DGAP-News: IKB Deutsche Industriebank AG: Results for the 2010/11 financial year
ID: 34489
(firmenpresse) - DGAP-News: IKB Deutsche Industriebank AG / Key word(s): Final Results
IKB Deutsche Industriebank AG: Results for the 2010/11 financial year
29.06.2011 / 08:00
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IKB: Results for the 2010/11 financial year
- Consolidated net profit (IFRS) of EUR 52 million (previous year:
consolidated net loss ofEUR -967 million)
- Net loss at IKB AG (HGB) improves to EUR -190 million (previous year:
EUR -349 million)
- Low level of provisions for possible loan losses
- Tier 1 capital ratios increase to 11.2% (Group) and 10.2% (IKB AG)
- EU conditions practically fulfilled
- Contracts with rating agencies terminated effective 30 June 2011
Business development and the earnings situation at IKB Deutsche
Industriebank AG improved in the 2010/11 financial year (1 April 2010 to 31
March 2011) for both the Group as a whole and IKB AG individually compared
with the previous year despite the extensive costs incurred for measures
aimed at fulfilling the EU conditions, restructuring the Bank and
establishing new areas of business. A further EUR 126 million was paid in
commission to SoFFin. All in all, extraordinary remeasurement effects in
particular had a substantial positive impact on the Group's results.
Group results
IFRS consolidated net profit amounted to EUR 52 million (previous year:
consolidated net loss of EUR -967 million).
The consolidated income statement for the 2010/11 financial year is as
follows:
Consolidated income statement
FY FY Differ-Some totals may be subject to discrepancies due to rounding differences.
EUR million 2010/11 2009/10* ence
Net interest income 140 179 -39
Provisions for possible loan losses 71 494 -423
Net interest income (after provisions for 69 -315 384
possible loan losses)
Net fee and commission income -93 -52 -41
Net income from financial instruments at fair 71 -599 670
value
Net income from investment securities 42 159 -117
Net income from investments accounted for 2 -1 2
using the equity method
Administrative expenses 321 301 20
Other operating result 243 165 78
Operating result 13 -944 957
Tax expenses -39 23 -62
Consolidated net profit/loss for the period 52 -967 1,018
* Figures restated
At EUR 140 million, net interest income was lower than in the previous year
(EUR 179 million). In particular, this reflects the lower earnings
contributions from proprietary trading and the reduction in lending
business and portfolio investments prescribed under the EU conditions.
The following extraordinary factors affected current net interest income:
The compounding of liabilities carried at present value in accordance with
IAS 39.AG8 resulted in interest expense of EUR -59 million (previous year:
EUR -55 million). At EUR -46 million, a further negative effect was the
amortisation of adjustment items for discontinued hedges in accordancewith
IFRS 1 IG 60A (previous year: EUR -65 million). This adjustment item was
fully amortised as of 31 March 2011, meaning that no further expense will
be recognised in future years.
Provisions for possible loan losses amounted to EUR 71 million. This
significant reduction as against the prior-year figure of EUR 494 million
was largely due to the improved economic environment.
Net interest income after provisions for possible loan losses improved by
EUR 384 million year-on-year to EUR 69 million.
Net fee and commission income declined by EUR 41 million year-on-year, from
EUR -52 million to EUR -93 million. In particular, this development is due
to the expenses of EUR 126 million for the SoFFin guarantees (previous
year: EUR 77 million), which are reported as commission expense. Net fee
and commission income adjusted for the SoFFin commission improved by EUR 8
million to EUR 33 million as a result of the upturn in customer business.
Net income from financial instruments at fair value was positive at EUR 71
million after
EUR -599 million in the previous year. The positive figure for the year
under review was largely attributable to opposing extraordinary factors:
The government debt crisis in the eurozone led to remeasurement losses on
securities held in the liquidity reserve in particular in the amount of EUR
-154 million. This was more than offset by remeasurement gains on the
Bank's liabilities at fair value in the amount of EUR 188 million, as well
as positive changes in the fair value of portfolio investments and other
financial instruments, which resulted in a net gain of EUR 37 million.
Net income from investment securities amounted to EUR 42 million (previous
year: EUR 159 million). This was almost entirely attributable to positive
changes in fair value and disposals of portfolio investments and long-term
investments.
