Annual Report 2013 RESPONSIBLE BANKING Creating value. Protecting value. A bank provides reliability. NORD/LB GROUP AT A GLANCE 1 Jan.–31 Dec. 1 Jan.–31 Dec. Change 2013 2012 1) (in %) In € million Net interest income 1 931 1 959 – 1 Loan loss provisions 846 598 41 Net commission income 163 168 – 3 Profit / loss from financial instruments at fair value through profit or loss including hedge accounting 73 – 122 > 100 Profit / loss from financial assets 11 – 5 > 100 Profit / loss from investments accounted for using the equity method 33 – 14 > 100 Administrative expenses 1 166 1158 1 Other operating profit / loss 69 – 99 > 100 Earnings before reorganisation and taxes 268 131 > 100 Reorganisation expenses – 38 – 34 – 12 Expenses for Public Guarantees related to Reorganisation 69 19 > 100 Earnings before taxes 161 78 > 100 Income taxes – 84 – 4 > 100 Consolidated profit 245 82 > 100 Key figures in % Cost-Income-Ratio (CIR) 51.4 61.2 Return-on-Equity (RoE) 2.1 1.0 31 Dec. 2013 31 Dec. 2012 1) Change (in %) Balance figures in € million Total assets 200 845 225 550 – 11 Liabilities to customers 54 861 55 951 – 2 Loans and advances to customers 107 661 114 577 – 6 Equity 8 190 7 700 6 Regulatory key figures Core capital for solvency reasons in € million 8 112 8 451 – 4 Regulatory equity in € million 9 811 10 776 – 9 Risk-weighted assets in € million 68 494 77 863 – 12 Total capital ratio in % 14.32 13.84 Core capital ratio in % 11.84 10.85 1) Some previous year‘s figures were adjusted as you can see at note (2) adjustment of figures for the previous year. NORD/LB ratings (long-term / short-term / individual) Rating agency Rating Date of rating Moody’s A3 / P–2 / D 12 March 2014 Fitch Ratings A / F1 / bbb – 30 July 2013 Total differences are rounding differences and may cause minor deviations in the calculation of percentages. Please find the detailed CONTENTS Corporate Governance Report at https://www.nordlb.com/ legal-information/legal-notices/ corporate-governance/ 2 Management 2 Extended Group Managing Board 4 Introduction by the Chairman of the Managing Board 5 Introduction by the Chairman of the Supervisory Board 6 Report of the Supervisory Board 7 Report of the Owners' Meeting 8 NORD/LB in the European Banking Union 12 Sustainable Business pays Dividends 14 Highlights of 2013 16 Responsible Banking 16 Promotion and Support: Braunschweigische Landessparkasse 20 Security for all Business Phases 24 Picking the Proper Ships 28 Co-creating Social Chance 32 Supporting Municipal Projects 36 Strengthening the Regional Economy 38 New Energy brings a Double Benefit 42 Enabling Individual Developments 49 Group Management Report 50 The NORD/LB Group – Basic Information 78 Economic Report 111 Supplementary Report 112 Forecast, Risk and Opportunities Report 141 Consolidated Financial Statements 142 Content 144 Income Statement 145 Statement of Comprehensive Income 146 Balance Sheet 148 Statement of Changes in Equity 150 Cash Flow Statement 152 Notes to the Consolidated Financial Statements 176 Segment Reporting 258 Statements Relating to the Future 259 Other Information 260 Responsibility Statement 261 Auditor‘s Report 262 Facts and Data 268 Glossary 270 Notes Directory 271 Imprint and Financial Calendar WHO WE ARE AND WHAT SERVICES WE PROVIDE > 7,000 employees As a commercial bank, NORD/LB offers a comprehensive range of attractive financial services to Private, Corporate and Institutional customers and the public sector in North- ern Germany and well beyond this core region. It is involved in structured financing for international projects – particu- larly in the areas of energy, infrastructure, shipping, aircraft 700 aircraft financed and real estate. With Braunschweigische Landessparkasse, NORD/LB performs the function of a savings bank in the Braunschweig region with around 100 branches. In the federal states of Lower Saxony and Saxony-Anhalt, NORD/LB acts as a Landesbank, supporting the states 8,500 agricultural customers in their banking business and regional economic develop- ment. In Mecklenburg-Western Pomerania and Saxony- Anhalt, it advises customers on current investment and development programmes. > In Mecklenburg-Western Pomerania, Saxony-Anhalt and Lower 5,000 Saxony, NORD/LB is also a partner to all local savings banks properties financed in its role as the central savings bank. In addition, it acts as a service provider to other savings banks in other Federal States, for example, in Schleswig-Holstein. NORD/LB offers all the services that savings banks require for their activities. > The NORD/LB Group‘s national and international networks 80 enable optimum solutions to be created for customers in the savings banks in the savings bank network savings bank financial group. NORD/LB acts as the parent company, managing all business activities in accordance with strategic goals, generating synergies, strengthening customer divisions and pooling services. 