Annual Report 2012 OUR PROXIMITY YOUR STRENGTH Close to people. Straight to the point. A bank anchored in its region. KEY FIGURES 1 Jan. – 1 Jan. – Change 31 Dec. 2012 31 Dec. 2011 1) (in %) Income statement – in € million Net interest income 1 957 1 762 11 Loan loss provisions – 598 – 197 > 100 Net commission income 168 166 1 Profit /loss from financial instruments at fair value through profit or loss including hedge accounting – 122 69 > 100 Profit /loss from financial assets – 5 – 48 – 90 Profit /loss from investments accounted for using the equity method – 14 – – Administrative expenses 1 158 1091 6 Other operating profit /loss – 99 69 > 100 Earnings before reorganisation and taxes 129 730 – 82 Reorganisation expenses – 34 – – Expenses for Public Guarantees related to Reorganisation – 19 – – Earnings before taxes 76 730 – 90 Income taxes – 4 194 > 100 Consolidated profit 80 536 – 85 Key figures in % Cost-Income-Ratio (CIR) 61.2 52.8 Return-on-Equity (RoE) 1.0 11.1 31 Dec. 2012 31 Dec. 2011 1) Change (in %) Balance sheet – in € million Total assets 225 550 227 633 – 1 Customer deposits 55 951 60 645 – 8 Customer loans 114 577 114 652 – Equity 7 700 6 546 18 Regulatory key figures Core capital for solvency reasons in € million 8 451 8 005 6 Regulatory equity in € million 10 776 10 727 – Risk-weighted assets in € million 77 863 84 800 – 8 Total capital ratio in % 13.84 12.65 Core capital ratio in % 10.85 9.44 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 10 January 2013 Fitch Ratings A/F1/bbb– 31 January 2013 Total differences are rounding differences and may cause minor deviations in the calculation of percentages. You can find the detailed Corporate Governance Report CONTENTS at www.nordlb.com/ legal-notices/corporate- governance/ or directly from the QR code opposite. 2 Management 2 Extended Group Managing Board 3 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 Strengthening of Equity at NORD/LB 10 Partners in the Association 12 Highlights of 2012 14 Our Proximity / Your Strength 14 Our Nature 20 Our Basis 26 Our Flight Level 32 Our Drive 38 Our Conviction 59 Group Management Report 60 Business Activities and the General Environment 70 Earnings, Assets and Financial Position 76 Development of the Business Segments 93 Summary 94 Personnel Report 94 Supplementary Report 95 Forecasts and Other Information on Anticipated Developments 111 Risk Report 153 Consolidated Financial Statements 154 Contents 156 Income Statement 157 Statement of Comprehensive Income 158 Balance Sheet 160 Statement of Changes in Equity 162 Cash Flow Statement 164 Notes to the Consolidated Financial Statements 186 Segment Reporting 253 Statements Relating to the Future 255 Other Information 256 Responsibility Statement 257 Auditor‘s Report 258 Facts and Data 264 Glossary 266 Notes directory 267 Imprint and Financial Calendar WHO WE ARE AND WHAT SERVICES WE PROVIDE As a commercial bank, NORD/LB offers a 7 000 employees comprehensive range of attractive financial ser- vices to private, commercial and institutional customers and the public sector in Northern Germany and well beyond this core region. It is involved in structured financing for inter- national projects – particularly in the areas of 750 energy, infrastructure, ships, aircraft and real aircraft financed estate. Together with the services provided by Braunschweigische Landessparkasse, NORD/LB thus offers private and commercial customers the best of two worlds. In the federal states of Lower Saxony and 3 700 middle-market corporate customers Saxony-Anhalt, NORD/LB acts as a Landes- bank, supporting the states in their banking business and remaining available to them in regional economic development. It also advises customers in Mecklenburg-Western Pomerania and Saxony-Anhalt on current investment and development programmes. 5 000 properties financed In Mecklenburg-Western Pomerania, Saxony- Anhalt and Lower Saxony, NORD/LB is also a partner to all savings banks in its role as the central savings bank. In addition, it acts as a service provider to other savings banks, 5 400 for example, in Schleswig-Holstein. wind turbines financed As a clearing bank (Girozentrale), NORD/LB offers all the services that savings banks require for their activities. The NORD/LB Group’s national and international networks enable optimum solutions to be created for customers 1 850 ships financed in the savings bank financial group. The NORD/LB Group encompasses all of these areas. It acts as the parent company, managing all parts of the Group in accordance with strategic goals, generating synergies, >100 strengthening customer divisions and pooling sites in the Braunschweig area services. OUR PROXIMITY YOUR STRENGTH CLOSE TO PEOPLE. STRAIGHT TO THE POINT. A BANK ANCHORED IN ITS REGION. If you want to get close, you need to be able to watch and listen carefully. Closeness requires trust. It is the basis of every