Business development in the first half of 2006 demonstrates that one year after the state guarantees were discontinued, Landesbank Baden-Württemberg (LBBW) has successfully dealt with the challenges posed by this far-reaching change to the market thanks to its structure and strategic positioning. "The integration of Baden-Württembergische Bank into the Group and the parent-subsidiary business model that was launched with Landesbank Rheinland-Pfalz at the beginning of 2005 have shown themselves to be future-oriented. The integration of the banks is noticeable and has created considerable synergies," explained Dr. Siegfried Jaschinski, Chairman of the Board of Managing Directors of LBBW.
Key performance ratios reach targets
In the first half-year of 2006, the LBBW Group generated operating income before risk provisions/evaluation of EUR 900 million. This was slightly above the year before, representing an increase of 3.0 percent or EUR 26 million. With net income before taxes of EUR 516 million, the previous year’s result was clearly exceeded, rising 8.7 percent or EUR 41 million. The return on equity (RoE) came to 15.0 percent. The BIS core capital ratio was 7.0 percent, right on target.
Growth in net commission income and net income from financial transactions
Net interest income remained stable in comparison with the first six months of 2005, amounting to EUR 1,086 million. By contrast, net commission income rose 8.8 percent (EUR 21 million) to EUR 265 million. Net income from financial transactions more than doubled, totalling EUR 95 million. The item "Other operating income/expenses" was reported at EUR 232 million.
Administrative expenses kept stable
Consistent cost management enabled the LBBW Group to maintain administrative expenses in the first half of 2006 at the previous year’s level. It fell slightly by 0.6 percent or EUR 5 million to EUR 778 million. The workforce of the LBBW Group dropped once again, failing to 12,282 employees from 12,551 at the end of 2005. This is equivalent to a 2.2-percent-decrease. As in previous years, cut-backs were made through normal attrition. The cost-income ratio (CIR) was improved, failing to 46.4 percent compared with 47.3 percent as of 30 June 2005.
Substantial increase in net income before taxes
On the whole, the operating result (profit from ordinary activities) showed distinct growth from the year before, rising by 6.9 percent or EUR 43 million to EUR 663 million. After deducting dividends paid to silent partners’ contribution and after subtracting extraordinary income/ expenses, net income before taxes came to EUR 516 million as of 30 June 2006.
Due to LBBW’s traditionally tight risk policy, which results in a high-quality loan portfolio, the risk provision/evaluation result was eased further. As of 30 June 2006, it amounted to EUR 237 million compared with EUR 253 million the year before. In keeping with the trend observed in the sector, the easing in lending operations was partly offset by increased write-downs on fixed-income securities from higher market interest rates.
Total assets and business volume experience growth
Total assets of the LBBW Group rose by 2.5 percent (EUR 10 billion) from the end of 2005 to EUR 415 billion. Business volume grew by 2.2 percent or EUR 10 billion to EUR 492 billion since the end of the year.
LBBW Group reports positive performance
"We set for ourselves the task of consistently pursuing the growth path we had started on, and to again achieve a return on equity of 15 percent for 2006 as a whole. Today it looks very much as if we can indeed achieve these targets. Whether this positive course will continue until the end of the year will, however, depend also on the development of the capital markets and risk provisionising," concluded Jaschinski.