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BayernLB
February 2009
Table of Contents
Appendix......................................................................................14
SoFFin ............................................................................................. 14
Solidarity/cross-guarantee system ........................................................... 14
Peer Analysis..................................................................................... 15
Bibliography...................................................................................... 16
Landesbank industry trends:
The German Landesbank sector at present, comprising of 7 Landesbanks, plays a significant role in
the German banking industry. They were established with an objective of providing clearing house
services to the regional saving banks.
In terms of ownership, these Landesbanks are owned by the savings banks and savings banks
association of the region to which they act as the principal bank. Due to this ownership structure
and the function they perform, Landesbanks in general are systemic important for the Germany
banking sector and command a high probability of support from the owners as well as government.
They are covered under cross guarantee/solidarity mechanism (Refer Appendix for details).
In addition to the clearing bank function, Landesbanks also provide wholesale banking services to
corporate clients of the saving banks of the region. Hence, they work in close association with the
saving banks for the banking business.
As an industry-wide feature, these Landesbanks are wholesale funded and mainly depend on
covered bonds issuance (Pfandbriefe) for their funding requirements, with little contribution from
customer deposits. Also, they heavily invest in structured and other securities to increase their
returns. As a result, the risk profiles of Landesbanks are high as compared to the saving banks.
Due to large investments in risky assets, Landesbanks suffered severely due to credit market crisis
started in 2007. All the Landesbanks recorded huge write-downs and credit related losses in their
portfolio, putting a pressure on their financial profile further. However, they were supported by
the capital infusion and bail out measures undertaken by their respective owners and the German
federal government.
As a side effect, the global financial crisis also created a favourable environment for consolidation
of Landesbanks, as the profitability and capitalization of all banks have been adversely affected by
massive write-downs and revaluations on their securities portfolio.
Profile of BayernLB
BayernLB was formed in 1972 through the merger of Landesbodenkreditansalt and Bayerische
Gemeindebank. It is the second-largest Landesbank and ninth largest commercial bank in Germany,
with an asset base of €426 billion as at 30 September 2008.
Headquartered in Munich, the bank mainly operates in the State of Bavaria and is into corporate
lending; project finance; capital markets and real estate lending to corporates, SMEs, retail
customers and municipal authorities. It is also a principal bank in the State of Bavaria and a part of
Sparkassen-Finanzgruppe, which comprises 75 Bavarian savings banks. BayernLB works closely with
these savings banks, and is well-positioned in the region of Bavaria.
The Free State of Bavaria and the Association of Bavarian Savings Banks, each with a 50% stake,
indirectly owns BayernLB (through BayernLB Holding AG). This ownership structure helps cover the
bank under the guarantee scheme run by German Savings Bank Association as well as reserve fund
set up by the Association of Bavarian Savings Banks. The bank is strongly supported by its
shareholders, especially from the State of Bavaria, as demonstrated by their recent capital
injections (For details refer financial market turmoil and its impact on BayernLB).
The bank operates internationally (wholesale and retail banking) as well through its subsidiaries in
central and south-eastern Europe and North America; branches in London, New York and
Luxembourg; and representative offices in Montreal, Tokyo, Moscow and Beijing.
BayernLB 1
Segmental performance
As at 3Q08 (€ million) Total operating profit Profit before tax Return on equity
BayernLB’s strategy: Restructuring plans in the light of the current difficult financial
markets
BayernLB, being the principal bank (clearing bank), is well established in the State of Bavaria and
uses the network of savings banks to reach its customers. It has been increasingly diversifying its
operations organically as well as geographically and segment-wise through acquisitions. The bank
has historically acquired several banks; it bought Hypo Group Alpe Adria (HGAA) in 2007, to expand
its retail banking activities in the eastern and south-eastern European markets.
The acquisition of HGAA helped BayernLB added 1.1 million retail clients; expand its presence in
south-eastern Europe and enhance expertise in attractive product segments, such as leasing, thus
enriching the bank’s retail portfolio. Hence, this acquisition and the bank’s other strategic
participation in Deutsche Kreditbank Aktiengesellschaft (DKB), Landesbank Saar, MKB Bank Zrt
(MBK), Banque LBLux SA and LB (Swiss) Privatbank AG increased its operating income from retail
activities by 32% to €536 million (as at 2007 end).
The bank is planning to expand in the emerging markets through its stakes in MKB in Hungary,
Bulgaria and Romania—it infused capital worth €2.3 million in MKB in January 2009.
