DVB Bank posts reasonable consolidated net income before taxes for the first quarter of 2016
Frankfurt/Main, 12 May 2016 – During the first three months of 2016, DVB Bank SE (ISIN DE0008045501) generated reasonable consolidated net income before taxes of EUR25.9 million (Q1 2015: EUR84.3 million).
Ralf Bedranowsky, CEO and Chairman of DVB Bank SE’s Board of Managing Directors, commented on the Bank’s interim financial statements:
“In a challenging environment – in geopolitical, macroeconomic and industry-specific terms – the Bank’s business model once again proved resilient. DVB’s clear focus on financing transportation assets has paid off, especially during these testing times.
We originated 27 new transactions in our core Transport Finance business, with an aggregate volume of
EUR1.2 billion (Q1 2015: 51 new transactions with a total volume of EUR1.7 billion). Whilst the Bank adopted a cautious lending policy in the persistently difficult segments of the shipping industry, it very successfully originated new business in Aviation Finance with aircraft financings, and in Land Transport Finance, where it finances rail rolling stock and rail-related vehicles.
We were also successful in the advisory business where net fee and commission income rose by 3.1%, to EUR27.0 million.
On another positive note, in spite of continued high expenses incurred with regulatory-driven projects, we managed to keep general administrative expenses at EUR46.2 million (Q1 2015: EUR44.8 million).
In line with our projections, allowance for credit losses increased from EUR13.4 million to EUR36.3 million. The increase was largely required for legacy exposures in the Shipping Finance portfolio, and for financings in the Offshore Finance portfolio, which is burdened by the slump in oil prices.
The first quarter of 2015 included substantial non-recurring income from the sale of investment securities, due to the partial disposal of the stake in Wizz Air Holdings Plc. This one-off effect, which was generated in our Aviation Investment Management activities, did not materialise during the reporting period 2016.
We continue to assess the financial year 2016 with cautious optimism, and are endeavouring to achieve consolidated net income that should approach the previous year’s level. Given the persistent challenges on the shipping and offshore markets, we are aware that allowance for credit losses will continue to remain on an elevated level.”
The detailed items of the interim financial statements are provided below:
Net interest income decreased by 10.8%, from EUR64.8 million to EUR57.8 million, due to the following reasons: risk costs included in net interest income of EUR0.9 million (Q1 2015: EUR2.7 million, largely comprising expenses incurred for vessels which are under the Bank’s control, as part of restructuring measures. Net interest income is also burdened by early loan repayments as well as the requirement to maintain additional liquidity with the European Central Bank (at negative interest rates), due to new EU liquidity requirements (LCR). Moreover, increasing global competition for transport market financings has put pressure on interest margins.
Allowance for credit losses amounted to EUR36.3 million during the period under review (Q1 2015: EUR13.4 million). Specifically, new allowance recognised for credit losses totalled EUR131.9 million, of which EUR113.3 million was accounted for by Shipping Finance and Offshore Finance, due to the persistently difficult environment on the international shipping and offshore markets. Conversely, allowance for credit losses of EUR95.6 million was reversed (of which EUR84.1 million in Shipping Finance and Offshore Finance). Net interest income after allowance for credit losses stood at EUR21.5 million and thus fell short of the previous year’s figure of EUR51.4 million. Total allowance for credit losses (comprising specific allowance for credit losses, portfolio-based allowances for credit losses, and provisions) rose to EUR309.1 million, up 5.9% from year-end 2015 (EUR291.8 million).
Net fee and commission income, which primarily includes fees and commissions from new Transport Finance business, asset management fees, and fees generated from Corporate Finance advisory mandates, was up 3.1%, from EUR26.2 million to EUR27.0 million.
Results from investments in companies accounted for using the equity method amounted to
EUR-0.2 million (Q1 2015: EUR3.1 million). Net other operating income/expenses amounted to EUR4.4 million (Q1 2015: EUR-0.9 million).
General administrative expenses were up 3.1%, to EUR46.2 million (Q1 2015: EUR44.8 million). Staff expenses increased by 6.2%, to EUR27.4 million (previous year: EUR25.8 million). The number of active employees increased by 36 year-on-year, to 611. Non-staff expenses (including depreciation, amortisation and write-downs) declined slightly, by 1.1%, from EUR19.0 million to EUR18.8 million.
