Annual Report 2004

Transcription

Annual Report 2004

Annual Report and Accounts 
Organisation Chart of the Bank*
Corporate Center
Support Operations
Financial Institutions &
Sovereigns
Business Area
Real Estate
Business Area
Bayerische Landesbodenkreditanstalt
Savings Banks and
Bavarian Market
Business Area
Werner Schmidt
Chairman of the Board
of Management
Dr. Rudolf Hanisch
Deputy of the Chairman
Dr. Rudolf Hanisch
Dr. Rudolf Hanisch
Theo Harnischmacher
Legal Services,
Compliance Center and
Prevention of Money
Laundering
• Walther
Schmidt-Lademann
Financial Institutions &
Sovereigns
• Michael Graf
von Hallwyl
(BA Spokesman)
• Dr. Theodor Klotz
Bayerische Landesbank
Real Estate
• Ernst Holland
• Georg Jewgrafow
Bayerische
Landesbodenkreditanstalt
• Gerhard Flaig
(BA Spokesman)
• Dr. Ulrich Kühn
• Heinrich Rinderle
Savings Banks,
Bavarian Municipals/
Corporates
• Karlheinz Müller
• Thomas Neher
Corporate Development/BoM Support
• Dr. Benedikt Haas
Press & Media Relations
• Peter Kulmburg
Financial Accounting,
Tax & Controlling
• Günther Kopf
Personnel
• Dr. Wolfram Peitzsch
Audit
• Peter Vökt
Economics and
Research Division
• Dr. Jürgen Pfister
* global responsibility, as per 01.03.2005
Private Banking
• Otto Schwendner
LBS Bayern
Corporates
Business Area
Global Markets
Business Area
Risk Office
Support Operations
Corporate Services
Support Operations
Theo Harnischmacher
Stefan W. Ropers
Member of the Board
of Management
Dieter Burgmer
Member of the Board
of Management
Dr. Gerhard
Gribkowsky
Member of the Board
of Management
Dr. Ralph Schmidt
Senior Executive
Vice President,
entrusted with Board
of Management tasks
Bayerische
Landesbausparkasse
• Dr. Franz Wirnhier
(BA Spokesman)
• Wolfgang Kube
• Helmut Straubinger
Global
Corporate Banking
• Dr. Detlev Gröne
Investor Relations
• Hans Christoph
Groscurth
Credit Consulting
• Andreas Dörhöfer
Financial Market
Services
• Peter Greppmair
• Dr. Dietrich Keymer
Global
Structured Finance
• Frank Hahn
Global
Treasury & Funding
• Ernst-Albrecht
Brockhaus
Equities
• Karl Filbert
Global Trading & Sales II
• Jürgen Adamitza
Global Trading & Sales I
• Florian Drexler
Risk Office Corporates/
Financial Institutions
• Thomas Hierholzer
Credit & Collateral
Services (CCS)
• Michaela Aumann
Risk Controlling &
Procedures
• Ullrich Ströhlein
Risk Office Real Estate/
Structured Finance
• Peter Weidemann
International Corporate
Services (CS)
• Dieter Seipt
Corporate
Organisation & IT
• Robert Berhof
• Michael Ludwig
Shared Services
• Christian Seidel
BayernLB Group at a glance
Performance
EUR million
Net interest income
01. 01.– 31. 12. 2004
01. 01.– 31. 12. 2003
Change in %
2,030
2,169
– 6.4
Net commission income
340
343
– 0.7
Administrative expenses
– 1,208
– 1,185
1.9
Net result from financial transactions
126
105
19.7
Operating result
950
547
73.7
44.4 %
43.3 %
2.5 (1.1 Pp**)
9.5 %
4.9 %
93.9 (4.6 Pp**)
EUR million
31. 12. 2004
31. 12. 2003
Change in %
Total assets
333,102
313,431
6.3
Credit volume
241,952
223,960
8.0
Total deposits
197,410
185,233
6.6
Securitised liabilities
103,833
95,597
8.6
16,671
17,177
– 2.9
31. 12. 2004
31. 12. 2003
Change in %
1,017,131
934,243
8.9
3,841
4,528
– 15.2
31. 12. 2004
31. 12. 2003
Change in %
15,957
15,468
3.2
8.3 %
7.8 %
6.4 (0.5 Pp**)
12.5 %
11.3 %
10.6 (1.2 Pp**)
31. 12. 2004
31. 12. 2003
Change in %
BayernLB
5,047
5,543
– 8.9
Group
8,940
9,061
– 1.3
Cost-income ratio*
Return on equity
Balance sheet figures
Equity disclosed
Derivatives transactions
EUR million
Nominal volume
Credit risk equivalent (after netting)
Key banking regulatory data under the German Banking Act (balance sheet figures)
EUR million
Own funds
Core capital ratio
Own funds ratio (Group level)
Number of employees
* Administrative expenses/income from operational banking business (previous year‘s figure adjusted)
** Percentage points
Clear figures. Clear objectives.
The Annual Report and Accounts 2004 reflect
BayernLB’s reorientation. And in more ways than
one. Because just as the figures prove the success
of our new business model, so our new marketing
image illustrates how we want to continue to build
on this success: with confidence, in proximity to
our customers and markets and with Bavarian
élan.
Tailor-made financial services are the focal point
of our activities – unique solutions matching the
individual needs of our customers. This means
having a keen eye and designing our products
with great care – just like a tailor who practises
his art with precision. With all of those whose
personal commitment leads to new perspectives
and results, we are united in a common goal:
creating unique solutions.
Contents
1 Board of Management and
executive bodies
2 Economic situation
3 BayernLB – our company
4 Report on the Bank and the Group
5 Report by the Board
of Administration, accounts of
BayernLB and the BayernLB Group
and notes to the accounts
6 Advisory Boards and addresses
Foreword by the Board of Management
8
Profile
12
Sparkassen-Finanzgruppe Bayern
13
Board of Administration
14
Financial Statements Audit Committee
15
General Meeting
16
Economy: no stable uptrend yet
22
Strategy
30
Business area activities
34
LBS Bayern and Landesbodenkreditanstalt
54
Group retail activities
58
Support operations activities
62
Our staff
78
Public sector mandate
82
Overview
90
Management report
93
Outlook
103
Risk report
106
Report by the Board of Administration
124
Balance sheet and profit and loss account
128
Consolidated balance sheet and profit and loss account
134
Consolidated statement of changes in shareholders’ equity
140
Cash flow statement for the Group
141
Segment report for the Group
144
Notes to the accounts and consolidated accounts
148
Trustees
184
Economic Advisory Council
185
Savings Bank Advisory Council
187
BayernLB’s network
188
Design requires absolute accuracy. Wherever things are produced,
values are created and a new course is chartered, a millimetre here or
there can make a huge difference. An important concept to keep in mind,
because there really is only one goal worth pursuing: a superior result.
Producing something unique means
recognising a fundamental principle:
precision.
 Board of Management and
executive bodies
8
Profile
12
13
14
Financial Statements Audit Committee
15
General Meeting
16
8
Board of Management and executive bodies
Werner Schmidt
born in 1943,
Chairman of the Board of Management
since 2001, Support Operations
Corporate Center (worldwide),
Corporate Services (worldwide)
Ladies and Gentlemen,
Dear Friends,
The year 2004 was a period of change and preparation for BayernLB. On 18 July 2005,
the guarantee mechanisms are set to change for all of the landesbanks. Over the last
year, BayernLB has consistently pushed on with the implementation of its new business
model, and is thus prepared for the coming challenges. We, the Board of Management, would like to thank the staff of BayernLB for their exceptional motivation and
willingness to face change. The successful realignment of the Bank is essentially thanks
to them. To our customers, we would like to express our gratitude for their many years
of trust in BayernLB. We are also grateful to our owners for their sustained support.
Together, we can face the future with confidence.
Our new marketing image is a visual expression of change. The new trademark represents our values, and the link between tradition and the present day. The diamond
motif is a clear reference to our Bavarian roots. The arrow communicates the dynamic
and modern nature of Bavarian thinking. It points to our brand name, which follows
the arrow, and acts as the ambassador of this message.
The satisfying annual result posted in 2004 is a reflection of change. Group operating
profit before risk provisions was EUR 1.532 billion, thus matching the previous year’s
level. Particularly pleasing is the improvement of operating profit by 73.7 percent from
9
Dr. Rudolf Hanisch
Theo Harnischmacher
born in 1946,
Deputy of the Chairman,
Member of the Board of Management
since 2000, Business Areas
Financial Institutions & Sovereigns (worldwide),
Real Estate (worldwide),
Bayerische Landesbodenkreditanstalt
born in 1946,
Deputy of the Chairman,
since 2002, Business Areas
Savings Banks and Bavarian Market,
LBS Bayern
EUR 547 million to EUR 950 million. The consistent streamlining of the credit and participations portfolios in recent years has clearly borne fruit. During 2004 as well, the
credit portfolio continued to be purged of risk clusters and concentration risks, within
reasonable legal and economic bounds. Our strategic realignment, increasing volumes
of new business with our customers and cooperative market development with the
savings banks are already reflected to a degree in our 2004 annual accounts.
In the future, the EU state aid proceedings regarding housing construction funds will
no longer affect our annual results. On 20 October 2004, the European Commission
reached a decision in respect of the interest accrued on the housing construction
funds transferred by the Free State of Bavaria to BayernLB. Pursuant to this decision,
BayernLB was to pay an absolute restitution claim of EUR 320 million. This amount was
charged as an extraordinary expense in the 2004 annual accounts and provisioned for.
We have continued in our strategic development of BayernLB as a wholesale bank that
focuses on certain core regions and collaborates closely with the Bavarian savings
banks and partners of the Sparkassen-Finanzgruppe. Market development activities
are supplemented by subsidiaries with strategic significance for the BayernLB Group,
namely DKB, SaarLB, MKB, LBLux and LBSwiss. These companies are entrusted with a
considerable share of the Group’s retail activities. Building on our core competences,
we aim to grow in our target markets: primarily Bavaria and its bordering regions.
The credit portfolio is consistently oriented toward profit and risk aspects. We intend
to make greater efforts to convey our brand values, namely Bavarian élan, confidence
and proximity, to our customers.
10
Stefan W. Ropers
Dr. Ralph Schmidt
Dieter Burgmer
born in 1955,
since 2002, Business Area
Corporates (worldwide)
born in 1962,
Senior Executive Vice President,
of Management tasks
Corporates Services (worldwide)
since 2004
born in 1960,
since 2001, Business Area
Global Markets (worldwide)
In 2004, we continued to expand our cooperative market development with the Bavarian
savings banks. Ninety-four percent of the savings banks have signed individual agreements as a framework for closer collaboration with BayernLB.
In the context of the newly drawn-up strategy for Eastern Europe, we as a Group are
exploiting the opportunities offered by the growth markets of Central and Eastern
Europe. We support the savings banks by offering superior processing competences,
and can boast a network of local cooperative partners in the core markets. We are
continuing to develop this network.
We have consistently pursued our aim of realigning the participations portfolio, by disposing of our 46.4 percent participation in the Bank für Arbeit und Wirtschaft (BAWAG)
and 10 percent participation in the Südtiroler Sparkasse. We also sold the Austrian
travel agency chain Ruefa.
In order to fund our planned growth, as well as securing our A + target rating, we
intend to carry out a nominal capital increase in two tranches (2005 and 2006). The
total volume of the transaction will be EUR 640 million. The Free State of Bavaria and
the Association of Bavarian Savings Banks (SVB) will contribute 50 percent each. The
planned capital increase is a clear demonstration of the owners’ loyalty to the Bank.
As another major factor supporting the Bank’s competitiveness, dated capital
contributions held by the Bank’s owners are to be converted to undated ones without
accompanying calling rights.
Moreover, the Bavarian savings banks and BayernLB are planning to set up a regional
guarantee fund. This fund will be an integral element of the close cooperation
between the two partners.
11
Dr. Gerhard Gribkowsky
born in 1958,
Risk Office (worldwide)
In transforming its business model, BayernLB is right on track for being awarded the
A + target rating by all major rating agencies once the guarantee mechanisms have
ceased to apply. We will continue to focus on the market – together with the Bavarian
savings banks – and to implement our new strategy in a consistent manner. We are
confident that, together with our staff and owners, we can achieve our goals.
