Geschäftsbericht 2016 Strategic Action. Developing solutions with competence. A bank provides answers. Annual Report 2016 1 Jan - 1 Jan - Change 31 Dec 2016 31 Dec 2015 (in %) Income Statement (in € million) Net interest income 1 735 1 974 – 12 Loan loss provisions 2 956 698 > 100 Net commission income 219 234 –6 Profit/loss from financial instruments at fair value through profit or loss including hedge accounting 415 280 48 Profit/loss from financial assets 49 72 – 32 Profit/loss from investments accounted for using the equity method – 2 8 > 100 Administrative expenses 1 113 1 114 – Other operating profit/loss –173 –97 78 Earnings before reorganisation and taxes –1 826 659 > 100 Reorganisation expenses –39 –6 > 100 Earnings before taxes – 1 865 653 > 100 Income taxes 94 135 –30 Consolidated net profit –1 959 518 > 100 Key figures in % Cost-Income-Ratio (CIR) 50,7 46,4 9 Return-on-Equity (RoE) – 24,5 8,7 > 100 31 Dec. 2016 31 Dec. 2015 Change (in %) Balance sheet figures in € million Total assets 174 797 180 998 – 3 Customer deposits 57 301 60 597 –5 Customer loans 105 640 107 878 – 2 Equity 6 041 8 513 –29 Regulatory key figures Common equity tier 1 capital (in € million) 6 752 8 320 – 19 Tier 2 capital (in € million) 2 655 2 207 20 Own funds (in € million) 9 777 10 647 – 8 Total risk exposure (in € million) 59 896 63 675 – 6 Common equity tier 1 capital ratio (in %) 11,27 13,07 – 1,8 Total capital ratio (in %) 16,32 16,72 – 0,4 Minor discrepancies may arise in this report in the calculation of totals and percentages due to rounding. Contents 6 Introduction by the Chairman of the Managing Board 8 Introduction by the Chairman of the Supervisory Board 12 Strategic Action. 16 Developing solutions with competence. 24 A bank provides answers. 43 Group Management Report 47 The Group - Basic Information 85 Economic Report 111 Personnel and Sustainability Report 117 Forecast, Opportunities and Risk Report 143 Consolidated Financial Statements 144 Income Statement 145 Statement of Comprehensive Income 146 Balance Sheet 148 Statement of Changes in Equity 150 Cash Flow Statement 153 Notes to the Consolidated Financial Statements 277 Statement and Audit 279 Auditor´s Opinion 281 Responsibility Statement 283 Further Information 284 Country-by-Country-Reporting 287 Forward-looking Statements 288 Facts and Figures 300 Glossary 303 Report of the Supervisory Board 304 Report of the Owners’ Meeting Please find the detailed Corporate Governance Report at www.nordlb.com/legal-information/ legal-notices/corporate-governance/ Who we are and what approx. 240 000 services we provide current accounts in the Braunschweig region As a commercial bank, NORD/LB provides an attractive and comprehen- sive offering of financial services to private, corporate and institutional cus- > tomers as well as to the public sector, in Northern Germany and well beyond 6 400 employees this core region. For example, NORD/LB participates in the structured financing of international projects, particularly in the areas of energy, infra- structure, shipping, aircraft and real estate. Through Braunschweigische Landes sparkasse, NORD/LB operates as a savings bank in the region between the Harz and Heide, Holzminden and Helmstedt. approx. 2400 NORD/LB acts as a Landesbank in the federal states of Lower Saxony and corporate customers Saxony-Anhalt, where it provides support for banking business, and is avail- able to promote the economic development of the region. In Mecklenburg- Western Pomerania and Saxony-Anhalt NORD/LB provides advice to customers about current investment and subsidy programmes. > In its capacity as a central bank for the savings banks, NORD/LB is also a 5 000 properties financed partner for all of the savings banks based in Mecklenburg-Western Pomera- nia, Saxony-Anhalt and Lower Saxony. Moreover, it is also a service provider for savings banks in other federal states such as Schleswig-Holstein. NORD/ LB offers all the services that the savings banks require for their activities. The nationwide and international network within the NORD/LB Group cre- ates ideal solutions for customers of the S-Finance Group. 1 363 ships financed NORD/LB is the parent company that guides all business activities in alignment with strategic objectives, creates synergy effects, bolsters the customer divisions and bundles the service offerings. 612 aircraft financed >70 savings banks in the savings bank network Den ausführlichen Corporate Governance Bericht finden Sie auf www.nordlb.de/rechtliches/ rechtliche-hinweise/ corporate-governance/ Who we are and what approx. 240 000 services we provide current accounts in the Braunschweig region As a commercial bank, NORD/LB provides an attractive and comprehen- sive offering of financial services to private, corporate and institutional cus- > tomers as well as to the public sector, in Northern Germany and well beyond 6 400 employees this core region. For example, NORD/LB participates in the structured financing of international projects, particularly in the areas of energy, infra- structure, shipping, aircraft and real estate. Through Braunschweigische Landes sparkasse, NORD/LB operates as a savings bank in the region between the Harz and Heide, Holzminden and Helmstedt. approx. 