nine-month results 2012 - interim management statement during the second half of 2012

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DVB Group Interim Management Statement during the second half of 2012

2012Interim Statement – Nine-Month Results

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DVB Bank Group: Sound operating performance during the first nine months of 2012 –Total income up 6.2%, to €262.7 million

DVB successfully conducted its international Transport Finance activities during the first nine months of 2012. Consolidated net income before IAS 39 and taxes rose to €125.6 million – a remarkable 7.8% year-on-year increase. Once again, the volatile net result from financial instruments in accordance with IAS 39 weighed on income before taxes which – as a result – declined by 2.0%, to €104.3 million.

Total income (comprising net interest income after allowance for credit losses, net fee and commission income, results from investments in companies accounted for using the equity method, and net other operating income/expenses) rose by 6.2 %, from €247.4 million to €262.7 million.

Net interest income grew by 2.2%, to €185.2 million. Interest income rose by 18.8%, from €636.4 million to €756.3 million. New Transport Finance business totalled 93 transactions in the year to 30 September 2012, with an aggregate volume of €2.8 billion (9m 2011: 109 transactions with a volume of €3.3 billion). When originating new business, DVB consciously targeted exposures which are attractive in terms of their risk/return characteristics. Accordingly, the average interest margin on new Transport Finance business rose from 297 to 357 basis points.

Against the background of the renewed escalation of the crisis affecting certain maritime shipping subsectors, the Bank carried out an even more cautious assessment of its lending portfolio during the third quarter. As a result, net allowance for credit losses increased to €53.3 million (9m 2011: €19.2 million) – an amount that is expected to be sufficient from today’s perspective. DVB does not anticipate allowance for credit losses for the full year 2012 to materially exceed the previous year’s figure of €59.2 million.

Specifically, new allowance recognised for credit losses (as at 30 September 2012) totalled €110.0 million; a net €57.1 million was

released, and charge-offs amounted to €29.9 million. These net figures included the following key items:

• €81.9 million was recognised and €31.0 million released in Shipping Finance;

• €15.2 million was recognised and €21.4 million released in Aviation Finance;

• €7.3 million was recognised and €1.3 million released in Investment Management.

Accordingly, total allowance for credit losses (comprising specific allowance for credit losses, portfolio-based allowances for credit losses, and provisions) rose to €171.5 million, up 15.2% from year-end 2011 (€148.9 million).

Net fee and commission income of €90.8 million (9m 2011: €76.1 million) exceeded the previous year’s high level by a remarkable 19.3%; the net figure primarily includes fees and commissions from new Transport Finance business, and asset management and advisory fees.

Net other operating income/expenses rose from €11.8 million to €42.3 million. Net other operating income of €53.1 million also includes the proceeds from the sale of shareholdings. On 14 June 2012, the Bank sold a 60% stake in TES Holdings Ltd, the British aero engine specialist headquartered in Bridgend, Wales, to two Japanese investors. The two new partners – Mitsubishi Corporation, and Development Bank of Japan, Inc. – acquired 35% and 25%, respectively. DVB Holding GmbH remains the largest shareholder, with a share of 40%.

General administrative expenses were up 4.7%, to €137.1 million. Staff expenses were up by 6.2%, to €75.9 million. DVB employed a total of 560 staff as at 30 September 2012, an increase of 16 compared to the end of the first nine months of 2011 (544 employ-ees). Higher bank levy charges and contributions to the deposit insurance scheme, meant that non-staff expenses (including depreciation, amortisation and write-downs) rose by €1.8 million, to €61.2 million.

131.6

71.6

116.3 116.5 125.6

2008 2009 2010 2011 2012

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50

100

150

Consolidated net income before IAS 39 and taxes (€ mn), as at 30 September

Substantial events and deals

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Net income from financial instruments in accordance with IAS 39 (comprising net trading income, the hedge result, the result from the application of the fair value option, the result from derivatives entered into without intention to trade, and net income from investment securities) changed from €–10.1 million to €–21.3 mil-lion. Once again, the IAS 39 result reflects the level of volatility on foreign exchange and interest rate markets.

Burdened by this result from IAS 39, consolidated net income before taxes declined by 2.0%, to €104.3 million (9m 2011: €106.4 million), whilst consolidated net income after taxes rose by 13.2%, to €95.8 million (9m 2011: €84.6 million). DVB’s total assets rose by 10.0%, from €22.0 billion to €24.2 billion. DVB’s nominal volume of customer lending (the aggregate of loans and advances to customers, guarantees and indemnities, irrevocable loan commitments, and derivatives) was unchanged year-on-year in euro terms, at €21.7 billion, and also in US dollar terms, at US$28.1 billion.

The distribution of customer lending (in euro terms) amongst the Bank’s business divisions is shown in the following graph:

DVB’s key financial indicators developed as follows: Return on equity before taxes was 12.7% – down 1.1 percentage points

(9m 2011: 13.8%). DVB lowered its cost/income ratio by 4.6 percentage points, to 46.5% (9m 2011: 51.1%).

Calculated in accordance with Basel II, DVB’s capital ratios developed as follows: the tier 1 ratio declined slightly, by 0.2 percentage points, to 19.5%, reflecting a higher level of risk-weighted assets. At the same time, the total capital ratio was up slightly, to 22.6%: the slight 0.8 percentage-point increase from the year-end 2011 (31 December 2011: 21.8%) reflected the issuance of US$180 million in subordinated capital.

Earnings forecast

The market environment remains very difficult indeed in some areas of maritime shipping. Despite the negative business framework in some sectors, and weaker growth rates of the world economy, the Bank expects to achieve fully satisfactory results for the 2012 business year. These are not expected to materially diverge from the previous year’s figures.