Sincerely,
Bayerische Landesbank (BayernLB)
Board of Management
Werner Schmidt
Dr. Rudolf Hanisch
Theo Harnischmacher
Chairman of the Board
of Management
Dieter Burgmer
Stefan W. Ropers
Dr. Ralph Schmidt
Senior Executive Vice President,
entrusted with Board of Management tasks
12
Profile
BayernLB was founded in 1972 with the merger of Landesbodenkreditanstalt and
Bayerische Gemeindebank. It is one of the largest banks in Germany and has the
legal status “corporation established under public law”. BayernLB is (indirectly) owned
by the Free State of Bavaria and the Association of Bavarian Savings Banks, each with
a 50 percent stake. This follows the transfer in 2002 of their shares in BayernLB to
BayernLB Holding AG, in exchange for which the Free State of Bavaria and the Association of Bavarian Savings Banks each took a 50 percent holding in BayernLB Holding AG.
BayernLB Holding AG is entrusted with the duties of the sole shareholder of BayernLB
and is not a bank itself (see diagram of the holding structure). BayernLB is subject to
legal supervision by the Bavarian State Ministries of Finance and the Interior as well as
financial supervision by the German Financial Supervisory Authority (BaFin) and the
Deutsche Bundesbank.
BayernLB is the central bank to the Bavarian savings banks and an important member
of the Sparkassen-Finanzgruppe Bayern. It is a service provider for the partner institutes of the Sparkassen-Finanzgruppe, acting as their network bank and enabling
them, with its support and product policies, to exploit existing market potential in
the Bavarian market together with the savings banks. In addition, BayernLB functions
as a principal bank to the Free State of Bavaria and actively supports national and
local governments, financial institutions, medium and large companies and real estate
customers. BayernLB is one of the leading issuers of bonds in Germany. Bayerische
Landesbodenkreditanstalt (Labo) and Bayerische Landesbausparkasse (LBS), both
legally dependent institutions, are integral parts of the Bank. BayernLB is a financial
service provider with a presence in selected global financial centres. It focuses on the
core market of Bavaria and the neighbouring regions.
Expansion of the Savings Bank Central Bank function, and with it the further intensification of joint marketing activities with the Bavarian savings banks, is an important
pillar of BayernLB’s business model. For this purpose a number of agreements were
signed by the individual savings banks and BayernLB which will increase their economic efficiency by providing for jointly-developed solutions while strengthening
the market position of the Sparkassen-Finanzgruppe Bayern.
13
Sparkassen-Finanzgruppe
Market leader in Bavaria
• Aggregated total assets in banking business: EUR 486 billion
• Aggregated premium volume of insurance business: EUR 5.2 billion
• Staff: 65,741
BayernLB
82 savings banks
Consolidated total assets:
EUR 333 billion
Staff: Bank: 5,047 Group: 8,940
Bayerische
Landesbausparkasse
Portfolio of 2 million building-saving
contracts with a volume of
EUR 44 billion
Bayerische
Loan volume: EUR 15 billion
Subsidised contracts: 15,438 homes
Part of the BayernLB Group
• Deutsche Kreditbank
Aktiengesellschaft
• Landesbank Saar
• Banque LBLux S. A.
• MKB, Hungary
• LB(Swiss)
Versicherungskammer Bayern
Total assets: EUR 153 billion
Premium volume: EUR 5.2 billion
Staff: 50,451
• Branches: 2,799
• Self-service branches: 242
• Advisory centres: 287
Staff: 6,350
Investment portfolio: EUR 26.6 billion
Operating profit: EUR 1.6 billion
Tax burden: EUR 0.4 billion
Customer advances: EUR 95 billion
Customer deposits: EUR 115 billion
Financing potential
• Approx. 40% of SMEs
• Two thirds of trade businesses
• Every second start-up
Sparkassen-Immobilien
Vermittlungs GmbH & Co. KG
Volume of business brokered:
EUR 1 billion
DekaBank
Share of Bavarian savings bank
organisation: 9.6% including share
of BayernLB.
Consolidated total assets:
EUR 115 billion
Germany’s largest public-sector
insurance provider
Market leader in Bavaria and the
Palatinate
Part of the VKB Group
• Bayerische Landesbrandversicherung
• Bayerischer Versicherungsverband
• Bayern-Versicherung
• Bayerische Beamtenkrankenkasse
• Union Krankenversicherung
• Saarland Feuerversicherung
• Saarland Lebensversicherung
• Feuersozietät Berlin Brandenburg
• Öffentliche Lebensversicherung
Berlin Brandenburg
Deutsche Sparkassen Leasing
Share of Bavarian savings banks: 13 %
Sparkassenverband Bayern
• Association members: 82 Bavarian savings banks and their guarantors
• Joint owners and guarantors of BayernLB together with the Free State of Bavaria
• Owners and guarantors of Versicherungskammer Bayern
14
Board of Administration*
Prof. Dr. Kurt Faltlhauser
Alois Hagl
Chairman
Savings Bank Director
State Minister
Chairman of the Board of Directors
Bavarian State Ministry of Finance
of Sparkasse im Landkreis Schwandorf
Munich
Chief Representative of the Bavarian
savings banks
Dr. Siegfried Naser
Schwandorf
First Vice Chairman
Executive President of the Association
Georg Schmid
of Bavarian Savings Banks
Permanent Secretary
Munich
Bavarian State Ministry of the Interior
Munich
Dr. Günther Beckstein
Second Vice Chairman
Klaus Weigert
State Minister
Deputy Secretary
Munich
Munich
Hansjörg Christmann
Professor Hubert Weiler
Third Vice Chairman
Chief District Administrator
First President of the Association
of Sparkasse Nürnberg
Nuremberg
Dachau
Dr. Otto Wiesheu
Josef Deimer
State Minister
Lord Mayor
Bavarian State Ministry
President of the Bayerische Städtetag
of Economic Affairs,
Landshut
Infrastructure, Transport
and Technology
Munich
* For the period from  January to  December 
Financial Statements Audit Committee*
Professor Hubert Weiler
Chairman
State Minister
Munich
Nuremberg
Dr. Siegfried Naser
Dr. Otto Wiesheu
Deputy Chairman
State Minister
Bavarian State Ministry of Economic
Affairs, Infrastructure, Transport and
Munich
Technology
Munich
Alois Hagl
savings banks
Schwandorf
Georg Schmid
Permanent Secretary
Munich
15
16
General Meeting*
Dr. Siegfried Naser
Heinrich Frey
Chairman
of the District of Starnberg
Munich
Martin Haf
Deputy Chairman
of Sparkasse Allgäu
State Minister
Kempten
Munich
Alois Hagl
Wolfgang Bayerl
(with effect from 1 November 2004)
First Lord Mayor of the City
of Neunburg v. Wald
savings banks
Schwandorf
State Minister
Rudolf Heiler
First Lord Mayor
of the Interior
of the City of Grafing
Munich
Dr. Erhard Hübener
Ludwig Bronold
of Sparkasse Miltenberg-Obernburg
of Kreissparkasse Mühldorf
Miltenberg
Mühldorf
Dr. Jörg Jung
Under-secretary
First President of the Association
of the Interior
Munich
Dachau
Gebhard Kaiser
Wolfgang Dandorfer
Lord Mayor
of the District of Sonthofen
of the City of Amberg
Norbert Kastner
Helmut Reich
Lord Mayor
of the City of Coburg
of the District of Lauf a.d. Pegnitz
Wolfgang Kelsch
Dr. Klaus-Jürgen Scherr
First Lord Mayor
of the City of Wendelstein
of Sparkasse Kronach-Ludwigsstadt
Andreas Knie
Kronach
(until 31 October 2004)
Lord Mayor
Dr. Werner Schnappauf
of the City of Kaufbeuren
State Minister
Dr. Joachim Kormann
for Environment, Health and
Deputy Secretary
Consumer Protection
Munich
of Economic Affairs, Infrastructure,
Transport and Technology
Dr. Walter Schön
Munich
Deputy Secretary
Bavarian State Chancellery
Harald Leitherer
Munich
of the District of Schweinfurt
Christa Stewens
State Minister
Franz Meyer
Bavarian State Ministry of Employment
Permanent Secretary
and Social Order, the Family and Women
Munich
of Finance
Munich
Dr. Reinhard Wieczorek
Councillor
Josef Miller
of the City of Munich
State Minister
Munich
of Agriculture and Forestry
Friedrich Wimberger
Munich
Matthias Nester
of Sparkasse Landshut
Landshut
of Sparkasse Mittelfranken-Süd
Roth
17
Responsibility is the foundation of every action. Assuming
responsibility means meeting challenges, making the right
decisions and paying attention to detail. Whoever does this
with élan and joy knows how to appreciate the great feeling
of knowing what he is doing.
You truly have to seek it in order
to find it: responsibility.
 Economic situation
22
Economic situation
Economy:
No stable uptrend yet
In 2004, the German economy finally transcended an unremitting three-year slump.
Real gross domestic product increased by 1.6 percent. The economy was characterised
by two opposing trends: exports experienced a brisk upswing (+ 8.2 percent), while
domestic demand was sluggish (+ 0.5 percent). Household consumption stagnated,
the rise in corporate investment fell far short of estimates, while the construction
industry experienced a recession for the ninth successive year. The still lacklustre
economic trend was reflected in the high number of corporate failures. In 2004, there
were almost 40,000 corporate insolvencies, with losses totalling more than EUR 30 billion. Experience shows that a surge of corporate failures only tends to recede during
the early stages of an upturn. This means that brighter prospects can only be anticipated from 2005.
} Strong demand
from abroad boosts
economic growth
In 2004, for the first time in several years, Germany was able to close ranks with its
neighbours in the euro area in terms of economic growth. This was only achievable,
however, thanks to strong demand from abroad. It was also partly due to the higher
number of working days. All in all, the pace of recovery in 2004 remained slack in
comparison to previous rebound phases. In particular, it was insufficient to mitigate
the serious problems evident in the labour market and the public sector.
The revival of the global economy was not least attributable to strong growth in the
United States. With a growth rate of 4.4. percent, the US economy once again began
to gather momentum. Besides the USA, the South East Asian economies were another
driving force of global trade, with China in the lead. The Western European economy
also experienced a rebound during 2004. However, at 2.0 percent, the pace was significantly slower than that of the global economy. The global economic upswing was particularly remarkable given the fact that economic activity was curbed by the increase in
the price of crude oil. High prices can also be expected in the medium-term due to the
strong upswing in demand for crude oil, as well as bottlenecks in its production and
processing.
} Hike in oil prices
curbs private
consumption
In Germany, the fall in purchasing power caused by increased oil prices acted as a
brake on private consumption. Household consumption, the most significant constituent of the domestic product, was therefore disappointing once again. An extremely
unfavourable labour market was a further strain on the economy. Although the labour
force actually increased by 271,000 members over the course of the year, this was
countered by a fall of 337,000 in the number of positions subject to social security
contributions. The average unemployment level for 2004 remained very high, totalling
4.38 million.
Low growth rates in consumer income are principally reflected in the subdued private
consumption of recent years. In addition, concerns relating to job and pension security
have increased. The spirited debate surrounding the reform of the labour market
Economic situation
23
(Hartz IV) contributed to an overall feeling of despondency. For this reason, it was no
great surprise that 2004 again saw the private households tightening their belts. Stagnating consumer demand generated by private households remains a considerable
barrier to sustained economic recovery in Germany. In order for the economy to perk
up, the labour market situation will have to improve significantly, with a concomitant
increase in the level of employment.
The precarious situation of Germany’s public finances saw no improvement in 2004.
The public deficit stood at 3.7 percent in relation to gross domestic product, thereby
} Maastricht criteria
breached again
clearly breaching the upper limit as stipulated by the Maastricht Agreement for the
third time in a row. The fact that the government deficit remained unchanged despite
an improved economic situation in 2004 was primarily due to two factors. Firstly, if
there had been a stronger upswing driven by domestic demand, the export-driven
rebound in the economy would probably have had a more perceptible effect on the
public coffers. Secondly, the continuing difficulties of the public budget reflect the
extremely high unemployment level. On top of this, income tax was reduced at the
beginning of 2004.
On the capital markets, the year was marked by continued – albeit somewhat leisurely
– recovery of the equity markets, a surprising decline in interest rates in the second
half, and not least by a weak dollar.
