances for losses on loans and advances continues falling at a low level
- The core Tier 1 capital ratio stood at 12.6 per cent as at 30.6.2015 – or 11.8 per cent fully-loaded in accordance with CRR
The DZ BANK Group brought the first half of financial 2015 to a successful conclusion with a profit before taxes of EUR 1.28 billion. Adjusted for the bank levy of EUR 143 million, it has thus already almost achieved its expected full-year result of EUR 1.5 billion. With their good operating performance all group companies contributed again to the positive development of the DZ BANK Group. Particularly noteworthy is the increase of around ten per cent in net fee and commission income resulting from the significant growth in assets under management at Union Investment. In addition, allowances for losses on loans and advances fell again. The higher profit before taxes in the year-earlier period (H1 2014: EUR 1.7 billion) was primarily the result of one-off effects, in particular reversals of impairments in government bond portfolios.
“The DZ BANK Group is thus in very good shape in a highly competitive market that is also difficult due to the ongoing low interest rate environment,” said Wolfgang Kirsch, CEO of DZ BANK AG. “This was also aided by the lively economic activity in Germany. We owe this good result to our considerable intrinsic earnings power, our robust business model and the successful cooperation within our banking group,” said Kirsch.
Besides its good performance in the operating business, the DZ BANK Group also made good progress improving its capital base. The preliminary core Tier 1 capital ratio fully-loaded in accordance with CRR climbed from von 11.4 per cent at the end of 2014 to 11.8 per cent as at 30 June 2015.
Income statement positions in detail (IFRS)
Net interest income in the DZ BANK Group declined slightly on the year-earlier figure, down 3.9 per cent to EUR 1,441 million (H1 2014: EUR 1,499 million). This decline is due to slightly lower net interest income in the corporate banking business and to one-off effects arising from the application of IFRS.
Allowances for losses on loans and advances totalled -EUR 41 million (H1 2014: -EUR 66 million).
Net fee and commission income increased 9.9 per cent, up from EUR 699 million in H1 2014 to EUR 768 million as at 30 June 2015. The bulk of this increase is attributable to fact that the volume of assets under management at Union Investment grew significantly again.
Gains and losses on trading activities declined slightly because of the performance of the capital market, falling from EUR 242 million in H1 2014 to EUR 226 million.
Gains and losses on investments of EUR 21 million were reported after EUR 140 million in the year-earlier period, which had benefited from income from the sale of equity investments.
Other gains and losses on valuation of financial instruments were down to EUR 127 million after EUR 275 million in H1 2014 because of the further decrease in valuation effects from DG HYP’s bond holdings.
Net income from insurance business increased 3.8 per cent from EUR 390 million to EUR 405 million.
Administrative expenses increased by 8.1 per cent to EUR 1.56 billion because of the costs of implementing regulatory requirements and market-related investments in IT and digitalisation.
The cost-income ratio increased in the period under review to 51.5 per cent after 44.8 per cent in H1 2014.
Profit before taxes reached EUR 1.28 billion after EUR 1.70 billion in the year-earlier half year.
Profit after taxes was EUR 913 million after EUR 1.28 billion in the year-earlier half year.
The DZ BANK Group’s results
DZ BANK AG’s profit before taxes declined in H1 2015 to EUR 266 million after EUR 524 million in H1 2014. However, the previous year benefited from one-off effects totalling EUR 106 million from the sale of the Natixis shares and proceeds from the sale of asset backed securities. Customer income in the capital markets business increased slightly compared to the year-earlier period despite the more difficult conditions caused by the interest-rate environment. In particular, the sales volume of structured interest rate products and corporate bonds grew significantly. DZ BANK AG also made good progress in the retail banking business. Thanks to close cooperation with the cooperative banks, it was able to improve its market share in the certificates business to 16.8 per cent (H1 2014: 14.8 per cent). It also increased its market share in exchange-traded derivative products – from 7.6 per cent in H1 2014 to 9.3 per cent. Due to the adverse interest-rate environment the sales of structured products declined slightly, down from EUR 2.4 billion in H1 2014 to EUR 2.1 billion. In the corporate banking business it was possible to expand the volume of lending especially in the renewables segment and due to the larger volume of development loans. However, this offset only a part of the negative effect of the lower credit margins resulting from the intense competition in the business with small and medium-sized enterprises.
