DVB Bank Group | Quarterly Statement – Three-Month Results 2016 • On another positive note, in spite of continued high expenses incurred with regulatory-driven projects, the Bank managed to keep general administrative expenses at €46.2 million (Q1 2015: €44.8 million).
• In line with DVB’s projections, allowance for credit losses increased from €13.4 million to €36.3 million. The increase was largely required for legacy exposures in the Shipping Finance portfolio, and for financings in the Offshore Finance portfolio, which is burdened by the slump in oil prices. • The first quarter of 2015 included substantial non-recurring
income from the sale of investment securities, due to the partial disposal of the stake in Wizz Air Holdings Plc. This one-off effect, which was generated in the Bank’s Aviation Investment Management activities, did not materialise during the reporting period 2016.
• Full-year charges of €8.5 million needed to be recognised in income already at the beginning of the year – comprising expected bank levy charges of €3.7 million as well as €4.8 million in expenses for the Deposit Guarantee Scheme of the National Association of German Cooperative Banks (BVR).
DVB posts reasonable consolidated net income before
taxes for the first quarter of 2016
During the first three months of 2016, DVB generated reasonable consolidated net income before taxes of €25.9 million (Q1 2015: €84.3 million). In a challenging environment – in geopolitical, macroeconomic and industry-specific terms – the Bank’s business model once again proved resilient. DVB’s clear focus on financing transportation assets has paid off, especially during these testing times.
DVB’s results were largely shaped by the following components: • DVB originated 27 new transactions in its core Transport
Finance business, with an aggregate volume of €1.2 billion (Q1 2015: 51 new transactions with a total volume of €1.7 billion). Whilst the Bank adopted a cautious lending policy in the persistently difficult segments of the shipping industry, it very successfully originated new business in Aviation Finance with aircraft financings, and in Land Transport Finance, where it finances rail rolling stock and rail-related vehicles. • The Bank was also successful in the advisory business where net fee and commission income rose by 3.1%, to €27.0 million.
90 75 60 45 30 15 0 22.0 2012 46.0 2013 40.1 2014 84.3 2015 25.9 2016 Consolidated net income before taxes, as at 31 March
Net fee and commission income, which primarily includes fees and commissions from new Transport Finance business, asset management fees, and fees generated from Corporate Finance advisory mandates, was up 3.1%, from €26.2 million to €27.0 million.
Results from investments in companies accounted for using the equity method amounted to €–0.2 million (Q1 2015: €3.1 million).
Net other operating income/expenses amounted to €4.4 million (Q1 2015: €–0.9 million).
General administrative expenses were up 3.1%, to €46.2 million (Q1 2015: €44.8 million). Staff expenses increased by 6.2%, to €27.4 million (Q1 2015: €25.8 million). The number of active employees increased by 36 year-on year, to 611. Non-staff expenses (including depreciation, amortisation and write-downs) declined slightly, by 1.1%, from €19.0 million to €18.8 million. Net result from financial instruments in accordance with IAS 39 (comprising the trading result, the hedge result, the result from derivatives entered into without intention to trade, and the result from investment securities) – which is generally volatile – amounted to €27.9 million (Q1 2015: €60.8 million). The previous year’s figure included substantial non-recurring income from the sale of investment securities, due to the partial disposal of the stake in Wizz Air Holdings Plc. This one-off effect, which was generated in the Bank’s Aviation Investment Management activ-ities, did not materialise during the reporting period 2016. The individual items of the interim financial statements developed
as follows:
Net interest income decreased by 10.8%, from €64.8 million to €57.8 million, due to the following reasons:
• Risk costs included in net interest income of €0.9 million (Q1 2015: €2.7 million, largely comprising expenses incurred for vessels which are under the Bank’s control, as part of restructuring measures.
• Net interest income is also burdened by early loan repayments as well as the requirement to maintain additional liquidity with the European Central Bank (at negative interest rates), due to new EU liquidity requirements (LCR).
• Moreover, increasing global competition for transport market financings has put pressure on interest margins.
Allowance for credit losses amounted to €36.3 million during the period under review (Q1 2015: €13.4 million). Specifically, new allowance recognised for credit losses totalled €131.9 million, of which €113.3 million was accounted for by Shipping Finance and Offshore Finance, due to the persistently difficult environment surrounding the international shipping and offshore markets. Conversely, allowance for credit losses of €95.6 million was reversed (of which €84.1 million in Shipping Finance and Offshore Finance). Net interest income after allowance for credit losses stood at €21.5 million and thus fell short of the previous year’s figure of €51.4 million. Total allowance for credit losses (com-prising specific allowance for credit losses, portfolio-based allowances for credit losses, and provisions) rose to €309.1 million, up 5.9% from year-end 2015 (€291.8 million).
DVB Bank Group | Quarterly Statement – Three-Month Results 2016 4.7%, to €24.1 billion. In US dollar terms, it remained constant, at US$27.5 billion.
The following chart illustrates the breakdown of customer lending (in euro terms) across the Bank’s business divisions.