The sharp rise in share prices perceptible from spring 2003 stalled at the beginning
of 2004, despite the fact that corporate earnings were on the up, exceeding the original expectations of market participants. A series of factors contributing to uncertainty
took centre stage, among them the terrorist attacks in Madrid and heightened fears
for the economy due to the hike in oil prices. This resulted in an increased risk premium. Towards year-end, the sentiment among investors began to brighten once
more: DAX, the German index of blue chip companies, closed 2004 with a good
7 percent growth.
From summer 2004, the bond markets too were affected by fears for the economy
arising from the massive increase in the price of crude oil. Investors did not interpret
the surge in oil prices as a risk factor for monetary stability, as they had in the past,
but rather as a threat to economic growth.
While the US Federal Reserve had already instigated a turnaround in interest rates
on the money market in summer 2004, and raised the Fed Funds Rate by 1 percent to
2.25 percent at year-end, the European Central Bank maintained a key lending rate of
2 percent over the whole of 2004. It has indicated, however, that its next move is likely
to be an interest rate increase. Moderate interest rate increases are expected from
mid-2005.
} Moods lift on the
equity market
24
Economic situation
Outlook for 2005
} Growth to remain
restrained in 2005
The global and domestic economic situations do not betoken a more sprightly rate of
recovery for Germany in 2005. Nor, however, is a slowdown anticipated, as forecasts
might at first seem to indicate. Adjusted by the lower number of working days in 2005,
the growth rate will remain more or less stable, at an expected 1.2 percent. This is still
too low to effect lasting improvement in the labour market or in the public sector.
In 2005, the global economy will no longer experience such a heady growth pace.
This applies equally to North America and Asia. Furthermore, appreciation of the euro
damages the price competitiveness of German suppliers. The outlook for domestic
demand remains mediocre, unless employment levels take off and companies restore
confidence in Germany’s industrial competitiveness. Thus, a self-sustaining upward
trend is not yet in store for Germany.
25
An open mind. Clarity. Inspiration. Individual solutions begin
with a good idea. Followed by many more – because thinking
through everything means thinking ahead. What will happen
tomorrow? And the day after that? The blueprints of today create
the foundation of tomorrow.
The source of incomparable
solutions: a wealth of ideas
 BayernLB – our company
Strategy
30
34
54
58
62
Our staff
78
82
30
BayernLB – our company
Strategy
In 2004, BayernLB consolidated its potential for successful market operation, while
laying the groundwork for the development of new strengths. The Bank is thus well
equipped to deal with the withdrawal of Gewährträgerhaftung (guarantee obligation)
and Anstaltslast (maintenance obligation) for new liabilities, effective as of 19 July 2005.
BayernLB’s business model
BayernLB is a wholesale bank that focuses on core regions and collaborates closely
with the Bavarian savings banks and other partners of the Sparkassen-Finanzgruppe.
Preliminary indications of the Bank’s future rating published in 2004 have confirmed
the wisdom of BayernLB’s strategic decisions. Fitch indicated an A+ rating; Standard &
Poor’s an A–. Moreover, Moody’s published an estimated A1 floor rating for the German Savings Bank Organisation.
Banking sector still faces daunting challenges
} BayernLB reinforces
product-related
and advisory competence in cooperation with Bavarian
savings banks
Withdrawal of the guarantee mechanisms entails changes in the competitive environment for landesbanks. However, this does not constitute the sole basis for BayernLB’s
decision to transform its business model. Rather, the market and competitive conditions for all banks in Germany have undergone a sea change. Germany’s sluggish
economy inspires only a limited degree of confidence. In addition, regulatory requirements (such as Basel II) and new accounting standards (IAS) must be implemented.
The increasing efficiency of information processing systems represents one of the
driving factors behind competitive dynamics throughout the entire banking sector.
Market transparency is increasing, as is our customers’ demand for product-related
and advisory competence. This, in turn, has serious repercussions for the management
and controlling of the institutions. Small organisations with a large variety of customer
groups and products run the risk of excessive costs. Larger organisations with several
customer groups and products, on the other hand, may be jeopardised by excessive
complexity. Against this backdrop, BayernLB, together with the Bavarian savings banks,
can gain competitive advantages by focusing on customer relationships and products,
while optimising the routine processes of the savings banks and generating economies
of scale.
31
Key elements of the Bank’s strategy
BayernLB’s strategy is based on the following pillars, which, in turn, form the foundation for the specific strategies of the individual business areas:
• Clear commitment of the owners to their Bank
• Focus and efficiency
• Network of the Sparkassen-Finanzgruppe Bayern
• Performance of the participations portfolio
The overall strategy of the Bank is constantly revised and adapted to evolving market
and competitive conditions, so that BayernLB is ready to meet new challenges in good
time. In this way, the Bank safeguards its competitiveness and market position in the
long term.
Clear commitment of the owners to their Bank
On 31 December 2004, the Bank reported a core capital ratio of 8.3 percent and a total
equity ratio of 12.5 percent, in accordance with the German Banking Act (KWG). At
Group level, BayernLB thus has excellent capital resources. When valuing the (equity)
capital resources of a bank, rating agencies do not tend to concentrate on those
elements central to the regulatory definition. The quality of a bank’s equity capital is
crucial to the rating agencies’ assessment. In view of the Bank’s target rating of A+,
the Free State of Bavaria and the Association of Bavarian Savings Banks intend to carry
out a capital increase of EUR 640 million in two tranches (2005 and 2006). This clearly
demonstrates the commitment of the owners of BayernLB.
In addition to the Sparkassen-Finanzgruppe’s national cross-guarantee system, there
are plans to set up a regional guarantee fund to reinforce cooperation within the Sparkassen-Finanzgruppe in Bavaria. Amounting to EUR 1 billion, this fund will be endowed
by the Bavarian savings banks and by BayernLB in accordance with the respective riskweighted assets.
The national cross-guarantee system represents the unequivocal commitment of both
landesbanks and savings banks to the Sparkassen-Finanzgruppe. In 2004, the joint liability mechanisms were fully revised. In the future, call commitments will be more
strongly oriented toward the risk profile of each individual institute. Furthermore,
agreements have been reached regarding the introduction of early detection and risk
monitoring systems. The Bank will implement these measures in 2005 as planned.
Focus and efficiency
In its business model, BayernLB has focused on particular customer groups. The Bank’s
activities are primarily centred on its core markets of Bavaria and bordering regions.
In 2004, the planned optimisation of the network of foreign entities was concluded.
BayernLB will continue to serve its customers in selected economic and financial
centres around the world (London, Paris, Milan, New York, Hong Kong and Shanghai).
In autumn 2004, BayernLB resolved a new strategy for Eastern Europe. Opportunities
} Capital increase
planned for 2005
and 2006
32
offered by the growth region of Eastern Europe are to be selectively exploited. Market
development is to be carried out primarily from Munich. Moreover, the Bank plans to
expand its subsidiary MKB into attractive neighbouring markets.
} Restructuring
measures largely
implemented ahead
of plan during 2004
Essential measures aimed at focusing and boosting efficiency were implemented in
2004. Far-reaching changes to the Bank’s structural and procedural organisation last
year led to staff restructuring measures, resulting in the termination of around 1,000
jobs in 2003 and 2004. However, target figures were reached early, meaning that
restructuring could be brought to a close in 2004. Other personnel-specific measures
aimed at training and recruiting junior staff and rewarding top performers were
pursued.
Landesbausparkasse (LBS) and Landesbodenkreditanstalt (Labo), the Bank’s legally
dependent institutions, continue to conform their resources and costs to the market
and to the earnings situation. This also applies for subsidiaries of strategic significance
to the Group, namely DKB, MKB, SaarLB, Banque LBLux and LB (Swiss) Privatbank.
Network of the Sparkassen-Finanzgruppe Bayern
In December 2003 a master contract between the Association of Bavarian Savings
Banks and BayernLB was signed. This agreement regulates the framework conditions
for market development in cooperation with the savings banks as well as the establishment and use of joint centres of competence. On 1 February 2005, 76 of the 80 Bavarian
savings banks signed individual agreements governing cooperative market development and collaboration with the centres of competence. This shows that the development and expansion of the Sparkassen-Finanzgruppe Bayern network is on the
right track.
The 2004 joint “IT Bayern” project represents another important step in the cooperation of Bavarian savings banks and BayernLB with its dependent institutions Bayerische
Landesbausparkasse (LBS) and Bayerische Landesbodenkreditanstalt. The aim is to
bundle the information technology of the companies involved into IZB SOFT in order
to create a shared system house. The necessary legal and organisational requirements
for IT bundling will have been met by mid-2005. The next stage involves the step-bystep transfer of systems and applications. This process takes into consideration the
needs of day-to-day business and projects to be implemented.
Performance of the participations portfolio
The Bank’s participations are oriented towards and measured against clearly defined
strategic objectives. While the strategic participations serve primarily to support and
round off the Bank’s core activities, financial participations are acquired with the aim
of achieving a specific return on investment.
33
New marketing image
In the future, BayernLB’s strategic realignment will be reflected by its overall appearance, both within the Bank and on the market. The objective of the new marketing
image is to convey both BayernLB’s new values and its long-established strengths.
Three core values describe the Bank’s clear position:
• Bavarian élan: The powerful combination of innovation and tradition has not only
helped create Bavaria’s strong business climate, but is also the driving force behind
BayernLB.
• Confidence: This value expresses certainty, experience and reliability in dealings
with customers and business partners.
• Proximity: Together with the Bavarian savings banks, BayernLB’s proximity to the
market at a regional level is clear. Proximity also characterises the trust placed by
customers worldwide in BayernLB which has been created and maintained by longstanding relationships.
The Bank will communicate its position using the core message “Customised financial
solutions – made in Bayern”.
Debate on banking structures
BayernLB takes a definite standpoint on the ongoing debate over banking structures:
dismantling the “three-pillar model” would restrain competition. Economically and
sociopolitically harmful oligopolistic structures would materialise in the long term.
These would ultimately have a negative impact on Germany’s industrial competitiveness. An integral element of BayernLB’s business model involves ensuring that corporate and private customers in the Free State of Bavaria are provided with a full range
of national and international financial services. This is achieved in tandem with the
Bavarian savings banks. This procedure not only safeguards the clear commitment of
the Bank’s owners, but also constitutes a sociopolitical task. Cross-pillar mergers are
simply not an option for BayernLB. However, cross-pillar cooperation is conceivable,
as long as this involves non-competitive back office activities.
The debate over mergers between landesbanks, often picked up by the media, is not
expedient from the Bank’s point of view. This is due to implicit problems such as varying ownership structures, coupled with insufficient synergy potential as well as newly
incurred concentration risks. The parent-subsidiary model undertaken with SaarLB is
an exception to this rule. Synergy potential from large-scale bundling can be gleaned
equally from similar cooperative agreements.
In this environment, BayernLB will continue to revise its business model on an ongoing
basis. In this way, it will be able to continue on its successful trajectory in cooperation
with the savings banks, even against a backdrop of changing market and competitive
conditions.
} Definite “no” to
mergers between
landesbanks
34
Corporates
The Corporates Business Area manages business on a global scale, with large SME
customers in Germany as well as multinationals in the Bank’s core regions of Europe,
North America and Asia. The minimum sales volume of these customers is EUR 500 million in Germany, while our customers abroad generate EUR 2 billion and more in revenues. This business is based on long-standing customer relationships characterised by
trust, and is propelled by our wide range of products. In collaboration with customers
and product specialists at the Bank, our relationship managers design solutions for
traditional credit financing, special financing (export, project and trade financing,
leasing), payment transactions and all capital market and Treasury products.
New structure
} Cross-business
area cooperation
carried out
Strategic and organisational restructuring measures within the business area began to
bear fruit at the start of the second half of 2004. Sales activities were bolstered by the
implementation of the newly created Global Head positions, entrusted with international responsibility for the Corporate Banking and Structured Finance Divisions.
Collaboration with the Global Markets Business Area was further intensified. We offer
our customers financing solutions tailored to their specific needs, comprising everything from interest rate and currency instruments to hand-picked products from the
debt and equity markets.
