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"My aim is to put WestLB on a stable footing again. The risk provisions charged against the first half result are a first step in this direction. I will not shy away from taking further tough measures should they become necessary. 2003 must form the basis for a new direction of the Bank, without the burdens of the past," said Dr. Johannes Ringel, Chairman of the Managing Board of WestLB AG, on the occasion of the presentation of the half-year results for the Banking Group.

Despite a good operating result, WestLB AG reported a loss for the first six months of this year. The operating result before risk provisions/result of evaluation rose by € 313.9 million to € 480.4 million (+188.5%) on a mark-to-market basis. Risk provisions amounted to € 615.2 million. This figure for the first half includes provisions for all currently known credit risks for the full year, resulting in a loss of € 195.6 million on a mark-to-market basis and € 359 million according to the German Commercial Code (HGB). The mark-to-market valuation, which conforms to International Accounting Standards (IAS) and represents common international practice, discloses unrealized market value reserves in the net income from trading operations. In the first six months of the year, the market value reserves amounted to € 163.4 million. In addition, the Bank has further substantial market value reserves in the trading portfolios. WestLB continues to report according to HGB, but plans to switch over to IAS reporting in 2005.

The provisions for loan losses of € 526 million cover all currently known credit risks. They also include additional risk provisions for BoxClever which take full account of the requirements of the German Financial Supervisory Authority (BaFin). The risk result/result of evaluation of securities and equity holdings amounts to roughly € 89 million and does not include risk provisioning expenses for market price risks in the industrial holdings portfolio. A decision on whether further write-downs will be necessary will depend on how the capital markets perform in the next six months.

In the first six months of the year, WestLB reported a result before risk provisions/result of evaluation of € 480.4 million on a mark-to-market basis, which is equivalent to € 317.0 million in HGB terms. This represents an increase of 188.5% (mark-to-market) and 49.7% (HGB) on the same period of the previous year. The result was once again driven primarily by net interest income, which rose sharply by 26.1% to € 968.3 million (2002: € 767.8 million), mainly due to higher income from money market transactions. Net commission income declined from € 343.2 million to € 275.2 million and net income from trading operations from € 63.4 million to € 41.9 million. The sharp increase in the operating result was also attributable in large measure to the planned cost reduction of € 118 million. Total cost reductions of approximately € 200 million have been targeted for the full year. Following the € 340 million in cost cuts in 2002, this means that costs will have been reduced by approximately € 540 million within a 2-year period. The sustained improvement in the cost base has enhanced the Bank’s structural profitability and therefore its capacity to absorb risk.

Personnel expenses declined from € 599.6 million to € 497.8 million (- 17%). At June 30, 2003, the total number of full-time employees in the Banking Group was down by 1,022 (-12%) on the figure for June 30, 2002. In the context of the restructuring programme initiated in 2002, headcount is to be reduced to 7,100 by the end of this year (excluding WestImmobank). Further staff reductions in Germany and abroad are planned in the context of the strategic reorientation of the Bank which is currently at the development stage. Following the strong decline last year, operating expenses fell to € 510.3 million, a drop of 3.1%. The Bank intends to tap additional cost-saving potential in the second half of the year through increased standardisation and outsourcing of certain IT services. The respective measures have been initiated.

Dr. Ringel: "I am satisfied with the revenue situation, particularly as it shows that we are able to hold our ground even in this difficult economic environment. I am therefore optimistic that the Bank will report a clearly improved operating result for the full year. Nevertheless, the result for the year as a whole will greatly depend on the development in the capital markets, even though we will see a significant improvement on the cost front."

The total assets of the WestLB Banking Group rose by 11% from € 264.1 billion at December 31, 2002 to € 293.0 billion, while the business volume increased by 4.9% to € 414.2 billion (2002: € 395.0 billion). Claims on customers rose by 7.1% to € 96.3 billion and claims on banks by 19.5% to € 92.1 billion. Securities/equalisation claims fell slightly by 3.8% to € 69.5 billion. On the liabilities side, liabilities to customers rose by 43.5% to € 96.8 billion and liabilities to banks by 3.6% to € 121.4 billion. Certificated liabilities declined by 6.8% to € 50.6 billion.

Since taking office, Dr. Ringel has stepped up efforts to further improve the Bank´s risk management system, including the initiation of the following measures:

• sale of credit receivables as regular policy
• refinement of internal rating processes
• reduction of major risk concentrations and country risks together with differentiated and timely limit management
• external review of model-driven transactions (e.g. in leveraged finance transactions)
• significant reduction of country risks.

At its meeting on August 6, 2003, the Managing Board submitted to the Supervisory Board a comprehensive interim report on the future strategic orientation of WestLB for the period after the elimination of institutional liability and guarantor liability in mid-2005. The Supervisory Board had already approved the proposed cornerstones of the new strategy at its meeting on July 2, 2003. These envisage a three-pillar structure for WestLB as an international commercial bank and a competence centre for small and medium-sized companies and the savings banks. The detailed strategy will be presented to the Supervisory Board at its meeting on September 16, 2003. Dr. Ringel: "With the new strategy we will present a convincing business model which builds on our strengths in, for example, the structuring of capital market products, and makes them attractive to medium-sized corporate clients and the savings banks. This will enable us to broaden our customer base and generate additional business potential for the savings banks and WestLB. This can only succeed, however, if WestLB as an organisation actively embraces change and does not lose sight of its ambitious medium-term objective to secure access to the capital market. The comprehensive elimination of risks in 2003 and the further development of our business strategy will ensure that we have a good chance of quickly regaining our former strength. The foundations for this have now been laid."