Die norddeutsche Art. Navigating NORTH Annual Report 2010 NORD / LB Annual Report 2010 These are our Þ gures 1 Jan.–31 Dec. 1 Jan.–31 Dec. Change 2010 2009 (in %) Figures in € million Net interest income 1 650 1 380 20 Loan loss provisions – 657 – 1 045 – 37 Net commission income 210 177 19 ProÞ t/loss from Þ nancial instruments at fair value through proÞ t or loss including hedge accounting 101 582 – 83 Other operating proÞ t/loss 48 144 – 67 Administrative expenses 1 070 986 9 ProÞ t/loss from Þ nancial assets 82 – 140 > 100 ProÞ t/loss from investments accounted – 128 – 200 36 for using the equity method Earnings before taxes 236 – 88 > 100 Income taxes – 50 – 100 Consolidated proÞ t 236 – 138 > 100 Key Þ gures in % Cost-Income-Ratio (CIR) 56.9 47.3 Return on Equity (RoE) 3.8 – 2.6 31 Dec. 31 Dec. Change 2010 2009 (in %) Balance Þ gures in € million Total assets 228 586 238 600 – 4 Customer deposits 60 742 61 303 – 1 Customer loans 113 605 112 083 1 Equity 5 890 5 798 2 Regulatory key Þ gures (acc. to BIZ) Core capital in € million 7 945 8 051 – 1 Regulatory equity in € million 9 605 8 976 7 Risk-weighted assets in € million 86 850 92 575 – 6 BIZ total capital ratio in % 11.1 9.7 14 BIZ core capital ratio in % 9.1 8.7 5 NORD/LB ratings (long-term / short-term / individual) Moody’s Aa2 / P-1 / C – Fitch Ratings A / F1 / C / D Die norddeutsche Art. NORD / LB Geschäftsbericht 2010 Our roles and responsibilities Commercial bank As a commercial bank with a clear focus on our core region of North Germany, we offer our private, corporate and institutional customers, as well as customers from the public sector, an extensive range of Þ nancial services. In the area of special Þ nancing, we Þ nance international projects in selected locations in the Þ elds of energy, infrastructure, manufactoring industry and commercial real estates, whereas we are active on a global scale in ship and aircraft Þ nancing. We are represented worldwide by our branches and representative ofÞ ces in all of the major trading centres, such as London, Moscow, Mumbai, New York, Beijing, Shanghai and Singapore. Landesbank As a Landesbank (federal state bank) we support the states of Lower Saxony and Saxony-Anhalt, which hold legal and economic responsibility for the bank, in their banking business and in their efforts to promote economic development in the region. Within the context of our holdings in the Landesförder- institut (State Institute for the Advancement of the Economy) of Mecklenburg-Western Pomerania and in the investment bank of Saxony-Anhalt, we also provide Þ nancial advice to their respective federal state governments. Central savings bank As a central savings bank, we are partners with the savings banks in the federal states of Lower Saxony, Saxony-Anhalt and Mecklenburg-Western Pomerania. In addition, we also offer individual services to other savings banks, e.g. to savings banks in Schleswig-Holstein. In connection with the savings banks, we offer optimal solutions to the customers of the S-Þ nancial group (savings banks Þ nancial group) with the support of the national and international network of NORD/LB Group. Furthermore, as a giro centre we can provide all of the services that are important to the savings banks we look after. Parent company As the parent company of the NORD/LB Group, we steer the entire group in accordance with our common business strategies and consolidate service functions in the areas of Þ nancial markets, Þ nances, risk management and organisation/IT. In so doing, we take care of reducing redundancies and strengthen- ing our customer areas. Our subsidiaries and holdings NORD/LB’s strategic subsidiaries and holdings are a material part of our business model. All business segments are managed in close cooperation throughout the Group. Our business areas We are an universal bank with a strong focus on our customers. Our business activities are focused on these regions where the headquarters of the bank and its subsidiaries are: in Northern Germany. Luxem- bourg has an outstanding role in the bank’s funding strategy. Business areas Die norddeutsche Art. Navigating NORTH Annual Report 2010 Contents page 3 Foreword 4 History 2010 6 The mainstays of NORD/LB 8 This is the NORD/LB Group NORD/LB 10 Private and Commercial Customers 14 Savings Bank Network 18 Financial Markets / Institutional Customers 22 Corporate Customers 26 Energy and Infrastructure Customers Substainability 30 Ship and Aircraft Customers 34 Real Estate Customers 38 Navigation Our 2010 Sustainability proÞ le 40 Sustainable Management Group Management Report Group 44 Living our values • Acting sustainably • Shaping the future 74 Explanation of the Corporate Governance Code 79 Group Management Report 167 Consolidated Financial Statements Financial Statements Consolidated 285 Reports 289 Data / Glossary Reports Data/Glossary 2 NORD/LB Annual Report 2010 Erweiterter Konzernvorstand (extended Group Managing Board) left to right: Dr. Johannes-Jörg Riegler, Harry Rosenbaum, Ulrike Brouzi (Chief representative for NORD/LB‘s capital market business), Christoph Schulz, Dr. Gunter Dunkel, Dr. Stephan-Andreas Kaulvers, Dr. Jürgen Allerkamp, Dr. Hinrich Holm, Eckhard Forst 3 In this Annual Report, we will sum up what we have achieved during the 2010 Þ nancial year – a year in which the shockwaves of the global economic and Þ nancial crisis could still be felt, but which was also characterised by the Þ rst signs of recovery in a number of markets. For a bank such as NORD/LB, 2010 was a year that provided us with much greater scope for innovation, which in turn caused our proÞ ts to rise. As a result of the combined commitment and professional skills of some 6 000 employees within the NORD/LB NORD/LB Group, our efforts to provide the very best service to our customers and our passion for our business, NORD/LB successfully remained on course throughout the entire duration of the economic crisis. We did not need to avail ourselves of any capital assistance and did not need to shelter ourselves from risk under the skirts of another organisation. Our customer-oriented business model and our conserva- tive risk policy proved their worth, even in such exceptional circumstances. The fact that this is right is due in no small measure to the mainstay provided by our guarantors, our association with the savings banks and the fact that our feet are still Þ rmly planted in the geographical area of Northern Germany. Substainability 2010 was a good year for the German economy. As a provider of Þ nance and advice, we were only too pleased to share in the optimism of our customers. In terms of our business operations, we made good progress. Our interest and commission income increased by a considerable margin, whilst we were also able to achieve a signiÞ cant reduction in our risk provisions. It is not a case of sitting back and relaxing and that is not what we wish to do. In the aftermath of the Þ nancial crisis, the banking supervisory authorities and the capital markets are now imposing signiÞ cantly more stringent requirements upon the banks, one example of this being Basel III, and it is in this area Management Report Group that we will encounter one of the challenges that we will need to face in the immediate term, as well as during the years to come. One of the key aspects in this regard will be to strengthen our “core capital”. This will be achieved by means of capital conversion and proÞ t retention, supported by responsible control of our risk assets, by limiting our expenditure and further developing our business model with the aim of further reinforcing our corporate proÞ tability. Together with our guarantors, we will face up to these challenges, without in any way limiting the level of service we provide, or our ability to serve the needs of our customers. Consolidated Financial Statements Consolidated Let us now roll up our sleeves and set our sails as we, our customers, owners and business partners steer towards a successful 2011! Yours sincerely, Dr. Gunter Dunkel Reports Data/Glossary 4 NORD/LB Annual Report 2010 Timeline 2010 January February March April May June 11 January 2010 12 May 2010 11 June 2010 Dr. Hinrich Holm joins the Managing Yet another award for its activities as NORD/LB commended as Board of NORD/LB an account manager for foundations a family-friendly employer Dr. Hinrich Holm joined the Management Board – NORD/LB and Landessparkasse once The NORD/LB and the Braunschweigische of NORD/LB Norddeutsche Landesbank on again top the list – quality of the Landessparkasse were received an award for 1 February 2010. He assumed responsibility highest level being an employer with a family-conscious for a number of areas of NORD/LB, includ- In the “Fuchsbriefe” test looking into asset personnel policy. At a ceremony held in Berlin, ing Finance, Organisation / IT and Corporate management for foundations, the Private the bank received a certificate from the “audit Services and will also be responsible for our Banking section of NORD/LB and the Braun- berufundfamilie”, which is an initiative of the business territory of Saxony-Anhalt. schweigische Landessparkasse once again not-for-profit Hertie Foundation. achieved excellent results, and their quality Family-friendly conditions of employment and 02 February 2010 was recognised as being of the very high- a family-conscious corporate culture provide NORD/LB divests itself of shares in est level. The “Fuchsbriefe” are the leading NORD/LB’s employees with greater room to Berenberg Bank benchmarking tool in the private banking manoeuvre and the ability to reconcile work NORD/LB intends to divest itself of its domain.