WestLB
WestLB Delivers a Solid Result
- Group profit before income tax of € 72 million in Q1 2010
- Core bank posts profit before income tax of € 117 million
- Core capital ratio rises to 8.3% - risk profile improved
WestLB began the new financial year with a solid result. Group profit before income tax as of March 31, 2010 was € 72 million; in the core bank WestLB posted a pre-tax profit of € 117 million. The result in the same quarter a year ago (Group: € 250 million, core bank: € 480 million) had benefited from exceptionally favourable market conditions and valuation effects.
Dietrich Voigtländer, Chairman of the Managing Board, said: “We are satisfied with the start we have made in 2010. Our chosen path of systematically reducing risk and focusing fully on our customer business is paying off. WestLB is now a profitable bank with a stable earnings base derived from business with its customers.”
Net Interest Income Up 30%
First-quarter net interest income rose 30% from 2009 to 2010, up € 117 million to € 511 million. A stable capital markets business and sustainable income from business with corporate clients and international project finance were the primary drivers of this growth. The impairment charge for credit losses decreased by € 32 million to € 142 million. The Bank took adequate account of all discernible credit risks.
Net fee and commission income fell to € 63 million compared with the first three months of the previous year (Q1 2009: € 73 million). Income in the lending and syndicated lending business and in the payments business outstripped the figures for the prior-year quarter; by contrast, income decreased in the securities and custody business. The marked expansion of the certificate business with the savings banks and € 22 million in related sales commissions (Q1 2009: € 11 million) prompted a notable increase in fee and commission expense.
The net trading result, which amounted to € - 130 million (Q1 2009: € 212 million), was primarily driven by a € 95 million loss in value of securities, essentially bonds from European central governments and European regional and local authorities, which were spun off to Erste Abwicklungsanstalt (EAA) on April 30, 2010 with retroactive effect from January 1, 2010. Credit spread changes with own liabilities dragged earnings down by € 18 million. In the same quarter a year ago, this effect had made a positive difference of € 290 million. The result from financial investments in the first three months of 2010, at € 13 million, was slightly above the result achieved in the same quarter a year ago (€ 10 million).
Cost Basis Reduced Further
The measures introduced to reduce costs continued to have an impact: Administrative expenses receded by 4% to € 270 million in the first three months of 2010 (Q1 2009: € 280 million). The number of employees decreased further, down by 66 from the end of 2009 to 4,905 full-time employees.
Segment Results: WestLB Firmly Anchored in the Market
WestLB’s firm footing in the customer business is nowhere more apparent than in the Corporates & Structured Finance segment, which in the first three months contributed € 85 million (Q1 2009: € 71 million) to the result before income tax. Among other things, the Bank cemented its strong position in promissory note transactions, corporate bonds and international project finance. The result of € 71 million in the Capital Markets segment reflects the Bank´s stronger focus on the customer business. The business with corporate clients in interest rate and money market products continued to perform well. In addition, there was increased income from primary market activities for financial institutions, public-sector clients and corporate clients as well as from business with interest rate certificates with savings banks and their clients. The significantly higher segment result achieved in the year-earlier quarter (€ 342 million) was attributable to especially favourable conditions in the money market business. The pre-tax result in the Verbund & Mittelstand segment amounted to € 3 million, following a break-even result in the comparable period of 2009. Income from the lending business exceeded the level of the previous year. The result before income tax in the Transaction Banking segment was on a par with the prior-year quarter. In the PEG/Unbundling segment, which captures the results of the portfolios to be transferred, the result stood at € - 45 million (Q1 2009: € - 230 million).
WestLB: Efficient, Customer-Oriented and with More Stable Earnings
WestLB Group’s total assets decreased as planned from December 31, 2009, down € 3.4 billion to € 238.9 billion. As a result of the silent contribution to capital from the Special Fund Financial Market Stabilisation (SoFFin), the equity capital reported on the balance sheet increased by
€ 1.5 billion from year-end 2009 to € 5.2 billion. The core capital ratio stood at 8.3% as of the end of the first quarter of 2010, whilst the overall ratio was 10.9%.
The spin-off of the main portfolio of non-essential strategic activities with a volume of approximately € 71 billion to the EAA took place on April 30, 2010 with retroactive effect from January 1, 2010. With that transfer, the total volume of the ring-fenced portfolio stands at approximately € 77 billion. By removing this portfolio from its balance sheet, WestLB has freed itself from the market value fluctuations and rating migrations associated with the spun-off assets. The advantages include less volatility in the statement of income, reduced total assets and risk-weighted assets and the freeing up of equity capital and management resources for the customer business.
Dietrich Voigtländer added: “With the transfer of non-essential strategic activities, the Bank has stabilised itself on a sustainable basis. WestLB is now a lean, efficient bank with a much improved risk profile and a clear focus on the customer business. The solid start to the year confirms that WestLB is on the right track.”
By freeing its balance sheet from risks and non-customer business, WestLB has fulfilled a decisive prerequisite for necessary structural changes at Germany´s Landesbanks. “The pressure to adapt in the Landesbank sector remains strong,” said Voigtländer. “We have completed the essential groundwork and will play our part in helping to shape the future viability of the Landesbank sector.”
Enclosures
Group Statement of Income January 1 - March 31, 2010
Group Balance Sheet as at March 31, 2010
WestLB Delivers a Solid Result
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