It suffered huge losses from its strategic risky investments since mid-2007, due to the global
financial market crisis. To sustain its business position and improve its financial performance,
BayernLB has reorganised its business model and is restructuring its operations. It plans to focus
more on core customer segments, such as institutional clients, savings banks, retail customers and
commercial real estate lending in Bavaria, Germany and selected European regions. This helps the
bank to strengthen its core earnings and actively use its collaboration with Sparkassen-
Finanzgruppe.
BayernLB is heavily cutting cost and focusing on its restructuring plan of downsizing and better
integrating its subsidiaries, to cut administrative expenses by about €670 million until 2013.
Key subsidiaries - The bank has 184 subsidiaries, including nine Special Purpose Entities and eight
special funds. Strategic subsidiaries include:
BayernLB 2
DKB, Berlin – It has been BayernLB’s wholly owned subsidiary since 1995. It operates throughout
Germany as a direct bank for retail customers, focusing on selected target groups in the public
sector and corporates segments, such as housing companies and agriculture enterprises.
HGAA, Klagenfurt – BayernLB acquired a 57.31% stake in HGAA in 2007 to expand in south-eastern
Europe. HGAA operates through its two strategic segments—banking and leasing. In the banking
segment, it offers traditional financing, savings and deposits, sophisticated investment products,
asset management, payments, documentary business and structured finance.
MKB, Budapest – It is one of Hungary’s largest banks and is actively into corporate and retail
banking. It is also an integral component of BayernLB’s business model and a link to the Hungarian,
Bulgarian and Romanian markets. MKB has a market share of 13.4% in wholesale loan, 11.2% in
wholesale deposits, 5.5% in retail loans, 6.2% in retail deposits and 3.7% in investment services.
BayernLB holds 89.62% in MKB.
BayernLB 3
nearly 33,000 employees. We believe that, this merger, if happens, will strengthen the bank’s
position and strategic importance in the German market.
Source: Bloomberg
The CDS spreads of the group are traded at 105 basis points. The above chart shows the trend of CDS
chart for past one year. In October 2008, the CDS for the group have shot up, due to Lehman brother’s
filling of bankruptcy. In the beginning of December 2008 (when the group released 3Q financials) the
CDS spreads have again sprung up, due to the losses incurred.
Strength Weakness
High likelihood of support from the Huge write-downs and revaluations on its
government due to its high systemic securities portfolio
importance Modest risk management systems .
Very high likelihood of support from both the High risk securities portfolio continues to
owners, as demonstrated by recent capital pressurise the bank’s financial profile,
injections managing which would be a challenge.
Increasing diversification into retail banking
business with specific customer segment focus
Growing its international presence in central
and eastern Europe through M&A
Well integration of subsidiaries and cost
containment
Credit Assessment
The credit assessment of the group is moderate. It is largely driven by the high likelihood of support
from its owners (State of Bavaria and the Association of Bavarian Savings Banks), as demonstrated by
the frequent capital injections and guarantees received. The group has also received support from
SoFFin which is subject to EU’s approval. There is a possibility that ownership would change and in that
case we might expect reduction support from existing owners.
BayernLB 4
BayernLB’s credit profile on a standalone basis is much weaker. The financial metrics has weakened
due to the heavy losses made on the securities portfolio. The securities portfolio is consistently
weakening due to its risky investments portfolio.
In addition, the global financial crisis and difficult operating environment has further rattled the
group’s credit profile. The effect of credit market turmoil is expected to be seen in the group
financials even in 2009, as BayernLB may book high losses from securities portfolio. Though the
management has taken various business restructuring initiatives, their positive effect is expected only
in the medium term.
Financial Snapshot
BayernLB
9M08 1H08 2007 2006
(EUR mn)
Tier 1 7% 8% 7% 8%
Total capital 11% 11% 11% 11%
Equity/assets 2.34% 2.78% 3.10% 3.65%
Hybrid capital/equity NA 29.83% 32.73% 26.51%
BayernLB 5
Liquid assets/total assets 35.60% 36.37% 37.85% 37.82%
Deposits/loans 50.85% 51.54% 52.75% 55.95%
Cash reserve
1% 1% 1%
0% 1% Loans and advances to banks
1% 17%
Loans and advances to customers
14%
Risk provisions
Investment assets
Investment property
18%
Property, plant and equipment
Intangible assets
The bank is highly focused on domestic clients, concentrating in Bavaria and other German regions, as
about three-fourths of the customer loan book consist of domestic customers.