Administrative expenses increased by EUR 20 million year-on-year to EUR 321
million (previous year: EUR 301 million). Staff costs rose by EUR 3 million
as against the previous year to EUR 167 million. The average number of
employees declined by 79 in the financial year to 1,534. Other
administrative expenses increased to EUR 154 million (previous year: EUR
137 million) as a result of the Bank's realignment and the associated costs
for process optimisation projects. Administrative expenses continued to be
impacted by costs of EUR 20 million in conjunction with overcoming the
crisis and the implementation of the EU conditions (extraordinary factors).
Other operating income increased by EUR 78 million year-on-year to EUR 243
million largely as a result of gains on the measurement of liabilities in
accordance with IAS 39.AG8 (EUR 321 million). This extraordinary effect
reflects the remeasurement of the repayment obligations for these financial
instruments at a lower amount.
All in all, the operating result was positive at EUR 13 million.
As a result of positive tax income of EUR 39 million, the consolidated net
profit amounted to EUR 52 million, an improvement of EUR 1,018 million as
against the previous year (consolidated net loss of EUR -967 million).
The extraordinary factors affecting consolidated net profit (see above)
contained some opposing effects but had a positive overall impact on
earnings of EUR 188 million in the past financial year, resulting in an
adjusted consolidated net loss of EUR -136 million.
Total Group assets amounted to EUR 31.4 billion as of 31 March 2011,
thereby meeting the target to be achieved by September 2011 in accordance
with the EU conditions. The EUR 4.3 billion decline in total Group assets
compared with the previous year is primarily attributable to the reduction
in loans and advances to customers, the reduction in investment securities
and trading assets, which are subject to significant fluctuations in value
in the same way as trading liabilities. The main developments on the equity
and liabilities side of the balance sheet were the decreases in securitised
liabilities, liabilities to banks and trading liabilities.
The Tier 1 capital ratio of the IKB Group amounted to 11.2% as of 31 March
2011 (previous year: 10.4%). At 15.9% (14.9%), the overall capital ratio
was significantly higher than the minimum statutory requirement. The Tier 1
capital ratio at IKB AG was 10.2% as of 31 March 2011 (previous year:
9.9%), while the overall capital ratio was 15.6% (14.9%). IKB is
contractually required, particularly in respect of SoFFin, to maintain
minimum Tier 1 capital of 8% at the level of both the Group and IKB AG.
The liquidity situation at IKB is stable. The first SoFFin-guaranteed bond
has been repaid and SoFFin guarantees amounting to a further EUR 0.4
billion have been returned ahead of schedule. The remaining SoFFin
guarantee volume currently amounts to EUR 8.6 billion. Liquidity has also
been secured through the substantial reduction in assets and customer
deposits. With 'IKB direkt', IKB is addressing private customers for the
first time. The expansion of its deposit business with business and private
customers and collateralised financing will allow IKB to free itself from
its previous dependence on rating-based capital market issues.
The Board of Managing Directors of IKB has decided to terminate its
contracts with rating agencies, as a rating is no longer beneficial to the
Bank and its investors and costs can be saved as a result.
Compared with the previous year, business development and the earnings
situation improved in the 2010/11 financial year. The conditions imposed by
the European Commission have now been largely implemented in material
terms, meaning that they can be expected to be fulfilled by the
implementation date (30 September 2011). The Board of Managing Directors
believes that IKB's restructuring can continue and be completed as planned.
The material fulfilment of the main conditions for IKB, regulatory minimum
capital requirements and IKB's risk-bearing capacity mean that there is
scope for the further successful implementation of the business model.
Results of IKB AG and loss participation of hybrid securities
The net loss of IKB AG in accordance with the German Commercial Code in
2010/11 amounted to EUR -190 million after EUR -349 million in the previous
year.
The loss participation of profit participation certificates and silent
partner contributions amounted to EUR 32 million. Due to a loss
carryforward from the previous year of EUR 1,631 million, reported net
accumulated losses for the 2010/11 financial year amounted to EUR 1,789
million.
The loss participation of the profit participation certificates and the
silent partner contributions was calculated on the basis of the net result
of IKB AG of EUR -190 million. The instruments affected by a capital
reduction or loss of interest (the aforementioned instruments as well as
trust preferred securities) are described in detail in the annex.