Bausparkasse Schwäbisch Hall reported profit before taxes of EUR 211 million (H1 2014: EUR 201 million). This corresponds to an increase of 5.0 per cent. The volume of home saving deposits rose by EUR 1.9 billion to EUR 50.2 billion. With 441,000 newly-signed contracts in H1 2015 the new home savings business totalled EUR 17.4 billion, which outstripped the good result in the year-earlier period by 11 per cent. The building society expanded the volume of new home-finance business by 9.5 per cent to chalk up a new record of EUR 7.1 billion.
Union Investment reported profit before taxes of EUR 340 million in H1 2015 after EUR 288 million in the previous year, which corresponds to an increase of 18.1 per cent. With net new business of EUR 14.0 billion, this was the strongest semi-annual result in the company’s history. Assets under management grew to a new all-time high of EUR 251.9 billion.
Earnings at R+V Versicherung climbed to EUR 356 million after EUR 347 million in the year-earlier period. Declining premium income in the life and health insurance business contrasted with higher premium income in the non-life and casualty insurance business.
TeamBank reported a profit before taxes of EUR 68 million in H1 2015 (H1 2014: EUR 73 million). This result shows that TeamBank performed successfully in a demanding competitive environment. The easyCredit portfolio grew by 4.2 per cent to EUR 7,092 million.
DZ PRIVATBANK posted a profit before taxes of EUR 37 million after EUR 36 million in the year-earlier period. While net interest income fell 2.5 per cent to EUR 77 million because of the historically low interest rate level, net fee and commission income increased by 5.6 per cent to EUR 57 million. Assets under management grew from EUR 14.2 billion (31.12.2014) to EUR 15.6 billion. Assets under custody in the custodian bank business increased by EUR 11.6 billion to EUR 95.7 billion.
DG HYP achieved earnings of EUR 156 million (H1 2014: EUR 386 million) due to lower reversals of impairments for bonds issued by the eurozone’s periphery states. In H1 2015 DG HYP reported a new business volume of EUR 2,153 million, which matched the year-earlier level (H1 2014: EUR 2.128 million).
VR LEASING reported profit before taxes of EUR 13 million and thus outstripped its year-earlier earnings by 18.2 per cent (H1 2014: EUR 11 million). The decline in allowances for losses on loans and advances that went hand in hand with reduced demand contributed to this. New business in the equipment leasing segment for banks also improved, increasing 9 per cent on the first half of 2014.
DVB increased its profit before taxes significantly to EUR 74 million compared to EUR 34 million in the previous year. This was primarily attributable to an improvement in gains on investments, which increased to EUR 38 million (H1 2014: EUR 1 million), which resulted from the sale of part of an equity investment.
DZ BANK expects business will continue to develop positively in the second half of the year. However, full-year earnings will be lower than in the previous year (profit before taxes in 2014: EUR 2.87 billion) because of the absence of the substantial one-off effects that were booked in 2014. The low interest-rate level, the increase in costs due to regulatory requirements and the bank levy are having a negative impact. Positive influences stem from the stable economy, the good consumer climate and the robust employment market. Germany is thus a positive exception in a European environment that is otherwise still unstable. “For the current year our economists expect German GDP growth of 2.0 per cent. Against this background, our target for our full-year profit before taxes of EUR 1.5 billion is built on stable foundations – with upside potential. Our business success is reflected in our first class ratings. Fitch Ratings recently raised our rating from A+ to AA- and our ratings have also improved at other rating agencies. Today the cooperative financial network is one of the best-rated banking groups in Europe. And it is our goal to remain so,” said Kirsch.
Semi-annual results of the DZ BANK Group as at 30.06.2015 vs. 30.06.2014 (IFRS)
in EUR m
Net interest income
Allowances for losses on loans and advances
Net fee and commission income
Gains and losses on trading activities
Gains and losses on investments
Other gains and losses on valuation of financial instruments
Net income from insurance activities
Other net operating income
Net profit before tax and before bank levy
Profit before taxes
|Cost-income ratio (in %)|
6.7 % points
The complete interim report for H1 2015 can be downloaded from the DZ BANK website as of 28 August 2015: