DGAP-News: IKB Deutsche Industriebank AG: Interim announcement as of 31 December 2011
(firmenpresse) - DGAP-News: IKB Deutsche Industriebank AG / Key word(s): Quarter
Results
IKB Deutsche Industriebank AG: Interim announcement as of 31 December
2011
20.02.2012 / 08:00
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IKB: Interim announcement as of 31 December 2011
The interim announcement covers the period from the start of the financial
year on 1 April 2011 to 31 December 2011.
Business development
Since the start of the 2011/12 financial year, the sovereign debt crisis
within the eurozone dominated trends on the capital markets. Up until the
end of December 2011, there was a strong upturn of volatility on the
markets. This was also the case with risk premiums, particularly for banks
and specific eurozone states, which rose in parallel due to their high
level of reciprocal dependencies. Added to this was a typical symptom of
the crisis - a further decline of what were already low interest rates for
German government bonds. Only after massive intervention on the part of the
European Central Bank (ECB) and the announcement of further action did the
markets calm somewhat over the Christmas period. However, the resolutions
of the EU Summits did not generate any calming effect. The consequent
worsening of the economic situation in Europe and the general international
environment had an increasing impact on the German economy. Nevertheless,
at the moment a period of pronounced weakness for Germany is not probable,
while the danger of a recession for other eurozone countries is high. The
future economic trend depends directly on the outcome of the European
sovereign debt crisis. This remains highly uncertain, at least for the next
few months.
IKB's new business volume in the first nine months of the 2011/12 financial
year amounted to EUR 2.5 billion (previous year: EUR 2.7 billion). Since
the autumn, the credit markets have lost momentum, particularly for
acquisition finance.
Credit margins for new business were again increased against the previous
year. Against the figure on 31 December 2010, the credit volume declined by
EUR 3.5 billion to EUR 31.4 billion. This also reflects the implementation
of requirements to reduce volume stipulated by the EU anti-trust
authorities as of 30 September 2011.
Profit and loss (IFRS consolidated income statement as of 31 December 2011)
Largely as a result of a high negative net income from financial
instruments at fair value, IKB reported a consolidated net loss of EUR 431
million for the first nine months of the 2011/12 financial year. On a
year-on-year basis, this represents an increase of the net loss by EUR 276
million (1 April to 31 December 2010: consolidated net loss of EUR 155
million). The main reason for the negative net income from financial
instruments is the escalation of the eurozone sovereign debt crisis. After
adjustment for extraordinary factors, an adjusted consolidated net loss of
EUR 13 million was generated for the nine-month period (previous year:
consolidated net loss of EUR 143 million).
The further escalation of the sovereign debt crisis resulted in sharp fair
value losses for non-current assets, obligations and derivatives up to the
autumn and further losses subsequently. This negatively impacted the net
income from financial instruments at fair value and led to a consolidated
net loss.
Despite the European sovereign debt crisis, the German economy continued toexpand in the current financial year. The impact of this development on
German SMEs is also reflected in IKB's provision for possible loan losses,
which declined year-on-year by EUR 77 million to EUR 3 million. In the
third quarter of the 2011/12 financial year, net additions totalled EUR 33
million (previous year: EUR 41 million).
Table: Income statement for the first nine months of the 2011/12 financial
year (1 April 2011 to 31 December 2011)
EUR million 1 Apr to 31 1 Apr to 31Figures for the previous year adjusted.
Dec 2011 Dec 2010 Change
Net interest income 114.2 88.1 26.1
Provisions for possible loan losses 2.6 79.1 -76.5
Net interest income (after provisions
for possible loan losses) 111.6 9.0 102.6
Net fee and commission income -49.1 -62.2 13.1
Net income from financial instruments -313.7 147.2 -460.9
at fair value
Net income from investment securities -8.8 37.7 -46.5
Net income from investments accounted
for using the equity method 0.7 0.4 0.3
Administrative expenses 216.8 217.2 -0.4
Personnel expenses 121.5 114.6 6.9
Other administrative expenses 95.3 102.6 -7.3
Other operating result 44.9 -67.8 112.7
Operating result -431.2 -152.9 -278.3
Tax expenses/income 0.1 1.9 -1.8
Consolidated net/cumulative loss for the -431.3 -154.8 -276.5
period
Net interest income increased by EUR 26 million year-on-year to EUR 114
million. In the Credit Products segment, net interest income rose, despite
the reduction in the credit volume. The earnings contribution from the
Treasury and Investments segment declined overall as against the previous
year, largely as a result of the low interest level and the reduction in
investments.
The non-recurring effect from the write-down of the adjustment item in
accordance with IFRS 1 IG60A no longer applies in the current financial
year.
