"The first quarter of 2012 shows that we are on the right track with our customer-oriented business model and the continued reduction of risk. This ensures we are creating the conditions for the long-term and sustained success of LBBW Group," said Hans-Jörg Vetter, Chairman of the Board of Managing Directors of LBBW.
The positive development of the operating business segments - Corporates, Retail/Savings Banks and Financial Markets - remained intact in the first three months of the year with consolidated profit before tax totaling EUR 473 million.
At EUR 221 million, consolidated profit before tax in the Corporates segment, whose main pillar remains the strong SME business, was in line with the previous year (EUR 220 million).
The Financial Markets segment benefited from strong customer business and the positive development on the financial markets. Consolidated profit before tax improved significantly to EUR 224 million (Q1 2011: EUR 123 million).
The Retail/Savings Banks segment performed well in a challenging environment defined by low interest rates and intense competition. At EUR 28 million, consolidated profit before tax was stable compared with the same quarter of the previous year (EUR 29 million).
Overview of Q1 2012 figures
Net interest income of EUR 434 million failed to meet the outstanding previous year's figure of EUR 603 million. The decline was due to the generally low interest rate environment and the continued reduction in risk-weighted assets, amongst other things. Additionally, non-recurring effects had enhanced the results of the first quarter of 2011.
Net fee and commission income of EUR 125 million was virtually unchanged from the same quarter of the previous year (EUR 126 million).
The net result from financial instruments at fair value amounted to EUR 164 million (Q1 2011: EUR 368 million). The decline compared to the previous year is primarily due to a negative effect from the higher marking to market of the bank's own liabilities (own credit spread), which impacted on the Q1 2012 result in the amount of around EUR 100 million. Because of the consistent reduction of positions held in highly-volatile credit default swaps (CDS) last year, LBBW was unable to benefit as much this year from the positive effects in the course of the spread recovery, as it did in 2011.
Other operating income came to EUR 9 million (Q1 2011: EUR 37 million). Provision for credit losses of EUR 47 million were recognized. Since a large proportion of the loan loss provisions in the first quarter had already been taken into account in the 2011 financial year in connection with adjusting events, the actual provision for credit losses required by LBBW was only in the single-digit million range. Compared with the allowances for losses on loans and advances in the same quarter of the previous year (EUR 168 million), LBBW's approach takes the favorable economic development in the core markets into account.
The net result from financial investments came in at EUR -31 million. A profit of EUR 41 million had been generated in the corresponding quarter of the previous year, particularly as a result of income from the disposal of equity investments.
Administrative expenses rose slightly to EUR 432 million (Q1 2011: EUR 423 million). The increase is primarily due to a EUR 13 million higher bank levy compared with Q1 2011 that amounted to EUR 23 million in the quarter under review. Total staff costs were reduced from EUR 256 million to EUR 252 million as a result of restructuring. As at 31 March 2012, LBBW had 11,751 employees, 480 fewer than at the start of the year.
The operating result amounted to EUR 223 million (Q1 2011: EUR 584 million). Commission expenses for the risk shield from the State of Baden-Württemberg added up to EUR 76 million. This resulted in consolidated profit before tax of EUR 147 million (Q1 2011: EUR 492 million). After the deduction of income taxes, consolidated profit for the first quarter of 2012 was EUR 124 million (Q1 2011: EUR 388 million).
LBBW continues to expect a moderately positive development of the real economy, while considerable risks will continue to determine the situation on the financial markets. Provided there are no new dramatic upheavals on the financial markets, LBBW still anticipates an improved result under IFRS for 2012 compared with 2011.