PRESS RELEASES 2011

08/29/2011

DZ BANK Group boosts earnings in challenging environment in first half of 2011

– €638 million profit before taxes underscores successful partnership within cooperative financial network
– Operating income advances by 5 percent to €2.1 billion
– Write-downs of €243 million on Greek government bonds included in profit figures
– Tier 1 capital ratio rises to 11.5 percent


The DZ BANK Group ended the first half of 2011 on a successful note in what was a volatile and challenging environment. Profit before taxes grew by 3.6 percent year on year to €638 million (first half of 2010: €616 million). Operating income for the reporting period advanced by 5.1 percent to €2.09 billion (first half of 2010: €1.99 billion). “This good earnings performance confirms our strategy of consistently focusing on the needs of the local cooperative banks in order to provide a solid platform on which to generate growth across the entire organization”, said Wolfgang Kirsch, Chief Executive Officer of DZ BANK. “The financial results reported by the DZ BANK Group for the first half of 2011 also bear testimony to the stability of our decentralized business model, which is firmly rooted in the real economy.” DZ BANK’s encouraging operating performance was impacted by significant adverse trends in the capital markets. The most prominent among these was the sovereign debt crisis in certain euro-zone member states, which necessitated write-downs on the bonds of the countries affected. Consequently, DZ BANK recognized impairment losses of €243 million on Greek government debt in its earnings figures for the first half of 2011. These bonds were therefore written down to their fair value through profit or loss.
Of these total impairment losses, €216 million was reported under gains and losses on investments and €27 million was recognized in net income from insurance business.


DZ BANK Group’s financial results for the period to June 30, 2011 under IFRS

Net interest income generated by the DZ BANK Group rose by 19.4 percent year on year to €1,491 million (first half of 2010: €1,249 million). Operating business in interest-rate products performed particularly well at DZ BANK AG, which expanded its joint credit business with the local cooperative banks. Financing provided in the highly promising market segment of renewable energies made an especially valuable contribution. Net operating interest income grew particularly significantly at both Bausparkasse Schwäbisch Hall and TeamBank.

Allowances for losses on loans and advances amounted to €135 million, which was virtually unchanged on the encouragingly low level reported for the first half of 2010 (€136 million).

Net fee and commission income declined by 9.2 percent to €493 million, which was largely attributable to the continued substantial growth in new building society operations conducted by Bausparkasse Schwäbisch Hall. This incurred higher fee and commission expenses for new business transacted, which initially reduced the level of net fee and commission income earned.

Gains and losses on trading activities in the reporting period fell to €362 million from €528 million in the first half of 2010, which had been boosted by reversals of impairment losses on bond portfolios.

The level of gains and losses on investments improved from minus €306 million to minus €231 million, which included impairment losses of €216 million on Greek government bonds.

Net income from insurance business totaled €100 million compared with €149 million in the first half of 2010. This decrease was attributable to the tough prevailing market conditions and the earthquake disasters in Japan and New Zealand. This year’s figure includes impairment losses of €27 million on Greek government bonds.

Administrative expenses rose by 6.6 percent to €1.31 billion largely as a result of the first-time recognition of the bank levy and higher expenses incurred by DZ PRIVATBANK in connection with the private banking market initiative. The cost/income ratio for the DZ BANK Group came to 63.0 percent (first half of 2010: 62.1 percent).

The profit before taxes earned by the DZ BANK Group increased from €616 million in the first half of 2010 to €638 million.

The Tier 1 capital ratio as at June 30, 2011 amounted to 11.5 percent, which was 0.9 percentage points higher than at the end of 2010.


Outlook

“Uncertainty in the markets has grown considerably since the early summer and the economic outlook is becoming increasingly gloomy”, said Wolfgang Kirsch. “Germany will not remain totally unscathed by these negative factors. Our economists expect German gross domestic product (GDP) to grow by only 1.8 percent in 2012 after having increased by 3.0 percent this year. We therefore reckon that the DZ BANK Group’s earnings for 2011 as a whole will be lower than they were last year – especially if the sovereign debt crisis in Europe continues to escalate. Nonetheless, we are optimistic that by working closely with the local cooperative banks we will be able to leverage our shared strengths. We are prioritizing the right issues.” A case in point was the merger of the private banking units of both DZ BANK and WGZ BANK, which was completed in June 2011 as part of the private banking market initiative. The merged entity will continue to work with the cooperative banks to develop and exploit this important and highly promising business segment. “Our remit as a financial services group that is fully focused on the needs of the cooperative financial network will remain an integral feature of our corporate strategy”, concluded Kirsch.


DZ BANK Group’s financial results for the six months to June 30, 2011 and 2010 (IFRS)

€ millionJan. 1 – Jun. 30, 2011Jan. 1 – Jun. 30, 2010Change (%)
Net interest income1,4911,24919.4
Allowances for losses on loans and advances-135-136-0.7
Net fee and commission income493543-9.2
Gains and losses on trading activities362528-31.4
Gains and losses on investments-231-306-24.5
Other gains and losses on valuation of financial instruments-135-162-16.7
Net income from insurance business100149-32.9
Administrative expenses-1,315-1,2346.6
Other net operating income8-15> 100.0
Profit before tax6386163.6
Cost-income ratio63.062.10.9 percentage points

 
The Half-Year Financial Report of DZ BANK Group will be published online on August 30, 2011 at www.dzbank.com -> Investor Relations -> Reports.

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Contact:

Martin Roth, Head of Communications & Marketing
Tel.: +49 (0)69 7447 42750
E-mail: martin.roth@dzbank.de

Dr. Ilja-Kristin Seewald, Head of Press, Internal Communications and Public Affairs
Tel.: +49 (0)69 7447 42894
E-mail: ilja-kristin.seewald@dzbank.de