During 2004, in the context of cooperation with the Financial Institutions & Sovereigns
Business Area, the Munich and London syndications desks were merged under joint
management. Thus, all of BayernLB’s expertise in this segment is brought together
and used to the benefit of the customer. Bundling European syndication activities has
allowed the Bank to gain more lead arranger mandates.
Development of the portfolio represented a key focus throughout 2004. This was due
to the strategic objective of streamlining the portfolio to the greatest degree possible
by year-end, as well as realigning BayernLB’s target portfolio. In addition to considerable enhancement of risk and profit profiles, expansion of the portfolio by acquiring
new business represented a focal point. As part of the consistent implementation of
the business area’s strategic objectives, enhancing the profitability of existing business
continued to be of major importance. The exit portfolio, created at the end of 2003,
was scaled down considerably, thereby exceeding target figures.
35
Key ratios of the business area
Gross income was generated in equal measures domestically and abroad. This illustrates the strong international orientation of the business area and the great importance attached to activities in the foreign markets. Great Britain, America and France
are among the strongest. In these markets, the Corporate Banking and Structured
Finance Divisions generated roughly 50 percent each of total income.
At around EUR 33 billion, risk positions were down by 14 percent in comparison to
2003. Net interest income also fell against 2003 as a consequence of this reduction in
risk assets. Net commission income remained more or less unchanged in comparison
to the previous year’s level.
Qualitative / structural enhancement of earnings, evident from the transactions carried
out in 2004, was a decisive factor in the success of the business area.
Specific examples
The following transactions exemplify the success in the corporate financing business
in 2004:
DaimlerChrysler
North America Corporation
Slovenské Elektrárne
Edeka Zentrale AG & Co. KG
Hafslund
1,000,000,000 Euro
Benchmark Bond
350,000,000 Euro
Revolving Credit and Term
Loan Facility
600,000,000 Euro
Term Loan and Revolving
Credit Facility
400,000,000 Euro
Dual Currency Revolving
Credit Facility
Joint Bookrunner
Mandated Lead Arranger
January 2004
April 2004
June 2004
June 2004
Corporate Banking
In 2004, margins in credit business experienced increased pressure. In cases where a
margin commensurate with risk would have been impossible to achieve, the transaction was simply not pursued. Complex structured loans offered as part of all-in-one
financing solutions represented a core focus, while using the credit product as a strategic facility (or anchor) was also important. All in all, cross-selling potential arising from
customer relationships was crucial in the activities of the business area, particularly
with regard to capital market products or the range of structured special financing
instruments.
In 2004, the business area successfully transformed itself from being a simple lender
to a prominent provider of structured and arranged syndicated loans. Thus, on the
domestic market, BayernLB was mandated lead arranger for Wacker Chemie GmbH’s
EUR 200 million syndicated credit facility, while it acted as arranger / syndicated agent
for a revolving credit facility with a volume of USD 200 million completed by the
US-based Calpine Generating Co., LLC.
} Cross-selling
activities reinforced
36
Structured Finance
} Lead arranger
position expanded
BayernLB offers structured finance solutions from almost all product lines at a national
and international level.
In 2004, project financing operations were particularly successful. Income increased
by approximately 28 percent in comparison to 2003, clearly illustrating our market
penetration and acceptance. The success of the project credit facilities totalling
USD 950 million arranged with Egyptian LNG El Behera Natural Gas Liquefaction
Company, S.A.E., is further evidence of our strong market position. The Bank was
international mandated lead arranger for this transaction. Project financing operations in Munich also demonstrated the Bank’s competence in expanding its position
as mandated lead arranger.
Of particularly benefit for export financing was 2004’s positive development of the
important supply markets of Western European machinery and equipment manufacturers. Demand increased in countries such as Russia, Iran, Bulgaria and Romania.
The steel and energy industries experienced what could almost be described as
a boom. These positive trends meant that record volumes of new business were
achieved. Three advisory agreements reached in Russia and Azerbaijan raised the
Bank’s profile.
Leasing and factoring business picked up in 2004, despite challenging conditions
caused by sharp declines in real estate leasing and the discontinuation of US crossborder leasing. This revival was due to the renewed vigour applied to the acquisition
of leasing customers, as well as the Bank’s strong position in municipal leasing and
factoring. New business was increased by 51 percent year on year. Total disbursements
increased by 45 percent over the same period, while follow-up financing rose by
26 percent.
In 2004, asset-backed aircraft financing operations were marked by subdued demand
due to adverse market conditions. In addition to a new transaction aimed towards
market positioning, restructuring of difficult exposures was also a key focus. The outplacement of 29 aircraft financing transactions in Asia, totalling around USD 190 million, was one of the success stories of the year.
Outlook
Reaching our ambitious earnings targets while maintaining an acceptable risk profile
represents our top priority. With the launch of a consistent sales initiative, both at
home and abroad, our objective is to gain new customers, while offering a product
range that is specifically geared to their needs. Solution-oriented all-in-one approaches
remain a core focus. The opening of the German Centre and concomitant raising of the
Shanghai branch’s profile will lead to a significant reinforcement of our involvement in
China in 2005. In this market, we offer both German SMEs and multinationals solutions
that are tailored to their needs, by virtue of a customised product range.
37
Financial Institutions & Sovereigns
BayernLB’s Financial Institutions and Sovereigns Business Area manages business relations worldwide with banks, insurance companies and other institutional customers,
as well as government and non-Bavarian municipal customers. This low-risk customer
group accounts for approximately half of BayernLB’s total portfolio. The lending business handled by this business area achieves a comparatively good return on capital
employed because low risk assets are required. These customers are also key partners
in our syndication, securities, refinancing and transaction businesses.
Earnings from new business were again increased in spite of unfavourable development of the market. Given the considerable pressure on interest margins, this was only
possible thanks to improved net commission income, strengthened cross-selling of
services and strong growth in the volume of new credit business.
Interbank business / loan syndication
Internationally syndicated loans reached new record volumes in the year under review.
High liquidity in the credit markets stimulated investment. This market environment
meant that margins and credit commissions came under considerable pressure. For
competitive reasons, the banks were also more prepared than previously to meet their
customers’ requests with regard to extended durations due to the low interest rate
level.
Against this backdrop, the Bank succeeded in maintaining the position held in previous
years in the syndication markets. Net commission income improved slightly due to
increased total volume. The number of lead management positions rose by more than
a third to 44 mandates.
Central and Eastern European borrowers were a key regional focus. Following EU
accession in May, some government and bank customers in this region were able to
exploit the relaxed regulatory equity requirements in order to procure new loans with
improved terms. Once again, financial service providers constituted the main sector
focus in both number and volume for the Bank’s syndication business. The well-known
trade magazine “EUROWeek” awarded BayernLB one of the two first places in the category “Best arranger for loans for financial institutions” for the third time.
Moreover, more lead management positions for corporate financing were gained
thanks to the joint market development (centre of competence) of BayernLB’s syndication units in Munich and London.
In 2004, the Bank further extended its network of correspondent banks. The main
focus was on public-sector banking groups and foreign savings bank organisations.
In particular, the cooperation agreement that the Bank has held with the Swiss cantonal banks for over a decade continues to be revitalised in several product sectors.
Following termination of its equity participation, the Bank nonetheless continued its
collaboration with the Austrian Bank für Arbeit und Wirtschaft (BAWAG) with a cooperation agreement. A further cooperation agreement was made with the Spanish savings
} Syndication
business focuses
on financial
institutions
38
} Cooperation
agreement with
the Spanish savings
banks
banks in order to reinforce collaboration. As with other agreements, the aim of the
agreement with the Spanish savings bank association CECA (Confederación Española
de Cajas de Ahorro) is to expand the market for the Bank’s own financing products by
exploiting its partners’ placement and sales facilities. Commercial products that had
previously been little used internationally, even within the EU, (e.g. direct debiting
systems) are to be made accessible to the institutions’ customers by means of system
networking. Furthermore, the agreement aims to assist customers of the savings
banks and of BayernLB in their business activities in the relevant partner country by
creating contacts there with trading partners, authorities, development institutions
and advisors.
Links with correspondent banks were further exploited to support primarily the savings
banks’ SME customers in setting up business relationships with international partners.
In addition, the EuropaService of the Sparkassen-Finanzgruppe Bayern (EIC), coordinated by the Bank, ensures that customer wishes are entered into the electronic network of the European Commission, the Business Cooperation Database.
Sovereigns business / support programmes
In 2004, the German public sector deficit again exceeded the previous year’s figure,
reaching approx. EUR 80 billion. This was primarily due to the still sluggish economy.
Financing instruments, also at länder level, were increasingly shifted from schuldschein notes to securities in order to expand the international investor base.
BayernLB used its expertise as a lead player in the placement of securities issues for
various different länder bonds. In government credit business, the Bank acted in a
conservative manner due to the difficult market environment, particularly noticeable
in the second half of 2004. For this reason, the volume of new business was halved in
comparison with the previous year.
Demand for loans from municipal institutions outside Bavaria remained at a high level
in spite of the investor restraint displayed by the central, regional and local authorities.
This particularly affected the need for cash advances. Customers continued to take
advantage of interest rates staying low to lock into interest rates long-term and to take
early interest rate hedging measures. The Bank maintained the previous year’s high
volume of new business and renewals.
Abroad, and particularly in New York, the Bank reinforced its strong market position
in the area of business with central, regional and local authorities. Due to enhanced
funding opportunities through public-sector covered bonds (pfandbriefe), there were
staff increases in this sector at branch level .
Subsidised loan programmes were again issued with the aim of developing the Bavarian economy, using the Free State of Bavaria’s share of the Bank’s profits and the State’s
budget. The majority of the subsidised development funds was used for municipal
water and sewage measures; just under a third was used for the purchase of existing
housing stock and student residences. The Bank also distributed subsidies for publicsector development measures under the agricultural investment development programme, and allocated interest subsidies in the context of the agricultural credit programme.
Institutional customers
BayernLB is one of the core banks for leading institutional investors. Insurers and foundations are among the Bank’s major investors. In addition to traditional fixed interest
products, structured products enjoyed increased favour due to the fact that interest
rates remained low on the capital markets. However, credit business with this customer
group was also extended considerably in the period under review, particularly through
the further expansion of letter-of-credit business.
Outlook
This business area is well equipped to deal with the challenges arising from the withdrawal of the Gewährträgerhaftung (guarantee obligation). In credit business with
financial institutions, the Bank remains in a strong competitive position thanks to its
wide variety of funding options. The leading global position gained in recent years
in syndicated underwriting business with these customers is to be further reinforced.
New competitors will enter the market for business with central, regional and local
authorities due to the planned legislation to extend the scope of covered bond (pfandbrief) funding. It will therefore require particular effort to expand this segment further.
39
40
Real Estate
The Real Estate Business Area serves private and institutional investors, project developers, residential property developers, retail customers and housing companies. The
product range spans everything from traditional, long-term loans to the various types
of structured financing instruments. Germany, Western and Eastern Europe and North
America are the target regions. Together with its specialised subsidiaries, the business
area offers comprehensive expertise in practically all areas of real estate business. Real
Estate’s prime objective is to make its customers’ ideas reality using innovative solutions. In doing this, the business area makes a solid contribution to the Bank’s overall
performance.
Commercial real estate financing
With a view to ensuring a sound level of earnings, the business area has focused on
expanding low-risk, high-yield long-term commercial real estate financing both at
home and abroad, in line with the target portfolio. Overall, real estate financing continued to be marked by a difficult, fiercely competitive market environment. As in the
previous year, the unfavourable market environment meant that relatively few large
construction projects were launched by investors in Germany, while some existent
large-scale plans were actually shelved. Pleasingly, though, new business volumes in
domestic commercial real estate financing matched those of the previous year. Financing activities were mainly focused on office, retail and special real estate, with consistently risk-oriented margins. In the context of cooperation with the savings banks, in
commercial business there was increased demand for expertise with regard to special
real estate, as well as qualified advisory services such as property valuation and real
estate rating.
New business: domestic and foreign
48 %
52 %
Portfolio structure: domestic and foreign
70 %
Domestic
Foreign
30 %
In the year under review, the business area further reinforced its real estate activities
abroad, in line with the target portfolio. Here, the key focus was providing both German and internationally operating real estate companies with support in foreign mar-
41
} International real
estate activities
reinforced
kets. The foreign entities also made a major contribution to the success of the business
area, thanks to targeted regional market development.
