000_Umschlag_aussen_englisch_f 17.03.2005 15:56 Uhr Seite 1 C M Y CM MY CY CMY K LRP 2004 ANNUAL REPORT LRP Landesbank Rheinland-Pfalz Grosse Bleiche 54-56 D-55098 Mainz Germany Tel (+ 49 61 31) 13-01 Fax (+ 49 61 31) 13-27 24 E-mail: [email protected] www.lrp.de Probedruck 000_Umschlag_aussen_englisch_f 17.03.2005 15:56 Uhr Seite 1 C M Y CM MY CY CMY K LRP 2004 ANNUAL REPORT LRP Landesbank Rheinland-Pfalz Grosse Bleiche 54-56 D-55098 Mainz Germany Tel (+ 49 61 31) 13-01 Fax (+ 49 61 31) 13-27 24 E-mail: [email protected] www.lrp.de Probedruck 80 82 84 86 88 90 92 94 96 98 00 02 04 10 8 6 4 2 0 DAX 30 Dow Jones 30 Yield of federal government bonds (“Bunds”) (chart in thousands) with a maturity of ten years (chart in %) 80 82 84 86 88 90 92 94 96 98 00 02 04 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.70 0.60 0.50 Euro in US-dollars Long-term development of capital market rates 2000 2001 2002 2003 2004 Development of operating Long-term ratings profit 250 Moody’s Aa1 LRP Group 1 Standard & Poor’s AA millions 200 Fitch AAA Operating profit before risk provisions 150 Japan Credit AAA Rating Agency Operating profit after risk provisions 100 Net income for the year Pfandbrief ratings Distribution 50 Moody’s Aaa Standard & Poor’s AAA 0 2000 2001 2002 2003 2004 % Return on Equity 6.0* Business volume 80 LRP Group Cost-Income Ratio 52.5 1 billions 70 Principle I Ratio 12.1 Other assets 60 Total Capital Ratio (BIS) 12.5 Securities 50 Core Capital Ratio (BIS) 8.1 Claims 40 * Newly defined RoE taking further elements of capital 30 into account (previous year (adjusted) 6.3 %) 20 10 0 2000 2001 2002 2003 2004 Key figures for the past five years LRP Group 1 millions Business volume 71,158 77,513 75,670 73,680 76,599 Total assets 63,871 69,809 65,801 65,566 67,711 Claims 39,154 44,284 42,141 42,670 40,682 Securities 20,863 21,511 19,546 19,069 23,846 Liabilities 29,972 32,847 29,129 28,188 31,899 Certificated liabilities 27,330 29,959 29,537 30,164 29,447 Total capital funds 2,610 3,030 3,255 3,270 3,175 Operating profit 193 157 144 192 131 Net income for the year 96 100 75 90 80 Employees (annual average) 1,998 2,034 1,961 1,942 1,848 Contents LRP 2004 1 Contents 2 The Managing Board 3 Preface by the Managing Board 6 Statement of Financial Condition of LRP and the Group 6 Disappointing Economic Development 7 LRP Group’s Net Income for the Year 1 80 Million 11 Business Volume Appropriately Increased 15 Sophisticated Risk Controlling and Management Systems 21 Outlook 22 Focus on Rheinland-Pfalz 28 Report of the Supervisory Board 29 Report of the Guarantors’ Meeting 32 Financial Statements including 40 Segment Reporting 42 Cash Flow Statement 44 Statement of Shareholders’ Equity 74 Bodies 2 LRP 2004 The Managing Board Dr. Friedhelm Plogmann Chairman of the Managing Board Responsibilities: – Central Staff Units, Corporate Communications Werner Fuchs – Group Steering and Control Paul K. Schminke Member of the Managing Board – Personnel and Administration Member of the Managing Board Responsibilities: – Legal, Taxes, Participations Responsibilities: – Savings Banks, Local Authorities, – Internal Auditing – Real Estate Customers National Bank Services – Organization and – Real Estate Customers International – Credit Department Corporates, Information Technology – Investment Banking Structured Finance, Administration – Corporates, Financial Institutions, – Treasury – Credit Department Financial Sovereigns, Trade Finance – Luxembourg Branch Institutions, Sovereigns, Trade Finance – Structured Finance – Real Estate Loans – State Trust Agency Preface by the Managing Board LRP 2004 3 Preface by the Managing Board The structural and economic problems of the German economy also persisted in 2004 and continued to weigh on the German banking industry. In addition to the weak market situation and lower margins, special expenses made to secure the Bank’s future affected our income. Due to these factors, we did not reach all of our business and balance sheet targets, but at W 80 million, net income for the year was still satisfactory. 