The compensation agreements in connection with the debt waivers previously
announced by KfW Bankengruppe, Frankfurt/Main and by LSF6 Europe Financial
Holdings, L.P. (LSF6 Europe), Delaware, Dallas/USA, as well as some profit
participation certificates and silent partnership contributions were
measured at the present value of the repayment obligations in accordance
with IAS 39 AG8. The year-on-year change in the present value also includes
a share of interest (unwinding) which is recognised in interest expense.
This unwinding declined year on year by EUR 20 million to EUR 24 million.
Provisions for possible loan losses decreased by EUR 77 million to EUR 3
million. This was driven primarily by lower additions to individual loans
loss provisions and provisions. In addition, reversals were higher than in
the equivalent period of the previous year.
Net fee and commission income improved by EUR 13 million year-on-year to
EUR -49 million. This was due primarily to the guarantee commission payable
to the SoFFin being EUR 16 million lower at EUR 80 million.
Net income from financial instruments at fair value amounted to EUR -314
million (previous year: EUR +147 million). This negative figure reflects
the acute sovereign debt crisis in the eurozone to the end of 2011.
Expansion of credit spreads for certain eurozone public-sector issuers was
a key factor resulting in the high fair value losses. At the same time,
lower interest rates considerably impacted non-current assets, liabilities
and derivatives in the form of fair value losses. Although there were
remeasurement gains on the Bank's liabilities as a result of increased risk
premiums for IKB, these did not compensate the remeasurement losses
mentioned above.
Net income from investment securities declined by EUR 47 million to EUR -9
million. This is a result of the abovementioned negative changes in fair
value and losses on the disposal of portfolio investments and non-current
assets.
Administrative expenses remained unchanged year-on-year at EUR 217 million.
Personnel expenses rose by EUR 7 million, due in particular to the increase
in the average headcount resulting from the realignment of the Bank. Other
administrative expenses were reduced year on year by EUR 7 million.
The other operating result improved year-on-year from EUR -68 million to
EUR 45 million. This was primarily attributable to positive effects from
the measurement of liabilities in accordance with IAS 39 AG8, which
resulted from the need to adjust expectations of future business
development to reflect the financial and government debt crisis in
particular. The prior-year comparative figures were primarily impacted by
write-downs on a real estate project and the derecognition of the
difference between the purchase price of a company and the fair value of
the net assets acquired.
For the first nine months of the 2011/12 financial year, this resulted in
an operating result and a consolidated net loss for the period of EUR 431
million (previous year: consolidated net loss for the period of EUR 155
million). After adjustment for extraordinary factors, an adjusted
consolidated net loss of EUR 13 million was generated for the nine-month
period (previous year: consolidated net loss of EUR 143 million).
Net assets (balance sheet as of 31 December 2011)
Total assets declined slightly by EUR 0.2 billion between 31 March 2011 and
31 December 2011, amounting to EUR 31.2 billion as of the reporting date.
The downturn resulting from the further reduction in loans and advances to
customers was partially offset by growth in other forms of investment. On
the liabilities side, there was a decrease in securitised liabilities in
particular, while the volume of refinancing via liabilities to banks and
customers increased.
As at 31 December 2011, the IKB Group had a Tier I ratio based on HGB data
of 10.4% (31 March 2011: 11.2%) and an overall capital ratio of 14.0% (31
March 2011: 15.9%) in accordance with the quarterly notification submitted
to Deutsche Bundesbank. Following Bundesbank notification, current
developments meant that it was necessary to recognise further valuation
allowances on receivables from the Republic of Greece in accordance with
the German Commercial Code (HGB). After updating its ratios accordingly,
the IKB Group had a Tier I ratio of 10.0% and an overall capital ratio of
13.6% as at 31 December 2011.
Financial position
The liquidity situation at IKB is stable. This was driven in particular by
the diversification of the funding mix. Since March 2011, IKB has been
accepting revolving deposits from a number of customers, including via the
'IKB direkt' private customer online platform. The Bank is also reducing
its volume of non-strategic assets in order to generate liquidity and being
selective when it comes to entering into new lending business with an
impact on the balance sheet.
Key events and transactions
Please see the 6-month 2011/12 report for details of the significant events
and transactions in the reporting period. The following current
developments are also of material importance:
Status of implementation of EU conditions
The final report on the implementation of the EU conditions was submitted
by the German government to the EU Commission to the end of 2011. The
implementation period for the ruling expired on 30 September 2011. IKB
implemented the measures set out in the restructuring plan on time to the
extent they were permitted by law and could be carried out. Accordingly,
IKB assumes that the conditions were met by the deadline.
SoFFin guarantees
After the early buyback of EUR 0.8 billion, IKB repaid the remaining EUR
1.2 billion SoFFin-guaranteed bond maturing on 27 January 2012 on schedule.
