DGAP-News: IKB Deutsche Industriebank AG: Interim announcement as of 30 June 2012
ID: 174167
(firmenpresse) - DGAP-News: IKB Deutsche Industriebank AG / Key word(s): Quarter
Results
IKB Deutsche Industriebank AG: Interim announcement as of 30 June 2012
14.08.2012 / 08:00
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IKB: Interim announcement as of 30 June 2012
The interim announcement covers the period from the start of the financial
year on 1 April 2012 to 30 June 2012.
Business performance
The first quarter of the 2012/13 financial year was determined by rising
uncertainty in the wake of the debt crisis in the European currency union.
As a result of the crisis, the already low interest level declined further
across all maturities in April 2012 and approached the zero line in short
maturities. Risk premiums for the major euro nations Spain and Italy
climbed to record heights in the first quarter. Not only international
investors feared the collapse of the euro zone or Greece's withdrawal.
Neither the European Central Bank nor the European Stability Mechanism, the
launch of which has been delayed, were able to reassure markets. There have
recently also been signs that the order situation on the German economy has
been negatively affected by the euro crisis.
In the first quarter of 2012/13, the volume of new lending business was
only slightly down on the figure for the same quarter of the previous year
at EUR 628 million despite the lingering euro crisis (1 April to 30 June
2011: EUR 686 million). The credit volume for the Bank as a whole has risen
by EUR 0.7 billion as against the end of the previous reporting period (31
March 2012). Thanks to the continuing overall stability of the German
economy, defaults were at only a low level.
After adjustment for provisions for possible loan losses, the operating
result of the core business segments (Credit Products, Consulting and
Capital Markets) was stable year-on-year at EUR 24 million. The net
interest income of the two core segments was virtually unchanged as
compared to the same quarter of the previous year at EUR 49 million.
Result of operations (IFRS consolidated income statement for the period 1
April to 30 June 2012)
The income statement for the first quarter of the 2012/13 financial year
reports a consolidated net loss of EUR 139 million, an increase of EUR 53
million as against the same period of the previous year. The further rise
in risk premiums and the very low interest level again squeezed net income
from financial instruments at fair value. Adjusted for extraordinary
factors, the consolidated net loss was EUR 30 million.
IKB's results are still affected by the payment of commission to SoFFin.
However, commission expenses have declined significantly as a result of the
early repayment and maturity of SoFFin-guaranteed bonds.
Table: Consolidated income statement for the first three months of the
2012/13 financial year (1 April 2012 to 30 June 2012)
EUR million 1 Apr. 2012 to 1 Apr. 2011 to Ch-Figures for the previous year adjusted. The adjustments relate to the net
30 June 2012 30 June 2011 ange
Net interest income 18.7 41.4 -22.7
Provisions for possible loan 2.1 -9.3 11.4
losses
Net interest income (after
provisions for possible loan
losses) 16.6 50.7 -34.1
Net fee and commission income -4.7 -15.8 11.1
Net income from financial
instruments at fair value -69.8 -45.2 -24.6
Net income from investment 4.9 -6.0 10.9
securities
Net income from investments
accounted for using the equity
method 0.3 1.5 -1.2
Administrative expenses 70.7 74.5 -3.8
Personnel expenses 38.6 40.2 -1.6
Other administrative expenses 32.2 34.3 -2.1
Net other operating income 6.9 7.7 -0.8
Operating result -116.5 -81.6 -34.9
Tax expense 22.1 4.3 17.8
Consolidated net loss for the period -138.6 -85.9 -52.7
interest income and the provision for possible loan losses, both of which
increased by EUR 2.2 million. The change has no influence on total
comprehensive income. Furthermore, the net income from financial
instruments at fair value declined by a total of EUR 2.6 million.
Net interest income declined by EUR 23 million to EUR 19 million. This was
due to lower interest income, which resulted from cash collateral bearing
interest at close to money market rates and the almost EUR 3 billion
reduction in customer lending (due in part to EU requirements), while
interest expenses did not decline to the same extent. The development in
net interest income in the Credit Products segment was stable. The earnings
contributions by the Treasury and Investments segment decreased as against
the same period of the previous year.
The provisions for possible loan losses were at a moderate EUR 2 million.
In the previous year, reversals of some portfolio impairment losses and the
reversal of individual impairment losses essentially resulted in net income
of EUR 9 million.
Net fee and commission income improved to EUR -5 million largely as a
result of the significant EUR 11 million year-on-year decline in guarantee
commission to be paid to SoFFin.
Net income from financial instruments at fair value amounted to EUR -70
million, down EUR 25 million on the previous year's figure of EUR -45
million. The negative result was primarily due to the euro crisis and
related further remeasurement losses on European government and corporate
bonds. The Bank's own obligations carried at fair value resulted in losses
on remeasurement due to the decline in the interest rate overall in the
financial year, which were not offset by gains on remeasurement as a result
of spread developments.