The group does not clearly disclose its assets quality in its quarterly results, as it does not have to
comply with IFRS requirements for interim results. Though the bank has not disclosed its impaired loans
position for 3Q08, the ratio (considered as default on the credit risk exposure entirely) declined to
BayernLB 6
2.65% in 1H08 from 5.14% (FYE07), mainly due to write-offs. Historically, the bank has had low loan-
loss coverage similar to its peers, and continued the trend with the coverage ratio of only 48% in 1H08.
%
20% 2%
10% 1%
0% 0%
LLR/NPL NPL/Gros
At 1H08, BayernLB’s total credit exposure (on-balance sheet and off-balance sheet) was marginally
reduced by 3.0% to €469 billion, mainly on account of restrictive business policies and international
currency rate fluctuations. The group has major credit exposures to financial institution/banks (36%)
and real estate (20%). Geographically, nearly half of the group’s credit exposure is from Germany (44%),
followed by other European countries (34%), North America, Asia and Middle East. We view this as a
fairly well-diversified credit exposure, but not enough to mitigate the perils of the current global
financial crisis.
The group’s trading portfolio is largely exposed to money market instruments at 60%, while bonds and
other fixed interest securities formed 17% at 1H08; however, its equity exposure is very low.
BayernLB has used accounting flexibility to reclassify certain securities from trading assets and AFS
assets into Loans and Receivables (LAR). In accordance with the International Accounting Standards
Board (IASB) publication titled ‘Reclassification of Financial Assets’, concerning amendments to IAS 39
and IFRS 7, the group has reclassified the securities reported in the balance sheet under investment
assets from AFS to LAR. The group intends to hold these securities, which were reclassified
retroactively, with effect from 1 July 2008, for the foreseeable future. The fair value of these
reclassified securities represents the new carrying amount at the time of the reclassification—i.e. €39
billion at 30 September 2008. This reclassification resulted in a €1.2 billion positive effect on the
revaluation reserves, but was partly offset by a €65 million expense for portfolio provisions at the end
of 3Q08.
The group has investments in securitised assets and it also structures securitisation transactions for
customers through its special-purpose entities. As at 1H08, BayernLB’s ABS portfolio was around €21
billion, which formed a high 2.12x of total equity. The core banking operations accounted for about
95% of the ABS portfolio, and rest relates to its subsidiaries (HGAA, Landesbank Saar and Banque LBLux).
Structuring ABS securitisation transactions for BayernLB’s customers amounted to about €6.5 billion,
98% percent of which has an internal rating of at least ‘A’.
BayernLB 7
Figure 5: BayernLB's exposure to structured securities (EUR In MM)
30,000
25,000
20,000
15,000
10,000
5,000
2007 3Q08
Prime RMBS Non-prime RMBS CDO CMBS Consumer ABS Commercial ABS
The above chart indicates reduction in the group’s ABS portfolio in past 9 months (from FYE07 to 9M08).
It also gives break up of types of securities included in the portfolio.
1,200
1,000
800
600
400
200
0
Balaba LBBW Landesbank HELABA NORDLB HSH Nord West LB
Berlin
Losses on securities portfolio in 1H08
BayernLB booked fair value losses of around €2.4 billion on its ABS portfolio in 1H08, resulting in a €1.3
billion (including impairments of €0.9 billion) effect on income statement and about €1.1 billion direct
effect on equity. The actual defaults from asset-backed securities remained low.
BayernLB 8
Effect of the ABS portfolio on BayernLB’s balance sheet and income statement
EUR mn Recognised through profit or loss Not recognised through profit or loss
As at May 2008, BayernLB had direct and indirect exposures to US monoliners, with a total nominal
volume of €4.8 billion. Out of the total exposure the indirect exposure to monoline insurer was €4.6
billion, of which nearly €2.9 billion was in the form of liquidity facilities committed to US municipal
bonds guaranteed by the insurer.
Overall, the group’s risk management systems are at moderate levels. Given the recent acquisition of
HGAA, there is a need to develop more robust risk management systems. BayernLB has a high market
risk, as it is more exposed to structured finance investments in the current global market meltdown.
