2011 Annual Report and Accounts Facts | Figures BAYERNLB | 2011 ANNUAL REPORT AND ACCOUNTS CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements Bayerische Landesbank Brienner Strasse 18 80333 Munich Germany www.bayernlb.de Sparkassen-Finanzgruppe in Bavaria Sparkassen-Finanzgruppe Market leader in Bavaria • Aggregate total assets (bank business): EUR 488 billion • Aggregate regulatory capital (excl. BayernLB): EUR 16.2 billion • Aggregate premium volume (insurance business): EUR 6.6 billion • Staff: Approx. 63,000 BayernLB 72 savings banks Versicherungskammer Bayern Consolidated total assets: Total assets: EUR 175 billion Premium volume: EUR 6.6 billion EUR 309.1 billion Staff: 45,394 Staff: 8.507* Staff: • Branches: 2,437 Investment portfolio: EUR 38.6 billion Bank: 4,034 • Self-service branches: 350 Group: 10,893 • Advisory centres: 467 Germany’s largest public-sector insurance provider Customer loans: EUR 105 billion Customer deposits: EUR 135 billion Market leader in Bavaria and the Palatinate Market share • Approx. 40 % of SMEs Entities within the Bayerische Landesbausparkasse • Two-thirds of trade businesses Versicherungskammer Bayern Group • 50 % of company start-ups (VKB) Portfolio of 2.1 million home loan savings contracts with a volume of Sparkassen-Immobilien • Composite insurers EUR 60.2 billion Vermittlungs GmbH & Co. KG • Life insurers Volume of business brokered: • Health insurers EUR 1.85 billion • Re-insurers Bayerische Landesbodenkreditanstalt DekaBank Lending volume (proprietary and Share of Bavarian savings banks fiduciary business): EUR 21.3 billion organisation: 14.7 % State subsidised business (number of Consolidated total assets: apartments and residences): 10,583 EUR 132 billion** BayernLB Group companies include Landesbank Berlin • Deutsche Kreditbank AG, Berlin Share of Bavarian savings bank • Banque LBLux S. A., Luxembourg organisation incl. VKB share: 13.6 % • MKB Bank Zrt, Budapest as well as many other subsidiaries which Deutsche Leasing offer special services to savings banks Share of Bavarian savings banks: 12.49 % New business volume: EUR 7.9 billion Sparkassenverband Bayern Association members: 72 Bavarian savings banks and their owners * incl. external sales force ** As at: 30 Sep 2011 BayernLB · 2011 Annual Report and Accounts BayernLB · 2011 Annual Report and Accounts ›› BayernLB Group at a glance 1 BayernLB Group at a glance Income statement (IFRS) EUR million 1 Jan – 31 Dec 2011 1 Jan – 31 Dec 2010 Change in % Net interest income 1,963 1,942 1.1 Risk provisions in the credit business – 548 – 696 – 21.2 Net interest income after risk provisions 1,415 1,246 13.6 Net commission income 262 265 – 1.0 Gains or losses on fair value measurement 341 1,043 – 67.3 Gains or losses on hedge accounting 106 53 > 100 Gains or losses on financial investments – 162 – 294 – 44.8 Income from interests in companies – 44 – 38 15.4 valued at equity Administrative expenses – 1,456 – 1,462 – 0.4 Expenses for bank levies – 74 – 51 46.0 Other income and expenses – 37 1 – Gains or losses on restructuring – 16 124 – Earnings before taxes 334 885 – 62.2 Balance sheet (IFRS) EUR million 31 Dec 2011 31 Dec 2010 Change in % Total assets 309,144 316,354 – 2.3 Business volume 358,536 371,597 – 3.5 Credit volume 220,729 231,207 – 4.5 Total deposits 168,398 174,905 – 3.7 Securitised liabilities 74,075 79,468 – 6.8 Subordinated capital 6,964 7,727 – 9.9 Equity 14,211 13,911 2.2 Banking supervisory ratios under the German Banking Act (KWG) EUR billion 31 Dec 2011 31 Dec 2010 Change in % Core capital 13.5 13.9 – 2.8 Own funds 18.4 19.2 – 3.9 Risk positions under the Solvency Ordinance 118.4 123.9 – 4.4 Core capital ratio 11.4 % 11.2 % 0.2 Pp1 Own funds ratio (overall ratio) 15.6 % 15.5 % 0.1 Pp1 Employees 31 Dec 2011 31 Dec 2010 Change in % Number of employees 10,893 10,853 0.4 Current ratings Long-term Short-term Pfandbriefs2 Fitch Ratings A+ F1+ AAA Moody’s Investors Service Baa1 Prime-2 Aaa 1 Percentage points 2 Applies to public-sector Pfandbriefs and mortgage Pfandbriefs BayernLB . 2011 Annual Report and Accounts ›› 2 Contents BayernLB . 2011 Annual Report and Accounts ›› Contents 3 4 Board of Management and Board of Administration 6 Foreword by the Board of Management 12 Report by the Board of Administration 18 Taking responsibility 20 What we are about. What we stand for. 24 Looking beyond your own four walls 28 Hot, hotter, geothermal 32 Partnerships that change the world 36 An enviably green environment 38 Forging partnerships 40 Corporates & Mittelstand 50 Deutsche Kreditbank AG 54 Banque LBLux 56 Savings Banks 62 Real Estate 66 Public Sector 70 Bayerische Landesbodenkreditanstalt 72 LBS Bayerische Landesbausparkasse 74 Markets 78 Mini guide to Bavaria 80 BayernLB Group management report 82 Overview 94 Business performance in 2011 108 Events after the end of the reporting period 109 Outlook 112 Risk report 154 BayernLB Group’s consolidated financial statements 156 Statement of comprehensive income 158 Balance sheet 160 Statement of changes in equity 162 Cash flow statement 164 Notes 257 Responsibility statement by the Board of Management 258 Auditor’s report 260 Committees and advisory boards 262 General Meeting 263 Board of Administration 264 Audit Committee 264 Risk Committee 265 Trustees 265 Savings Bank Advisory Council 266 Economic Advisory Council 270 Locations and addresses BayernLB . 