Net income from investment securities climbed by EUR 11 million from EUR -6
million in the previous year to EUR 5 million. A key factor in this was the
portfolio investments and non-current assets, which resulted in net income
of EUR 4 million, while in the previous year contributions of EUR -6
million had been reported due to changes in value and losses on disposal.
At EUR 71 million, administrative expenses were down EUR 4 million on the
previous year. The decline reflects the success of the measures taken to
cut costs. Personnel expenses dropped by EUR 2 million to EUR 39 million
while other administrative expenses also decreased by EUR 2 million to EUR
32 million.
The net other operating income fell by EUR 1 million to EUR 7 million.
Overall, the operating result amounted to EUR -117 million (previous year:
EUR -82 million). After adjustment for extraordinary factors, the operating
result was EUR -28 million (previous year: EUR 11 million). The
consolidated net loss after taxes amounted to EUR 139 million (previous
year: consolidated net loss of EUR 86 million).
Net asset situation (balance sheet as of 30 June 2012)
Total assets amounted to EUR 32.1 billion as of 30 June 2012, climbing
slightly by EUR 0.5 billion as against 31 March 2012.
Accordingto the report to Deutsche Bundesbank, the tier 1 capital ratio of
the IKB Group based on HGB figures was 9.4% on 30 June 2012 (31 March 2012:
9.4%), while the total capital ratio was 13.3% (31 March 2012: 13.0%).
Financial position
The liquidity situation at IKB is stable. This is thanks in part to the
utilisation of the SoFFin guarantees and the diversification of the funding
mix. IKB also accepts revolving deposits from a number of customers, a
practice that has also included the 'IKB direkt' retail banking platform
since March 2011. In addition, the Bank is reducing non-strategic assets in
particular and conducting selective on-balance sheet new lending business
to reduce its eligible risk-weighted assets. Further SoFFin guarantees of
EUR 250 million each were repaid early in May and August 2012.
Key events and transactions
The following events and transactions are material:
Mandatory conversion of convertible bonds
In December 2008, IKB Deutsche Industriebank AG issued subordinate
convertible bonds (ISIN DE000A0SMN11) with a nominal value of EUR
123,671,070.72. Following several elective conversions, the remaining
convertible bonds of nominally EUR 146,488.32, underwent mandatory
conversion into a corresponding number of IKB bearer shares in line with a
conversion ratio stipulated in the terms of issue on 11 April 2012, the
stated final conversion date. As a result of this mandatory conversion and
an elective conversion performed in January 2012, the total number of
voting rights rose by 58,662 from 633,326,261 to 633,384,923, and issued
capital increased by EUR 150,174.72 from EUR 1,621,315,228.16 to EUR
1,621,465,402.88.
Change in segment from regulated market to open market quality segments
With the approval of the Supervisory Board, the Board of Managing Directors
of IKB Deutsche Industriebank AG has resolved to initiate a change in
segment for all the Bank's securities from the regulated market to the open
market quality segments.
This move affects the following securities of IKB, ISIN:
Shares: DE0008063306; bearer bonds (subordinated bonds): DE0002197761,
XS0118282481, XS0163286007, XS0163773251, XS0165828673, XS0165937458,
XS0169197646, XS0171797219, XS0200612355, XS0241326924, XS0266017622,
XS0282589505; bearer bonds: DE0002731304, DE0002731445, DE0002731494,
DE000A0SMPA3, DE000A0SMPB1, XS0238155088; profit participation
certificates: DE0002731429, DE0002731197; credit-linked notes: DE000A0EUEZ7
IKB has applied for the admission of IKB's shares to the General Standard
of the regulated market of the Frankfurt stock exchange to be revoked,
coupled with an application for introduction in the open market Entry
Standard of the Frankfurt stock exchange. The revocation application has
since been granted and will take effect from 26 October 2012. IKB's shares
and some of the securities listed above were launched on the primary market
of the Düsseldorf stock exchange in July 2012. The other securities of IKB
will also be launched in open market quality segments on a German stock
exchange. The change in segment is expected to be completed by the end of
the 2012 calendar year at the latest.
The segment change will enable IKB to save costs and grant it the option of
restricting its accounting to the regulations of the German Commercial
Code.
Debt issuance programme
The Bank is planning to update its debt issuance programme in the 2012/13
financial year.
SoFFin guarantees
IKB AG repaid SoFFin guarantees of EUR 250 million ahead of schedule on two
occasions on 18 May 2012 and 2 August 2012. The guarantees repaid related
to the bond maturing on 2 February 2015. IKB's SoFFin guarantee framework
has therefore been reduced to a total of EUR 4.0 billion.