Certain profit participation certificates participate in losses based on
the reported net loss for 2010/11 (EUR -190 million); these instruments
bore losses of EUR 5 million for the 2010/11 financial year, resulting in
net accumulated losses before appropriation of losses of EUR -185 million.
For the other profit participation certificates and silent partner
contributions, the loss participation amount is determined by reference to
the adjusted net accumulated losses before appropriation of losses of EUR
-185 million; accordingly, these instruments bore proportionate losses of
EUR 7 million for the 2010/11 financial year.
In addition, two profit participation certificates and the silent partner
contributions participate in the loss carryforward from the previous year
(EUR -1,631 million) in accordance with their terms and conditions. This
resulted in a further loss participation of EUR 20 million for these four
instruments.
Profit participation certificates issued by IKB AG
The table with the loss participation of profit participation certificates
is available at
http://www.ikb.de/content/en/press/press_releases/index.jsp.
Silent partnership interests in the commercial enterprise of IKB AG
securitised by way of securities issued by Capital Raising GmbH and Hybrid
Raising GmbH
The table with the loss participation of silent partnership interests is
available at
http://www.ikb.de/content/en/press/press_releases/index.jsp.
Under certain circumstances set out in the terms and conditions of the
profit participation certificates and the silent partner contributions, the
reduced repayment claims of the profit participation certificates and the
carrying amounts of the silent partner contributions can be replenished in
future periods. Were such a claim to arise in a financial year, this would
reduce the net retained profits available for distribution for the
financial year in question.
In addition, under specific conditions set out in the terms and conditions
of the profit participation certificates, holders of profit participation
certificates (including those securitised by way of the securities issued
by ProPart Funding LP) may be entitled to the subsequent payment of
deferred interest in future periods, which would also reduce the net
accumulated profits available for distribution for the financial year in
question. However, the loss of interest on the other securities listed here
is final.
Outlook
IKB has implemented fundamental changes to its business model. The Bank has
been recapitalised, risk management has been expanded, risks have been
reduced and liquidity has been guaranteed, while the EU conditions have now
been largely fulfilled in material terms. This means that the foundations
for the successful further development of the Bank have been laid. The
stable macroeconomic environment will help in this respect. The sale of IKB
by Lone Star could also accelerate this development; as such, the Board of
Managing Directors of IKB is supporting the current sales process.
Although the financial and economic crisis is subsiding, uncertainty
remains due to the government debt crisis in the eurozone and fears of
global inflation or a potential economic slowdown in Germany, among other
things. All of these factors could lead to volatility in IKB's business
development. There is also a degree of uncertainty due to the current
restructuring of the German banking sector.
IKB's future earnings structure will contain a larger proportion of fee and
commission income from consultancy, derivatives and capital market
business. The reduction in total Group assets means that net interest
income will initially decline before stabilising in the medium term on the
back of the growth in new lending business. The impact of the guarantee
commission payable to SoFFin will decline with the repayment of the
guaranteed funds.
Administrative costs within the Group will fall again following the
temporary increase due to investments in infrastructure and the cost of
fulfilling the EU conditions. In order to limit refinancing costs and
ensure that liquidity continues to be secured in future, IKB will further
diversify its refinancing structure. The main elements of this process will
be collateralised financing, the active utilisation of programme loans and
global loans from public-sector development banks, and the expansion of our
deposit business with business and private customers.
The Board of Management is maintaining its target of returning to operating
profitability in the medium term - starting from the next two financial
years depending on economic development. This will provide scope for a
further strengthening of the Bank's Tier 1 capital. The need to service
compensation agreements with a total volume 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.
Further details on developments in the 2010/11 financial year can be found
in the 2010/11 Annual Report and in the annual financial statements and
management report of IKB AG, which are available at
www.ikb.de/content/en/ir/financial_reports.
Düsseldorf, 29 June 2011
Annex: Securities participating in losses by way of deferral of
interest/distributions
The table with the Securities participating in losses by way of deferral of
interest/distributions is available at
http://www.ikb.de/content/en/press/press_releases/index.jsp.
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
Deutschland
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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Datum: 29.06.2011 - 08:00 Uhr
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