- Profit before tax of €1,083 million – including non-recurring effects of €1,268 million from sale of DAB
- Consolidated profit after tax of €958 million
- All business segments with positive contribution to profits, retail and business banking enjoy healthy performance
- Common Equity Tier 1 capital ratio on an outstanding level of 22.1%, despite introduction of Basel 3
- Important decisions implemented with sale of DAB and modernisation of the retail banking operations
Despite historically low interest rates, HVB Group succeeded in maintaining its result at around the same level as last year, thus meeting the targets it had set for itself. HVB Group (also referred to as HypoVereinsbank) generated a profit before tax of €1,083 million in the 2014 financial year (2013: €1,439 million). Including the gain on the disposal of DAB, the profit before tax amounts to €1,268 million. The net profit after tax totals €958 million (2013: €1,074 million). Compared with last year, this represents a decrease of almost 13%.
“HypoVereinsbank again performed extremely well in 2014. We generated stable results across all four quarters, with all the business segments making positive contributions. Commercial Banking – which encompasses our Private Clients Bank and Unternehmer Bank units – proved both robust and successful last year,” comments Dr Theodor Weimer, Board Spokesman of HypoVereinsbank. “HypoVereinsbank once again reaped the benefits of its robust, balanced business model as a result. Our operations are sustainably profitable, even in a demanding market environment, and we have costs and risks firmly under control. Over the last year, we’ve leveraged a position of strength to implement strategic decisions for the future with things like the modernisation of our retail banking operations and the sale of DAB Bank. We’re focussing more than ever on our core business and driving its growth with target investments. We intend to stay firmly on this path in the year ahead.”
Market environment and customer reticence depress operating income
The decline in profit before tax is mainly due to the €913 million decrease in operating income to €4,602 million in 2014. In particular, the extremely low interest rates once more impacted the development of earnings in interest-related operations, causing net interest to fall by €230 million in the reporting period to €2,643 million.
At €1,082 million, net fees and commissions almost matched the good year-ago total of €1,102 million. On the other hand, there was a sharp decline in net trading income, which was down by €612 million to €483 million. However, it must be taken into account that the year-ago total included gains on the buyback of hybrid capital instruments that did not recur in the reporting period. In addition, the result in the reporting period was impacted by a sharp increase in credit value adjustments. Moreover, net other expenses/income fell slightly, by €26 million to €302 million.
Operating costs were up by €81 million to €3,559 million compared with last year, which can, however, be attributed to the initial consolidation of the BARD Group and the depreciation taken on our offshore wind farm which is included in full for the first time in the reporting period. If this effect is eliminated, operating costs would have declined by 1.4%. At €151 million, net write-downs of loans and provisions for guarantees and commitments are at a very low level and are even below the very low figure recorded last year (2013: €214 million).
Capital ratios and liquidity base again very high
HypoVereinsbank has had an excellent capital base for years. The Common Equity Tier 1 capital compliant with Basel 3 excluding hybrid capital (CET1 capital) amounted to €19.0 billion at 31 December 2014. Compared with the core capital excluding hybrid capital compliant with Basel 2.5, it increased by €0.6 billion over year-end 2013 due to the conversion in the calculation from HGB to IFRS, and from Basel 2.5 to Basel 3.
The CET1 capital ratio (ratio of Common Equity Tier 1 capital to the total amount of credit risk-weighted assets and risk-weighted asset equivalents for market risk and operational risk) increased to 22.1% at 31 December 2014 after a Core Tier 1 ratio of 21.5% compliant with Basel 2.5 at year-end 2013. HypoVereinsbank’s core capital (Tier 1 capital) rose to €19.0 billion at 31 December 2014 (31 December 2013: €18.5 billion) as a result of the factors mentioned above.
Growth mainly in retail and corporate banking
As was already the case last year, all the business segments made a positive contribution to the profit before tax of €1,083 million.
The Commercial Banking business segment – with the Unternehmer Bank and Private Clients Bank business units plus Private Banking – recorded a profit before tax of €338 million, which is €290 million higher than the year-ago total of €48 million. However, it must be taken into account that last year’s profit before tax was adversely affected by restructuring costs of €325 million in connection with the modernisation of the retail banking operations.
When it launched the modernisation of its retail banking operations in August 2014, HypoVereinsbank became the first bank in Germany to respond consistently and comprehensively to changed patterns of customer behaviour and digitisation. In the meantime, a hundred branches across Germany have been completely renovated and equipped with state-of-the-art technology. A further 240 branches are set to follow by the end of 2015. In parallel, HypoVereinsbank has expanded its mobile and web-based advisory and service offering. This means that HypoVereinsbank is right on target to complete the modernisation of its retail banking operations by the end of 2015 as planned. The feedback from customers is very positive, as reflected in the results.
Despite the modernisation work coupled with persistently low interest rates and customer demand that remains restrained, Commercial Banking succeeded in keeping its operating income almost stable at €2,434 million (2013: €2,466 million). There was even a slight decline of 0.4% in operating costs to €1,979 million. Net write-downs of loans and provisions for guarantees and commitments continue to be at a low level, showing a net addition of €108 million (2013: €74 million).
The Corporate & Investment Banking (CIB) business segment recorded operating income of €1,971 million (2013: €2,565 million). This sharp year-on-year decline of €594 million results mainly from decreases of €434 million in net trading income and €171 million in net interest.
The €88 million rise in operating costs to €1,429 million is due to the initial consolidation of the BARD Group and the commissioning of the offshore wind farm at the end of 2013; without this effect, there would have been a tangible decline of 3.1%. With a very low level of net write-downs of loans and provisions for guarantees and commitments of €112 million (2013: €240 million) and a net reversal of provisions of €9 million (2013: net addition of €134 million), the CIB business segment recorded a profit before tax of €565 million overall on the back of weak net trading income, after €966 million last year.
HypoVereinsbank optimistic for 2015
The commercial performance of HypoVereinsbank will again be dependent upon macropolitical uncertainties and the high volati¬lity on the financial and capital markets in 2015. This year, the banking industry will once more face ultra-low interest rates, rising regulatory requirements, restrained economic growth in Europe and debates about the future of European integration.
Dr Theodor Weimer states: “The obstacles that will make navigation so difficult over the coming months are already known. Nonetheless, we've made the most of the opportunities that have arisen over the last twelve months, and I'm sure that we'll do so again in 2015. We’re aiming to grow primarily in private banking and wealth management as well as in our activities involving corporate customers. The markets might be volatile, but they’re also throwing up opportunities. HypoVereinsbank is in good shape for the future. Our customers are loyal and our employees passionately follow our customers‘ aspirations.”
To download the complete Annual Report of HVB Group (HypoVereinsbank), please visit HVB’s Investor Relations website at
This press release contains forward-looking statements. Forward-looking statements are statements that are not historical facts. They include statements about our beliefs and expectations, and the underlying assumptions of UniCredit Bank AG. These statements are based on plans, estimates and projections as currently available to the management of UniCredit Bank AG. Consequently, forward-looking statements are only applicable on the day on which they are made. We undertake no obligation to update such statements in light of new information or future events. By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could cause actual results to differ materially from forward-looking statements. Such factors include conditions in the financial markets in Germany, Europe and the United States, the development of asset prices, potential defaults of borrowers or trading counterparties, and other changes – notably including significant political changes – that may materially alter the parameters underlying our business activities. This press release does not constitute any kind of recommendation or investment advice.