Annual Report 1999

LB Kiel Landesbank Schleswig-Holstein Girozentrale LB Kiel Annual Report 1999 LB Kiel Landesbank Schleswig-Holstein Girozentrale Annual Report 1999 Helsinki Oslo Tallinn Stockholm Copenhagen Kiel Lübeck Rostock Hamburg Schwerin London Berlin Dresden Luxembourg Contents 2 LB Kiel at a Glance 5 Preface of the Managing Board 8 Report of the Supervisory Board 9 Report of the Guarantors’ Meeting 10 Statement of Condition and Group Statement of Condition 1999 36 Our Staff 40 Activities Beyond the Banking Sphere 43 Annual Accounts for 1999 44 Balance Sheet 48 Statement of Income 50 Group Balance Sheet 54 Group Statement of Income 56 Notes to the Annual Accounts and Group Annual Accounts 56 Notes to the Annual Accounts and Group Annual Accounts 75 Executive Bodies 79 Auditor’s Certificate 80 Organizational Structure 84 Addresses The photographs in this Annual Report show staff members from different LB Kiel departments and teams. 1 Inhalt LB Kiel at a Glance Foundation Tasks 1917 established as the state bank of the province of Commercial Bank: LB Kiel is a universal bank offering a Schleswig-Holstein full range of traditional and innovative products 1940 merger with Girozentrale Schleswig-Holstein Central Clearing Bank: LB Kiel is the central clearing in- Legal Form stitution for the savings banks of Schleswig-Holstein, pro- Institution under public law viding them with supplementary group services. Landes- Bausparkasse (LBS) is an important member of the Group, Owners and Guarantors which complements the product range together with its - the State of Schleswig-Holstein 25.05 % field staff and its subsidiary, LBS Immobilien GmbH. - the Savings Banks and Giro Association of Schleswig-Holstein 25.05 % State Bank: LB Kiel grants loans to public bodies and is - Westdeutsche Landesbank Girozentrale (WestLB) 39.9% involved in issuing and placing state bonds and Schuld- - Landesbank Baden-Württemberg 10.0 % scheindarlehen; it supports the State of Schleswig-Holstein in performing economic and structural tasks through Governmental Control Investitionsbank Schleswig-Holstein (a legally dependent Ministry of Economic Affairs, Technology and Transport division of LB Kiel). of the State of Schleswig-Holstein Headquarters Executive Bodies Kiel - Guarantors’ Meeting - Supervisory Board Branches - Managing Board Domestic: Lübeck, Rostock, Schwerin Foreign: Copenhagen, Luxembourg Representative Offices Domestic: Berlin, Hamburg Foreign: Helsinki, London, Oslo, Stockholm, Tallinn Real Estate Finance Office Dresden Member of - German Savings Banks and Giro Association, Bonn - Federal Association of German Public Banks, Bonn Major Equity Holdings - Landesbank Schleswig-Holstein International S.A., Luxembourg (100 %) - Gudme Raaschou Bankaktieselskab, Copenhagen (100 %) - Hamburgische Landesbank (49.5 %) Ratings Moody’s: short-term P-1, long-term Aa1 Standard & Poor’s: short-term A-1+ Fitch IBCA: short-term F1+, long-term AAA 2 LB Kiel at a Glance Balance Sheet (Group) in € billion 120 100 Financial Highlights of the LB Kiel Group 1) 80 Business volume 128.0 € billion Total assets 115.1 € billion 60 Credit volume 125.9 € billion 40 Claims on banks 28.9 € billion customers 52.7 € billion 20 Securities 30.1 € billion 0 1995 1996 1997 1998 1999 Liabilities to € banks 48.8 billion Operating profit € customers 22.6 billion before risk provisions (Group) in € million Certificated liabilities 34.0 € billion 500 Liable capital funds 5.2 € billion 400 Principle 1 ratio (German Banking Law) 300 Total capital 10.2 % Core capital 5.6 % 200 Net interest income 704.1 € million 100 Net commission income 100.3 € million Trading operations 24.3 € million Personnel expenses 203.8 € million 0 1995 1996 1997 1998 1999 Operating expenses 175.2 € million Operating profit before risk provisions 429.6 € million Operating profit 251.4 € million Liable capital funds (Group) in € billion 6 Employees 1) 2,264 5 1) excluding Hamburgische Landesbank (HLB) 4 3 2 1 0 1995 1996 1997 1998 1999 since 1997 including HLB 3 LB Kiel at a Glance 4 Preface Preface of the Managing Board Dear Business Partners, 1999 was yet another successful fiscal year for LB Kiel, which is not least shown by the new record results reported for 1999. We are particularly pleased about the fact that earnings increased more strongly than volumes. In FY 1999, we consolidated and expanded our market position in nearly all core business segments through – in some cases strong – portfolio gains while at the same time remaining true to our conservative risk policy. No extra- ordinary loan losses occurred. The conservative approach to risk provisioning remained unchanged. The good earnings for the year mean we will again be able to pay out a net dividend of 7 % to our shareholders while increasing reserves significantly