The Bank employs key financial indicators to assess and manage its business: the return on equity (ROE) before taxes, the cost/income ratio (CIR) and the risk-adjusted Economic Value Added (EVA™). In order to harmonise the calculation methodology and enhance transparency thereof, the Bank has included expenses for the bank levy and the BVR Deposit Guarantee Scheme, as well as the operative component of the IAS 39 result (the result from investment securities) in its calcu-lation methodology for all three financial indicators since the first quarter of 2016. Expenses for the bank levy and the BVR Deposit Guarantee Scheme must be recognised at the beginning of each financial year, for the full year, and are then no longer amortised over the course of the year. However, in DVB’s view, amortising these charges over the periods within a financial year is commercially sensible for calculating key financial indicators, since this allows for a more realistic reflection of business performance.
Consolidated net income before bank levy, BVR Deposit Guarantee Scheme, and taxes totalled €34.4 million (Q1 2015: €95.8 million). Estimated bank levy charges of €3.7 million for the financial year 2016 (2015: €3.3 million in bank levy actually paid) as well as €4.8 million in expenses for the Deposit Guarantee Scheme of the National Association of German Cooperative Banks (2015: €4.6 million in expenses for the BVR Deposit Guarantee Scheme) needed to be deducted from this figure already at the beginning of the year.
Consolidated net income before taxes declined by 69.3% year-on-year, from €84.3 million to €25.9 million, and consoli-dated net income after taxes of €19.2 million was well short of the previous year’s figure of €74.9 million.
DVB’s total assets decreased to €25.7 billion as at 31 March 2016, down 3.4% from the 2015 year-end (31 December 2015: €26.6 billion), mainly due to currency translation effects. DVB’s nominal volume of customer lending (the aggregate of loans and advances to customers, guarantees and indemnities, irrevocable loan commitments, and derivatives) was down
Customer lending
€ bn US$ bn
31 Mar 2016 31 Dec 2015 % 31 Mar 2016 31 Dec 2015 %
Shipping Finance 11.1 11.8 –5.9 12.6 12.8 –1.6
Aviation Finance 7.4 7.7 –3.9 8.5 8.3 2.4
Offshore Finance 2.3 2.4 –4.2 2.6 2.7 –3.7
Land Transport Finance 1.8 1.7 5.9 2.0 1.8 11.1
ITF Suisse 0.9 1.0 –10.0 1.0 1.1 –9.1
Investment Management 0.5 0.5 – 0.6 0.6 –
Business no longer in line with DVB’s strategy 0.1 0.2 –50.0 0.2 0.2 –
Total 24.1 25.3 –4.7 27.5 27.5 – Shipping Finance 46.1% (–0.5 pp) Aviation Finance 30.7% (+0.3 pp) Offshore Finance 9.5% (0.0 pp)
Land Transport Finance 7.5% (+0.8 pp)
ITF Suisse 3.7% (–0.3 pp)
Investment Management 2.1% (+0.1 pp)
Business no longer in line with the Bank’s strategy 0.4% (–0.4 pp)
On this basis, the financial indicators developed as follows: The ROE before taxes stood at 1.3% (Q1 2015: 23.5%) and was calculated as follows: consolidated net income before IAS 39 and taxes (but including the result from investment securities) was divided by the total of weighted capital (issued share capital, capital reserve, retained earnings excluding funds for general banking risks, non-controlling interests and deferred taxes, as well as before appropriation of consolidated net income) on a pro-rata basis.
The CIR totalled 54.4% (Q1 2015: 34.1%) and was calculated in the following manner: the aggregate of general administrative expenses as well as pro-rata expenses for the bank levy and the BVR Deposit Guarantee Scheme was divided by the total of net interest income before allowance for credit losses, net fee and commission income, the result from investment securities, results from investments in companies accounted for using the equity method, and net other operating income/expenses.
The risk-adjusted indicator EVA™ amounted to €–21.2 million (Q1 2015: €53.9 million) and was calculated by deducting pro-rata risk capital costs from consolidated net income before IAS 39 and taxes (but including the result from investment securities). DVB discloses capital ratios determined in accordance with the Basel III framework (Advanced Approach). On this basis, the common equity tier 1 ratio as at 31 March 2016 amounted to 13.5% (31 December 2015: 16.3%), whilst the total capital ratio was 18.7% (31 December 2015: 22.4%).
DVB’s outlook is as follows:
The Bank continues to assess the financial year 2016 with cautious optimism, and is endeavouring to achieve consolidated net income that should approach the previous year’s level. Given the persistent challenges on the shipping and offshore markets, DVB is aware that allowance for credit losses will continue to remain on an elevated level.