As a result, IKB's SoFFin guarantee volume decreased to its current level
of EUR 6.1 million. The maximum guarantee volume was EUR 12 billion.
The outstanding SoFFin-guaranteed bonds have the following maturities:
- EUR 1.1 billion maturing on 13 March 2012
- EUR 2.0 billion maturing on 10 September 2012
- EUR 1.0 billion maturing on 1 February 2013
- EUR 2.0 billion maturing on 2 February 2015.
Results of the special audit
No report from the special audit has been received. Please refer to the
details provided in the 2010/11 Annual Report.
Risks
For details of the risks to which the Bank is exposed, please see the
6-month 2011/12 report. There the fact was emphasised that the duration and
severity of the ongoing government debt crisis in the eurozone remains the
main risk. This statement continues to apply. To the end of the year,
capital markets have evidenced an extremely high level of risk aversion. It
was only the massive intervention on the part of the ECB and the
announcement of further comprehensive support actions in the new year which
prevented the situation from worsening further.
European debt crisis
The Greek government bonds held by IKB in the amount of EUR 211 million
(EUR 200 million original nominal volume plus EUR 11 million cumulative
rise in an inflation-linked bond) are currently measured at a fair value of
EUR 38 million in accordance with IFRS. The Bank classified these bonds as
problem exposures and on a precautionary basis in accordance with HGB wrote
down these bonds by 70% of the higher of their nominal and settlement
amount.
According to the current state of knowledge, the rescue measures for Greece
involving private creditors have not triggered a so-called credit event.
This includes the first-to-default instruments held by IKB, some of which
relate to Greece (nominal volume of EUR 149 million), which are carried at
a fair value of EUR 51 million.
Outlook
For a detailed analysis of expected developments, please see the forecast
report in the 6-month report. The current situation remains dominated by
uncertainty with regard to the outcome of the government debt crisis in the
euro member states, economic development in the USA and the possibility of
an economic
slowdown in Germany, all of which could lead to a high degree of earnings
volatility, also in the business development at IKB. There is also a degree
of uncertainty concerning the current restructuring of the German banking
sector.
IKB still considers the government debt crisis in the eurozone to be a
serious but ultimately temporary phenomenon. It is uncertain as to how long
the EU governments will require to find a convincing solution and calm the
markets. Based on the current situation, however, it must be assumed that
the economic development in the eurozone, particularly in the 'problem
countries' will lead to recession, especially as the corresponding banking
systems will have to reduce the high level of debt. For Germany, the
economic development appears muted, without there being a credit squeeze
for business. However, it is probable that the economic situation would be
completely different if a country in the eurozone defaulted. This would
mean an end to the cautious easing on capital markets which the ECB has
achieved by its interventions so far in 2012.
Due to the ongoing impact of the crisis, IKB's profit expectations are
delayed and its business model will show positive results with a time lag.
The future earnings structure will feature a stronger proportion of
commission income from consulting, derivatives and capital market business.
Profitable new lending business will lead to a stabilisation of net
interest income in the medium term. The expenses arising from the guarantee
commission owed to SoFFin will diminish.
The Group's administrative costs will be reduced on a sustained basis
following a temporary flare-up owing to investments in infrastructure and
the costs of meeting the EU conditions. IKB plans to reduce the headcount
by approximately 200 and is examining the efficiency of all important
business processes. Negotiations have been initiated with the Works
Council.
To limit its refinancing costs and ensure its liquidity, IKB will continue
to diversify its refinancing structure. The key components of this are
secured financing, actively using programme loans and global loans from
government development banks and broader deposit business with corporate
and retail clients.
IKB is maintaining its target of returning to operating profitability in
the medium term. This will also create the scope to strengthen its Tier I
capital. Furthermore, servicing the compensation agreements in the total
amount of EUR 1,151.5 million and the value recovery rights of the hybrid
investors mean that the Group and IKB AG will probably not report any, or
only minimal, profit for several financial years to come.
Düsseldorf, 20 February 2012
The Board of Managing Directors
Contact:
Dr. Jörg Chittka, telephone: +49 211 8221-4349; Armin Baltzer, telephone:
+49 211 8221-6236, e-mail: presse(at)ikb.de
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Language: English
Company: IKB Deutsche Industriebank AG
Wilhelm-Bötzkes-Straße 1
40474 Düsseldorf
Germany
Phone: +49 (0)211 8221-4511
Fax: +49 (0)211 8221-2511
E-mail: investor.relations(at)ikb.de
Internet: www.ikb.de
ISIN: DE0008063306
WKN: 806330
Listed: Regulierter Markt in Frankfurt (General Standard)
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