NORD/LB To Take More Losses From Shipping Loans


NORD/LB Norddeutsche Landesbank concluded the first quarter of 2018 with earnings before taxes of € 68 million. After taxes, profit stood at € 43 million. Last year the first-quarter result reflected extraordinary income in the securities business and totalled € 295 million before taxes and € 248 million after taxes. However, the introduction of the new accounting standard IFRS 9 means that there is only limited comparability with the prior-year figures. The common equity tier 1 capital ratio at NORD/LB rose further and stood at 12.8 per cent as at 31 March 2018.

“We have started well into the new year. We are fully on track with our transformation programme. We further reduced our balance sheet as planned and achieved another increase in our capital ratios,” said Thomas Bürkle, CEO of NORD/LB. “We also made further progress in running down the shipping portfolio. Nonetheless, the challenges we face are still demanding. Further strengthening our capital ratios continues to be the top priority. We will present a viable plan for this in conjunction with our owners in the course of this year. In terms of business, we expect a difficult year overall. Given the current framework conditions we nevertheless continue to aim at a profit for the full year 2018.”

Income statement for the first quarter of 2018

This is the first NORD/LB quarterly result prepared in accordance with the new accounting standard IFRS 9, which replaces the previous standard IAS 39 and has been binding since the start of the year. Therefore, because of new classifications and amended rules for appraisal, there is only limited comparability with the prior-year figures. Under IFRS 9 net interest income in the first quarter of 2018 was € 352 million (1Q17 under IAS 39: € 406 million). The drop in net interest income compared to the prior-year quarter was the result primarily of the shrinking of the balance sheet over recent years, in particular the reduction in the shipping finance portfolio.

Under the risk result net income of € 25 million was recorded (prior-year quarter: minus € 101 million) mainly because of the reversal of loan loss provisions. However, in view of the ongoing crisis in shipping, the Bank expects to have to set aside new loan loss provisions as the year progresses, as previously announced, which means that in this respect the first quarter represents a temporary special effect.

Net commission income stood at € 18 million (€ 43 million). Profit/loss from financial instruments at fair value (including hedge accounting) stood at € 3 million (€ 114 million).

The new item Realisation result from financial assets not measured at fair value through profit/loss recognised because of the introduction of IFRS 9 amounted to minus € 6 million. The corresponding prior-year figure was € 224 million because of special effects in the securities business which in the prior year were still predominantly recognised in other operating profit/loss.

Administrative expenses fell by 8 per cent compared to the prior-year quarter to € 291 million (€ 318 million). Other operating profit/loss was minus € 35 million (minus € 75 million) and also included expenses for the bank levy of € 50 million. Income taxes recognised according to IFRS amounted to € 25 million (€ 47 million).

The balance sheet total and risk-weighted assets of the NORD/LB Group were further reduced and as at 31 March 2018 stood at € 159.7 billion (end of 2017: € 165.4 billion) and € 45.7 billion (€ 46.8 billion) respectively.

The capital ratios of NORD/LB improved again. The common equity tier 1 capital ratio rose to 12.8 per cent in the first quarter. At the end of 2017 it was 12.4 per cent (adjusted value). The total capital ratio increased from 18.1 to 18.9 per cent.

The Bank’s shipping finance portfolio amounted to € 11.6 billion as at 31 March 2018. At the end of 2017 it totalled € 12.1 billion. Out of the entire portfolio, at the end of March € 7.9 billion (end of 2017: € 8.2 billion) was accounted for by non-performing loans. NORD/LB has announced its intention of reducing this number to less than € 5 billion by the end of 2019 at the latest.