- Profit before tax of €197 million; high one-off charge due to EU resolution fund
- Pleasingly stable net interest despite difficult market environment, strong growth in net fees and commissions; weak net trading income
- Stable cost trend despite new marketing campaign and increased regulatory requirements
- All business segments deliver positive contribution to profits
- Strategic repositioning of retail banking business running fully to plan
- Capital ratios and balance sheet structure ratios reflect strength and solidity of HypoVereinsbank
HVB Group (also referred to as HypoVereinsbank) has continued the stable quarterly performance seen last year, generating a profit before tax of €197 million in the first quarter of 2015. This quarterly result was negatively affected by weaker net trading income than in 2014 coupled with the contribution of €70 million to the EU resolution fund accruing for the first time. In accordance with the relevant rules, the contribution to the resolution fund was recognised in the first quarter of 2015 at the full amount expected for the year as a whole. This means that the profit before tax of €289 million recorded a year ago was not matched.
“The combination of low interest rates, a weak euro, cheap oil and stable prices is currently boosting the economic tailwind in Germany. Yet the upturn is not sustainable due to a shortage of investment and innovation, and is being impaired by ongoing geopolitical uncertainties. Nonetheless, we have again recorded a profit in all of our business segments, sharply increased our net fees and commissions and kept our net interest stable. Like all other banks, though, our result was depressed by the much higher contribution to the EU resolution fund,” comments Dr Theodor Weimer, Board Spokesman of HypoVereinsbank. “We will continue to focus on profitability and efficient risk management, and systematically push our growth in Private Banking and Wealth Management as well as our business involving corporate customers.”
It proved possible to keep net interest stable at €652 million in the first quarter of 2015 despite the historically low interest rates, while net fees and commissions climbed a strong 18.4% compared with the first quarter of 2014 to reach a very healthy total of €302 million. Net trading income fell by €86 million in the first quarter to €180 million.
At €917 million, operating costs were almost the same as last year (€907 million) thanks to consistent cost management, despite higher marketing expenses relating to the advertising campaign that was launched in December 2014 and higher regulatory costs. Net write-downs of loans and provisions for guarantees and commitments remained at a very low level, with the total of just €62 million for the first quarter of 2015 €16 million below the equivalent year-ago figure of €78 million.
All business segments deliver positive contribution to profits
Both business segments delivered positive contributions to the profit before tax recorded by HypoVereinsbank.
The Corporate & Investment Banking business segment recorded a profit before tax of €130 million in the first quarter of 2015, which represents a year-on-year decline of €38 million. The total was, however, depressed by the contribution paid to the EU resolution fund. By contrast, operating income fell only a minor €30 million to €532 million (Q1 2014: €562 million), primarily as a result of lower net trading income (down €64 million to €182 million). This was, however, almost fully offset by the higher net interest (up €12 million to €262 million) and the very healthy rise in net fees and commissions (up €47 million to €91 million) with operating costs remaining constant.
The Commercial Banking business segment was also negatively affected by the expenses for the EU resolution fund. At the same time, operating costs rose on account of higher marketing expenses for the new advertising campaign. The profit before tax fell to €57 million (Q1 2014: €111 million), in contrast to operating income, which remained pleasingly stable (€605 million compared with €631 million in the first quarter of 2014). Despite the low interest rates, net interest remained constant largely thanks to the strong new business written in commercial real estate finance. Net fees and commissions also matched the good level recorded in the equivalent period last year.
The market environment for activities involving corporate customers in Germany remains demanding on account of lower investment and restrained demand for credit. Nonetheless, HypoVereinsbank succeeded in growing its business involving international corporates in the first quarter. And the Wealth Management unit also continued to expand.
Strategic repositioning of the retail banking activities running to plan
The modernisation of the retail banking activities that was initiated in August 2014 is running to plan. This will have been completed by the end of the year. So far, more than 155 branches throughout Germany have been completely remodelled to date and equipped with state-of-the-art systems. All 341 branches are scheduled for modernisation by the end of 2015. At the same time, HypoVereinsbank has expanded its mobile and internet-based advisory and service offer. Among other things, a new advisory process has been rolled out in all branches and in the online branch to provide customers with all-round wealth advice featuring a high level of individuality, transparency and interaction. All account managers have also received special training, while the next step will see them gaining external certification.
The first earnings-related effects of the modernisation were already felt in the first quarter, with the volume of deposits increasing, for instance, especially in the securities business. There was also a sharp rise in private building loans.
Capital ratios reflect HypoVereinsbank’s strength
HypoVereinsbank has had an excellent capital base for years. Both the Tier 1 ratio and the Common Equity Tier 1 (CET1) capital ratio amounted to 21.8% at 31 March 2015 compared with 22.1% at year-end 2014. The equity funds ratio totalled 22.4% after 22.9% at year-end 2014. This means that these banking supervisory ratios under Basel III are at an excellent level by both national and international standards.
The shareholders’ equity shown in the balance sheet rose by €138 million to €20.7 billion compared with year-end 2014 on account of the consolidated profit generated in the first quarter of 2015. With total assets up by 13.0% to €339.4 billion over year-end 2014, the leverage ratio (defined as the ratio of core capital to the overall risk position (risk position values of all assets and off-balance-sheet items)) amounted to 5.8% after 6.1% at 31 December 2014.
To download the complete Interim Report at 31 March 2015, please visit HVB’s Investor Relations website at www.hvb.de/ir .