2004 was a year of important decisions for the future of LRP. The withdrawal of Westdeutsche Landesbank (WestLB) as a shareholder of LRP with effect from 4 October 2004 paved the way for a reorganization of our ownership struc- ture. After a transitional period during which the two remaining guarantors, the Savings Banks and Giro Associa- tion of Rheinland-Pfalz and Landesbank Baden-Württemberg (LBBW), held 80 % and 20 % of the nominal capital, respectively, a 100 % parent-subsidiary structure with LBBW was established with effect from 1 January 2005. Lan- des-Bausparkasse Rheinland-Pfalz, which had successfully been managed as a division of the Bank for over 30 years, was spun off and is now a separate entity under the ownership of the Savings Banks Associations of Rheinland-Pfalz and Baden-Württemberg. The new ownership structure enables LRP to continue its successful business policy as an independently operating company also after the abolition of the guarantee obligation. As an integral part of the LBBW Group, LRP acts in particu- lar as a bank for medium-sized enterprises with a clearly defined profile, own market presence and focus on consult- ing-oriented corporate finance business, real-estate business and comprehensive support of the Rheinland-Pfalz savings banks as well as public-sector and promotion business especially in Rheinland-Pfalz. With our new ownership structure, the joint liability scheme of the German savings banks organization and the im- proved cost efficiency we paved the way for an “A” category rating. On this basis, we want to improve the Bank’s profitability to a sustained Return on Equity of 15 % before taxes and help to increase the value of the LBBW Group as an independent financial institution in the years to come. Together with our group companies, we will continue to be an efficient partner of our clients. Our competent employees are committed to the shared success of our business partners and our Bank. Yours faithfully, Dr. Friedhelm Plogmann Werner Fuchs Paul K. Schminke 000_LRP_Trennseiten_englisch_f 17.03.2005 15:57 Uhr Seite 1 C M Y CM MY CY CMY K Probedruck 000_LRP_Trennseiten_englisch_f 17.03.2005 15:57 Uhr Seite 2 C M Y CM MY CY CMY K STATEMENT OF FINANCIAL CONDITION FINANCIAL STATEMENTS BODIES Statement of Financial Condition Financial Statements Bodies Probedruck 2000 2001 2002 2003 2004 6 LRP 2004 5 4 3 Statement of Financial Condition 2 of LRP and the Group 1 0 -1 Growth rate of gross domestic product (GDP) % United States Eurozone Germany Disappointing Economic Development Growth figures of 1.6 % in Germany and 2.0 % in the In contrast to the eurozone, the US economy was sup- eurozone mean that the macroeconomic development ported by very expansionary monetary and fiscal poli- remained behind original expectations. While the eco- cy and remained relatively robust throughout the year. nomic situation in the eurozone and in particular in Against this background, the Fed started to cautiously Germany initially continued to stabilize thanks to increase the key interest rates in small steps in the strong stimulation from the world economy, rapidly summer months. In view of moderate wage increases growing global energy requirements resulted in a and low domestic price pressure, the European Central marked rise in oil prices in the second half of the year Bank, in contrast, adopted a wait-and-see attitude and which put an increasing burden on economic growth in left the main refinancing rate unchanged at 2.0 %. The all regions and slowed down the extraordinary export development of capital market interest rates largely re- boom. Due to continued high unemployment and un- flected the economic trend: An increase in the first half certainty among companies because of the bad experi- of the year was followed by a decline which almost ences made in previous years, the domestic economy reached previous lows by the end of the year. The stock remained subdued. In contrast to past economic cycles, markets showed no clear trend with share prices recov- a self-sustaining recovery consequently failed to mate- ering slightly at the end of the year. rialize. In Germany, domestic demand was particularly weak. The continued debate about the German govern- ment’s long-term reform policy led to unusually re- strained consumer spending, while German companies saw little need for increased capital spending. As a re- sult, economic sentiment deteriorated, not least be- cause of the high number of insolvencies, until the end of the year. The charts are not part of the audited Statement of Financial Condition. Statement of Financial Condition LRP 2004 7 LRP Group’s Net Income for the Year 3 80 Million This statement of financial condition illustrates the Income Influenced by Special Factors Group’s development. The attached tables show the Moderate volume growth, reduced contributions from corresponding figures for the development of the maturity transformation due to the flat yield curve, Bank’s business volume and earnings. lower contributions from the investment in non-inter- est-bearing liabilities due to the continued low level of The following companies have been fully consolidated interest rates as well as a further increase in funding in the Group’s financial statements: costs affected the Group’s net interest income. More- • LRI Landesbank Rheinland-Pfalz International S.A., over, the redemption of own issues above par contrib- Luxembourg, uted to the decline in income.