LBBW is in a good position for the forthcoming tests by the European banking supervisory authorities. "With our capital base, we are well-positioned for the ongoing asset quality review and the upcoming stress test," said Vetter. The common equity Tier 1 ratio in accordance with Basel III after taking into account the transitional rules currently in force stands at 14.0 percent and the total ratio at 18.5 percent. On the basis of fully loaded Basel III, which is scheduled to take effect in 2019, the common equity Tier 1 ratio currently equals 12.9 percent and the total ratio 17.7 percent.
Following the successful completion of restructuring, LBBW is continuing its systematic reduction of the remaining non-core activities. Thus, credit substitute business was reduced further from EUR 11 billion at the end of 2013 to EUR 9 billion. In 2008, this portfolio had been valued at EUR 95 billion. At the same time, there was a further decline in risk weighted assets. As at 31 March they came to EUR 88 billion in accordance with Basel III. At the end of last year they stood at EUR 90 billion on a like-for-like basis, i.e. in accordance with Basel III.
The figures at a glance
Net interest income contracted by EUR 24 million compared to the first quarter of the previous year to EUR 439 million. Among other things, this decline was due to the systematic reduction of interest-bearing assets and muted credit demand.
At EUR 28 million (previous year: EUR 50 million), allocations to allowances for losses on loans and advances remained at a moderate level and substantially below the long-term average. This is a reflection of the bright economy and the stability of companies in the core markets.
Net fee and commission income fell by EUR 13 million to EUR 123 million. Increases in securities and custody business, among other things from support provided during issuing activity, were accompanied by a decline in income from trust investment, guarantee business and international business.
Net gains/losses from financial instruments measured at fair value through profit or loss fell to minus EUR 8 million owing to difficult market conditions (previous year: net gains of EUR 42 million).
Net gains/losses from financial investments improved to EUR 19 million, up from net losses of EUR 46 million in the previous year. The previous year's figure had been weighed down by losses deliberately realized on the reduction of foreign securities forming part of credit substitute business.
At EUR 31 million, other operating income/expenses were at the previous year's level. This yielded a total operating income (after allowances for losses on loans and advances) of EUR 576 million (previous year: EUR 574 million).
Administrative expenses rose by EUR 29 million to EUR 439 million. While staff costs remained almost constant, material expenses rose by EUR 28 million. The increase in administrative expenses reflects the cost of implementing the growing regulatory requirements among other things. The operating result stands at EUR 137 million, down from EUR 164 million in the previous year.
The guarantee commission for the State of Baden-Württemberg fell to EUR 63 million after the first three months of this year, thanks to the continuing reduction of risk (previous year: EUR 77 million). This led to net profit before tax of EUR 74 million, down from EUR 88 million in the pre-year period. After tax expenses, consolidated profit after tax came to EUR 68 million in the first quarter (previous year: EUR 69 million).
Total assets decreased substantially to EUR 285 billion in comparison with the pre-year quarter (31 March 2013: EUR 323 billion). A slight increase was recorded over the end of 2013 in connection with liquidity management measures.
Overview of the operating segments
The Corporates segment, which contributed the largest share of consolidated profit, proved a reliable mainstay once again. Despite harsh competition, muted credit demand from companies and the systematic reduction of individual major exposures, profit before tax came to EUR 179 million, thus almost matching the previous year's figure of EUR 187 million.
The Retail/Savings Banks segment continued its encouraging performance. In spite of persistently low interest rates, consolidated profit before tax was kept at the previous year's level at EUR 23 million, mainly thanks to increases in deposits and a continuation of the positive performance in the securities business.
The Financial Markets segment had a challenging start to the year. Weak interest rates in conjunction with low market volatility led to customer restraint with regard to investment and hedging products. With a quarterly result before tax of EUR 74 million (previous year: EUR 106 million) the segment's performance is proceeding roughly as planned.
Unchanged outlook for the current year
As announced at the financial statement press conference in early April, LBBW expects a clearly positive result for this year despite the persistent challenges presented by the sector setting. At this stage, profit before tax at the same level as in the previous year continues to be conceivable, in the absence of any unforeseen market turbulence or an unexpectedly sharp decline in the economy.
Business figures for the LBBW Group as at 31 March 2014 in accordance with IFRS