Earnings from the Group’s core business activities, primarily business with corporate customers, the real estate sector, savings banks, and DKB, rose by EUR 131 million to EUR 935 million. The positive performance benefited from the relatively sound economic situation in BayernLB’s core markets of Bavaria and Germany. The negative impact from non-core activities fell to EUR -259 million (FY 2011: EUR -450 million), which continues to be primarily due to the Hungarian subsidiary MKB. Consolidated net income after taxes and non-controlling interests amounted to EUR 762 million compared to EUR 125 million the year before.
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Gerd Haeusler, BayernLB’s CEO, said, "BayernLB’s business model, which is focused on the needs of the Bavarian and German economy, has again proven its worth in day-to-day competition. Customer driven business at BayernLB and DKB is doing well. The quality of our portfolio improved again thanks to the economic stability in our core markets of Bavaria and Germany and the rapid reduction in non-core activities. BayernLB is now so stable that net income can rise despite the continuing negative impact from MKB."
BayernLB reached an important milestone with the conclusion of the EU state aid proceedings on 25 July 2012. This means that the European Commission has confirmed the viability of the business model that the Bank has been focusing on since 2009. BayernLB was also required to meet a number of conditions and commitments over the coming years. The key challenge is to repay EUR 5 billion in core tier 1 capital to the Free State of Bavaria by 2019. A significant first step has already been taken in this regard: in November 2012 and February 2013 BayernLB paid a total of EUR 800 million to the Free State.
The European Commission also required BayernLB to divest itself of additional non-core activities and shareholdings. As a result, the Bank will continue to shrink in future, even as it continues to prudently grow its core business. On 31 December 2012, the Bank’s total assets amounted to EUR 286.8 billion, more than EUR 22 billion below the previous year’s figure. That is the lowest figure for total assets since 1999.
The substantial decrease in total assets once again resulted from the disposal of significant parts of its non-core activities. The Bank sold DKB Immobilien AG and LBS Bayern, thereby fulfilling two significant requirements laid down by the European Commission. In September, BayernLB also launched the process to sell its stake in the residential property company GBW AG. The sale is expected to be completed in the spring of 2013. Over the course of the year, the securities and loan portfolios pooled within the Restructuring Unit (RU) were reduced by EUR 8.7 billion to EUR 18 billion as a result of maturities and active management. The RU’s assets include the ABS securities, whose nominal value was under EUR 10 billion at the end of 2012 and is now below EUR 9 billion.
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By GlobalDataBayernLB’s capital base again improved significantly in 2012. The core tier 1 ratio as defined by the European Banking Authority (EBA) increased from 9.7 percent at the end of 2011 to 11.6 percent as at 31 December 2012. This provides a solid foundation for doing business in the future and making further payments to the Free State of Bavaria.
Gerd Haeusler, "We achieved significant progress with the new BayernLB in 2012. The conclusion of the EU proceedings, substantial payments to the Free State and the accelerated reduction in non-core activities, while simultaneously improving capital ratios, have enabled us to achieve some major milestones. Our objective is that we should one day be a completely normal bank again. Although we are very pleased with the progress of the strategic realignment so far, further efforts are required if we are to transform ourselves into a high-performance customer-driven bank. In particular, this requires further streamlining our cost structures."
