• Real estate bank overcomes effects of the sovereign debt crisis
• Positive earnings trends in individual and consolidated financial   statements

Mainz, 11 April 2013 - Despite the stresses from the restructuring of the former WestLB group, Westdeutsche Immobilienbank AG has been able to deliver a sustained improvement in its 2012 results: having finished in the red the previous year, the commercial individual financial statements for the 2012 financial year have returned into the black, with net earnings at EUR 0.1 million before tax and EUR 0.5 million after tax (previous year: -€203.2m). The deficit in the group was also almost entirely wiped out, coming in at minus EUR 19.8 million before tax for 2012 (previous year: -€167.2m). Excluding EUR 29.6 million in special effects relating to the restructuring of the former WestLB group, the bank would have recorded a positive pre-tax result in the IFRS consolidated financial statements as well.

“The results of the last financial year underline the solidity and structural profitability of WestImmo”, said CEO Claus-Jürgen Cohausz in Mainz. This was all the more remarkable given that the real estate bank had not been allowed to take on any new business after 1 July 2012 following the decisions to restructure WestLB. Even before that date the proposed sale of the bank had had a significant restrictive impact on its business development.

In 2012 WestImmo renewed commercial real estate loans to the tune of EUR 1.5 billion (previous year: €0.7bn). Around one fifth of the volume went on Germany, about half on other European countries. The volume achieved in North America made up some 16 per cent, while Asia accounted for 13 per cent. In 2012 the bank was able to continue to shrink potential risks from the sovereign debt crisis. It sold off its entire portfolio of Greek government bonds and significantly reduced its holdings of Italian government debt. This would deliver further improvements in the bank’s risk profile, Cohausz emphasised.

Net interest income and risk provisions evidence of sound core business
In 2012 WestImmo achieved net interest income in the group of EUR 191.4 million (previous year: €219.5m), while net fee and commission income came to EUR 2.8 million (previous year: €3.4m). The decline on the previous year is due primarily to the restrictions that were imposed on WestImmo in connection with the restructuring of the former WestLB group. The risk provision for credit losses rose by EUR 10.6 million on 2011 and now stands at EUR 52.9 million, below the planned level.

The trading result is negative at EUR -42.0 million (previous year: €57.8m). This can be traced largely back to the development of spreads in foreign exchange refinancing. Net income from non-current financial assets is dominated by losses from the sale of government bonds and comes to EUR -18.7 million (previous year: -€283.2m). The result in the previous year had been affected by impairments on Greek government bonds. 

General administrative expenses fell 15 per cent to reach EUR 72.9 million (previous year: €85.8m). Personnel as well as other administrative expenses declined, although in both cases this must be seen in the light of the restricted business opportunities afforded to WestImmo under the terms of the European Commission’s decision to restructure WestLB. At the end of 2012 the WestImmo group had 357 employees (previous year: 420).

Provisions in HGB financial statements strengthen profitability
The HGB individual financial statements also contain special effects that reduced interest income from the previous year. They stem from the unwinding of interest rate swaps against which there was no further interest income following the sale or rescheduling of Italian and Greek government debt. The Managing Board also boosted the provisions for general banking risks. This had the effect of reducing the results from ordinary activities by just under 50 million euros, so that they now stand at EUR 1.8 million (previous year: -€175.7m).

“After adjusting for this special effect, the results of the 2012 financial year show that WestImmo continues to enjoy a sound core business”, said Cohausz. The bank had exploited its profitability from the lending business to absorb the stresses from the sovereign debt crisis and restructuring of the former WestLB group. These precautionary measures would strengthen the future profitability of the bank in the long term.

Sale allows intensification of business activities
WestImmo continues to offer its existing customers renewals and, in certain circumstances, increases in existing exposures if this serves to minimise risks. It will also actively manage its cover assets. In the absence of new business, however, loan books will necessarily fall further, which will in turn have an impact on the net interest and net fee and commission income as well as the number of employees. In 2013 the management expects to see both a much lower refinancing requirement than in previous years and results that are at least balanced.

“WestImmo has proven once again that it is a healthy and successful real estate bank in its core business”, commented Matthias Wargers, chairman of the Supervisory Board, on the annual report. Wargers sits on the board of Erste Abwicklungsanstalt (EAA), which acquired all shares in WestImmo under the terms of the WestLB restructuring. WestImmo and EAA confirmed that they are focusing their efforts at present on a sale of the real estate bank. In the event of a sale, WestImmo would be able to further intensify and expand its business activities in selected markets.

Table: Key P&L ratios (IFRS)

Table:  Key P&L ratios (HGB