The group uses VaR methodology to measure its market risk. During 1H08, its average market price risk
(VaR based on a 1-day holding period and 99% confidence level) on trading and bank books was €299.8
million (€113.1 million in FYE07). The sharp rise in overall risk, since the start of the year, is chiefly
due to the continuing credit crunch. Price volatility on the ABS and bond markets has also risen
significantly, in tandem with widening spreads.
When converted to 10-day holding period VaR on the trading and banking book accounts to €948 million
(€357.8 million in FY07), which forms 8% of the group’s equity. The stressed VaR (max VaR * 8
(391.7*8)) of €3,133.6 million would account for 27% of equity, which is on the higher end.
We do not expect any substantial improvement in the bank’s credit risk position in the short term. But
the credit quality can deteriorate further and affect the bank’s investment portfolio, if the credit
market turmoil continues.
Earnings: Bayern LB has historically maintained low profitability (due to the nature of business). With
the outbreak of credit crisis profitability has suffered badly, resulting from the write offs on its
investments portfolio. In the near term the probability of earnings recovery is very low.
Like most of the German Landesbanks, BayernLB has suffered from the financial markets volatility. The
earnings base is volatile due to investment losses, despite almost stable income from core banking
operations. The group posted €1.7 billion net loss before tax in nine months ended September 2008 as
against €191 million profits in the same period last year, mainly on account of write-downs in its ABS
and other securities portfolio.
The group incurred mark-to-market losses of €1,017 million on its trading securities portfolio for 9M08
that is closely linked to international financial market events. The results were severely affected by
the massive widening of credit spreads and the insolvency of Lehman Brothers. The financial market
BayernLB 9
crisis also weighed heavily on the results from financial investments (AFS), which registered write-offs
of €1,178 million (€252 million in 9M07).
BayernLB has maintained its core banking income, in spite of volatile markets. It has a concentrated
revenue base, with high dependence on interest income and a moderate contribution of fee and
commission income. The bank’s NIM remained almost flat at 0.65% in the last few years. Both in 3Q08
and 1H08, BayernLB’s pre-provisioning operating profits have increased as a result of the HGAA
acquisition. Net fee and commission income nearly doubled to €452 million during first 9M08, from
€285 million a year ago, mainly due to the HGAA acquisition and financial consolidations.
Figure 7: Net interest margin
0.70%
0.65%
0.64%
0.65%
0.59%
(%)
0.60%
0.54%
0.55%
0.50%
In line with most of its peers, BayernLB has a history of consistently lower profitability. The group’s
performance in the past 15 months has been hampered due to the financial market turmoil. Returns
metrics have turned unfavourable for the group, and its ROAA and ROAE in 3Q08 have declined to -
0.55% and -21.58% respectively (0.05% and 1.38% as at FYE07). The group would have shown improved
performance, if there had been no large write-offs in the securities portfolio.
Figure 8: Returns metrics
10 7.88
5 1.38
-0.35 0.05 0.29
0
%
-5 -0.55
-10
-15
-13.1
9M08 1H08 2007 2006
ROAA ROAE
Given the volatile nature of the group’s earnings, its cost-to-income ratio is not a good indicator of its
operating efficiency. Also it has high cost base. The true picture is reflected by the cost-to-average-
asset ratio, which deteriorated to 0.42% in 3Q08 from 0.27% in 1H08. The cost base increased as a
result of a one-off restructuring expense (€66 million as at 3Q08) incurred on account of strategic
BayernLB 10
realignment of Financial Markets Business Area and downstream. Hence, we infer that the weakening
of cost-to-average-assets ratio is due to the one-off event and should not be considered as negative.
The group is focusing on the restructuring programme, especially in HGAA, to improve its operating
efficiency in the future. BayernLB plans to improve its cost structure by better integrating its
subsidiaries and achieving synergies, thereby reducing administration expenses by €670 million in 2013.
It has also planned to cut headcount by around 5,600 from the current 19,200 over a five-year period.
BayernLB has a history of severe credit quality problems in its lending books that intensified in 2001–
2002, as provisioning requirements increased significantly up to 95% of the net interest income,
resulting in significant losses. In 1H08, the provisions/net interest income was just 17%, which is on the
higher end when compared with its German peers.
BayernLB has a history of severe credit quality problems in its lending books that intensified in 2001–
2002, as provisioning requirements increased significantly up to 95% of the net interest income,
resulting in significant losses. In 1H08, the provisions/net interest income was just 17%, which is on the
higher end when compared with its German peers.