1,750 ships financed 106 branches in the Braunschweig area Note: You can find additional information about topics marked with this symbol in our sustainability report, which is based on the Global Reporting Initiative (GRI). Creating value. Protecting value. A bank provides reliability. RESPONSIBLE BANKING Taking responsibility forms the core of daily banking. We take responsibility every day: for our customers, our employees, our region. Beginning with solid finances for secure investments and extending well beyond sustainable operations for the future of our employees. We scrutinise our decisions constantly and subject them to critical review. In doing so, our primary focus is on how to best fulfil the trust bestowed in us and how to best real- ise our customers‘ wishes, visions and plans – every day. RESPONSIBLE MANAGEMENT RESPONSIBLE BANKING BANKING Extended Group Managing Board EXTENDED GROUP MANAGING BOARD CHRISTOPH SCHULZ ECKHARD FORST HARRY ROSENBAUM Born 1960 Born 1959 Born 1958 Private and Commercial Customers; Corporate Customer Business including Chairman of the Managing Board Chairman of the Managing Board of Housing and Agricultural Banking, of NORD/LB Luxembourg Braunschweigische Landessparkasse Commercial Real Estate Finance, Ship and Aircraft Finance, DR. STEPHAN-ANDREAS KAULVERS Corporate Finance, Structured Finance Born 1956 and Corporate Sales Chairman of the Managing Board of Bremer Landesbank 2 GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS OTHER INFORMATION From left to right: Christoph Schulz, Eckhard Forst, Harry Rosenbaum, Dr. Stephan-Andreas Kaulvers, Dr. Hinrich Holm, Ulrike Brouzi, Dr. Gunter Dunkel, Thomas S. Bürkle, Andreas Pohl DR. HINRICH HOLM DR. GUNTER DUNKEL THOMAS S. BÜRKLE Born 1965 Born 1953 Jahrgang 1953 Treasury, Markets, Bank-Assets Allocation, Chairman of the Managing Board (CEO); Chief Risk Officer (CRO); Investitionsbank Sachsen-Anhalt and Managing Board Office / Legal / Invest- Financial and Risk Control, Credit Risk relationship with Saxony-Anhalt and ments, Human Resources, Internal Audit, Management, Central Risk Management, foreign branches Corporate Communications and Special Credit Management, Research / Economy Strategy Development and Relationship, Savings Bank Network ULRIKE BROUZI Born 1965 ANDREAS POHL Jahrgang 1957 Chief Financial Officer (CFO); Chief Operations Officer (COO); Speaker of the Board of Managing Directors Finance / Tax, Organisation and IT, of Deutsche Hypo Corporate Services, Group Security Division, Compliance as well as Landesförderinstitut and Relationship Mecklenburg-Vorpommern NORD/LB Annual Report 2013 3 RESPONSIBLE MANAGEMENT RESPONSIBLE BANKING BANKING Introduction by the Chairman of the Managing Board Introduction by the Chairman of the Supervisory Board INTRODUCTION by the Chairman of the Managing Board Dr. Gunter Dunkel Chairman of the Managing Board of NORD/LB, Hanover “Equipped with a business model that has proved its worth for yet another year, we can strengthen our customers.” Ladies and Gentlemen, Annual reports provide a review of the past financial year – what went well, what could have gone better, what were our successes and what do we expect for the coming year? The most important theme in this Annual Report: We are living with and learning from the crisis, but we will not allow it to dominate us. Yes, developments in the ship- ping markets are an ongoing concern for us. More specifically, they are of concern to us because they are a burden on our customers and pose a threat to the survival of ship owners and many other companies from the maritime economy in our region. We know that there is also no sign of relief on the horizon in 2014. However, we also know that at some point the cycle will start heading in the right direction again and that people involved in these markets will be able to breathe freely once again. Until this happens, we take our special responsibility to our customers seriously. As a bank and financial partner, we continue to steer a course that is safe enough that we can continue to support our customers. We have achieved strong results across in all other business divisions of the bank. Our diversified business model has proved its value for yet another year. Our owners fully support us and our employees demonstrate not only know-how and expertise, but also a strong sense of commitment and personal responsibility. What is the legacy of 2013? Our financial statements show that it was yet another successful year for a solid bank that is firmly rooted in the real economy in Northern Germany. While this might not sound spectacular, it creates the right combination of trust, responsibility and realism that we want to offer our customers. Sincerely, Dr. Gunter Dunkel 4 GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS OTHER INFORMATION INTRODUCTION by the Chairman of the Supervisory Board Peter-Jürgen Schneider Minister of Finance, State of Lower Saxony and Chairman of the Supervisory Board of NORD/LB, Hanover “NORD/LB’s business model is based on responsibility and responsibility always has a future.” Ladies and Gentlemen, The outbreak of the global financial crisis is already several years behind us. And in spite of this, we are still dealing with its enormous consequences.