PRESS RELEASES 2008
DZ BANK Group makes headway in the first half of 2008 – Business model proving its viability in the financial markets crisis
The DZ BANK Group expects its profit before tax for the full 2008 financial year to exceed previous year’s level provided conditions in the financial markets do not deteriorate further. „It is precisely in this market environment that we enjoy the benefits of the cooperative financial services network’s close integration and successful partnership approach“, said Wolfgang Kirsch, Chief Executive Officer of DZ BANK AG. In a fiercely competitive market, the group has performed especially well in the areas of building society operations, certificates and Riester (pension) products. „The resilience of our business model has been demonstrated especially clearly in the last months. We have profited from the DZ BANK Group’s balanced portfolio of businesses and we have made positive progress. We have continued to be a reliable partner to our customers as well as to other banks“, said Kirsch. Despite the challenging business environment, the DZ BANK Group has reported a profit before tax of € 496 million for the first six months of 2008, including valuation adjustments of € 467 million. Adapted for these valuation adjustments, profit before tax was € 963 million. The revaluation reserve as at 30 June 2008 reflected € 771 million of valuation adjustments arising from the financial markets crisis. The Tier 1 capital ratio stood at 8.8 percent as at 30 June 2008 (31 December 2007: 7.7 percent).
Referring to the proposed merger with WGZ BANK in Düsseldorf, Kirsch said: „The combination of DZ BANK and WGZ BANK will present major opportunities for the cooperative financial services network to strengthen its market position. Both banks are well set up, and both will go into the next round of talks fortified by strong results.“
DZ BANK Group: Key results for the period to 30 June 2008
The DZ BANK Group has presented its first Semi-Annual Financial Report (for the six months to 30 June 2008) according to the International Financial Reporting Standards (IFRS) that now apply throughout the EU. The following figures for the first six months of 2008 and the equivalent prior-year period are reported on this basis.
Net interest income has reduced by 2.5 percent year-on-year to € 1,391 million (from € 1,426 million). Compared with the second half of 2007 however, net interest income has increased by 8.9 percent (H2 2007: € 1,277 million). Risk provisioning in the lending business amounted to € -105 million compared with € -71 million in the first half of 2007. Net commission income has fallen by 9.2 percent from € 479 million to € 435 million. This decline is explained primarily by the reduced flow of performance-related commissions received from funds-related operations so far this year, coupled with increased fee and commission expenses from the strong expansion of new business at Bausparkasse Schwäbisch Hall. Net trading income has fallen substantially on the effects of the financial markets crisis to € 64 million, compared with € 450 million in the first half of 2007 which was still unmarked by the world-wide financial crisis. The net trading income for the second half of 2007 was € -697 million however, which shows the positive trend year-to-date in 2008.
Net income on investments has weakened from € -21 million in H1 2007 to € -180 million in the first six months of 2008. This year-on-year deterioration is essentially the result of DZ BANK AG’s writing down of the value of its interest in NATIXIS S.A. by € 139 million; value corrections necessitated by the financial markets crisis only accounted for € 26 million of this outcome. The group’s other revaluation result from financial instruments is reported at € -93 million (H1 2007: € 53 million). The combined income from the insurance business, conducted within the DZ BANK Group exclusively by R+V Versicherung, amounted to € 152 million compared with € 206 million in H1 2007, an outcome that crucially reflects the insurance segment’s reduced investment income due to the strained situation of the financial markets.
The DZ BANK Group’s first-half total operating income excluding valuation adjustments arising from the financial markets crisis amounted to € 2,303 million compared with € 2,544 million in the first half of 2007. The group’s operating income including the valuation adjustments of € 467 million resulting directly from the financial markets crisis amounted to € 1,836 million. The ABS portfolio has reduced substantially compared with the beginning of the year however, and is of good quality.
The effectiveness of the cooperative financial services network’s partnership approach is reflected in some impressive sales figures for the first six months of 2008: DZ BANK was once again market leader in guarantee certificates for example, while Union Investment has launched the most successful new fund ever by attracting € 21 billion into the money-market-linked UniOpti4 fund up to 30 June 2008. R+V also launched several successful innovative products such as funds-linked pension insurance plans, while Bausparkasse Schwäbisch Hall was able to increase its total new business by 8 percent.
The Group’s administrative expenses have increased by 1.0 percent to € 1,235 million from € 1,223 million, within which total personnel expenses rose by 0.6 percent and other administrative expenses rose by 1.4 percent.
The cost-income ratio excluding valuation adjustments arising from the financial markets crisis stands at 53.6 percent compared with 48.1 percent at the end of the first half of 2007; the unadjusted cost-income ratio for the first half of 2008 was 67.3 percent.
The profit before tax has reduced from € 1,250 million to € 496 million (H2 2007: € -182 million). Excluding the valuation adjustments induced by the financial markets crisis, profit before taxes totals € 963 million. Tax expense in respect of the first half of 2008 was € 108 million compared with € 305 million in the first half of 2007. The DZ BANK Group’s net profit amounted to € 388 million compared with € 945 million in the comparable prior-year period.
Outlook: Forecast confirmed
Although the market conditions remain difficult, the DZ BANK Group is confident of improving its full-year earnings. The DZ BANK Group expects its profit before tax for the full 2008 financial year to exceed previous year’s level (2007 profit before tax: € 1,068 million) provided conditions in the financial markets do not deteriorate further. „Implementing our strategic initiatives in the retail and corporate customers segments and maintaining our systematic focus on our partners in the cooperative financial services network will help to deliver sustainable earnings improvements“, said Kirsch. The proposed merger of DZ BANK and WGZ BANK will further strengthen the cooperative network: „Our combined positioning is already more powerful than that of many of our competitors. We have competitive products and services and strong brands. The merger of the two central institutions is the logical next step,“ said Kirsch.
IFRS first-half results of the DZ BANK Group as at June 30: 2008 vs 2007
|In € million||01.01.08-30.06.08||01.01.07-30.06.07||Change|
|Net interest income||1,391||1,426||-2.5|
|Net commission income||435||479||-9.2|
|Net trading income||64||450||-85.8|
|Net income on investments||-180||-21||>100.0|
|Other revaluation result|
|Combined income from|
|Other operating result||67||-49||>100.0|
|Profit before tax||496||1,250||-60.3|
* as at 30.06.08, adjusted for special effects within operating income (valuation adjustments totaling € 467 million on securities portfolios arising from the financial markets crisis); unadjusted: 67.3%
Ilja-Kristin Seewald, Head of Department, Press, Internal Communication and Public Affairs
Sylke Grußendorf, Spokesperson
Uwe Wulf, Spokesperson