The group is expected to book losses even in 1Q09, given the extremely volatile global financial market
conditions and deteriorating operating environment in Germany. The management has announced a
series of restructuring initiatives, to sustain business position and contain costs. However, we expect to
see the positive results of these initiatives in the medium to long term.
Funding and Liquidity: BayernLB, like most of its German peers, is largely wholesale funded.
Securitised liabilities (Pfandbriefe and other debts) contributed 29% of the total liabilities (excluding
equity) as at 3Q08, marginally declining from 31% (FYE07). Interbank funding and deposits contributed
24% each while trading liabilities, subordinated capital and other liabilities formed 16%, 3% and 4% of
total liabilities, respectively.
As at 3Q08, the bank did not disclose its refinancing position. In FY07 (pre-crisis affected period), the
group had a much lower need for refinancing loans. Overnight and time deposits at BayernLB averaged
more than €8 billion over the year. To a large extent, BayernLB depends on Pfandbriefe issuances for
refinancing. In the current market situation, the refinancing costs have increased, pressurising the
group’s margins.
Figure 9: Funding mix
1% 1% Liabilities to banks
3%
1%
1% Liabilities to customers
24%
16% Securitised liabilities
Provisions
Other liabilities
24%
29%
Subordinated capital
The group is increasing its reliance on wholesale funding to support its loan growth, with customer
deposits/loan ratio declining to 50.8% as at 3Q08 from 52.7% in 2007 end.
BayernLB 11
BayernLB did not release detailed disclosures related to liquidity along with 3Q08 results. It maintained
a stable liquidity ratio of 1.25–1.35% in 1H08, as against a regulatory requirement of 1%. However, the
group increased its core banking business, with raising loan leverage and declining liquidity.
The group has a good liquidity position, driven by large portion of liquid bond portfolio and substantial
interbank funding. BayernLB has maintained huge portfolio of liquid securities after July 2005 to insure
against the effect of the removal of state guarantees from its liabilities (which backfired, as these
were invested in ABS).
As at 1H08, the bank maintained a positive liquidity gap in the short-term bucket. However, there is a
liquidity shortfall of about €20 billion up to five years.
As disclosed in the annual report, as at FYE07, the group had 41% of its securitised liabilities maturing
in the one to five years. However, there is no maturity disclosure in the interim reports. We believe
that the group may refinance these liabilities, considering the strong support received by the owners.
However, refinancing costs are expected to be higher.
Going ahead, looking at the group’s business profile, we expect its liquidity profile to remain stable.
Nevertheless, funding problems may arise if huge write-offs on securities portfolio continue, despite of
liquidity support from the government, owners and SoFFin.
Capitalisation: BayernLB’s capitalisation is weakening due to reserve write-offs. In the medium term,
this depends on the capital injections made by the owners and internal capital generation capacity.
Capitalisation problems sprang up due to losses incurred in its securities portfolio that in turn, affected
the equity (depletion of reserves). As at 3Q08, the group’s equity base slumped to €9.9 billion from
€11.5 billion in 1H08 due to €1.7 billion write-down in revaluation reserve. However, this was partially
offset by the positive effect of reclassification of securities from recent IFRS amendments.
6%
4%
2%
0%
9M08 1H08 2007 2006
As at 3Q08, the group’s total and core capital ratios declined to 10.5% and 6.8%, respectively,
indicating the need for a capital infusion. BayernLB’s capitalisation has been distressed for over a year.
Earlier in June 2008, State of Bavaria offered a risk shield to the group in a bid to cover the losses
incurred in 2007 and early 2008. In December 2008, a bail-out package was announced, through which
the State planned to inject €10 billion. Also, as per the package, it would also receive €3 billion from
SoFFin for recapitalisation.
The quality of group’s capital is expected to deteriorate as amount of hybrid capital is increasing and
we consider hybrid capital as quasi equity (low quality equity). In H108 the group’s hybrid capital/
equity is around 30%
We expect some restructuring and strategic realignment to happen, once the capital is infused from
the government. In such a situation, the State support is crucial to maintain the group’s solvency. The
BayernLB 12
possibility of external capital infusion (by any other third party) is very low, considering the bad phase
the group is undergoing.
BayernLB’s has weak solvency position as reflected by net NPL/equity ratio of 47% at H108. Any further
increase in unprovided NPL will in turn affect the capitalization, this is highly likely as reserve coverage
is very low and seems to be inadequate.
