European Commission Confirms WestLB´s Restructuring Plan
- Bank acquires planning and legal certainty
- Reduction of total assets and risk-weighted assets by 50%, sale of participations and streamlining of domestic and foreign branch network
- Landesbank consolidation remains an option
The European Commission today announced a formal decision bringing the WestLB proceedings to a close. The risk shield of € 5 billion guaranteed by WestLB´s owners for the Phoenix portfolio, which the Bank removed from the balance sheet in spring 2008, has therefore been finally approved. The decision gives WestLB the planning and legal certainty which it requires. The basis of the decision is an extended restructuring plan agreed with the Commission, which the Commission also believes will ensure a viable business model. It is the shared aim of the owners, the Bank and the Commission to strengthen the Bank´s core competencies on this basis in a sustainable way. WestLB will thus remain a strong partner for customers and business partners. The Bank will phase out activities which do not conform to its strategy and reduce total assets as well as risk-weighted assets by 50% by March 31, 2011. At the same time the Commission´s decision includes a majority change of ownership within the framework of a non-discriminatory bidding procedure of WestLB by the end of 2011. This explicitly does not preclude the possibility of WestLB playing an integrative role in the Landesbank consolidation.
The owners had already given a commitment to the Commission to make a sustainable reduction in total assets and to reorganise the ownership structure in an agreement of August 8, 2008. These conditions are therefore not new. In addition, the extended restructuring plan approved by the Commission provides for the sale of participations and a streamlining of the domestic and foreign branch network.
Future Viability of Core Bank
The restructuring plan now approved forms the basis for a sustainable business model and hence the possibility to sell WestLB AG. The Bank is thus well positioned for the future and for a potential transaction affecting the Bank. Going forward, WestLB will focus on the following three business segments: Verbund/Mid-Caps, Transaction Banking and Capital Markets/Corporates/Structured Finance.
Heinz Hilgert, Chairman of the WestLB Managing Board, said: “The decision in Brussels shows that we took the right steps last year. We now have the legal certainty to press ahead further along this path. The conditions which have been imposed are in line with what we expected and which have been imposed on other banks. What is important for our customers, employees and owners is that the Bank´s strong and solid core remains intact. This includes, above all, our international capital market expertise, our acknowledged structuring and project financing know-how and our outstanding position in transaction banking.”
Regarding the implementation of the reduction in total assets and risk-weighted assets demanded by the Commission, WestLB has already taken a number of important steps. Apart from the Phoenix risk shield, these include especially the initiative to remove activities from the balance sheet which no longer conform to the Bank´s strategy. The total volume of these activities amounts to approximately € 80 billion. The Bank identified a portfolio of this size and merged it already in a separate unit in August 2008. The reduction/removal of these activities is the central assumption of the extended restructuring plan approved by the Commission and also the prerequisite for both the Landesbank consolidation and a successful bidding procedure.
Customer Business in All Regions Worldwide
WestLB will maintain a presence in all important regions worldwide and will systematically continue the streamlining of the foreign branch network which has already begun. The Bank will also streamline its domestic branch network. It will remain active in Düsseldorf, Berlin, Frankfurt, Hamburg, Munich and Stuttgart. The branches and offices in Münster, Bielefeld, Cologne and Dortmund will, however, be closed.
Heinz Hilgert added: “We will continue to maintain a presence in all time zones and all relevant economic regions of the world. Our trading activities, as well as our project finance business, in which WestLB is ranked seventh worldwide, will maintain a global footprint. Consequently, within the framework of our new location concept we will continue to make available the comprehensive expertise of our employees to our customers and business partners at national and international level.”
Restructuring Requires Sale of Further Participations
Under the agreement reached with the Commission, WestLB will sell, amongst others, Westdeutsche ImmobilienBank AG, readybank ag, Weberbank and WestLB International S.A. in Luxembourg within the next two years.