- Profit before tax of €513 million
- Consolidated profit after tax of €334 million
- All business segments contribute to the profit
- Result in retail and corporate banking operations better than last year despite low interest rates and customer reticence
- Net write-downs of loans still extremely low
- At 21.3%, Common Equity Tier 1 ratio in accordance with Basel III still at very high level
In the first half of 2014, HVB Group (also referred to as HypoVereinsbank) generated a profit before tax of €513 million in a challenging economic and financial environment. This fell short of the profit before tax of €1,222 million recorded in the first half of 2013, which is due particularly to the decrease of €612 million, or 20.6%, in operating income.
"The first half of 2014 was dominated by declining economic data and yet another reduction in the lending rate for the banking industry. Although all the business segments made a positive contribution to the half-yearly result of the Bank in this difficult market environment, the extremely low level of interest rates also left its mark on us, particularly in Corporate & Investment Banking. By contrast, our retail and corporate banking operations showed pleasingly stable development and even surpassed the year-ago total", reported Dr. Theodor Weimer, Board Spokesman of HypoVereinsbank.
In the first half of 2014, the continuing extremely low interest rates adversely affected net interest in particular, which was down by €131 million to €1,365 million. At the same time, there was a €409 million decrease in net trading income to €300 million, although it should be noted in this context that gains on the buy-back of hybrid capital instruments were included last year which did not recur in the reporting period. With earnings of €568 million, net fees and commissions were €51 million lower than the year-ago total, while net other expenses/income fell by €14 million to €77 million.
Operating costs rose by €106 million, or 6.0%, to €1,870 million compared with the same period last year. This rise is almost exclusively due to the initial consolidation of the BARD Group and the write-downs on our offshore wind farm which are included in full for the first time in this connection. Without these two effects, the increase in operating costs – despite higher regulatory expenses and inflation – would have been negligible at €2 million or 0.1%.
At €90 million, net write-downs of loans and provisions for guarantees and commitments are at a very low level and are thus only €4 million higher than the figure recorded last year.
Capital and liquidity base still at a high level
HVB Group has had an excellent capital base for years. The new Common Equity Tier 1 capital ratio determined in accordance with Basel III fell to 21.3% at 30 June 2014 compared with (core Tier 1 ratio) 21.5% at year-end 2013. It is thus still at an excellent level by both national and international standards. At 30 June 2014 the equity capital amounted to €19.7 billion (31 December 2013: €20.0 billion); the equity funds ratio was 22.2% (31 December 2013: 23.4%).
The shareholders’ equity shown in the balance sheet fell by €0.5 billion to €20.5 billion compared with the year-ago total due to the dividend payout totalling €756 million decided at the Shareholders' Meeting in the second quarter of 2014, which was only partially offset by the consolidated profit of €330 million generated in the first half of 2014 (accruing to the HVB shareholder). With total assets up by 3.0% to €298.6 billion over year-end 2013, the leverage ratio amounted to 6.7% at 30 June 2014 after 7.1% at year-end 2013.
Positive profit contribution from all business segments
All the business segments contributed to the profit before tax of €513 million in the first half of 2014.
The Commercial Banking business segment recorded a pleasing profit before tax of €228 million, thus surpassing the figure reported for the same period last year by €1 million. This profit was generated through the increase of €17 million in operating income to €1,252 million and the €13 million decrease in operating costs to €986 million. At the same time, net write-downs of loans and provisions for guarantees and commitments were up by €16 million to €44 million while the net reversal in provisions decreased by €18 million (2013: €20 million). In this context, it is pleasing that net interest was able to be increased by €21 million to €803 million despite the difficult situation caused by low interest rates.
The Corporate & Investment Banking (CIB) business segment generated operating income of €956 million (first half of 2013: €1,382 million). This decrease of €426 million is primarily due to a fall of €282 million in net trading income to €300 million – partly due to the credit value adjustments made in the first half of 2014. Furthermore, net interest fell by €75 million to €527 million, mainly as a result of lower trading-induced interest and contracting credit volumes. Operating costs increased by a total of €115 million to €758 million, primarily on account of the initial consolidation of the BARD Group and the write-downs on our offshore wind farm to be included in full for the first time. By contrast, net write-downs of loans and provisions for guarantees and commitments decreased by €108 million to €62 million. The profit before tax fell by an appreciable €361 million to €232 million.
The Asset Gathering business segment recorded a profit before tax of €13 million after €10 million in the first half of 2013. The slight increase results notably from an increase of €9 million in operating income (30 June 2014: €69 million) while operating costs rose by €3 million to €57 million.
To download the complete Half-yearly Financial Report at 30 June 2014, please visit HVB's Investor Relations website at www.hvb.de/ir.