Net result from financial instruments in accordance with IAS 39 (comprising the trading result, the hedge result, the result from derivatives entered into without intention to trade, and the result from investment securities) – which is generally volatile – amounted to EUR27.9 million (Q1 2015: EUR60.8 million). The previous year’s figure included substantial non-recurring income from the sale of investment securities, due to the partial disposal of the stake in Wizz Air Holdings Plc. This one-off effect, which was generated in the Bank’s Aviation Investment Management activities, did not materialise during the reporting period 2016.
Consolidated net income before bank levy, BVR Deposit Guarantee Scheme, and taxes totalled EUR34.4 million (Q1 2015: EUR95.8 million). Estimated bank levy charges of EUR3.7 million for the financial year 2016 (2015: EUR3.3 million in bank levy actually paid) as well as EUR4.8 million in expenses for the Deposit Guarantee Scheme of the National Association of German Cooperative Banks (2015: EUR4.6 million in expenses for the BVR Deposit Guarantee Scheme) needed to be deducted from this figure already at the beginning of the year.
Consolidated net income before taxes declined by 69.3% year-on-year, from EUR84.3 million to EUR25.9 million, andconsolidated net income after taxes of EUR19.2 million was well short of the previous year’s figure of EUR74.9 million.
DVB’s total assets decreased to EUR25.7 billion as at 31 March 2016, down 3.4% from the 2015 year-end (31 December 2015: EUR26.6 billion), mainly due to currency translation effects.
DVB’s nominal volume of customer lending (the aggregate of loans and advances to customers, guarantees and indemnities, irrevocable loan commitments, and derivatives) was down 4.7%, to EUR24.1 billion. In US dollar terms, it remained constant, at US$27.5 billion.
DVB employs key financial indicators to assess and manage its business: the return on equity (ROE) before taxes, the cost/income ratio (CIR) and the risk-adjusted Economic Value Added (EVA(TM)). In order to harmonise the calculation methodology and enhance transparency thereof, the Bank has included expenses for the bank levy and the BVR Deposit Guarantee Scheme, as well as the operative component of the IAS 39 result (the result from investment securities) in its calculation methodology for all three financial indicators since the first quarter of 2016. Expenses for the bank levy and the BVR Deposit Guarantee Scheme must be recognised at the beginning of each financial year, for the full year, and are then no longer amortised over the course of the year. However, in DVB’s view, amortising these charges over the periods within a financial year is commercially sensible for calculating key financial indicators, since this allows for a more realistic reflection of business performance.
On this basis, the Bank’s financial indicators developed as follows:
The ROE before taxes stood at 1.3% (Q1 2015: 23.5%) and was calculated as follows: consolidated net income before IAS 39 and taxes (but including the result from investment securities) was divided by the total of weighted capital (issued share capital, capital reserve, retained earnings excluding funds for general banking risks, non-controlling interests and deferred taxes, as well as before appropriation of consolidated net income) on a pro-rata basis.
The CIR totalled 54.4% (Q1 2015: 34.1%) and was calculated in the following manner: the aggregate of general administrative expenses as well as pro-rata expenses for the bank levy and the BVR Deposit Guarantee Scheme was divided by the total of net interest income before allowance for credit losses, net fee and commission income, the result from investment securities, results from investments in companies accounted for using the equity method, and net other operating income/expenses.
The risk-adjusted indicator EVA(TM) amounted to EUR-21.2 million (Q1 2015: EUR53.9 million) and was calculated by deducting pro-rata risk capital costs from consolidated net income before IAS 39 and taxes (but including the result from investment securities).
DVB discloses capital ratios determined in accordance with the Basel III framework (Advanced Approach). On this basis, the common equity tier 1 ratio as at 31 March 2016 amounted to 13.5% (31 December 2015: 16.3%), whilst the total capital ratio was 18.7% (31 December 2015: 22.4%).
About DVB Bank SE:
DVB Bank SE, headquartered in Frankfurt/Main, Germany, is the leading specialist in the international transport finance business. The Bank offers integrated financing solutions and advisory services in respect of Shipping Finance, Aviation Finance, Offshore Finance and Land Transport Finance. DVB is present at all key international financial centres and transport hubs: at its Frankfurt/Main head office, as well as various European locations (Amsterdam, Athens, Hamburg, London, Oslo and Zurich), plus offices in the Americas (New York City and Curaçao) and in Asia (Singapore and Tokyo). DVB Bank SE is listed at the Frankfurt Stock Exchange (ISIN: DE0008045501). Further information is available onwww.dvbbank.com.