– Positive development of operating income
– Allowance for credit losses remains on an elevated level
– Volatile effects from the IAS 39 result
Frankfurt/Main, 11 May 2017 – DVB Bank Group (DVB), the specialist in international transport finance, reported a consolidated net loss before taxes of EUR83.8 million in the first quarter of 2017 (previous year: net income of EUR25.9 million). This was heavily influenced by a negative net result from financial instruments in accordance with IAS 39 (EUR-61.3 million). Furthermore, reflecting market developments, additional allowance for credit losses was recognised in the amount of EUR65.9 million.
Ralf Bedranowsky, CEO and Chairman of DVB Bank SE’s Board of Managing Directors, commented on the Bank’s consolidated results:
“On a positive note, income generated by our operating activities continued to show a stable development. Specifically, net interest income (before allowance for credit losses) was up 4.7%, to EUR60.5 million, net fee and commission income rose 20.0%, to EUR32.4 million, and net other operating income/expenses improved from EUR4.4 million, to EUR10.0 million. In particular, we originated 36 new international transport finance transactions, with an aggregate volume of EUR1.0 billion (previous year: 27 new financings with a total volume of EUR1.2 billion).
Due to the persistent structural excess tonnage capacity, the continued deterioration in vessel values and charter rates (especially in container shipping), and the challenging environment for the offshore industry – caused by low oil prices – allowance for credit losses required predominantly for legacy exposures in the Shipping Finance portfolio, and for financings in the Offshore Finance portfolio, rose by EUR29.6 million to EUR65.9 million (previous year: EUR36.3 million).
As mentioned, the net result from financial instruments in accordance with IAS 39 amounted to
EUR-61.3 million (previous year: EUR27.9 million); this was largely driven by the measurement of cross-currency swaps, which the Bank is not allowed to include in its hedge accounting. Based on prudent economic risk management, these derivatives form hedging relationships with the related hedged items, whereby measurement gains and losses reported on a particular record date are neutralised over the entire term of the financings extended.”
The detailed items of the interim financial statements are as follows:
Net interest income increased by 4.7%, from EUR57.8 million to EUR60.5 million. Allowance for credit losses amounted to EUR65.9 million (previous year: EUR36.3 million). New allowance recognised for credit losses totalled EUR103.0 million, EUR98.9 million of which in Shipping Finance and Offshore Finance. Conversely, allowance for credit losses of EUR36.9 million was reversed, of which EUR32.8 million in Shipping Finance and Offshore Finance. Net interest income after allowance for credit losses amounted to EUR-5.4 million (previous year: EUR21.5 million). Total allowance for credit losses (comprising specific allowance for credit losses, portfolio-based allowances for credit losses, and provisions) rose to EUR679.1 million, up 7.3% from year-end 2016 (EUR633.1 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 20.0%, from EUR27.0 million to EUR32.4 million.
Results from investments accounted for using the equity method stood at EUR-0.6 million (previous year: EUR-0.2 million).
Net other operating income/expenses amounted to EUR10.0 million (previous year: EUR4.4 million), largely due to two non-recurring effects.
Moreover, DVB managed to keep general administrative expenses of EUR47.0 million stable and in line with the previous year (EUR46.2 million) – in spite of continued high expenses incurred from regulatory-driven projects. Staff expenses increased by 5.1%, to EUR28.8 million (previous year: EUR27.4 million), whilst non-staff expenses (including depreciation, amortisation and write-downs) were down 3.2%, from EUR18.8 million to EUR18.2 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) amounted to EUR-61.3 million (previous year: EUR27.9 million).
Consolidated net income/loss before bank levy, BVR Deposit Guarantee Scheme, and taxes totalled
EUR-71.9 million (previous year: EUR34.4 million). Estimated bank levy charges of EUR7.5 million for 2017 (2016: actual bank levy of EUR6.4 million) as well as EUR4.4 million in expenses for the Deposit Guarantee Scheme of the National Association of German Cooperative Banks (2016: actual expenses of EUR4.7 million) needed to be deducted from consolidated net income/loss before taxes already at the beginning of the year.
Consolidated net income/loss before taxes declined from EUR25.9 million to EUR-83.8 million, whilst consolidated net income/loss (after taxes) amounted to EUR-72.9 million (previous year: EUR19.2 million).
DVB’s total assets increased to EUR27.8 billion as at 31 March 2017, up 0.4% from the 2016 year-end (31 December 2016: EUR27.7 billion).
DVB’s nominal volume of customer lending (the aggregate of loans and advances to customers, guarantees and indemnities, contingent liabilities from irrevocable loan commitments, and derivatives) declined by 3.9% to EUR24.9 billion. In US dollar terms, it was down by 2.6%, to US$26.6 billion.
Key financial indicators developed as follows:
Return on equity (before taxes) decreased to -5.4% (previous year: 1.3%). The Bank managed to lower its cost/income ratio by 4.2 percentage points, to 50.1% (previous year: 54.3%). Risk-adjusted Economic Value Added amounted to EUR-48.1 million (previous year: EUR-21.2 million).
DVB discloses capital ratios determined in accordance with Basel III (Advanced Approach). On this basis, DVB’s common equity tier 1 ratio as at 31 March 2017 was 11.3% (31 December 2016: 13.2%), whilst the total capital ratio amounted to 18.8% (31 December 2016: 20.7%).
About DVB Bank SE:
DVB Bank SE, headquartered in Frankfurt/Main, Germany, is specialised 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 on www.dvbbank.com.