Frankfurt/Main, November 2012

THE BOARD OF MANAGING DIRECTORS

€ bn US$ bn

30 Sep 2012 31 Dec 2011 % 30 Sep 2012 31 Dec 2011 %

Shipping Finance 11.7 11.3 3.5 15.1 14.6 3.4

Aviation Finance 6.7 6.9 –2.9 8.7 9.0 –3.3

Land Transport Finance 1.6 1.6 0.0 2.1 2.1 0.0

Investment Management 0.6 0.7 –14.3 0.8 0.9 –11.1

ITF Suisse 0.8 0.9 –11.1 1.1 1.1 0.0

Business no longer in line with DVB’s strategy 0.3 0.3 0.0 0.3 0.4 –25.0

Total 21.7 21.7 0.0 28.1 28.1 0.0

Customer lending by business division

Shipping Finance

Aviation Finance

Land Transport Finance

ITF Suisse

Investment Management

Business no longer in line with the Bank‘s strategy

30.9% (−0.9 pp)

53.9% (+1.8 pp)

7.4% (0.0 pp)

3.6% (−0.5 pp)

2.8% (−0.4 pp)

1.4% (0.0 pp)

Customer lending

Substantial events and deals

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€ mn1 Jan 2012– 30 Sep 2012

1 Jan 2011– 30 Sep 2011 %

Net interest income 185.2 181.3 2.2

Allowance for credit losses –53.3 –19.2 −

Net interest income after allowance for credit losses 131.9 162.1 –18.6

Net fee and commission income 90.8 76.1 19.3

Results from investments in companies accounted for using the equity method –2.3 –2.6 –11.5

General administrative expenses –137.1 –130.9 4.7

Net other operating income/expenses 42.3 11.8 −

Consolidated net income before IAS 39 and taxes 125.6 116.5 7.8

Net result from financial instruments in accordance with IAS 39 –21.3 –10.1 −

Consolidated net income before taxes 104.3 106.4 –2.0

Income taxes –8.5 –21.8 –61.0

Consolidated net income 95.8 84.6 13.2

thereof: consolidated net income attributable to non-controlling interests –1.6 –0.9 77.8

thereof: consolidated net income attributable to shareholders of DVB Bank SE 97.4 85.5 13.9

Earnings per share (€)1 Jan 2012– 30 Sep 2012

1 Jan 2011– 30 Sep 2011 %

Basic earnings per share 2.11 1.85 14.1

Diluted earnings per share 2.11 1.85 14.1

Key ratios in accordance with IFRS (%)1 Jan 2012– 30 Sep 2012

1 Jan 2011– 30 Sep 2011 pp

Cost/income ratio before IAS 39 43.4 49.1 –5.7

Cost/income ratio 46.5 51.1 –4.6

Return on equity before IAS 39 and taxes 15.3 15.1 0.2

Return on equity before taxes 12.7 13.8 –1.1

Return on equity after taxes 11.7 11.0 0.7

Condensed income statement (IFRS)

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Assets (€ mn) 30 Sep 2012 31 Dec 2011 %

Cash and balances with the central bank 1,061.6 80.9 −

Loans and advances to banks 537.9 491.8 9.4

Loans and advances to customers 20,056.8 18,739.0 7.0

Allowance for credit losses –171.3 –148.4 15.4

Positive fair values of derivative hedging instruments 623.6 475.0 31.3

Trading assets 217.3 287.8 –24.5

Investment securities 501.1 484.7 3.4

Investments in companies accounted for using the equity method 171.4 103.7 65.3

Intangible assets 99.6 107.9 –7.7

Property and equipment 958.2 1,244.6 –23.0

Income tax assets 73.7 77.5 –4.9

Other assets 56.3 86.5 –34.9

Total 24,186.2 22,031.0 9.8

Liabilities and equity (€ mn) 30 Sep 2012 31 Dec 2011 %

Deposits from other banks 5,123.8 5,190.4 –1.3

Deposits from customers 4,891.7 4,460.3 9.7

Securitised liabilities 11,659.8 9,830.1 18.6

Negative fair values of derivative hedging instruments 320.3 296.3 8.1

Trading liabilities 281.3 373.4 –24.7

Provisions 45.3 59.7 –24.1

Income tax liabilities 45.9 73.7 –37.7

Other liabilities 100.3 136.5 –26.5

Subordinated liabilities 421.9 400.6 5.3

Equity 1,295.9 1,210.0 7.1

Issued share capital 117.9 117.9 0.0

Capital reserve 331.4 331.7 –0.1

Retained earnings 739.2 740.8 –0.2

thereof: fund for general banking risks 82.4 82.4 0.0

Revaluation reserve 3.3 0.1 −

Reserve from cash flow hedges 0.4 –11.1 −

Currency translation reserve 4.1 –1.7 −

Distributable profit 97.4 27.9 −

Non-controlling interests 2.2 4.4 –50.0

Total 24,186.2 22,031.0 9.8

Customer lending volume (€ bn) 30 Sep 2012 31 Dec 2011 %

Nominal customer lending volume 21.7 21.7 0.0

Capital ratios – Basel II (%) 30 Sep 2012 31 Dec 2011 pp

Tier 1 ratio 19.5 19.7 –0.2

Total capital ratio 22.6 21.8 0.8

Statement of financial position (IFRS)

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DVB Bank SEInvestor Relations

Elisabeth WinterPlatz der Republik 6

60325 Frankfurt/Main, GermanyPhone +49 69 9750 4329

Fax +49 69 9750 4850

nine-month results 2012 - interim management statement during the second half of 2012

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