PRESS RELEASES 2008
The DZ BANK Group - preliminary figures for 2007
Profit before tax of a good EUR 1 billion / The Group performs well in a challenging competitive environment / The strengths of the cooperative financial services network pay off
The DZ BANK Group performed well in a challenging competitive environment, reporting a profit before tax of EUR 1,068 million after EUR 2,067 million in 2006 on the basis of preliminary figures. The net consolidated profit was EUR 897 million after EUR 1,859 million in 2006.
Payment of a dividend at year-earlier level (13 cents per share) is to be proposed to the shareholders meeting. 2007 was a challenging business year with two faces: on the one hand, we reported a positive operating performance, scoring convincing sales successes with our products for private and corporate clients, which clearly illustrates the viability of our business model. On the other hand, we were affected by the negative effects of the financial markets crisis, which are controllable and temporary, said Wolfgang Kirsch, CEO of DZ BANK, at the financial press conference. In the DZ BANK Group as a whole, valuation write-downs totalling EUR 1,360 million were made on the securities portfolios as a result of the crisis in the financial markets of which EUR 957 million were charged against earnings and EUR 403 million against the revaluation reserve. The valuation writedowns, which totalled EUR 715 million, were primarily due to spread-widenings on bank bonds. The EUR 26 billion ABS portfolio was written down by EUR 515 million.
In our function as a central institution and as the provider of liquidity management for the DZ BANK Group, we hold a large securities portfolio of over EUR 100 billion. The majority of these securities proved to be of high quality and credit standing even under extreme market conditions. We continue to assume that most of the valuation writedowns made to date are only temporary, continued Wolfgang Kirsch.
Results of the DZ BANK Group
The DZ BANK Group will present annual financial statements according to the International Financial Reporting Standards (IFRS) for the first time for the financial year 2007. The following preliminary figures are reported on this basis: the operating income of the DZ BANK Group, which includes net interest and commission income as well as the trading result, the investment result, the other revaluation result from financial instruments, the result from the insurance business and the other operating result, reached EUR 3,862 million. Adjusted for valuation writedowns of EUR 957 million, the operating income was EUR 4.819 million. The year-earlier figure adjusted for reduced revenues in connection with the sale of the branches of the former norisbank AG by the present TeamBank is EUR 4,665 million. Net interest income rose by 6.2 percent from EUR 2,545 million in 2006 to EUR 2,703 million in 2007. DZ BANK made a particularly great contribution to this because of the increased lending business resulting from a significant revival in corporate investment and business activity, as did Bausparkasse Schwäbisch Hall with its efficient financial management. In addition, the net interest income also improved thanks to a perceptible increase in new lendings at DVB as well as at VR LEASING. Risk provisioning in the lending business was reduced by EUR 126 million to EUR 209 million in 2007 compared to the previous years -EUR 335 million. DZ BANK played a crucial role in the reduction of loan-loss provisioning in the group: its loan-loss provisioning improved compared to the previous year with a net allocation of EUR 25 million on a write-back surplus of EUR 46 million. The net commission income in the DZ BANK Group increased significantly, up by 21.6 percent from EUR 791 million to EUR 962 million in 2007. This increase is attributable in particular to the increased volume of assets under management and also to a great extent by significantly above-average investment results in the funds managed by the companies of the Union Investment Group. In addition, DZ BANK was also able to increase the contribution to income in the securities business segment. In the international transport finance business DVB benefited from increased commission income on a higher volume of new business. The successes scored in the area of net interest and commission income despite the difficult market environment clearly show that we are correctly positioned at the operating level, said Wolfgang Kirsch.
At EUR 247 million, the trading result of the DZ BANK Group lagged the previous years EUR 699 million due to the repercussions of the crisis in the financial markets. The investment result declined from EUR 9 million to -EUR 103 million in 2007. The decline in the investment result compared to the previous year is mainly due to higher realised losses on securities and DZ BANK AGs EUR 53 million write-down of is stake in NATIXIS S.A.. The other revaluation result from financial instruments in the group was EUR 35 million (2006: EUR 17 million). The combined income from the insurance business declined in 2007 compared to the previous year by 5.1 percent, down from EUR 495 million to EUR 470 million. The generally successful financial year reported by the R+V Group and the significantly higher premium income was not sufficient to offset the increased claims expenditure due to the storm Kyrill and other large claims. The other operating result came in at EUR 112 million after EUR 20 million in the previous year.
This was mainly the result of the improvements in earnings at DZ BANK and TeamBank. Administrative expenses rose by 5.8 percent to EUR 2.585 million (2006: -EUR 2,444 million). The year-on-year change in administrative expenses was due in particular to the expansion of business activities at Union Investment, DVB and VR LEASING. The result on the sale of non-current assets held for sale and disposal groups fromdiscontinued operations for 2006 is made up exclusively of the gross contribution toincome of EUR 310 million resulting from the disposal of branches of the former norisbankAG by the present TeamBank.
The cost-income ratio in the DZ BANK Group adjusted for exceptional operating income and administrative expense items was 53.6 percent compared to 52.3 percent in the previous year.
The profit before tax was down from EUR 2,067 million to EUR 1,068 million in 2007. The tax expense declined from EUR 208 million in the previous year to -EUR 171 million in 2007; the previous year’s figure was influenced by a non-recurrent corporation tax claim of EUR 277 million against the inland revenue due to changes in tax legislation as of 31 December 2006. The net profit of DZ BANK Group was EUR 897 million after EUR 1,859 million in 2006. The total assets of the DZ BANK Group increased as of 31 December 2007 by EUR 8.6 billion or 2.0 percent to EUR 430.3 billion.
The DZ BANK Group got off to a good start at the operating level in 2008. According to current estimates, 2008 will, however, be another volatile year for banks and the stock market. We shall take early preventive measures and extend our already very good riskmanagement system yet further. In 2008 we are aiming for an even tighter intermesh
between the activities of the DZ BANK Group and those of the local cooperative banks, said Wolfgang Kirsch. A good business model, innovative products and excellent service, outstanding risk management and the early identification of market trends will be decisive in our sector. This is clearly shown by current developments. Our potential in the
cooperative financial services network is enormous and is far from being exhausted. We intend to work on this in 2008. For us, the cooperative financial services network comes first, said Wolfgang Kirsch. For example, the local cooperative banks serve 30 million private customers, of which 1.5 million private banking clients. 'We wish to serve these customers even better by realigning our private banking activities. To this end, we combined our units in Switzerland and Luxembourg in 2007 and set up DZ BANK Private Wealth Managementgesellschaft S.A. in Luxembourg, said Wolfgang Kirsch. The realignment of the groups real estate activities with DG HYP as a specialised service provider of commercial property financing and Bausparkasse Schwäbisch Hall, which provides private housing finance, also serves to lend greater support to the local cooperative banks. In the SME segment, DZ BANK now intends to dedicate more attention to customers with sales of more than EUR 100 million. In the next three years we plan to recruit 600 new customers for DZ BANK, said Wolfgang Kirsch.
Dr. Ilja-Kristin Seewald, Tel.: +49-69-7447-42894
Silvia Conesa, Tel.: +49-69-7447-90568
Sylke Grußendorf, Tel.: +49-69-7447-2381
Uwe Wulf, Tel.: +49-69-7447-6125