Frankfurt/Main, May 2016
DVB Bank Group | Quarterly Statement – Three-Month Results 2016 € mn 1 Jan 2016 – 31 Mar 2016 1 Jan 2015 – 31 Mar 2015 %
Net interest income 57.8 64.8 –10.8
Allowance for credit losses –36.3 –13.4 –
Net interest income after allowance for credit losses 21.5 51.4 –58.2
Net fee and commission income 27.0 26.2 3.1
Results from investments in companies accounted for using the equity method –0.2 3.1 –
General administrative expenses1) –46.2 –44.8 3.1
Net other operating income/expenses 4.4 –0.9 –
Consolidated net income before IAS 39, bank levy,
BVR2) Deposit Guarantee Scheme and taxes1) 6.5 35.0 –81.4
Net result from financial instruments in accordance with IAS 39 27.9 60.8 –54.1
Consolidated net income before bank levy, BVR2) Deposit Guarantee Scheme and taxes1) 34.4 95.8 –64.1
Expenses for the bank levy and the BVR2) Deposit Guarantee Scheme1) –8.5 –11.5 –26.1
Consolidated net income before taxes 25.9 84.3 –69.3
Income taxes –6.7 –9.4 –28.7
Consolidated net income 19.2 74.9 –74.4
thereof: consolidated net income attributable to non-controlling interests 0.0 0.0 – thereof: consolidated net income attributable to shareholders of DVB Bank SE 19.2 74.9 –74.4
Earnings per share (€)
1 Jan 2016 – 31 Mar 2016
1 Jan 2015 –
31 Mar 2015 %
Basic earnings per share 0.42 1.64 –74.4
Diluted earnings per share 0.42 1.64 –74.4
Key financial indicators (%)
1 Jan 2016 – 31 Mar 2016
1 Jan 2015 –
31 Mar 2015 pp
Cost/income ratio 54.4 34.1 20.3
Return on equity (before taxes) 1.3 23.5 –22.2
Economic Value Added (€ million) –21.2 53.9 –
1) In the previous year, pro-rata expenses for the BVR Deposit Guarantee Scheme were reported in general administrative expenses. To enhance comparability of the figures, these expenses were reclassified retrospectively, and are now also included in ”Expenses for bank levy and the BVR Deposit Guarantee Scheme”.
Assets (€ mn) 31 Mar 2016 31 Dec 2015 %
Cash and balances with the central bank 1,568.2 1,164.1 34.7
Loans and advances to banks 571.3 1,116.8 –48.8
Loans and advances to customers 22,348.4 22,975.5 –2.7
Allowance for credit losses –303.7 –289.0 5.1
Positive market value of derivative hedging instruments 82.4 321.3 –74.4
Trading assets 122.1 95.0 28.5
Investment securities 337.3 349.8 –3.6
Investments in companies accounted for using the equity method 255.5 228.3 11.9
Intangible assets 102.2 101.4 0.8
Property and equipment 328.4 373.1 –12.0
Income tax assets 81.6 96.4 –15.4
Other assets 187.2 56.9 –
Non-current assets held for sale – 20.9 –
Total 25,680.9 26,610.5 –3.5
Liabilities and equity (€ mn) 31 Mar 2016 31 Dec 2015 %
Deposits from other banks 3,120.4 2,457.0 27.0
Liabilities to customers 7,631.3 7,510.8 1.6
Securitised liabilities 12,435.0 13,141.9 –5.4
Negative fair values of derivative hedging instruments 42.7 169.4 –74.8
Trading liabilities 112.4 975.5 –88.5
Provisions 75.6 60.9 24.1
Income tax liabilities 51.6 53.3 –3.2
Other liabilities 70.3 69.5 1.2
Subordinated liabilities 687.8 742.7 –7.4
Equity 1,453.8 1,429.5 1.7
Issued share capital 116.5 116.7 –0.2
Capital reserve 319.9 321.3 –0.4
Retained earnings 989.4 975.5 1.4
thereof: fund for general banking risks 82.4 82.4 –
Revaluation reserve 6.8 6.2 9.7
Reserve from cash flow hedges 1.3 –6.7 –
Reserve from net investment hedges –15.6 –24.5 –36.3
Currency translation reserve 16.1 26.9 –40.1
Distributable profit 19.2 13.9 38.1
Non-controlling interests 0.2 0.2 –
Total 25,680.9 26,610.5 –3.5
Customer lending volume (€ bn) 31 Mar 2016 31 Dec 2015 %
Nominal customer lending volume 24.1 25.3 –4.7
Capital ratios – Basel III (%) 31 Mar 2016 31 Dec 2015 pp
Common equity tier 1 ratio 13.5 16.3 –2.8
Additional tier 1 ratio 13.5 16.3 –2.8
Platz der Republik 6
60325 Frankfurt/Main, Germany www.dvbbank.com, info@dvbbank.com Elisabeth Winter
Head of Group Corporate Communications Managing Director
Phone +49 69 9750 4329 Lisa Boose-Kirwel
Group Corporate Communications Manager Investor Relations Phone +49 69 9750 4435 Design and realisation
Studio Oberländer GmbH, Frankfurt/Main, Germany
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Shipping Finance GasLog Ltd, Monaco Aviation Finance
Bert van Leeuwen, DVB Bank SE, Amsterdam, The Netherlands Offshore Finance
Songa Offshore Management Ltd, Limassol, Cyprus Land Transport Finance
Wouter Radstake, DVB Bank SE, Frankfurt/Main, Germany The interim management statement during the first half of 2016 is published in English and German. It is available for download, in PDF format, from our website: www.dvbbank.com > Investors > Publications > Financial reports.
