Annual Report 2004. the Bank and Its Performance
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Annual Report 2004. The Bank and its Performance. Landesbank Baden-Württemberg Important Key Figures at a Glance >> At home anywhere in the world. Whether Amsterdam, New York, or Shanghai: this annual report takes you on a trip to visit some of our customers. Like LBBW they are at home anywhere in the world. We think and act globally, are familiar with national and international markets, and oper- ate in all of the key economic centers of the world. And we like to take a look at the world beyond just pure financials. You will meet seven of our customers where they feel most at home: in their favorite places. In these profiles, they explain what is special about these places – and their partic- ular relationship with Landesbank Baden-Württemberg. Important Key Figures at a Glance. Dec. 31, 2004 Dec. 31, 2003 EUR million EUR million LBBW Group Business volume 384 862 368 868 Balance sheet total 339808 322 795 Derivative financial instruments (nominal volume) 996 314 777 039 Claims on banks 138102 132 720 Claims on customers 105 547 106 121 Bonds and other fixed-interest securities 81234 68 825 Liabilities to banks 101347 99 509 Liabilities to customers 77 107 74 065 Certificated liabilities 137 972 126 442 Operating results 1579 1499 Profit from ordinary activities 1052 927 Net income 502 366 Disclosed liable capital funds 15 722 15 714 Dec. 31, 2004 Dec. 31, 2003 Employees Number Number LBBW Group 12184 12 648 Offices/Branches (as of March 2005) in the State of Baden-Württemberg 184 189 in Germany as a whole 194 200 Rating (as of March 2005) Long-term Rating BFSR/IR* Moody’s Investors Service Aaa B- Standard & Poor’s AA+ – Fitch Ratings AAA B/C *BFSR = Bank Financial Strength Rating IR = Individual Rating Organizational Chart. Corporate Center Retail and Investment Corporate Customers Financial Markets Customers (RIC) (CC) Dr. Siegfried Jaschinski Michael Horn Joachim E. Schielke Dr. Siegfried Jaschinski Group Strategy and Legal Sales Controlling Sales Controlling Capital Market Investments Dr. Armin Brendle RIC** CC** Dr. Thomas Keller Human Resources Back Office/Financial Markets CC Stuttgart Region Capital Markets Trading and Sales Hubert Sühr Karl-Otto Bickert Werner Partsch Hans-Joachim Strüder Internal Auditing* Research CC Baden-Württemberg Equity Gerhard Leitschuh Dr. Peter Merk Northern Region Ralf Menzel Wilhelm Dannenbaum Overseas RIC Region I Treasury Dr. Peter A. Kaemmerer Karl-Heinz Hausch CC Baden-Württemberg Wolf-Dieter Ihle Southern Region RIC Region II Harald Pfab Hans-Joachim Beuth Key Account I/Structured Finance RIC Region III Hans-Peter Uehlin Stefan Brieger Key Account II/Corporate Finance Private Banking Jürgen Haller Rainer Grähling Real Estate Rainer Konopka Back Office Operations and IT Dr. Karl Heidenreich Rudolf Zipf Risk Management Controlling Wholesale Heinrich Lichtl Berthold Veil Risk Management Integration Accounting, Regional Business Controlling and Coordination Peter Vogt for BW-Bank Dr. Klaus-Dieter Kremkow Credit Risk Management and Basic Issues Accounting/ Thomas Römer Reporting System/Tax Andreas Zimber Key Account and Real Estate Dr. Frank Schwertfeger IT/Organization Klaus Rausch Central Loan Monitoring Claudia Diem Banking Operations Hasko Neumann Administration Peter Mayer * Reporting to the whole Board of Managing Directors ** Staff departments reporting directly to the Head of Division Annual Report 2004. Contents. 01 Preface and Reports Preface to the Annual Report 2003 7 Report of the Guarantors’ Meeting 9 Report of the Supervisory Board 13 02 Economic Background Economic Background 20 03 Landesbank Baden-Württemberg Landesbank Baden-Württemberg 28 04 Key Equity Investments/ Subsidiaries Key Equity Investments/Subsidiaries 36 05 Segments Retail Clients 50 Corporate Finance 61 Financial Markets 69 Corporate Items 84 06 Cooperation Between Landesbank Baden-Württemberg and the Savings Banks Cooperation Between Landesbank Baden-Württemberg and the Savings Banks 92 Expression of Appreciation by the Board of Managing Directors 97 07 Management Report of the Landesbank Baden-Württemberg Group Management Report of the Landesbank Baden-Württemberg Group 102 08 Consolidated Financial Statements Consolidated Balance Sheet 162 Consolidated Statement of Income 166 Notes 168 Substantial Subsidiaries and Affiliates – Guarantors’ Meeting – Supervisory Board – Board of Managing Directors – Advisory Board – Cash flow Statement 192 Segment Reporting 193 Statement of Changes in Equity 194 Independent Auditors’ Report 196 Addresses Organizational Chart 3 Landesbank Baden-Württemberg: A Bank that thinks ahead. 