PRESS RELEASES 2009
DZ BANK Group 2008 preliminary annual results
A good operating performance in an extremely difficult market environment – Financial markets crisis has imposed great burdens – Business model realigned to give even closer focus on the Cooperative Financial Services Network – A solid operational start to fiscal 2009
The DZ BANK Group has confirmed the full-year 2008 earnings outcome it announced in January: based on the preliminary IFRS figures, the group will end 2008 with a negative after-tax result of around EUR -1 billion. DZ BANK AG has posted a positive result, a net profit of EUR 59 million on the 2008 financial year on the HGB-basis, so the board will ask the AGM to approve the distribution of a dividend of 5 cents per share (2007: 13 cents).
"Operationally, the DZ BANK Group has made good progress in 2008. However, this performance has been overshadowed by the impact of the financial markets crisis", said Wolfgang Kirsch, Chief Executive Officer of DZ BANK. "However, we were always able to rely on our healthy liquidity situation, which is due first and foremost to our excellent working partnership with Germany’s local cooperative banks. Our business model has proven its value again in an operating environment whose like we have never seen. The solid start we have made to 2009 business year is further evidence of this. Key earnings components are performing very satisfactorily, especially in private and corporate banking. The German public trusts the Cooperative Financial Services Network", said Kirsch.
Key earnings measures for the DZ BANK Group
The result before tax for the 2008 financial year amounted to EUR -1,472 million compared with the positive 2007 outcome of EUR 1,068 million. This includes total fair value impairments on the group’s securities portfolios of EUR 1,757 million. DZ BANK is confident that this value diminution will be made good again in the reasonably near future.
The DZ BANK Group’s stated pre-tax loss also includes charges of EUR 364 million arising from exposures to Lehman Brothers and EUR 451 million arising from exposures to Iceland. The carrying value of the group’s stake in NATIXIS has also been written down by EUR 269 million.
The DZ BANK Group‘s net interest income has evolved very satisfactorily. This surplus has increased by 7.3 percent from EUR 2,703 million in 2007 to EUR 2,900 million in 2008 – a new all-time record. The credit for this is due principally to DZ BANK AG’s lending operations, and specifically its joint lending in partnership with local cooperative banks. In terms of both the numbers of loans extended and their aggregate value, joint lending has expanded again year-on-year both in the area of traditional syndicated credit and in the area of standardised risk transfer products (Standard Meta and Agrar Meta). The group’s aggregate market share in the nationwide distribution of KfW development credit has risen to 14 percent – a clear sign that the local cooperative banks and their central institution are committed to Germany’s Mittelstand and have targeted their development lending programs clearly on the SME customer group. "More clearly than ever, DZ BANK has proved itself to be the Mittelstand‘s reliable partner in the cauldron of the financial markets crisis", said Kirsch. This helps explain the around 13 percent increase in DZ BANK AG’s net interest income (ex shares of affiliates). Substantial net interest income growth was also recorded by TeamBank (+5.5 percent), VR LEASING (+7.0 percent) and DZ BANK International (+25.2 percent).
The DZ BANK Group‘s allowances for losses on loans and advances have increased from EUR -209 million in 2007 to EUR -545 million in 2008. The most important contributory factor was provisioning for DZ BANK‘s credit exposures to Icelandic banks.
The group‘s net fee and commission income has failed to match the previous year’s strong outcome and has moderated by 10.4 percent to EUR 862 million (from EUR 962 million). DZ BANK AG’s net fee and commission income was 16 percent higher than in 2007 at EUR 214 million thanks to positive contributions from the lending and payment processing operations.
There were varying performances from the group’s specialised subsidiaries: Bausparkasse Schwäbisch Hall had the best year’s trading in its history in 2008 – signing up more than 1.1 million new home savings contracts. The building society operations‘ new business has expanded by around 17 percent in 2008 to EUR 32.0 billion. Because of the introduction commissions payable to the local cooperative banks and the building society’s integrated bank-based field sales force however, this success is reflected in inverse proportions in the DZ BANK Group’s income statement: Bausparkasse Schwäbisch Hall’s net fee and commission expense has increased from EUR -162 million in 2007 to EUR -195 million in 2008.
