- Profit before tax of €1.5 billion despite restructuring costs of €0.4 billion
- Consolidated profit after tax of €1.1 billion
- All the business segments make a positive contribution to earnings
- Cost-income ratio, at 63.6%, at good level despite regulatory costs
- Net fees and commissions surpass high year-ago total
- Net write-downs of loans still very low
- At 21.5%, Core Tier 1 ratio at new record high
HVB Group (also referred to as HypoVereinsbank) again showed itself to be one of the most profitable and strongest banks in Germany in 2013 despite the persistently challenging environment. In the 2013 financial year it generated a profit before tax of €1,458 million. Although last year’s profit of €2,058 million was not matched, it should be taken into account in this context that the result in the reporting period was adversely affected by restructuring costs of €362 million (2012: €102 million) and the year-ago total also benefited from a non-recurring item of €395 million in net trading income. The non-recurring item was due to the reversal of credit value adjustments. Adjusted for the restructuring costs in the two years and the non-recurring effect in net trading income in 2012, the profit before tax of €1,820 million in 2013 is even €55 million higher than the adjusted result of €1,765 million. Consolidated profit after tax amounted to €1,074 million in the reporting period (2012: €1,287 million).
Business model and employees boost earnings momentum
"In 2013, HypoVereinsbank yet again showed that it can generate really good results also in a very challenging environment. The Bank achieved a pre-tax result of around €1.5 billion – despite extremely low interest rates and investments of more than €300 million in the future of retail banking. Adjusted for non-recurring effects, we even exceeded the strong year-ago total. This again highlights how robust and sustainable our business model is – and how strong our workforce is", stated a delighted Dr Theodor Weimer, Board Spokesman of HypoVereinsbank.
The decline in profit before tax is mainly attributable to lower net interest. Due to the extremely low interest rates, it fell by €552 million to €2,912 million. In contrast, net trading income came to a respectable €1,118 million and was thus up 40.6% or €323 million on last year’s result adjusted for the non-recurring item named above. Net fees and commissions developed extremely well, rising by 5.2%, or €58 million, over the high year-ago total to €1,166 million. Furthermore, net other expenses/income increased by €186 million to €327 million.
Operating costs rose by a mere 2.0% to €3,587 million year-on-year, with an inflation rate of 1.5% and high regulatory costs. The cost-income ratio of 63.6% in the reporting period (2012 excluding non-recurring effect in net trading income: 62.2%) remained at a good level for a universal bank by both national and international standards. At €214 million, net write-downs of loans and provisions for guarantees and commitments are at a very low level and are thus significantly lower than the €727 million recorded in 2012.
Key capital ratios at record high, liquidity base still very good
HVB Group has had an excellent capital base for years. The core Tier 1 ratio in accordance with Basel II (ratio of core capital excluding hybrid capital instruments to the total amount of credit risk-weighted assets and risk-weighted asset equivalents for market risk and operational risk) increased again to 21.5% at 31 December 2013 (year-end 2012: 17.4%), which is an excellent level by both national and international standards. The shareholders’ equity shown in the balance sheet fell by €2.3 billion compared with year-end 2012 to €21.0 billion. Among other things, this reflects the dividend payment totalling €2,462 million for the 2012 financial year.
With total assets down by 16.5% compared with year-end 2012 to €290.0 billion, the leverage ratio (defined as the ratio of shareholders’ equity shown in the balance sheet less intangible assets to total assets less intangible assets) amounted to 7.1% at 31 December 2013 after 6.6% at year-end 2012.
HVB Group enjoyed a very comfortable liquidity base and a solid financing structure at all times in the reporting period. In this context, it is worth mentioning that HVB Group has placed a large part of its excess liquidity with Deutsche Bundesbank. The funding risk remained low on account of the diversification in the Bank’s products, markets and investor groups.
Positive profit contribution from all business segments
Like last year, all the business segments made a positive contribution to the profit before tax of €1,458 million.
The Commercial Banking (CB) business segment with the Unternehmer Bank and Private Clients Bank business units including retail banking recorded a profit before tax of €37 million. This was adversely affected by restructuring costs of €325 million in connection with the modernisation of the retail customer operations of HVB Group. Without these restructuring costs, CB would have generated a profit before tax of €362 million (2012: €514 million with restructuring costs of €86 million).
The Corporate & Investment Banking (CIB) business segment posted a profit before tax of €978 million, after €1,059 million in 2012. Without the non-recurring item in net trading income last year, profit before tax would have been €314 million higher than the adjusted year-ago total. CIB's success is based on the close cooperation between customer advisers and the Markets, Financing & Advisory and Global Transaction Banking product factories but also on cooperation with other countries and segments of UniCredit.
The activities of DAB Bank are reflected in the Asset Gathering business segment. The profit before tax of this business segment came to €19 million, after €28 million in 2012.
HVB also confident for 2014
The performance of HVB Group in 2014 will again depend on the persistent uncertainty entailed in the macropolitical environment in Europe and the high volatility of financial markets.
The Management Board of HypoVereinsbank is nevertheless confident that it will generate a solid result in 2014. All the business segments are expected to contribute to HVB Group’s result once more. In this context, HVB Group assumes that there will be a slight year-on-year decrease in operating income in 2014. Interest income is expected to fall slightly as a result of the persistently very low interest rates. By contrast, the Bank expects net trading in-come to provide a considerable contribution to earnings in 2014, although this will not match the good result achieved in 2013. In terms of net fees and commissions, a sharp rise is anticipated compared with the already good total recorded in the 2013 financial year. HVB Group will continually adapt its business strategy to reflect changes in market conditions and effectively exploit the opportunities that may arise from these also in 2014.
To download the complete Annual Report of UniCredit Bank AG (HypoVereinsbank), please visit HVB’s Investor Relations website at www.hvb.de/ir .