All in all, there was a perceptible market trend towards high-volume transactions
involving international real estate funds. The Real Estate Business Area, for instance,
concluded a transaction with a volume of EUR 230 million, involving a fund structured
according to the capital investment act. This fund invests in the European and American real estate markets on behalf of an institutional investor. This type of investment
and financing structure is also enjoying increased demand.
In addition to its core countries for international business (USA, Great Britain, France,
Switzerland and Spain), financing activities were pursued for the first time in Sweden
and Canada in the year under review. Scandinavia is also set to become a target market
for sales activities. Moreover, as part of the Bank’s Eastern European strategy, the Real
Estate Business Area will extend the scope of its business activities to include the EU
accession countries, including the Hungarian subsidiary bank MKB.
In order to meet our customers’ diverse needs, the business area, in tandem with the
Global Markets Division, is turning increasingly toward innovative financing products.
These include hedging instruments to secure exchange and interest rates, structures
incorporating mezzanine elements, or B-notes serving as participations in real estate
financing tranches secured by lower-ranking collateral. In 2004, the business area was
involved in B-note transactions both at the New York foreign entity and in Munich.
Thus, as a member of an international banking syndicate, BayernLB was involved in
funding the acquisition of a large well-known property in New York with a total transaction volume of more than USD 1 billion. This was achieved by interlinking senior and
junior tranches with varying structures.
Residential real estate financing
In residential real estate, sentiment in 2004 was clouded by the weak overall economic
trend. In financing to completion, pricing became the main factor in cut-throat competition, while the overall financing volume was lower. The unpredictability of legislation
governing tax and rent continues to represent an obstacle to capital investment.
Debate surrounding the abolition of the home ownership subsidy, on the other hand,
did not have any perceptible impact on demand. All in all, the Real Estate Business Area
achieved its goals in residential real estate financing.
} Tax and rent
legislation thwarts
investment
42
Activities of the Bank’s subsidiaries
LBImmowert, a real estate valuation subsidiary owned jointly with Helaba, enjoyed positive development in its second year of existence, and continued on its course of moderate growth. For the first time, the subsidiary reported considerable demand for its
services from companies outside the BayernLB and Helaba groups.
REAL I.S. AG is an investment company which is wholly owned by BayernLB. In collaboration with partner companies, it offers a comprehensive range of products including
well-established funds, as well as managing international institutional real estate portfolios. In 2004, equity trading was almost doubled in comparison to the previous year,
reaching a volume of EUR 307 million. In 2004, REAL I.S. was once again able to offer
attractive products to savings banks and security-oriented institutional investors for
their own investment activities, namely with its BGV Bayerische Grundvermögen II
product, as well as LB ImmoInvest’s special funds (REAL I.S.-Beteiligungsgesellschaft).
Property development and real estate value creation (real estate management consulting) for savings banks and municipalities complete the range of services offered by the
company. Amongst other initiatives, REAL I.S.’s real estate benchmarking projects for
savings banks (involving 70 savings banks) and municipalities (69 participants) created
a unique data basis covering the whole of Germany.
In 2005, REAL I.S. will continue to expand its separate product range targeting the Sparkassen-Finanzgruppe, and expects its placement volume to increase significantly.
Outlook
In 2005, the Real Estate Business Area anticipates a slight rebound of the domestic real
estate market, while steady development is expected for the foreign real estate markets. Key focuses for 2005 include the use of innovative financing products, securing
arranger positions for large financing transactions, as well as further reinforcement of
cross-selling activities. The Real Estate Business Area thus considers real estate portfolio
financing an attractive market segment in which it can display to advantage its advisory
and financing expertise. Financing products enjoy increasing demand, for example,
from large national housing construction companies, while large international investors are showing ever more interest in residential property portfolios within Germany.
In 2005, the business area also intends to reinforce cooperation with the savings banks
in the domain of real estate. The cultivation of specific target customers will represent
a joint focus, while the continuing expansion of advisory services throughout the
entire range of the Bank’s services will represent another key priority.
43
Global Markets
The Global Markets Business Area bundles all primary and secondary money and capital market products: bonds, equities, money market instruments, foreign exchange
and energy and commodity derivatives. Global business activity is focused on Europe,
North America and Asia. In these markets, Global Markets advises and supports its target customers, which include savings banks, insurers, capital investment companies,
multinationals and corporate customers, as well as real estate customers.
Business development
Global Markets posted a satisfying result for 2004. The business area achieved this
largely by accurately predicting the trajectory of interest rates, exploiting the credit
margin trend, successfully managing the Bank’s position and marketing high-margin
products.
By developing new structured products, BayernLB was once again able to offer its
investors and customers high-yield solutions tailored to each particular risk profile.
The Bank reported high demand in the areas of financial engineering, structured share
issues for retail business and customer solutions for bond issues denominated in euro.
BayernLB’s strong reputation as a competent partner proved a key factor in the success
of client-driven business, with its twin offer of market-oriented prices combined with
high quality advice. BayernLB’s partners, the savings banks, were also able to use this
competence to their benefit for their own marketing activities.
Cross-selling potential was exploited to the full with multinational and SME customers.
This was also a result of the corporate franchise project carried out in tandem with the
Corporates Business Area.
In terms of organisation, the year continued to be marked by the restructuring of the
business area and the imminent withdrawal of the Gewährträgerhaftung (guarantee
obligation). London and Paris were fully integrated into Head Office structures, while
harmonisation of the technical platforms is right on target. The Toronto, Singapore
and Tokyo locations and the subsidiary Asia Pacific Ltd. were closed as planned. In
2004, BayernLB carried out a series of funding measures and steps aimed at preserving
liquidity. Thanks to these, the Bank will be in a strong position once the guarantee
obligation has ceased to apply for new liabilities.
Treasury
In order to guard against future liquidity risks and increased funding costs after the
withdrawal of the guarantee obligation and Anstaltslast (maintenance obligation), a
portfolio strategy was implemented for long-term funds on the liabilities side. In this
way, the Bank is ensuring that once the guarantee mechanisms no longer apply from
July 2005, it will still have access to sufficient liquidity for planned business activities at
all times.
} Sparkassen-Finanzgruppe places
tailored structured
products successfully
44
Demand for long-term investment products remained buoyant among domestic and
international investors. This gave the Bank access to funding on favourable terms. As in
the previous year, BayernLB continued to offer attractive structured interest rate and
equity products alongside tap issues.
} BayernLB prepared
for introduction
of new pfandbrief
legislation
In order to guarantee a funding source independent of issuer rating, the Bank set up
the technical parameters necessary to issue a greater number of AAA covered bonds
(pfandbriefe) following the introduction of the new pfandbrief legislation, expected to
come into force in mid-2005. This means that the requirements of the new legislation,
which are expected to be more stringent, are already being met today through the successful implementation of new software for managing and controlling the register of
cover.
New issues
Against the backdrop of a generally favourable market environment, BayernLB was
one of the leading tap issuers on the German and international capital markets in
2004, as in earlier years. New issues totalling over EUR 16 billion were placed under
the international issue programme. The 184 individual transactions were spread over
ten currencies. Besides the euro (11 billion in 2004), BayernLB once again conducted
transactions in other major currencies including the US dollar, Japanese yen, Swiss
franc and British pound. Bonds denominated in Canadian and Australian dollars,
Swedish krona, Norwegian krone and Hong Kong dollars represented another attractive alternative for investors.
2004 new issues volume by currency (in percent)
Other 1.5 %
CAD 2.0 %
JPY 2.2 %
CHF 2.4 %
GBP 10.3 %
EUR 56.6 %
USD 25.1 %
In January, the Bank started out in the jumbo benchmark bonds segment, issuing a
ten-year EUR 1.5 billion bond. This was followed by a seven-year issue with a total volume of EUR 1 billion in May. Both transactions were underwritten by an international
banking syndicate and placed in domestic and foreign markets. BayernLB increased
} BayernLB also
reports success in
foreign currency
markets
one of its outstanding jumbo pfandbriefe by EUR 250 million. The Bank was also active
in the foreign currency markets, issuing a number of jumbo bonds. These included a
seven-year CHF 500 million fixed-rate bond and a three-year “kangaroo bond” with a
total volume of AUD 325 million in the Australian domestic market. The Bank was once
again active in the Japanese domestic market, issuing a Uridashi bond totalling AUD
414 million. Two extendible notes were issued for the first time in the US market, representing a total volume of USD 3 billion.
Short-term interest rate products, foreign exchange, interest rate,
energy and commodity derivatives
In the face of volatile markets with dramatic interest rate fluctuations in the long-term
segment, coupled with erratic oil prices and the increased price of gold, our target customers were increasingly in need of comprehensive solutions. This demand was met by
concepts designed to fulfil our customers’ need for high yields, while attending to
financial, balance sheet structure and energy price management.
The increased volatility of exchange rates boosted business activity considerably. In client-driven business, especially with corporate customers, there was increased demand
for currency risk hedging. This was particularly the case for shorter durations. Eastern
European currencies are becoming increasingly important. In interbank foreign
exchange trading, BayernLB maintained a strong position in spite of changed market
conditions.
The shift from unsecured to secured short-term interest rate products was continued
successfully in 2004. The use of collateral for short-term interest rate products was
optimised by means of targeted collateral trading, special repo instruments (e.g. triparty repos) and bank-wide participation in the general collateral pooling project.
Corporate customers have a strong liquidity base. For this reason, they are increasingly
turning to CP investment, and show particular interest in ABS CP-programmes.
Equity markets
Consolidation in the international equity markets was the hot topic of 2004. Following
an encouraging start, growth expectations were brought to a sudden halt by turmoil in
the commodity markets. Growth was curbed especially by the increase in oil prices. In
the second half of the year, major fluctuations on the foreign exchange markets led
investors to flee to the bond markets. It was only in mid-November that the markets
began to rebound.
45
} Collateral use
optimised
46
New issue business fell far short of estimates in 2004. Instead, the focus was on other
types of capital market transaction. These included complex squeeze-outs (such as the
squeeze-out of EON Bayern AG) and capital increases (such as those carried out by
Lufthansa AG and SGL Carbon AG). Here, the Bank succeeded in positioning itself well.
In order to strengthen our competitive position and to benefit European issuers and
German private customers, a cooperative agreement was reached with five leading
landesbanks. In addition to an additive underwriting commitment, the agreement
facilitates the offer of European share issues to German private customers in line with
European prospectus guidelines.
Following their record performance in 2003, the success of structured retail products
continued in 2004. BayernLB’s status as product developer for the Bavarian savings
banks was further enhanced by 12 jumbo retail issues and various individual issues.
The Bank showed real innovation in expanding the product range, from pure equities
right up to interest rate and hybrid products. This trend is set to continue with the
issue of a family of certificates in 2005. Customer demand for plain vanilla options
showed healthy growth in 2004, with a concomitant increase in traded premium
volumes.
Retail issues
Period from June 2002
Name
Date
Volume (in EUR)
Current coupon
Golden-Goal-Bond
June 2002
92,092,000
5.00 %
Magic 10-Bond
November 2002
150,000,000
10.00 % 1
Catch-up-Bond
March 2003
250,000,000
10.00 %
Power Bond
May 2003
53,541,000
9.00 %
Catch-up-Bond w. Kick
July 2003
200,000,000
15.00 % 2
Oktoberfest-Bond
November 2003
427,692,000
1.00 % 3
smart-Bond
March 2004
200,000,000
0.66 %
Espresso-Bond
May 2004
200,000,000
1.00 %
smartXL
June 2004
62,000,000
4.80 %
Feuer & Flamme-Bond
August 2004
50,000,000
8.00 %
Genuss-Bond
October 2004
50,000,000
3.00 % 4
Sparfein-Bond
November 2004
100,000,000
4.50 %
Swiss Value-Bond
December 2004
25,000,000
Polar-Bond
March 2005
150,000,000
1 First determination date in third year of duration on 8 December 2004
2 “Catch-up-function”: interest income lost in the first year (7 %) can be caught up in the second year
(7 % + 8 % = 15 %)
3 First determination date in second year of duration on 7 February 2005
4 Minimum interest rate of 3 % upon matrity
5 No current return
5
6.00 %
47
Bond market
Issuers on the Euro capital market enjoyed a good year, ending with a boom in the
fourth quarter, triggered by the weakness of the US dollar. The low interest rate
policy favoured by the central banks had promoted a general surge of liquidity.