Like everyone else in the industry, the Union Investment Group was also affected by the financial markets crisis; however, it has ended the year as the market leader in value-assured products and has set new records for the number of „UniProfiRente“ (Union‘s Riester pension fund product) contracts now in force (around 1.7 million). Union Investment’s net fee and commission income has reduced by around 20.6 percent to EUR 682 million in 2008 as the financial markets crisis has undermined the performance of its assets under management.
DVB Bank was able to significantly increase its net fee and commission income from its international transport finance operations again in 2008 (by around 25 percent from EUR 85 million to EUR 106 million).
The group‘s net trading expense reflects the impact of the financial markets crisis. It has reduced significantly compared to the previous year figure by EUR -920 million to EUR -1,167 million (2007: EUR -247 million).
The net expense from investments has worsened from EUR -103 million in 2007 to EUR -640 million in 2008. The deterioration was due to valuation adjustments necessitated by the financial markets crisis.
The group‘s other net gains and losses on valuation of financial instruments have reduced from EUR -35 million to EUR -659 million; this figure includes impairment charges of EUR 514 million arising from the financial markets crisis.
The summary net income from insurance operations amounted to EUR 141 million compared with EUR 470 million in 2007. This decline was essentially the result of the financial markets crisis and its impact on net investment income. R+V’s total premium income (from all business segments) has reached a new high of EUR 9.5 billion.
The DZ BANK Group‘s administration expense has reduced by 3.8 percent from EUR 2,585 million to EUR 2,487 million. This encouraging outcome is due firstly to the successful restructuring of DG HYP. The second contributory factor is that performance-related remuneration has been adjusted to better align with the new market framework and with earnings performance.
The DZ BANK Group’s total assets have reduced by 1.0 percent to EUR 427.1 billion at 31 December 2008 (2007: EUR 431.3 billion). The DZ BANK Group’s core capital ratio (tier 1 ratio) as defined by the Solvency Regulation was 7.4 percent at 31 December 2008 (31 December 2007: 7.7 percent).
The proposed initiatives to strengthen DZ BANK AG’s capital base announced in mid-February are in the process of implementation. The placing of EUR 500 million of tier 1 capital with the local cooperative banks is scheduled to complete by the end of the first half. Following the conclusion of the merger of DZ BANK and WGZ BANK, and on the basis of their aggregated results and projections, the new entity will consult with its owners to determine the size and conditions of a share capital increase that is provisionally intended to raise the same value. As a supplementary measure, the BVR will furnish DZ BANK with a temporary guarantee that will relieve the burden on equity capital. "These capital initiatives are fully in the self-help spirit of the Cooperative Financial Services Network. We know that we are as one with the cooperative organisation and DZ BANK is grateful for this support", said Kirsch.
The merger of DZ BANK and WGZ BANK is still progressing as planned: the two banks’ managing directors are scheduled to sign the formal merger agreement on 9 April. DZ BANK and WGZ BANK are fully agreed that serving the needs of the Cooperative Financial Services Network will be the primary business object of the new unified central institution. Supplying the local cooperative banks with competitive services and products that equip them to service their retail and SME customers will be the top priority for the combined central bank.
Other core roles will be private banking, transaction banking, network-centered capital-market operations, and treasury functions.
"We have made a solid operational start to the 2009 year. Unfortunately, we can expect to get no support from the economy or the capital markets in the foreseeable future, as the current uncertainty over government bonds shows. Our broadly diversified business model is a help in this environment, however our future performance will still depend on a stabilisation of the capital markets over the rest of 2009", said Kirsch.
DZ BANK Group: provisional income statement (IFRS)
|Net interest income||2,900||2,703||7.3|
|Impairment losses on loans and|
|Net fee and commission income||862||962||-10.4|
|Net trading income||-1,167||-247||>100.0|
|Net income on investments||-640||-103||>100.0|
|Other net gains and losses on|
valuation of financial instruments
|Net income from insurance|
|Gains and losses on non-current|
assets classified as held for sale
and disposal groups
|Other net operating income||121||112||8.0|
|Total profit before tax||-1,472||1,068||>100.0|
|Cost income ratio [%]||>100.0||66.9|
|Total assets [in EURbn]||427.1||431.3||-1.0|
Ilja-Kristin Seewald, Tel.: +49-69-7447-42894
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