Capitalisation for BayernLB is expected to weaken further, as we do not expect any major
improvement in the group’s performance in 4Q08 and even in 2009. We could witness further depletion
in the AFS reserves. This could be partially mitigated, if the owners inject adequate capital. In the
longer term, however, capital levels need to be restored from internal business sources; this could be a
long and arduous process.
BayernLB 13
Appendix
SoFFin
The German government has established a Financial Markets Stabilisation Fund (SoFFin) for €480 billion
under the Financial Markets Stabilisation Act to stabilise its financial markets. The fund aims to ease
the current liquidity crunch and also support the capital base of financial firms incorporated in
Germany. SoFFin plans to do this through three tools:
Federal government guarantee for refinancing up to €400 billion, applicable on new debt
instruments issued on or before 1 December 2009 with maturity of less than 36 months
Recapitalisation of financial institutions
Option to acquire problematic assets
Solidarity/cross-guarantee system
BayernLB is a member of the Landesbank guarantee fund and hence a part of the guarantee scheme run
by the Sparkassen-Finanzgruppe under the German Savings Bank Association. This fund aims to provide
coverage and protection to the member banks by providing guarantee to their liquidity and solvency.
This protection is not limited to any specific maximum amount.
The guarantee scheme comprises Landesbank guarantee fund, 11 regional Sparkassenstützungsfonds
(savings bank guarantee funds) and guarantee fund of the state building societies (central building
societies). All these form a cross-guarantee system, so that they are readily available to one another as
extra coverage, if needed.
Apart from the guarantee fund, the Association of Bavarian Savings Banks has shared a reserve fund of
€1 billion with BayernLB since July 2005, to provide a backup for the member savings banks or
BayernLB in the event of any emergency. This reserve fund is operated independently of the cross-
guarantee system and ensures both institutional and credit protection. This indicates solidarity
between the Association and BayernLB.
BayernLB 14
Peer Analysis
Landesbank Hessen- Norddeutsche
Bayerische Landesbank Baden- Landesbank Berlin Thueringen Landesbank
HSH Nordbank AG WestLB AG Peer Medians
EUR million Landesbank Wurttemberg AG Girozentrale - Girozentrale
HELABA NORD/LB
1H08 2007 1H08 2007 1H08 2007 1H08 2007 1H08 2007 1H08 2007 1H08 2007 H108 2007
External Ratings
Aa2/Watch
Moody's Aa1/Stable A+/Stable Aa2/Stable Aa2/Stable Aa3/Stable A2/Negative
Negative
A/Watch A-/Watch
S&P A/Negative A+/Negative Not Rated A/Stable A/Negative
Negative Negative
Total assets 415,641 415,639 500,363 443,410 146,736 142,147 174,702 173,787 238,923 201,569 204,362 204,863 267,863 286,587 238,923 204,863
Equity 11,546 12,893 8,654 10,406 2,260 2,831 4,810 4,906 5,969 6,291 4,278 4,611 5,119 4,464 5,119 4,906
Gross loans to customers 186,168 175,567 147,647 146,408 48,177 47,003 83,584 80,351 107,219 88,442 112,045 105,475 96,043 81,288 107,219 88,442
Customer deposits 95,943 92,617 106,729 96,451 30,691 29,552 38,142 38,032 33,733 33,215 55,767 50,247 26,538 24,851 38,142 38,032
Gross impaired loans 4,926 11,114 3,226 3,192 NA NA 1,007 1,075 2,047 1,914 2,219 2,243 NA NA 2,219 2,243