2400 NORD/LB acts as a Landesbank in the federal states of Lower Saxony and corporate customers Saxony-Anhalt, where it provides support for banking business, and is avail- able to promote the economic development of the region. In Mecklenburg- Western Pomerania and Saxony-Anhalt NORD/LB provides advice to customers about current investment and subsidy programmes. > Strategic Action. In its capacity as a central bank for the savings banks, NORD/LB is also a 5 000 properties financed Broadly diversified and yet highly specialised: What partner for all of the savings banks based in Mecklenburg-Western Pomera- makes NORD/LB´s business model so special and nia, Saxony-Anhalt and Lower Saxony. Moreover, it is also a service provider for savings banks in other federal states such as Schleswig-Holstein. NORD/ what strategy it will apply in the year 2017 to keep it LB offers all the services that the savings banks require for their activities. on track for profit are explained by the new Chairman The nationwide and international network within the NORD/LB Group cre- of the Managing Board Thomas S. Bürkle. ates ideal solutions for customers of the S-Finance Group. 1 363 ships financed NORD/LB is the parent company that guides all business activities in alignment with strategic objectives, creates synergy effects, bolsters the >Page 12 customer divisions and bundles the service offerings. 612 aircraft financed >70 savings banks in the savings bank network Developing solutions with competence. External factors cannot always be influenced. Though the way in which they´re dealt with can be. We meet challenges – such as those continually posed to us by the shipping sector – with a cool head and circumspect decision-making. >Page 16 A bank provides answers. Digitalisation, low interest rates, international orientation: Dynamic times raise questions – for our customers, business partners and employees. NORD/LB has an ear that´s open to everyone and has many good answers. >Page 24 6 / NORD/LB Annual Report 2016 Introduction by the Chairman of the Managing Board Thomas S. Bürkle Dear reader, Chairman of the Managing Board of NORD/LB, Hanover 2016 was an extremely challenging year for NORD/LB. The global shipping crisis has once again intensified and NORD/LB responded with another massive increase in its risk provisioning. As a result, the Bank has posted a loss for the first time since 2009. It is obvious that a loss of this magnitude is painful. Yet NORD/LB is strong enough to withstand it unaided. One of the biggest tasks for 2017 will be to integrate the Bremer Landesbank into NORD/LB Group. At the same time, there‘s a huge opportunity here. We will use this opportunity to reor- ganise the Group as a whole and make it more efficient. We will continue to develop our busi- ness model and reorganise the structure of business segments within the Group. In so doing, we will tap into synergy potential and optimise and streamline work processes across the Group. All of us at NORD/LB will work on this with full vigour and dedication, as will also be the case for the other challenges we face such as the digitalisation of the financial sector and the tighten- ing of regulatory requirements. I have no doubt that we will succeed in our endeavour. We have already made great progress on scaling back the shipping portfolio, and we will continue in this vein in 2017. / 7 „We will continue to develop our business model and reorganise the structure of business seg- ments within the Group.“ What is often overlooked: NORD/LB consists of much more than ship finance. It has considerable profitability. All our business segments outside ship finance are profitable, despite pressure on margins and low interest rates. In the past year, we have again been able to realise many success- ful and innovative finance operations for our customers, for instance in the fields of renewable energy, aircraft finance, infrastructure projects, for commercial real estate and in agricultural banking as well as in all other sectors for our Mittelstand corporate clients. For this, we must not only thank the knowledge and commitment of our employees, but also the trust placed in us by our customers, investors and owners. For this trust, I would like to express my heartfelt thanks. I look forward to continuing this excellent collaboration as partners in future. Kind regards, Thomas S. Bürkle Chairman of the Managing Board of NORD/LB Norddeutsche Landesbank 8 / NORD/LB Annual Report 2016 Introduction by the Chairman of the Supervisory Board Peter-Jürgen Schneider Dear reader, Minister of Finance, State of Lower Saxony, and Chairman of the Supervisory Board of A solution isn‘t really worth much if it only solves one problem.