Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pre-provision profit for the first half of 2024 increased by 47% year-on-year, reaching EUR150 million.
- Operating income rose by EUR19 million to EUR278 million, supported by a 14% increase in net interest income.
- The bank maintained a CET1 ratio at its ambition level of 14%, despite a temporary increase in risk-weighted assets.
- Liquidity position improved significantly, with more than EUR7 billion, covering funding needs for the year.
- The pro forma Basel IV FIRBA ratio increased to 17.2%, indicating strong capital management.
Negative Points
- Risk provisioning remained high at minus EUR103 million for the first half of the year, although it decreased compared to the previous period.
- The volume of new business was below the previous year's level, with a focus on increasing margins rather than volumes.
- The REF portfolio decreased slightly due to portfolio sales and active non-performing loan management.
- Stage 3 risk provisions increased, particularly related to office properties in the US and development projects in Germany.
- The cost/income ratio is expected to rise temporarily to around 50% by year-end due to strategic and IT investments.
Q & A Highlights
Q: What is the outlook for loan loss provisions, and how confident are you in achieving your targets given the current market conditions?
A: Kay Wolf, Chairman of the Management Board, explained that while Stage 3 credit loss provisions (CLP) were higher in Q2 compared to Q1, they expect a reduction in the second half of the year. This confidence stems from substantial de-risking of the US book and the realization of expected downward pressures. Additionally, the development book remains stable with no new non-performing loans (NPLs), and ongoing projects are progressing well.
Q: How has the cut in customer rates affected retail funding, and what are the plans to reduce it to EUR7.5 billion?
A: Marcus Schulte, Treasurer and Member of the Management Board, noted that despite lowering customer rates by 100 basis points, retail funding remains strong and above model expectations. The bank plans to adjust rates based on market conditions to achieve the target of EUR7.5 billion, which should positively impact net interest income (NII).
Q: With the CET1 ratio at 14%, how will you ensure it doesn't fall below this level in the next quarter?
A: Kay Wolf emphasized the bank's ability to manage its capital position effectively, having reduced risk-weighted assets (RWA) by EUR1.5 billion in one quarter. The bank is confident that the current CET1 ratio is a low point for 2024, and they have measures in place to mitigate any potential downward pressure.
Q: Are there any risks of further significant impairments in the US NPL portfolio due to high vacancy or modernization needs?
A: Kay Wolf stated that any potential impairments are already reflected in the current loan loss provisioning under IFRS 9 regulations. The bank closely monitors each transaction and works with clients to manage risks, having successfully restructured or repaid loans in Q2.
Q: What strategic measures are being taken to improve the bank's profitability in the long term?
A: Kay Wolf mentioned that the bank is focused on broadening its revenue base by diversifying into less capital-intensive businesses. They are leveraging their real estate expertise and client relationships to offer additional services, with a strategy update to be presented at the Capital Markets Day in October.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
