Helaba Landesbank Hessen-Thüringen succeeded in achieving a satisfactory result in the 2020 financial year, despite the negative impact in the wake of the Covid-19 pandemic. The bank posted a consolidated net profit before tax under IFRS of EUR 223 million (previous year: EUR 518 million). After tax, the consolidated net profit amounted to EUR 177 million (previous year: EUR 470 million). "Our Group earnings reflect the fact that the transformation programme that we have launched is having a positive effect. Overall, our operating activities performed well. Thanks to stringent cost management, we were able to halt the trend of rising costs. At the same time, remeasurement effects, which had weighed significantly on our results for the first half of 2020, declined considerably in line with our expectations. On balance, we can be justifiably satisfied when looking back at the result we achieved in 2020", commented Thomas Groß, Helaba's CEO, in summing up the Group's annual results.
"Our Group earnings reflect the fact that the transformation programme that we have launched is having a positive effect. Overall, our operating activities performed well."
Net fee and commission income increased sharply by EUR 40 million to EUR 435 million (2019: EUR 395 million), while net interest income, at EUR 1,172 million, was slightly below the previous year's level (2019: EUR 1,191 million). Income from rented properties, primarily at GWH, once again proved to be a stable and dependable earnings component. In the period under review, it amounted to EUR 215 million (2019: EUR 214 million).
At the same time, the bank succeeded in halting the trend of steadily rising costs. In the course of the ongoing transformation programme, the Group's organisational structure was noticeably streamlined in 2020 and costcutting measures were defined and implemented. In addition, IT and consulting expenses were noticeably reduced. Overall, general and administrative expenses decreased to EUR -1,468 million (2019: EUR -1,521 million).
Due to the Covid-19 pandemic, the altogether good performance of the Group's operating activities was overshadowed by a substantial increase in risk provisioning and a marked decline in the result from fair value measurement. Thanks to its good portfolio quality, Helaba has not recorded any major loan defaults to date. However, given the defaults that is anticipates in 2021, the bank proactively increased its provisions for losses on loans and advances in 2020 to an adequate level of EUR -305 million (2019: EUR -86 million) and considers itself well prepared to cope with upcoming challenges. Helaba will remain well capitalised going forward so that it can continue to act as a reliable partner for its clients in the future, too.
The negative valuation effects in the first half of 2020 were of a temporary nature and subsided considerably in the second half of the year, as expected. Consequently, Helaba reported a net income from fair value measurement of EUR 4 million at the end of the year (2019: EUR 128 million).
At 14.7 percent, the CET1 ratio is at a very good level and significantly above current regulatory requirements. The increase compared to the previous year (2019: 14.2 percent) is mainly attributable to a rise in the Group's capital base.
The Helaba Group's balance sheet total rose by EUR 12.3 billion to EUR 219.3 billion. This increase was primarily due to measures to boost liquidity in the wake of the Covid-19 pandemic as well as higher market values of derivatives.
Amid a challenging market environment, the Real Estate segment generated a pre-tax result of EUR 252 million, which was on a par with the previous year (2019: EUR 257 million). In the Corporates & Markets segment, the decline in the result from fair value measurement overshadowed the encouraging performance of operating activities, particularly in corporate finance. The segment's result before tax fell to EUR 5 million (2019: EUR 71 million). Earnings before tax in the Retail & Asset Management segment saw a moderate increase to EUR 202 million (2019: EUR 195 million). Frankfurter Bankgesellschaft, Helaba Invest, Frankfurter Sparkasse and LBS were the principal drivers of this growth. In addition, rental income from GWH's residential property portfolio, which is allocated to this segment, continued to make a stable contribution to earnings. At WIBank, the pre-tax result of EUR 33 million was above the previous year's level (2019: EUR 26 million). During the Covid-19 pandemic, WIBank has been a dependable partner in supporting local businesses with targeted aid programmes on behalf of Hessian state government. It granted funding commitments of EUR 236 million for around 7,600 businesses and entrepreneurs in Hesse. Total earnings in the Other segment, at EUR -267 million, were significant below the previous year (EUR -30 million). Negative valuation effects in the result from fair value measurement as well as absence of extraordinary gain from addition of KOFIBA included in previous year's result also had adverse impact in this respect. This segment also includes management and pandemic-related adjustments to risk provisioning.
"The strong performance in our operating activities demonstrates that, with our diversified business model, we are well placed for the future, particularly in times of crisis. In 2020, Helaba took the opportunity to pave the way for the continued successful development of its business. Thanks to our refined strategic agenda and the initiatives it has set in motion, we are in an ideal position to face the challenges that await us," affirmed Thomas Groß.
"The strong performance in our operating activities demonstrates that, with our diversified business model, we are well placed for the future, particularly in times of crisis."
Besides addressing the immediate challenges as a result of the pandemic, Helaba has also set itself the following long-term goals:
1. Diversifying our business model more broadly and boosting efficiency
In the course of further diversifying its business model, the bank is focusing on more growth in capital-efficient business lines and developing its long-term lending strategy towards a greater emphasis on placing risks with third parties through syndication. In keeping with its remit as an S-Group bank, Helaba will strengthen its S-Group business with the savings banks by using syndication and launching funds and will become even more closely integrated into the Sparkassen-Finanzgruppe.
2. Modernising the IT infrastructure and driving the digital transformation
A modern IT infrastructure serves as a basis for the growth and future viability of a financial services provider. Therefore, having completely replaced the IT equipment in 2020, the focus in 2021 will be on a fundamental modernisation of the IT infrastructure. In addition to the core banking system, aspects such as smart data and artificial intelligence will also play a key role. In order to achieve this, the bank has planned annual capital expenditure in the triple-digit million range. In addition, the bank will consistently exploit opportunities arising from digitisation, both through inhouse development as well as by forging partnerships with platforms and service providers.
3. Harnessing sustainability as an opportunity for growth and strengthening diversity
Finally, the bank will increasingly turn its attention to the issue of sustainability, pursuing a holistic approach that encompasses Helaba itself, its customer relationships and its commitment to society as a whole. The focus in this regard is on expanding its range of sustainable products with the aim of providing its clients with even more effective support in their own sustainable transformation as well as tapping into further potential for growth in this area. As part of its sustainable approach to human resources, Helaba is placing a greater emphasis on promoting diversity and equal opportunities and, among others, has set itself the goal of appointing women to fill more than 30 percent of management positions in future.
With this strategic alignment, Helaba believes it is well prepared for the challenges ahead. Thomas Groß expresses his optimism for the current financial year, even though it will continue to be heavily impacted by the coronavirus pandemic: "Strategically, we have laid the right groundwork for the future. However, the Covid-19 crisis and its repercussions continue to define the macroeconomic and business environment and interest rates are set to languish at all-time lows. Despite this, we anticipate that we will be able to achieve a pre-tax profit in 2021 in line with last year's result, assuming risk provisioning remains largely unchanged."
"Strategically, we have laid the right groundwork for the future. However, the Covid-19 crisis and its repercussions continue to define the macroeconomic and business environment and interest rates are set to languish at all-time lows."