Against the backdrop of a sometimes considerable scarcity of offers, this meant that
spreads narrowed to historical lows. While burgeoning budget deficits resulted in
unabated issuing activity from public-sector issuers, there was a 40 percent decrease in
new corporate issues in comparison with 2003. The offer of corporate bonds shrank
further due to diminished activity in the M&A sector, the existence of alternative
sources of funding and measures aimed at consolidating or improving corporate rating. Given the low nominal interest rate level, investors either looked to the BBB sector
for yield opportunities, held, or turned increasingly toward durations of up to 30 years
(corporates: 20 years). Corporate investors, on the other hand, exploited the capital
market situation in order to buy back outstanding high-coupon bonds.
BayernLB was lead manager for 40 customer issues in 2004. This allowed the Bank to
both preserve and gain market share in public-sector issues as well as in the area of
arranging and drawing under MTN and CP programmes. Considerable headway was
made in expanding the pfandbrief / covered bond product at a national and international level. This included the issue and successful placement of the first covered bond
} BayernLB places
first Hungarianissued covered
bond and first
Bavarian savings
bank pfandbrief
from a Hungarian issuer – placed in HUF and EUR – as well as the first Bavarian savings
bank pfandbrief (Stadtsparkasse München, with a volume of EUR 150 million),
for which BayernLB was lead manager.
Particularly worthy of note was EUROweek’s decision to award both first and second
place in the category “Best sub-sovereign municipal bond – 2003” to BayernLB-managed issues: namely of a EUR 750 million 3 3/4 percent treasury note by the Free State
of Bavaria and a EUR 1 billion 4 1/4 percent bond by the Province of Quebec under
BayernLB’s lead management.
BayernLB’s lead management of a EUR 1 billion 4 1/8 percent bond with a duration
from 2004 to 2009 for DaimlerChrysler represented another important milestone in
2004 in terms of corporate bond issues. This placement was also completed successfully.
Business with asset backed securities (ABS) continued to be highly satisfactory for
BayernLB in 2004. The Bank is currently sponsoring five asset backed commercial
paper programmes (ABCPs) in Europe and the USA, whose activities include the purchase of receivables from customers. The programmes are funded on the capital market. At year-end, the Special Purpose Entities had a total of around of EUR 11.6 billion
outstanding ABCPs.
As one of the instigators of the true sale initiative (TSI) and one of the founding members of True Sale International GmbH, founded in May 2004, BayernLB, along with 12
other banks, contributes significantly to the expansion of the securitisation market in
Germany. The objective of the TSI is to create favourable conditions for true sale securitisation transactions. These conditions are already in place in other European countries
} As founding
member of TSI,
BayernLB develops
German securitisation market
48
and the USA. The first asset backed securities transaction in November 2004, certified
by TSI GmbH, represented a major step for the German securitisation market.
In client-driven securities and money market business, BayernLB was once again able
to support the Bavarian savings banks in the area of own securities. Structured securities products in particular enjoyed a pleasing pick-up in turnover. These products are
becoming increasingly important for the derivatives business of the savings banks.
In business with national investors, the focus shifted towards prime borrowers and
yield curves. Underwriting competence in this segment was considerably enhanced,
particularly in the areas of MTN drawings, euro investments and corporate bonds.
Bayern-Invest KAG
In 2004, there was a perceptible wait-and-see attitude in new special funds business,
due not least to lack of regulatory clarity. With assets totalling around EUR 15 billion
under its management, Bayern-Invest was more than capable of maintaining its position in a challenging market environment. This was the case for both special funds
business and institutional asset management.
The increased demands of institutional investors were met thanks to enhanced strategic focus in the areas of products and services. New mandates were gained in particular through the asset allocation advisory service for savings banks and other institutional investors.
The product range was expanded thanks to cooperation with external partners and
enhancement of the Bank’s own core competencies in the field of asset management.
In institutional asset management, Bayern-Invest expects the “Master-KAG” concept to
capture two thirds of the overall special funds market in the medium term. With its
“Service-KAG” solutions, Bayern-Invest has identified and reacted to changes in the
market. The investment modernisation legislation which came into force on 1 January
2004 incorporates a certain degree of facilitation and improvement for capital investment companies when it comes to securing meaningful solutions for investors.
Bayern LB International Fund Management S.A.
Bayern LB International Fund Management S.A. is a Luxembourg-based capital investment company that issues and manages publicly offered funds in line with UCITS
guidelines. As at 31 December 2004, Bayern LB International Fund Management S.A.
managed a total of 23 publicly offered funds under three structures, with assets totalling EUR 828 million. During the calendar year, the volume of funds managed by the
company rose by EUR 79 million (an increase of 11 %).
Outlook
The objectives for 2005 are, firstly, a significant expansion of client-driven business,
to be achieved by exploiting existing customer potential, and, secondly, the acquisition
of new customers and mandates. The focus will be on structured products, interest
rate, energy and commodity derivatives and credit derivatives, as well as the implementation of capital measures in primary market business.
BayernLB will tackle strong competition in the area of client-driven business by launching new products onto the market (e.g. structured equity products), adopting the
advisory approaches developed during 2004 (e.g. value research products) and implementing new funding concepts (e.g. ABS). The Bank will continue to exploit cross-selling potential in a consistent manner, namely by transferring its successful franchise
approach to other customer groups such as savings banks, institutional investors and
real estate customers.
The market development strategies resolved for Asia and North America due to the
transformation of the Global Markets Business Area will continue to be pursued consistently in 2005, as will the harmonisation of technical platforms.
Global Markets Asia will focus more strongly on customers in this region, while accompanying its customers in their expansion on the Chinese market. In order to offset
earnings shortfalls following the withdrawal of the guarantee obligation for new liabilities, Global Markets will expand client-driven business (e.g. ABS) in North America.
49
50
Savings Banks and Bavarian Market
One of the integral strategy principles of BayernLB’s new business model is an even
stronger positioning as a network bank within the Sparkassen-Finanzgruppe Bayern.
The Savings Banks and Bavarian Market Business Area drives and coordinates collaboration within this cooperative framework throughout the Group. The business area
serves and supports the Bavarian savings banks in their various roles as customers,
sales partners and service partners. It also works in harmony with the Bavarian savings
banks to serve and support their customers in turn. Further tasks include jointly advising and supporting the Bavarian local governments customer group. The business area
assumes a sales function for all business with Bavarian SME customers. From 2005,
retail business and card business are to be added to this scope of responsibility. In
2004, cooperation with the Bavarian savings banks was optimised as planned, with a
view to safeguarding and further developing the market and brand positions of the
Sparkassen-Finanzgruppe Bayern. Strengthening promising product segments and
customer groups has been a prime objective of the business area in the past, and
continues to be a top priority today, as does the provision of a comprehensive range
of national and international financial services to the benefit of the Bavarian economy,
municipalities and private customers. In addition to the framework agreement between
the Association of Bavarian Savings Banks (SVB) and BayernLB, a series of individual
bilateral agreements with the Bavarian savings banks form the basis of close and
binding cooperation.
Optimisation of cooperation within the Sparkassen-Finanzgruppe
The development of strategies, services and processes conjointly with specialists from
the Bavarian savings banks and the Association of Bavarian Savings Banks (SVB) constitutes an important means of optimising cooperation within the Sparkassen-Finanzgruppe Bayern. This development is carried out in the Bank’s various centres of competence dedicated to municipal business, international business, corporate finance, real
estate, investment business and credit risk management. In line with the Bank’s expectations, solutions developed jointly in this way have indeed considerably enhanced
quality, swiftness and customer acceptance. The asset allocation coordination centre
has also proved to be of great value. Here, knowledge and practical experience from
the Sparkassen-Finanzgruppe Bayern is pooled, while existing concepts and technologies are bundled together and refined.
Cooperative market development is the principal focus of the business area. In this
process, market potential in investment, municipal, real estate and corporate customer
business (including international business) is identified and exploited jointly with the
Bavarian savings banks. This systematic cooperative market development is already
beginning to bear fruit. Active exploitation of potential is to be further stepped up by
involvement with the “Verkaufsoffensive Bayern” sales initiative launched by the Association of Bavarian Savings Banks. This move is planned for 2005.
Overview of overall project
“Optimisation of cooperation“
Centres of competence
Cooperative market
development
Credit risk
management /
Credit risk trading
New issues
Pool knowledge
Enhance earnings
Avoid duplication
of work
Increase customer
loyalty
Improve risk
identification
Secure funding on
favourable terms
Reduce risks
Boost competitiveness
Promote joint
solutions
Gain new
customers
Avoid burdens on
earnings
Expand market
position
International business
Corporate customers
Investment business
Real estate customers
Real estate business
Local government
Corporate finance
Investment
management
Asset allocation
coordination centre
Numicipal business
Credit risk management
Credit risk trading
51
52
} BayernLB helps
savings banks
to control credit
risks with
“S-Bayern-Basket-I”
transaction
In 2004, BayernLB positioned itself as risk clearing house for the Bavarian savings
banks for the first time. Thus, in the context of a transaction called “S-Bayern-Basket I”,
the individual credit risks of the Bavarian savings banks involved were transferred to
a Special Purpose Vehicle by means of a credit default swap (CDS). There, they were
pooled and then sold back to these savings banks via the issue of a credit linked note
(CLN). BayernLB acted as arranger and administrator for this deal. An “S-Basket” transaction to be carried out at national level is currently in the pipeline. Savings banks can
use products of this kind to control risks and discharge economic capital, in the context of sound portfolio management. This creates enhanced opportunities for SME
financing that is not suitable for trading on the capital markets.
The withdrawal of the state guarantees in July 2005 will increase the price of uncovered funding for public-sector credit institutions. For this reason, BayernLB, in collaboration with the Association of Bavarian Savings Banks and the Bavarian savings banks
themselves, is currently developing models dedicated to new issue business. These
models involve using covering assets from the balance sheets of the savings banks in
order to exploit favourable funding options. This is expected to generate considerable
value added for the Sparkassen-Finanzgruppe Bayern. Some of these models envisage
the transfer of covering assets from Bavarian savings banks to BayernLB’s registers of
cover. BayernLB then issues covered bonds (pfandbriefe) based on this cover, and can
thus transfer the liquidity generated to the Bavarian savings banks as required.
Business development
Performance in 2004 was characterised by even closer cooperation within the Sparkassen-Finanzgruppe Bayern. Bavarian savings banks and their customers take advantage of virtually all of BayernLB’s broad range of products and services. A pleasing
increase in cooperation is evident in all of the Bank’s core businesses.
Portfolios in the savings banks’ proprietary securities trading were up slightly, despite
an unfavourable investment environment. Significant portfolio increases were achieved
in structured products and equity investments, thanks to the exploitation of diversification opportunities and alternative investments.
In securities business with customers of the Bavarian savings banks, BayernLB’s private
asset management activities developed particularly well. Furthermore, in collaboration
with the centre of competence for asset management, two new price information systems were selected to bolster Sales Support, while increased usage of a portfolio management system was promoted.
} Cooperation in
Sparkassen-Finanzgruppe intensified
In corporate customer and real estate business, a strategy coordinated with the Bavarian savings banks helped to increase transparency and successfully implement cooperative market development. In the corporate customer segment, demand from the
Bavarian savings banks for BayernLB’s services as a syndicating partner picked up
significantly from mid-2004. This segment was marked by both the general cyclical
trend and the individual risk profiles of the Bank’s SME corporate customers. Requests
for syndicated loan business from the Real Estate Business Area once again increased
53
significantly. This meant that interesting transactions could be concluded in residential
real estate development and commercial property financing.
The product range offered to Bavarian SME customers in the corporate finance segment was further expanded. Innovative financing solutions and advisory services were
designed to suit the needs of the Bank’s SME customers, and offered as product packages matching the life cycle of the particular company, for example combined with traditional financial products. The range of existing equity and quasi-equity products was
enhanced by the addition of the “Bayern Fonds Mezzaninekapital”, a fund placed by
the Sparkassen-Finanzgruppe Bayern with a total volume of EUR 100 million. As anchor
investor, BayernLB holds 40 percent of the fund. This represents a further financing
alternative for Bavarian SMEs in particular.