at the same time. Structural change in the European banking sector continued against the back- ground of noticeably improved economic prospects. Two external developments took on more concrete forms in 1999 and exposed us to additional challenges: the EU Commission’s decision regarding WestLB as well as the discussion about a review of the capital adequacy requirements. With regard to the calculation of the remuneration for the liable capital of the Wfa assets integrated into WestLB, the EU Commission decided on July 8, 1999 that the remuneration paid in the past was not in line with the market. WestLB, the federal government and the North Rhine-Westphalian government have lodged a complaint against this decision; the proceedings are ongoing. LB Kiel, too, considers the decision to be inappropriate in legal and economic terms. Nevertheless, we have to prepare for the EU Commission taking a similar decision regarding the liable capital remuneration to be paid by Landesbank Schleswig-Holstein. In June 1999, the Basle Committee on Banking Supervision presented proposals for a “new capital adequacy framework”. While these proposals are still being discussed, we expect tougher capital adequacy requirements to be imposed. Both developments discussed above will force us to use our capital even more efficiently and manage our risks even more effectively. Also, it will be ever more important to further strengthen our Bank’s profitability and, hence, profit reten- tion ability in order to expand our capital base through increased reserves. In order to fulfil the regulatory requirements and use the capital market as an additional source of capital, we will further refine the management of all risks related to our business activities and make the risk management system more transparent. For this purpose, we have initiated a project on “Overall Bank Con- trolling” and “Risk Management”. 5 Preface With regard to its business policy, LB Kiel has responded by focusing on its core competencies and imposing strict return criteria for its strategic business segments. Our objective is to achieve qualitative growth in these segments and hence to further strengthen the Bank’s profitability. In the context of setting the strategic course for the future, we have also star- ted to redesign our operational processes with a strict view to service orientation and cost containment, to spin them off where necessary and to merge them with our partners’ processes in order to achieve economies of scale. The measures initiated mean we have created the basis for a continued successful operation in an increasingly competitive environment. The ongoing review of our strategic orientation and the controlling concepts will remain a task to which we will devote our full attention in the interests of our business partners, our employees and our shareholders. LB Kiel The Managing Board Dr. Dietrich Rümker Hans Berger Peter Pahlke Dieter Pfisterer Ernst Schröder 6 Preface The Managing Board (from the left): Dieter Pfisterer Hans Berger Dr. Dietrich Rümker Peter Pahlke Ernst Schröder 7 Preface Report of the Supervisory Board The Supervisory Board and its committees were regularly informed about the business development and the situation of the Bank and the Group during the report year. They supervised the Managing Board’s conduct of business in accordance with the legal and statutory regulations and decided on matters requiring their approval which were submitted to them. Wollert-Elmendorff Deutsche IndustrieTreuhand GmbH (WEDIT) Wirtschafts- prüfungsgesellschaft audited the annual accounts of the Bank and of the Group, as well as the statement of financial condition for the 1999 business year. The annual accounts comply with the legal requirements. The statement of financial condition is consistent with the annual accounts. The certificate of audit was given without qualifications. The Supervisory Board and the Audit Committee composed of its members have comprehensively reviewed the official auditor’s report and conclusions and have no objections. The Supervisory Board and the Audit Committee have also reviewed the annual accounts and statement of financial condition drawn up by the Managing Board. No objections have been raised. The Guarantors’ Meeting was recommended to approve the annual accounts and statement of financial condition drawn up by the Managing Board. The Supervisory Board approved the proposal of the Managing Board on the distribution of profit to the shareholders. The Supervisory Board has taken cognizance of the Group annual accounts. The Supervisory Board herewith expresses its thanks to the Managing Board and the employees of the Bank for their efforts in the 1999 business year. Kiel, June 14, 2000 The Supervisory

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