WestImmo: Earnings for 2011 hit by exceptional factors
- Net interest income stabilised at high level, risk provision reduced
- Negative impact of sovereign debt crisis causes results to slip into the red
- Positive results expected for 2012 as a whole
Mainz, 27 April 2012 – The results posted by Westdeutsche ImmobilienBank AG (WestImmo) for the 2011 financial year clearly reflect the negative impact of the sovereign debt crisis and the sale of the bank imposed on WestLB by the European Commission. The stability of net interest income and the drop in risk provision nevertheless demonstrate the strength and earnings capacity of its core business portfolio.
WestImmo reported consolidated pre-tax earnings of -€167.2m for the year 2011, compared with €99.2m in the previous year. Group earnings after tax came to -€156.6m from €94.8m in 2010. The reason for this substantial drop in earnings lies essentially with the write-down of Greek government bonds to the tune of -€243.8m. On top of this came exceptional factors in the form of payments to the protection funds of the Westphalia-Lippe Association of Savings Banks (SVWL) and the Rhineland Savings Banks and Giro Association (RSGV), as well as the ongoing sale process.
Net interest income and risk provision demonstrate strength of core business
Despite the obvious fall in new business, net interest income was €219.5m (previous year €238.9m). It was also possible to reduce risk provision for credit losses to -€42.4m (previous year -€68.1m) in spite of the difficult situation in individual real estate markets. The trading result showed pleasing growth, climbing to €57.8m (previous year -€5.6m) due to valuation effects. General administrative expenses were reduced by 4.1% to €85.8m (previous year €89.5m).
“Even though our results are affected by the extraordinary pressures of impairments on Greek government bonds and the sale process has placed tight constraints on the development of WestImmo, the figures for our core business underline the quality of our credit portfolio. This is clear proof of the success of our conservative and consistent business policy over recent years. WestImmo is a solid and healthy bank in terms of its core business,” commented Claus-Jürgen Cohausz, chairman of WestImmo’s Managing Board, on the annual financial statements. “The fact that we have achieved this in spite of extremely difficult circumstances is due first and foremost to the dedication of our staff. Their commitment and loyalty cannot be taken for granted in the light of the bank’s situation, and the Managing Board has good reason to express its thanks and appreciation,” Cohausz continued.
Net fee and commission income fell to €3.5m, compared with €11.2m the previous year, due to the substantial reduction in the volume of new business. The balance of other operating income and expenses fell to -€36.6m from €7.7m in the previous year. Of crucial importance here were exceptional factors in the form of payments made to the protection funds of the Westphalia-Lippe Association of Savings Banks (SVWL) and the Rhineland Savings Banks and Giro Association (RSGV) associated with WestImmo’s withdrawal from the funds.
The downturn in earnings also impacted on the key income ratios of the bank. The return on equity (RoE) fell to -16.8% (previous year 10.2%). At 35.1%, the ratio of cost to income (CIR) remained more or less constant compared with the previous year (34.7%) on the back of the bank’s strict cost and process management. The group’s balance sheet total on 31 December 2011 was €23.7bn, representing a drop of 8.4% (previous year €25.9bn). A key factor here was the fall in receivables from customers to €18.0bn (previous year €20.4bn) due to the lower volume of new business at the bank. The core capital ratio stood at 8.9% on 31 December 2011 (previous year 8.0%).
Sale process has negative impact on growth of new business
The sale process imposed by the European Commission and the negative effect this had on WestImmo’s refinancing situation had a significant impact on the development of new business. In the expired financial year, the volume of new business realized by WestImmo amounted to €855m (previous year €3.3bn), a fall of 74%. Germany was the biggest individual market in the commercial investor business with a 32% share, whilst 54% of new business was pulled in from other European countries, 9% from USA/Canada and 5% from Asia.
Outlook: Development in the commercial real estate markets
The bank expects further upward movement in the majority of real estate markets in 2012. The recovery will also continue in the German real estate markets, particularly in the prime segment.
Sale process runs until 30 June 2012
On 15 December 2011, WestLB terminated talks with the bidder Apollo, with whom it had been in exclusive negotiations since July 2011. WestLB is continuing its efforts to sell WestImmo by 30 June 2012 in line with the ruling of the European Commission. Should it not be possible to sell the bank by this date, it is anticipated that WestImmo will be transferred to Erste Abwicklungsanstalt (EAA) with effect from 1 July 2012.
Irrespective of a transfer to EAA and provided that no further pressure is exerted by the European sovereign debt crisis, WestImmo expects to achieve positive results in 2012. Given the long-drawn-out sale process, the Managing Board is not issuing a forecast for earnings or new business at present.
After a transfer to EAA, WestImmo will still manage its Pfandbrief cover pool in line with the requirements of ratings agencies and supervisory authorities. Furthermore, the bank will continue to handle its credit portfolio in the same way, either as a subsidiary of EAA or as the latter’s service provider.
The financial report will be available to download from WestImmo’s website (www.westimmo.com) from 30 April 2012.
WestImmo: Key P&L ratios
|In EUR million||2011||2010||Change as %|
|Net Interest income||219.5||238.9||-8|
|Credit risk provisions||-42.4||-68.1||-38|
|Net fee and commission income||3.5||11.2||-69|
|Net income from non-current financial assets||-283.2||4.6||>-100|
|General administrative expenses||85.8||89.5||-4|
|Balance of other operating expenses and income||-36.6||7.7||>-100|
|Taxes on Income / Deferred taxes||-10.6||4.4||>-100|
|Number of employees at year-end||420||474||-11|
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