In state-subsidised business, BayernLB acts as an advisor and transmits loans to Bavarian
savings banks. The Sparkassen-Finanzgruppe Bayern has the biggest share of the market for programmes set up by LfA Förderbank Bayern, the Bavarian Development Institute. Alongside traditional programme loans, BayernLB has offered the Bavarian savings banks global loans from the LfA Förderbank Bayern since 2004. In this way, funding
advantages gleaned are passed on to SME customers.
With a view to enhancing the market position of the Sparkassen-Finanzgruppe Bayern
in the growth market of international business, the Sparkassen-Finanzgruppe has developed a strategy for international business with corporate customers. SME customers
can thus choose from a comprehensive range of products in international business.
Bavarian local governments are supported with innovative, individually tailored financing alternatives. The Sparkassen-Finanzgruppe Bayern’s share of the market for municipal lendings could be further expanded, also taking the company Bayerngrund Grundstücksbeschaffungs- und -erschließungs-GmbH into consideration. A municipal real
estate benchmarking project for the Sparkassen-Finanzgruppe Bayern was carried out
successfully in collaboration with the Bank’s subsidiary Real I.S. AG in 2004. Cooperation with Real I.S. AG also provides an opportunity to offer customised models for
municipal building construction in the context of Public Private Partnerships.
Outlook
The first experiences and results of the centres of competence, as well as the cooperative market development carried out in 2004, form an excellent starting point for further enhancement of cooperation within the Sparkassen-Finanzgruppe Bayern. The
way is thus paved for even more successful outcomes for all those involved. Based on
the measures taken in connection with cooperative market development, the business
volume will develop positively in our joint activities with the savings banks.
} Bavarian local
governments
offered individual
support with
innovative products
54
LBS Bayern
} LBS Bayern
celebrates its 75th
anniversary
In the year of its 75th anniversary, LBS Bayerische Landesbausparkasse, the Bank’s Home
Loan Division, achieved the third best volume of new business in its history. With
223,406 contracts totalling EUR 5.65 billion, the sales result was actually significantly
below that of the peak year 2003 (by 27.2 percent in terms of contract amounts). This
result was considerably influenced by the long-running debate over the abolition of
building-saving premiums and the home ownership subsidy. However, it significantly
exceeded the long-term average, amounting to EUR 4.5 billion achieved between 1993
and 2002, by more than EUR 1 billion.
Broad swathes of the population see building saving primarily as a secure and flexible
investment and financing instrument. The building saving trend thus tends to be stable. Building saving products offer clear advantages, including the fact that building
saving loans are unaffected by fluctuations in the capital market, the benefit of a
guaranteed interest rate over the entire duration, the freedom the saver enjoys during
the savings phase, and the possibility of unscheduled repayment during the term of
the loan. Such products are particularly attractive in the context of the current market
environment. Building saving has a more positive image than other forms of financial
investment. Today, security is the most crucial investment criterion. In the 2004 investment barometer conducted by Emnid for the German Savings Bank Association (DSGV),
97 percent of German citizens assert that security is either “very important” or “important” for their investment decisions. Moreover, building saving is a tried and trusted
way of preparing for and backing up retirement provisions with property. Building
saving fees earmarked for financing accounted for 75 percent of LBS’s new business.
Since 1948, LBS Bayern has taken on around 4.5 million building saving contracts with
a total volume of more than EUR 60 billion. These contracts have helped to finance
some 1.5 million homes predominantly detached and semidetached. From monetary
reform in 1948 to the present day, 7.4 million building saving contracts have been
arranged, representing a total volume of EUR 120 billion. Some 1.5 million savers
currently hold more than two million building saving contracts with LBS: Given this
customer base, in addition to new business, LBS is market leader in Bavaria as “the
savings banks’ building and loan association”.
Slump in housing construction
} Investor confidence
dented by
deterioration of
housing policy
In line with the overall market trend, LBS’s financing business is at a relatively low level.
There was no respite from the slump in housing construction, as continuing economic
stagnation and high unemployment levels curbed the propensity to invest. The gradual
deterioration of housing policy in general, as well as the never-ending debate over the
curtailing or abolition of the home ownership subsidy meant that the tax situation for
house construction became more and more unpredictable. This leads to a climate of
uncertainty and thus faltering investor confidence. For this reason, demand remains
meagre – in spite of favourable investment conditions due to historically low interest
rates and reasonable construction and purchase prices.
Stable earnings situation
LBS reports a consistent upside profit trend in its 2004 profit and loss statement. Net
interest income was up EUR 3.2 million compared with the previous year. This was
primarily due to the fact that the decline in building savings loans due to low interest
rates was more than offset by the expansion of financial investments and non-collective credit business. Administrative costs were further reduced. Bottom-line operating
profit before risk provisions was EUR 72.3 million (EUR +4.9 million). This clearly illustrates LBS’s earning power, given the pressure on earnings caused by low capital market rates.
Outlook
Since motives for building saving tend to be long lasting, LBS expects that in the
current capital market environment and with an unchanged state housing subsidy,
building saving business in 2005 will level off above the long-term average. LBS also
expects a stable operating profit thanks to its market-oriented products and strict cost
management.
Details on LBS’s business performance can be found in its annual report or online
(www.lbs-bayern.de).
4,725,197
4,350,980
4,023,892
4,472,938
4,465,920
5,000,000
4,175,691
6,000,000
4,145,952
7,000,000
4,290,991
6,056,279
8,000,000
4,848,501
9,000,000
5,650,000
7,761,938
Stabilisation at high level
EUR thousand
4,000,000
3,000,000
2,000,000
1,000,000
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Average gross new business 1993–2002: EUR 4,555,634,000
Source: Press briefing on annual results – 8 December 2004
55
56
Bayerische Landesbodenkreditanstalt (Labo) operates in the area of housing as part of
its public-sector mandate as development bank of the Free State of Bavaria. This sphere
of activity includes the construction, modernisation and purchase of homes and rooms
in homes for the elderly, as well as infrastructural measures such as promoting urban
planning. Labo helped the Free State of Thuringia in the area of construction in the
nineties, and manages the subsidies then granted in this State.
State-subsidised activities in 2004
Labo’s fiduciary operations are supported by federal funds and funds from the Free
State of Bavaria. These activities comprise the financing of rented apartments, rooms
in homes for the elderly and also owner-occupied homes. Labo’s proprietary business
consists of programmes based on development guidelines issued by the Free State of
Bavaria. As part of these programmes, low-interest funds from the Kreditanstalt für
Wiederaufbau (KfW) receive a further interest subsidy from Labo’s own funds and
funds from the Free State of Bavaria. Focal points of Labo’s proprietary business include
the modernisation of rented apartments as part of the Bavarian modernisation programme, owner-occupied homes and the promotion of sport facilities.
During 2004, Labo’s new business was marked by the challenging economic environment. In contrast to previous years, it thus proved impossible to use proprietary business in order to compensate for the reduction of government subsidies in the fiduciary
operations sector, a move perceptible in all segments. In the KfW-funded programmes
for the construction and purchase of owner-occupied homes, the loan volume in Labo’s
proprietary business fell by a third in comparison to the previous year. This was primarily due to the general economic situation and the restraint of potential investors.
} Modernisation of
rented apartments
increasingly
important
Contrary to the general trend, encouraging growth was achieved compared to 2003 in
fiduciary operations funding the construction of rented apartments, as well as in the
modernisation of these apartments in the context of the 2004 Bavarian modernisation
programme. This area, namely the modernisation of rented apartments, represents
an important future business area for Labo. If they are to remain viable in the future,
older apartments have to be adapted to meet today’s requirements with regard to
ecology and comfort. This poses a great challenge for housing companies. For the
construction industry, on the other hand, it represents a chance to compensate for
the decline in new business.
Labo’s fiduciary operations helped finance a total of 4,116 owner-occupied homes and
rented apartments as well as 1,541 rooms in homes for the elderly via loans worth
EUR 205.15 million. In Labo’s proprietary state-subsidised business, loans in the amount
of EUR 301.53 million were allocated for the construction and purchase of 4,592 homes
while EUR 114.17 million in loans went to the modernisation of another 5,189 homes.
A credit total of EUR 23.28 million was approved under the special sports facility
funding programme. Compared with the previous year, this represents a decrease of
around 19 percent in lending in fiduciary business and around 30 percent in proprietary business.
Labo’s loan programmes in 2004
Creation and acquisition
of residential space:
EUR 427 million
Modernisation and
reconstruction of
residential space:
EUR 193.8 million
Sports facilities funding
EUR 23.3 million
Outlook
In 2005, Labo will continue its furtherance of residential space, as in 2004, through
trust loans and through its own interest-subsidised funds. It is encouraging that the
trust loan quotas were increased in the Free State of Bavaria’s 2005 budget. The successful Bavarian modernisation programme for rented apartments is also certain to
continue at the previous year’s level.
The construction of rented apartments in conurbations with the aim of creating affordable residential space remains a key focus for 2005, as does the modernisation of rented
apartments in the context of the Bavarian modernisation programme.
In 2005, the new Bavarian interest subsidy programme will be used to fund owneroccupied residential property in proprietary business. This programme comprises two
previous programmes for the construction and purchase of existing residential space.
It should also help to increase the German residential property ratio, which is lower
than that of its European neighbours. If the overall economic situation improves, as
hoped, the result for state-subsidised business in owner-occupied homes will also
recover once more.
Details on Labo’s business performance can be found in Landesbodenkreditanstalt’s
report on its state-subsidised business or online (www.labo-bayern.de).
57
In the BayernLB Group, retail activities play an important role in diversifying risks and
generating solid earnings. Of key importance here are the dependent institutions LBS
Bayern and Landesbodenkreditanstalt, as well as the subsidiaries of strategic significance to the Group. The Group’s objective is to continue its targeted expansion of
retail activities both at home and abroad, working in harmony with and supplementing the activities of the members of the Sparkassen-Finanzgruppe Bayern.
The following segment report by customer group, drawn up as per 31.12.2004, supple-
Corporate customers
Financial institutions
and sovereigns
Financial markets
Other /
consolidation
BayernLB Group
ments the segment report published in the Report on the Bank and the Group:
Retail customers
58
Net interest income
736
727
185
429
– 46
2,030
Net commission
income
126
162
59
17
– 25
340
– 357
– 268
– 108
– 317
– 158
– 1,208
13
2
6
109
–4
126
9
1
0
–1
213
223
Result before risk
provisioning/
revaluation result
528
624
142
237
– 20
1,511
Risk provisions/
revaluation result
– 174
– 18
10
– 34
– 344
– 561
Operating result
354
606
152
203
– 364
950
Cost-income ratio (%)
40.4
30.0
43.1
57.1
–
44.4
EUR million
Administrative
expenses
Result from financial
transaction
Other operating
result
The retail customer segment comprises all of BayernLB’s activities with private customers, credit card business, as well as LBS Bayern and Landesbodenkreditanstalt.
59
} Retail customer
segment
This segment also includes SME corporate customers of the subsidiaries of strategic
significance to the Group, with a maximum annual sales volume of EUR 50 million.
BayernLB’s retail customer business contributes EUR 354 million to the operating
result, representing a share of 37 percent. Alongside the corporate customer sector,
this segment is thus one of the cornerstones of the Group.
The corporate customer segment encompasses savings bank syndicate business
as well as business with large corporate customers of the consolidated subsidiaries,
} Corporate customer
segment
sharing these areas with BayernLB’s corporate and commercial real estate customer
business. With a contribution of EUR 606 million to the operating result, the corporate
customer segment dominates the segment report by customer group.
The financial institutions and sovereigns segment comprises the Group’s dealings
with savings banks and financial institutions, as well as government and municipal
business.
The financial markets segment encompasses BayernLB’s operations in the Global
Markets Business Area, the trading business of the consolidated subsidiaries and the
contribution from maturity transformation.
The other / consolidation segment bundles all activities not directly allocable to a customer segment, as well as their contributions to the operating result. It also includes
consolidation effects. The distinctly negative operating result is largely due to value
adjustments and assumptions of losses in participations that cannot be allocated to
a particular segment.