The maturity structure of the outstanding bonds issued under the SoFFin
guarantee is as follows as at 14 August 2012:
- EUR 2.0 billion maturing on 10 September 2012
- EUR 0.75 billion maturing on 1 February 2013
- EUR 1.25 billion maturing on 2 February 2015.
Changes in the Group
The investment fund Partner Fonds Eurobonds, Luxembourg, was liquidated in
full in April 2012.
IKB Partner Fonds, Luxembourg, and Partner Fonds Europa Renten Teilfonds
II, Luxembourg, were dissolved in May 2012.
Legally relevant events
On 25 May 2012, King County, Iowa Student Loan Liquidity Corporation and
IKB reached a court-witnessed agreement intending to end the pending legal
dispute between the two parties before the United States District Court of
the Southern District of New York, USA. The confidential agreement sets out
an end to the legal dispute without an admission of guilt by any party
involved. IKB is assuming that the agreement will not constitute a
financial burden to the Bank and considers its legal risks to have been
mitigated as a result.
The company is carefully monitoring the legal landscape in the United
States, where a number of disputes are emerging concerning irregularities
in subprime lending or its packaging in securitisation products. It has
taken initial steps and filed suits against several parties in the US. The
company is therefore analysing its duties under stock corporation law on an
ongoing basis to determine whether new information can be gained on the
crisis at IKB and its causes, and the legal consequences of this in the
interests of the company.
Reconciliation of interests and redundancy scheme
A new reconciliation of interests and redundancy scheme has been negotiated
with employee representatives and was signed on 8 May 2012 in order to
perform further cost-cutting and restructuring measures.
Bonds referencing Greece
All Greek bonds were sold after 31 March 2012. The expenses of this have
been recognised under bonds carried at amortised cost as of 31 March 2012
as an adjusting event.
Personnel - Supervisory Board
Mr Olivier Brahin resigned effective 25 May 2012.
Outlook
Please see the 2011/12 annual report for details of the forecast for
further business developments. It has since proven to be true that the debt
crisis is increasingly becoming a burden for economic participants in the
euro zone. Fears that the euro zone could collapse have been on the rise
since investors began to have massive doubts about Italy and Spain. It will
take some time to restore confidence.
The fundamental changes in IKB's business model have been implemented. The
Bank has a solid tier 1 capital base and ratio, risk management has been
expanded, risks have been reduced and liquidity has been secured. IKB has
been able to devote more attention to customer business since it fulfilled
the EU conditions (deadline: 30 September 2011). The costs resulting from
implementing the EU requirements by that deadline will gradually diminish.
The repayment of the SoFFin guarantee means that the currently high
commission expenses will be reduced further.
IKB believes it has good prospects for expanding its activities in the area
of consulting, hedging and credit products. However, owing to the high
restructuring costs and the issues arising from Basel III in particular, it
will still be some time before the reorganisation is reflected positively
and permanently in the income statement. Greece's default and the
smouldering Euro crisis are delaying the return to a positive result of
ordinary operations. The European debt crisis is continuing to impair the
global economy and financial markets; there is still no end to the crisis
in sight and it could still cause severe earnings volatility in the future
business performance of IKB.
The future earnings structure will feature a stronger share of commission
income from consulting, derivatives and capital market business. Net
interest income will stabilise in the medium term with profitable new
lending business. The expenses of the guarantee commission owed to SoFFin
will continue to diminish. The downward trend in total assets will
continue. The Group's administrative expenses will be reduced continuously
with efficiency enhancements, particularly in the fulfillment of regulatory
requirements, the reduction of Group complexity and headcount reductions.
Uncertainties on the effects of implementing Basel III in terms of costs
and business developments have increased because legislators have not yet
made any final determinations nor technical implementing provisions just a
few months before Basel III is due to take effect on 1 January 2013.
To limit its refinancing costs and ensure its liquidity in the future as
well, 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 sustainable deposit
business with corporate and retail clients.
The Board of Managing Directors is maintaining its objective of returning
to operating profitability in the medium term and thereby creating more
room to further strengthen its tier 1 capital. Servicing the compensation
agreements of a total amount of EUR 1,151.5 million and the value recovery
rights of the hybrid investors mean that IKB AG will probably not report
any, or only minimal, profit for several financial years to come, even if
operating activities are profitable.
Düsseldorf, 14 August 2012
The Board of Managing Directors
Contact:
Dr. Jörg Chittka, telephone: +49 211 8221-4349; Armin Baltzer, telephone:
+49 211 8221-6236, fax: +49 211 8221-6336, e-mail: presse(at)ikb.de
End of Corporate News
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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);
Freiverkehr in Berlin, Düsseldorf, Stuttgart
End of News DGAP News-Service
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181495 14.08.2012
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