01 Preface and Reports 7 Preface to the Annual Report 2004 9 Report of the Guarantors’ Meeting 13 Report of the Supervisory Board Dr. Siegfried Jaschinski: “We are a Landesbank with our own unique profile. As a customer- oriented, Baden-Württemberg- based German bank we have an established reputation on the European and international mar- kets. As one of the major banks in Germany, our objective is to combine innovation and reliability – in the interest of both our custom- ers and our investors.” Dear Customers and Business Partners, Ladies and Gentlemen, Writing the preface to the annual report on the past fiscal year generally lends itself to reflection. In the banking business, a review of the previous fiscal year is anything but vague – the past comes into crystal- clear focus in our financial statements. And those figures can be exhilarating and rewarding, a fact that is demonstrated by more than just the visuals in our current annual report. In the cold light of day, the LBBW Group’s earnings situation in 2004 emerges as favorable, as does the “shadow rating” indicating LBBW’s rating without state guarantees. This look back on 2004 underscores clearly how well positioned LBBW is in the banking market. We have advanced to become one of the major banks in Germany. Our customer base is as varied as our list of investors. We are proud to be a Landesbank with our own unique profile as a customer-oriented, Baden-Württemberg- based German bank with an established reputation on the European and international markets. Looking to the future, I accepted the position of Chairman of the Board of Managing Directors of LBBW in early 2005. At the same time, LBBW’s guarantor structure was reorganized so that LBBW can now count Landesbank Rheinland-Pfalz and BW Bank among its Group companies. The establishment of the contractual conditions necessary for the new LBBW Group structure was a priority in the past fiscal year. Now our job is to take further steps to integrate both of these institutions into the LBBW Group. The aim of this process is to achieve one thing above all: to ensure that our customers and investors select the LBBW Group as their business partner of first choice thanks to our innovative solutions and reliability. Against the backdrop of the elimination of state guarantees, LBBW will be unable to avoid instituting comprehensive cost-cutting measures. However, it is equally important to increase earnings in all areas of our business. We met a key milestone in this effort in fiscal year 2004 and set goals to achieve further improve- ments in fiscal 2005. Our objectives include continuing to strictly pursue our risk-sensitive business policies. Finally, we are focusing more than ever before on profitability in order to reinforce our excellent position, not only in the German banking industry, but also on the European and international markets. The strong position of the LBBW Group can be viewed as evidence that our customers do business with us with confidence. Without our guarantors and our partnership with Baden-Württemberg’s savings banks, LBBW’s success in 2004 would have been unthinkable. And attaining the position we now hold would not have been possible without the efforts of our employees. I would like to express my appreciation to all of you. Sincerely, Dr. Siegfried Jaschinski Chairman of the Board of Managing Directors 7 Erwin Teufel: “The state of Baden-Württemberg is strong. We have well-educated workers, highly qualified technicians and engineers, creative scientists and researchers, farsighted entre- preneurs, and many top-notch volun- teers and cultural innovators. And we have LBBW: globally positioned, regionally rooted, profitable. That is a solid foundation for the future.” Report of the Guarantors’ Meeting. During four meetings, one of which was a special As part of the takeover of Landesbank Rheinland-Pfalz session, Landesbank Baden-Württemberg’s Board of (LRP) and the reorganization of LBBW’s shareholding Managing Directors provided the Guarantors’ Meeting structure, it was deemed advisable for Landeskredit- with regular verbal and written reports on the busi- bank Baden-Württemberg – Förderbank (L-Bank) to first ness situation and performance of Landesbank Baden- acquire additional shares in BW Bank held by Landes- Württemberg (LBBW) in 2004. In particular, the reports stiftung Baden-Württemberg and then to contribute contained information on the development of the its shares in BW Bank to LBBW as a non-cash contribu- Bank’s financial results. tion by way of a capital increase. As a result, LBBW holds a nearly 100 % interest in BW Bank, while L-Bank The Guarantors’ Meeting took note of the fact that holds an equity interest in the share capital of LBBW. initial steps had been taken in the process of inte- The Guarantors’ Meeting approved this reorganization grating Baden-Württembergische Bank AG (BW Bank) of LBBW’s shareholding structure. into LBBW with the transfer of the responsibilities and functions of BW Bank’s service departments to Specific reports were presented to the Guarantors’ LBBW. The aim is to unify the management of the Meeting about the takeover of LRP and the parent/ two banks and reduce the number of interfaces. The subsidiary model agreed with the guarantors of LRP. transfer of these functions also involved the transfer The Guarantors’ Meeting approved this model, the of 135 employees from BW Bank to LBBW. A project agreed transaction structure, and the resulting new entitled “Migration of BW Bank’s Securities Settlement guarantor structure based on a corresponding amend- Operations to LBBW” was also launched.