well-functioning partnership. Our focus in the region is therefore on our local customers. Here in the heart of Northern Germany, we are close – even if you want to go abroad. With our international branches and partners, a direct connection is always ensured. Rooted in the region but part of a worldwide network.That’s what makes us and our customers strong. Knowing you have a reliable partner by your side gives you the courage you need for innovation and the strength for outstanding achievements.That’s how our proximity is your strength – for optimum management of future challenges. OUR PROXIMITY YOUR STRENGTH MANAGEMENT OUR PROXIMITY / YOUR STRENGTH Exteneded Group Managing Board Introduction by the Chairman of the Managing Board Left to right: Dr. Johannes-Jörg Riegler, Thomas S. Bürkle, Eckhard Forst, Ulrike Brouzi, Dr. Hinrich Holm, Harry Rosenbaum, Christoph Schulz, Dr. Stephan-Andreas Kaulvers, Dr. Gunter Dunkel EXTENEDED GROUP MANAGING BOARD DR. GUNTER DUNKEL THOMAS S. BÜRKLE DR. STEPHAN-ANDREAS KAULVERS Born 1953 Born 1956 Born 1956 Chairman of the Managing Board (CEO); Chairman of the Managing Board Chairman of the Managing Board Managing Board Office/Legal/Investments, of Deutsche Hypo of Bremer Landesbank Human Resources, Auditing, Corporate Communications and Strategy ECKHARD FORST HARRY ROSENBAUM Development Born 1959 Born 1958 DR. JOHANNES-JÖRG RIEGLER Corporate Customer Business including Chairman of the Managing Board Housing and Agricultural Banking, of NORD/LB Luxembourg S.A. Born 1964 Commercial Real Estate Finance, Ship and Chief Risk Officer (CRO); Aircraft Financing, Corporate Finance, CHRISTOPH SCHULZ Financial and Risk Control, Credit Risk Structured Finance and Corporate Sales Management, Central Risk Management, Born 1960 Special Credit Management, Research/ DR. HINRICH HOLM Private and Commercial Customers; Economy and Relationship with the Chairman of the Managing Board Savings Bank Network Born 1965 of Braunschweigische Landessparkasse Treasury, Markets, Bank Assets Allocation, ULRIKE BROUZI Investitionsbank Sachsen-Anhalt and relationship with Saxony-Anhalt and Born 1965 foreign branches You can get more informa- Chief Financial Officer (CFO), tion from our homepage Chief Operations Officer (COO); Finance/ www.nordlb.com/investor- Tax, Organisation and IT, Corporate relations/committees-and- Services, Group Security, Compliance, executive-bodies/ or directly Landesförderinstitut and Relationship from the QR code opposite. 2 with Mecklenburg-Western Pomerania GROUP MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS OTHER INFORMATION INTRODUCTION by the Chairman of the Managing Board 2012 was a year of challenges. As the situation in the global economy remained tense, it was once again necessary to demonstrate good crisis management. NORD/LB has a special way of not only keeping itself afloat when faced with strong headwinds, but of actually progressing. This is thanks to our traditionally conservative and calm business philosophy. What was once regarded in the sector as a little boring is proving to be a recipe for success in these economically turbulent times. High levels of national debt in many euro countries, stagnation or even a recession in the global economy, the ongoing shipping crisis – the list of difficult general conditions in banking business is long. This is compounded by the stricter requirements imposed on banks by Basel III, such as the strengthening of equity and higher demands in terms of risk and liquidity control. NORD/LB has coped well with these challenges and is now more stable than ever before. I would like to particularly emphasise the extraordinary achievement of our employees, whose expertise and commitment guarantees us the strong position we are in today. I would like to sincerely thank our outstanding team and encourage it to continue on this path together. NORD/LB launched a comprehensive capital-boosting programme in 2011 and 2012, thereby responding to tightened equity requirements. The European Commission has approved the capital measures involved, including a guarantee that can now be provided by NORD/LB’s owners, Lower Saxony and Saxony-Anhalt, if general conditions worsen significantly. As part of this, NORD/LB has agreed with the European Commission on a catalogue of binding measures that are in line with NORD/LB’s established business model and strategy. In operational terms, we have performed very well this year, not least thanks to long-term trusting collaboration with our customers. Our expertise allows us to offer them solutions that deserve to be called “bespoke”. Our regional proximity repeatedly proves to be a major competitive advantage here. For this reason, we have given this annual report the title “Our proximity – your strength”. We have compiled a small selection of real-life examples on the following pages. 2012 was also a successful year for project financing.