2011 Annual Report and Accounts ›› 4 Board of Management and Board of Administration BayernLB . 2011 Annual Report and Accounts ›› Board of Management and Board of Administration 5 6 Foreword by the Board of Management 12 Report by the Board of Administration BayernLB . 2011 Annual Report and Accounts ›› 6 Foreword by the Board of Management Ladies and Gentlemen, dear customers and friends, Financial year 2011 was a year replete with contrasts for BayernLB. The Bank had a good year in its core business areas which generated earnings before taxes for the Group of more than EUR 800 million. But several instances of government interference had a negative impact on non-core business areas in particular and undid much of the good work. As a result the non-core business areas reported losses before taxes of EUR 470 million and the BayernLB Group posted overall earnings before taxes of EUR 334 million. As forecast a year ago, this fell far short of the unusually high earnings for the previous year, which were boosted by a string of one-off factors. The stability of the new BayernLB’s core business in the volatile market environment of 2011 could be seen especially in the net interest income, which rose slightly once more from an already high level to EUR 1.96 billion, and net commission income of EUR 262 million, which was largely unchanged. All BayernLB’s customer business areas made a positive contribution to this performance, for example, by steadily expanding the customer base by more than 230 new Mittelstand companies and by producing earnings in the savings banks customer segment that were significantly higher than forecast. The Board of Management also pressed ahead with the fundamental realignment of BayernLB to transform it into a purely customer bank. The goal is unchanged: to become a markedly smaller and leaner corporate and real estate financier, as well as a reliable partner to the savings banks. Evidence of the strong regional focus on Bavaria and Germany can be seen in the further winding down of the foreign business. As planned, lending to banks fell by 20 percent to below EUR 50 billion. Loans to foreign banks decreased even faster by nearly 25 percent. Lending to savings banks rose slightly to more than EUR 16 billion. Loans to foreign customers fell by 8.9 percent to just under EUR 42 billion, while lending to domestic customers climbed by 5.7 percent to EUR 116 billion. Non-core activities were divested from the portfolio in the Restructuring Unit more quickly than planned. Since it was established just two-and-a-half BayernLB . 2011 Annual Report and Accounts ›› Board of Management and Board of Administration Foreword by the Board of Management 7 years ago, the portfolio has been reduced in size by around EUR 40 billion or 60 percent to EUR 27 billion on an adjusted basis. The Board of Management has also vigorously driven the process forward in the subsidiaries affected. Despite the satisfactory progress in creating a sustainably profitable BayernLB, certain external factors weighed heavily on the Bank’s earnings. Chief among them was government interference in Hungary. This pushed the Hungarian subsidiary MKB deeply into the red and even forced BayernLB to report a loss for the year in its accounts under German accounting standards in contrast to the consolidated accounts prepared under IFRS. The Foreign Currency Loan Repayment law, implemented without warning by the Hungarian government in autumn 2011, was a major factor in the net loss for the year of EUR 392 million at our Hungarian subsidiary MKB. The losses resulting from the law have also significantly muddied the medium and long-term outlook for MKB. The impact of this, coupled with the ongoing bleak economic prospects for south-eastern Europe, forced BayernLB to write down its stake in MKB by EUR -576 million in its accounts under German accounting standards, which in turn led to a loss for the year of EUR -328 million under German accounting standards. BayernLB faced additional external charges in the form of bank levies, which weighed on the Group’s earnings to the tune of EUR 74 million. Earnings were also driven down by BayernLB’s contribution to the restructuring of WestLB via the Landesbank cross-guarantee fund which resulted in provisions of EUR 62 million. The sovereign debt crisis also weighed significantly on the BayernLB Group, though the impact of this was limited as its overall exposure to bonds from the peripheral eurozone countries was moderate.