The Helaba Landesbank Hessen-Thüringen closed out the first half of 2017 with consolidated net earnings before taxes under IFRS of EUR 238 million.
The Helaba Landesbank Hessen-Thüringen closed out the first half of 2017 with consolidated net earnings before taxes under IFRS of EUR 238 million. The consolidated net profit after taxes amounted to EUR 150 million. The result thus fell short of the previous year’s strong figures of EUR 279 million before and EUR 184 million after taxes, as expected. In a challenging competitive market, the bank performed well in all business segments. In this respect, a significant increase in net trading income as well as lower provisions for losses on loans and advances had a particularly positive impact. At the same time, however, the low interest rate environment and volatile net income from hedge accounting and derivatives weighed on earnings in the first half of the year.
“In view of on-going challenges for our sector, we are satisfied with our earnings in the first six months of 2017. Growth in new business is especially encouraging and, in this regard, we have benefited from our excellent and long-term customer relationships as well as our strong market position”, emphasises Herbert Hans Grüntker, the Chairman of Helaba’s Board of Managing Directors. “As a result of the persistent zero and negative interest rate scenario, we reiterate our forecast for 2017 in which we expect a significant decline in net profits. From today's perspective we are optimistic that we will be able to exceed the earnings target we had set ourselves for the year as a whole”, Grüntker added.
Given the persistence of zero and negative interest rates, net interest income fell by EUR 69 million to EUR 542 million. The good quality of the portfolio resulted in lower provisions for losses on loans and advances in the first half of 2017 in an amount of minus EUR 2 million (H1 2016: minus EUR 75 million). Net fee and commission income rose by 8 percent to EUR 180 million, which primarily resulted from a positive development in fees from Helaba and Frankfurter Sparkasse’s cash management and foreign trade finance activities as well as Helaba Invest’s asset management business. Net trading income increased to EUR 168 million, after minus EUR 13 million in the same period last year. In a similar way to the first quarter of 2017, valuation adjustments on derivatives as a consequence of higher long-term interest rates contributed to this.
In common with the net trading income, net income from hedge accounting and derivatives was affected by its market valuation. Having generated earnings of EUR 107 million in the first half of the previous year, it amounted to minus EUR 108 million in the period under review. The main reason for this decline was the fact that the cross-currency basis spread had an opposite effect compared to last year in relation to the refinancing of foreign currency transactions.
Net income from financial investments (incl. at-equity valuation) declined to EUR 7 million (H1 2016: EUR 10 million). Other net operating income rose by EUR 9 million to EUR 108 million. General and administrative expenses increased by just over 4 percent to EUR 656 million. In common with the year before, this item already includes full provision for the bank levy as well as the DSGV and SGVHT security reserves.
In total, this results in a consolidated net profit before taxes of EUR 238 million (H1 2016: EUR 279 million) and after taxes of EUR 150 million (H1 2016: EUR 184 million.
In the first half of 2017, the balance sheet total of the Helaba Group shrunk from EUR 165.2 billion to around EUR 164 billion. Loans and advances to customers amounted to EUR 91.7 billion, representing a reduction of approximately EUR 1.4 billion, mainly due to currency effects, compared to the level at the end of 2016 (31 December 2016: EUR 93.1 billion). The amount of new medium and long-term business – excluding WIBank’s competitively neutral promotional loan activities – showed encouraging growth, rising to EUR 9.1 billion (H1 2016: EUR 8.8 billion).
As of 30 June, the CET1 capital ratio (“phased in”) was 15.1 percent and 14.9 percent (“fully loaded”). The cost/income ratio on the reporting date of 30 June 2017 amounted to 73.3 percent (30 June 2016: 64.0 percent) and return on equity (before taxes) reached 6.1 percent.
In the segment of Real Estate, net income before taxes rose by around 10 percent to EUR 195 million (H1 2016: EUR 178 million). Thus, the corporate division of Real Estate Finance once again made the largest contribution to consolidated net income. The level of new medium and long-term business declined in the first half of 2017, compared to the same period in 2016, by 14 percent to EUR 4.2 billion (H1 2016: EUR 4.9 billion). Provisions for losses on loans and advances amounted to EUR 3 million (H1 2016: minus EUR 14 million).
In the Corporate Finance segment, net income before taxes of EUR 65 million was considerably above the earnings in the same period last year of minus EUR 10 million, mainly as a result of lower provisions for credit losses. In the first six months of the year, the amount of new medium and long-term business of EUR 2.7 billion significantly exceeded the EUR 1.9 billion achieved in the same period of 2016. Provisions for losses on loans and advances, at minus EUR 31 million, were considerably lower than last year’s figure of minus EUR 110 million.
Net income before taxes of minus EUR 10 million in the segment of Financial Markets was substantially lower than the previous year’s result (H1 2016: EUR 38 million). Net trading income rose to EUR 138 million (H1 2016: minus EUR 22 million). The net income from non-trading derivatives and financial instruments accounted for using the fair value option declined by EUR 205 million to minus EUR 109 million (H1 2016: EUR 96 million). This was chiefly a result of lower valuation gains on financial instruments accounted for using the fair value option as well the reverse effect of taking cross-currency basis swaps into account in the scope of valuing derivatives.
In the segment of S-Group, Retail Customer and SME Business, net income before taxes of EUR 49 million was below last year’s figure of EUR 55 million. Earnings before loan loss provisions at the S-Group Bank increased by EUR 7 million to EUR 60 million (H1 2016: EUR 53 million). As expected, the impact of low interest rates on Frankfurter Sparkasse’s activities led to a reduced net interest income compared to the year before and lower earnings from the special fund. On the other hand, this segment reported growth in net fee and commission income. Frankfurter Sparkasse thus accounted for net earnings within this segment of EUR 60 million, which were slightly below those in the same period last year (H1 2016: EUR 63 million). Due to the low interest rate environment, there was a decline in the net interest income generated by LBS. Frankfurter Bankgesellschaft successfully raised its earnings compared to the previous year by EUR 1.5 million.
The segment of Public Development and Infrastructure Business mainly reflects the activities of WIBank. Net income before taxes in this segment amounted to EUR 9 million and was therefore below that of the same period last year (EUR 12 million). In the first half of the year, net interest income rose by EUR 1 million thanks to an increase in the volume of promotional loans. Net fee and commission income from the promotional loan business, at EUR 19 million, remained on the same level as last year. Due to higher costs for IT services, however, there was a noticeable increase in general and administration expenses.