Liquid assets 151,739 141,587 228,902 196,216 38,490 37,731 66,942 68,894 63,168 58,848 45,858 53,993 81,216 107,152 66,942 68,894
Trading assets 78,871 84,812 62,128 51,096 9,440 10,231 50,108 52,264 10,436 11,481 20,582 24,255 66,465 93,341 50,108 51,096
Financial investments 63,177 67,827 8,881 5,372 51,142 50,696 18,416 19,188 63,521 50,268 43,742 43,309 15,095 21,913 43,742 43,309
Interbank borrowing (liabilities) 96,731 93,446 188,890 157,446 54,194 50,686 29,780 31,814 63,672 58,825 54,355 57,764 21,485 27,052 54,355 57,764
Interbank lending (assets) 69,239 68,311 165,296 143,643 28,295 26,514 15,979 15,794 52,443 46,260 24,890 28,541 14,287 11,340 28,295 28,541
P&L Items
Net income -722 92 -144 311 117 220 76 353 160 305 121 280 580 -1601 117 280
Net interest income 1,288 2170 1142 2127 563 815 530 936 706 1478 799 1602 561 1090 706 1,478
Net fee and commission income 287 380 259 584 158 297 117 215 88 162 100 326 193 406 158 326
Operating income 1,459 2,339 -64 347 138 291 121 402 202 487 720 1131 657 -1502 202 402
Loan-loss provisions -179 -115 -23 186 19 53 46 106 75 38 131 1 186 238 46 53
Trading losses -124 -155 339 568 NA NA -155 -126 -380 -307 -64 -591 674 -1616 -94 -231
Losses on securities portfolio -1060 -574 -580 -714 -131 -49 -184 -136 -202 -450 -228 -933 773 -1325 -202 -574
BayernLB 15
Landesbank Hessen- Norddeutsche
Bayerische Landesbank Baden- Landesbank Berlin Thueringen Landesbank
HSH Nordbank AG WestLB AG Peer Medians
EUR million Landesbank Wurttemberg AG Girozentrale - Girozentrale
HELABA NORD/LB
1H08 2007 1H08 2007 1H08 2007 1H08 2007 1H08 2007 1H08 2007 1H08 2007 H108 2007
Profitability ratios
Net interest margins 0.7% 0.6% 0.5% 0.5% 0.8% 0.6% 0.6% 0.6% 0.6% 0.8% 0.8% 0.8% 0.4% 0.4% 0.6% 0.6%
ROAA -0.4% 0.5% -0.6% 0.7% 1.6% 0.8% 0.9% 2.1% 1.3% 1.5% 1.2% 1.4% 4.2% -5.6% 1.2% 0.8%
ROAE -13.1% 1.4% -3.3% 3.0% 23.0% 7.5% 3.2% 7.4% 5.4% 5.2% 5.5% 6.2% 21.8% -28.6% 5.4% 5.2%
Cost/income 77.5% 85.0% 99.7% 78.7% 76.6% 82.5% 77.6% 64.7% 77.5% 74.9% 70.8% 74.7% 44.1% NA 77.5% 76.8%
LLP/net interest income 17.9% 0.0% -0.2% 9.4% 3.4% -6.6% 2.5% 5.0% 11.5% 3.7% 15.9% 0.8% 36.4% 23.7% 11.5% 3.7%
Asset Quality
NPL/gross loan 2.7% 6.3% 2.7% 2.7% NA 9.9% NA NA 10.7% 1.2% 2.0% 2.1% NA NA 2.7% 2.7%
Liquidity
Gross loans to
customers/deposits from 194.0% 189.6% 138.3% 151.8% 157.0% 159.1% 219.1% 211.3% 317.8% 266.3% 200.9% 209.9% 361.9% 327.1% 200.9% 209.9%
customers
Liquid asset/total assets 36.5% 34.1% 45.7% 44.3% 26.2% 26.5% 38.3% 39.6% 26.4% 29.2% 22.4% 26.4% 30.3% 37.4% 30.3% 34.1%
Interbank ratio 71.6% 73.1% 87.5% 91.2% 52.2% 52.3% 53.7% 49.6% 82.4% 78.6% 45.8% 49.4% 66.5% 41.9% 66.5% 52.3%
Capital ratios
Tier I ratio 8.0% 7.0% 7.3% 6.5% NA 7.2% 8.1% 6.5% 7.9% 7.0% 6.5% 6.2% 5.6% 5.6% 7.6% 6.5%
Total capital ratio 11.0% 11.0% 11.1% 9.7% NA 10.8% 14.1% 11.4% 9.6% 9.5% 10.3% 10.4% 10.4% 8.6% 10.7% 10.4%
Total equity/assets 2.8% 3.1% 1.7% 2.4% 0.7% 1.2% 2.8% 2.8% 2.5% 3.1% 2.1% 2.3% 1.9% 1.6% 2.1% 2.4%
Liquid assets: Cash and central bank balance + interbank and trading assets excluding derivatives and financial assets through P&L
Bibliography
1) Bloomberg for CDS charts and write-downs, credit losses details.
2) Latest updates from Reuters, Financial Times and WSJ.
3) Annual reports, interim reports, financial sustainability report and press releases by Bayern LB.
BayernLB 16