• Pre-tax earnings and consolidated net income up 17% and 14% respectively
• Net interest income around €239m
• New business volume at €3.3bn
• Strategic objectives achieved

Mainz, 5 April 2011 – In the 2010 financial year, which was dominated by the European Commission’s order to sell the bank, Westdeutsche ImmobilienBank AG (WestImmo) increased its pre-tax earnings to €99.2m, a rise of some 17% on the previous year. Consolidated net income grew 14% to €94.8m. It means that WestImmo has maintained the successful run of the last few years, in which it managed to stay in the black despite the extremely harsh environment of the financial and economic crisis.

“In spite of the ongoing sale process we have been able to post a sharp improvement in our earnings and key income ratios and achieve what is a satisfactory volume of new business in light of these difficult conditions”, said Peter Knopp, Chairman of the Managing Board of WestImmo. “WestImmo has yet again demonstrated that it is a profitable bank. Given the background of the difficult market and refinancing conditions in 2010 and the particular challenge presented by the sale process, WestImmo’s business model has proved to be both sound and sustainably viable”, Knopp continued. 

The operative earnings capacity of the bank was highlighted in the net interest income, which climbed 10% from €217.9m in 2009 to €238.9m in 2010. At -€68.1m, the risk provision for credit losses was only slightly above the previous year (2009: -€65.4m). This 4% rise is respectable in view of the continuing difficulties on the property markets across the world and underlines the high quality of WestImmo’s loan portfolio. Net fee and commission income came to €11.2m (2009: €27.8m). This figure reflects in particular the lower new business volumes recorded by the bank due to the ongoing sale process.

The trading result fell to -€5.6m (2009: €4.3m) due to valuation effects. By contrast, net income from non-current financial assets was up sharply, at €4.6m exceeding the -€10.2m for 2009 by some distance.

Despite the expenses associated with the current sale process, general administrative expenses were reduced to €89.5m (2009: €93.1m).  The balance of other operating income and expenses rose to €7.7m from €3.7m in the previous year.

The positive results also impacted on the key income ratios of the bank, allowing the strategic objectives to be achieved. The return on equity employed (RoE) climbed to 10.2% (2009: 9.0%), while the Tier I ratio stood at 8.0% on 31. December 2010 (2009: 8.2%). The ratio of costs to income (CIR) improved to 34.7% (2009: 37.6%) on the back of the bank’s strict cost and process management. On 31 December 2010 the bank’s balance sheet total came to €25.9bn (2009: €26.9bn).

New business volumes hit by the sale process

The sale process imposed by the European Commission and the negative effect this had on WestImmo’s refinancing situation had a significant impact on the development of new business, particularly in the second half of 2010. In total, WestImmo pulled in €3.3bn of new business in 2010 (2009: €6.2bn). Of this volume, 22% came from Germany, which was once again the most important single market in WestImmo’s commercial investor business. Another 52% was distributed among the other European core markets, essentially Great Britain, Poland, France and Benelux. Business in North America accounted for 19%, while another 7% came from the Asian markets.

In Japan WestImmo had loan commitments totalling €1.1bn on 31 December 2010, of which €0.9bn was in Tokyo and €0.2bn for properties in regions in the south-west of the country. The information we have available indicates that the financed properties have not suffered significant damage from the natural disaster. The medium and long-term impact of the earthquake and subsequent tsunami and the knock-on effects directly and indirectly associated with them cannot be either estimated or measured at this stage.

Last year WestImmo arranged syndicated financing to the tune of €1.8bn, placing more than half of this volume with regional banks and pfandbrief banks, international institutions and savings banks. Syndicate business has thus again proved to be a key component of the business model.

Issuing volumes amounted to €2.3bn in total (2009: €4.3bn). Of this figure, mortgage pfandbriefs accounted for €1.7bn and uncovered instruments €0.6bn.

Pleasing collaboration with the savings banks

Collaboration between the savings banks and WestImmo continued to develop positively in 2010. The volume of loans realised with all association partners in 2010 amounted to €271m (2009: €250m), of which WestImmo was responsible for €142m and the savings banks €129m. As a specialist bank, WestImmo participates in real estate financing operations of the member institutions of the Sparkassen-Finanzgruppe that the savings banks are unable to handle alone due to size or because of risk aspects and, in turn, offers the institutions a stake in financing syndicates.

Concentration on commercial real estate financing

WestImmo maintained its focus on commercial real estate financing activities in 2010.

On 30 April 2010 the bank transferred a portfolio of private construction financing loans of some €500m in volume to Erste Abwicklungsanstalt (EAA) in a demerger. The EAA has given a finance guarantee for that part of the private client portfolio, totalling about €3.7bn, that is remaining with the bank. WestImmo has not written any new business in the private client sector since the start of 2009. The entire private client portfolio will continue to be serviced by WestImmo.

Outlook for 2011

The bank expects to see a clear improvement in the situation on most property markets in 2011. Some international office letting markets in the prime segment have already reached the low point in the rental cycle, while a recovery in the German property markets is also in sight. However, the ongoing concentration on the core property segment will intensify competition for these properties. In the secondary markets, by contrast, the recovery will not set in until later.

WestImmo expects to achieve positive earnings in 2011 as well. With the sale process continuing, the Managing Board has refrained from offering a concrete forecast for the development of earnings and new business volumes. The management is convinced that WestImmo will be able to participate in the nascent upturn on global property markets. This will be all the more beneficial the sooner certainty about the future ownership structure is obtained.

With the market position it has achieved and its business and risk policies, the bank has laid the foundations for maintaining the successful performance of the last few years and steadily expanding its market position. This will be founded on the sound and viable business model that demonstrated its resilience so well in 2010.

The financial report will be available to download from WestImmo’s website (www.westimmo.com) from 29 April 2011.