Contributions to the retail segment’s operating result
LBS 20 %
Other 4 %
LB(Swiss) 2 %
LBLux 2 %
Labo 11 %
DKB 28 %
Credit cards
3%
Real Estate BA
10 %
MKB 20 %
} Financial
institutions
and sovereigns
segment
} Financial markets
segment
60
In 2004, LBS Bayern succeeded in maintaining market leadership, in close cooperation
with the Bavarian saving banks. During the year under review, Landesbodenkreditanstalt, in line with the tasks under its remit, continued to promote residential construction and urban development in Bavaria through trust loans and subsidies as well interest-subsidised programmes funded by state monies and LBS’s own funds. Proprietary
business accounted for 70 percent of the overall result for state-subsidised business,
thus remaining virtually unchanged year on year.
Deutsche Kreditbank Aktiengesellschaft (DKB), an internet-based retail bank, focuses
on selected target customer groups as part of its business model. In the year under
review, the core focus was on expansion of the bank’s private customer business. The
number of customers was significantly increased in 2004. In addition to gaining new
customers, also targeting private customers in granular credit business, customer
retention represented another key priority of the bank’s activities. Streamlined, rapid
workflows incorporating quality assurance consolidated DKB’s position as an internetbased retail bank. For the coming years, the bank intends to further increase contribution margins by exploiting savings potential and expanding the customer base by
means of innovative customer acquisition initiatives.
Magyar Külkereskedelmi Bank RT. (Hungarian Foreign Trade Bank / MKB) succeeded
in significantly increasing its market share of private customer business through the
acquisition of Konzumbank at the end of 2003, and incorporation of the acquired company in July 2004. This allowed MKB to boost its retail base. The network of branches
in Hungary was expanded by 22 further foreign entities, reaching a new total of
52 branches. Over 35,000 new customers were gained. MKB’s strategic objective for
2005 is to exploit the earnings potential of existing customer relationships, as well as
acquiring new customers. It aims to considerably expand its market position vis-à-vis
SMEs. MKB focuses on customers and sectors that require tailored solutions and a
broad product range due to their economic orientation, thus opening up potential
for cross-selling activities in particular – also at Group level.
In residential real estate financing (excluding property developers) under the Real
Estate Business Area, the bank succeeded in meeting its targets for 2004 in spite of a
generally difficult environment. For 2005, the business area anticipates slight recovery
of the real estate markets, and a concomitant upward trend in the financing-to-completion market.
BayernLB’s credit card business has been making solid contributions to the Bank’s net
commission income for many years. In 2004, the Bank continued to build on its strong
position. Thus, the average number of credit cards issued at the end of 2004 stood
at 830,000 units (representing an increase of 3.5 percent against 2003), while 2004’s
transaction volume amounted to EUR 4.17 billion. BayernLB’s share of the German
credit card market, measured in terms of transaction volume, is thus 12.1 percent.
The target retail customers of LB(Swiss) and LBLux are HNW private customers. These
banks focus on asset management, investment consulting and fund business. LB(Swiss)
and LBLux complement the business model of the Bavarian savings banks perfectly.
Landesbank Saar (SaarLB) generates around 10 percent of its revenues with retail customers. This is largely attributable to its private residential construction financing business over internet platforms, which has been proving successful for many years, as
well as to SaarLB’s subsidiary, Landesbausparkasse Saarbrücken. SaarLB’s retail activities
are supplemented by services in investment consulting, including the active marketing
of BayernLB’s products (such as structured bonds and credit cards), also in tandem with
the Saarland savings banks.
61
62
Corporate Center
The Corporate Center bundles together all of the central support units of BayernLB. In
this way, it nurtures a central, consistent strategy for the Bank, and manages the areas
under its remit at a global level.
The divisions of the Corporate Center serve internal customers such as the Board of
Management, the business areas, support operations, and subsidiaries of BayernLB,
as well as the Bank’s owners and outside parties such as auditors, authorities, rating
agencies and members of the press / public.
Participations
In the participations business, as in all of BayernLB’s other business activities, the
objective is to generate adequate long-term profitability after risk. BayernLB’s participations portfolio is subdivided into strategic, financial and other participations (for
more information on significant changes to the participations portfolio during 2004,
see Section 4: Report on the Bank and the Group).
Participations in German and foreign banks comprise a major component of BayernLB’s
strategic participations portfolio. These help the Bank to both broaden customer potential and expand market share. The Bank also has participations in the real estate and
housing construction sector. Here, BayernLB has a tradition of high-level expertise in
financing, and can offer a broad range of products. Rounding off our range of strategic
participations are various service companies specialising in securities settlement and
computer services. The Bank’s financial holdings consist of investments in other companies. These are acquired with the expectation that the companies will significantly
increase in value over the coming years.
The following are the main participations that are of strategic significance to the
Group. For many years, BayernLB has been active in its enlarged core European market
through these companies. They are managed in part by the Bank (for the retail activities of these companies, see “Group retail activities”, Section 3).
Deutsche Kreditbank Aktiengesellschaft, Berlin (DKB)
DKB has been wholly owned by BayernLB since 1 February 1995.
As a retail bank operating within the BayernLB Group, DKB focuses on target customer
groups hand-picked from the private, public-sector and corporate customer segments.
Its business activities are centred on the new federal states, where the bank has an
extremely high market share of public-sector customers.
One particularly salient feature of the 2004 financial year was the ever greater expansion of private customer business over the Internet. Remarkable growth rates were
achieved in this sector. The number of customers was increased from 90,000 to approximately 150,000 over the course of the year. Process optimisation over the Internet
played a significant role in the successful expansion of direct banking activities.
Extension of the core public-sector customer segment was another key element in
2004. Particularly within the scope of Public Private Partnerships, a number of different
projects were carried out in tandem with the government (including sewage plants,
health resorts, multipurpose halls, police stations, school facilities, sports and leisure
pools and theatres). At the same time, the bank succeeded in acquiring substantial
deposits from customers. Within this target customer segment, DKB also pressed
ahead with gaining customers from the old federal states.
As part of the consistent implementation of its corporate strategy, DKB reined in business activities in the corporate customer segment, concentrating instead on specific
segments where it has a high level of expertise, such as agriculture. Targeted risk
management was also rigorously applied during the year, using focused portfolio
structuring.
Deutsche Kreditbank Aktiengesellschaft, Berlin (DKB)
Core business activities
Retail bank with a geographical focus on the new federal
states. Three market areas: Corporate Customers, PublicSector Customers and Private Customers
Size of participation
BayernLB 100 percent
Total assets
EUR 28.3372 billion
Equity
EUR 1.2403 billion (after proposed distribution)
Number of employees
1,258 (2004 average)
Operating profit before and after
risk provisions
EUR 364.7 million
EUR 232.5 million
Net income for the year and profit
available for distribution
EUR 139.4 million
EUR 120.0 million
Number of customers
31. 12. 2004
160,435
Key ratios
• Cost-income ratio 27.7 percent
• Return on equity 18.0 percent
Strategic objectives for the
participation in 2005 – 2006
Further expansion of direct banking business with
private customers over the Internet
63
64
Landesbank Saar, Saarbrücken (SaarLB)
Since 1 January 2002, BayernLB has held a stake of 75.1 percent in the partner’s capital
of Landesbank Saar, Saarbrücken (SaarLB), with which it has been in ever-closer partnership since 1993.
With total assets of around EUR 17.5 billion and working in close conjunction with
BayernLB, SaarLB conducts universal banking operations in its region with an emphasis
on lending to the commercial sector. Together with the Saarland savings banks, it holds
over 60 percent of all loans by regional institutions to non-banks and was able to
consolidate its market position further during 2004. SaarLB’s regional remit comprises
not only the core Saarland market, but also its neighbouring regions, and in particular
those beyond national borders. In business with France, double-digit growth rates
were again achieved during the past year. In addition to SaarLB’s cooperation with
French partners, the representative office opened in Metz on 1 January 2004 was a
major factor in this growth.
SaarLB’s activities are supplemented by a medium-sized real estate business operating
at both national and international level (underwriting business and direct business)
and by a real estate retail business exploiting the sales opportunities offered by the
Internet.
SaarLB cultivates a close cooperative relationship with the Saarland savings banks. This
cooperation was further affirmed by an agreement signed by the members of the Saarland Savings Bank Organisation in the first half of 2004. Ongoing cooperation in the
back office units is now complemented by reinforced joint development of market
potential, particularly in the fields of corporate finance and international commercial
business. Here, the entire Saarland savings bank sector benefits from BayernLB’s product range and international connections.
In the context of a still unfavourable economic environment, SaarLB succeeded in
increasing its credit volume further in both corporate and private segments. This is
also reflected in the bank’s increased net interest and commission income. Costs rose
only moderately, and in spite of a significantly lower trading income, it was possible to
hold the cost-income ratio at the lower end of the target range, namely at 50 percent,
while operating profit was again increased. This gave SaarLB the necessary scope to
carry out appropriate risk provisioning and to build up reserves. The bank was thus
able to increase its net income for the year by EUR 1 million to EUR 14 million.
Another key focus, outside of business activities in the strict sense, was the continued
orientation of asset / liability management towards the phasing out of the guarantee
mechanisms in July 2005. One measure with this objective was the expansion of the
investor base – achieved not least by issuing a commercial paper programme. Comprehensive provisioning initiatives helped to offset the negative effects of the anticipated
rise in funding costs. Another measure involved significantly improving the core capital
base through retention of earnings and allocation of permanent silent capital contributions. This meant that, at year-end, SaarLB’s core capital ratio exceeded its long-term
target of 7.5 percent.
Landesbank Saar, Saarbrücken (SaarLB)
SaarLB is a credit bank with a regional focus, and with
an independent corporate identity within the BayernLB
Group. Its main business focuses are corporate customer
business in the region (including cross-border areas in
France) based on many years of experience with most
of its customers (market leader in Saarland) as well as
a nationally oriented real estate financing business. It
pursues a niche policy in its other business in the rest
of Germany and abroad, via participation in syndicated
financing.
BayernLB 75.1 percent; Sparkassen- und Giroverband Saar
14.9 percent; Saarland 10.0 percent
Total assets
EUR 17.526 billion
Equity
EUR 504.3 million
Number of employees
637
Operating profit before and after risk
provisions
EUR 65.5 million
EUR 37.6 million
EUR 14 million each
Number of customers
31. 12. 2004
67,813
Key ratios
The following are to be expanded: the bank’s market
position in neighbouring areas of France, not least via
the new Metz representative office set up in 2004, SME
corporate customer business (principal bank function)
in the local Saarland / western Palatinate / Eifel / Mosel /
Rhine-Neckar market, and national and international real
estate financing (retail business, serving high-calibre
private investors).
Focus on international business and trading / treasury,
both as a supplement to the core areas and as a centre
of competence for the Saarland savings banks.
65
66
Magyar Külkereskedelmi Bank Rt. (MKB) –
Hungarian Foreign Trade Bank, Budapest
The Budapest-based Magyar Külkereskedelmi Bank Rt. (MKB) represents BayernLB’s
bridgehead in Eastern Europe, and forms an integral part of the strategy for Eastern
Europe approved by the BayernLB Board of Management at the end of 2004. Hungary’s
accession to EU on 1 May 2004 constitutes an important milestone which will enhance
the already close trade relations between Hungary and Germany.
Business with corporate customers is one of the traditional strengths of MKB, which
operates as a universal bank. Its customers include leading large Hungarian corporates
as well as SMEs. MKB represents a reliable and competent partner for these firms.
MKB is market leader in project financing in Hungary. The bank’s retail business has
achieved considerable importance. The incorporation of Konzumbank, acquired at
the end of 2003 and legally merged with MKB as per 1 July 2004, has allowed MKB to
expand its market position further. As at year-end 2004, the bank reported a market
share of 5.7 percent in deposits and 3.5 percent in loans in the private customer segment. The current network of branches, comprising 52 retail outlets, is to be expanded
to around 80 locations by 2007. With a view to reinforcing sales activities, MKB is continuing to focus on close cooperation with strategic partners such as Allianz Hungária
and T-Mobile. MKB offers private customers an exceptionally broad range of services.
Unique, innovative products on the Hungarian market, such as home and consumer
loans as well as bank cards denominated in euro, put the finishing touches to the
range on offer.
MKB and BayernLB operate in close cooperation on the market. Thus, for example, a
Public Private Partnership funding transaction with great significance in Hungary was
concluded, as was a debt issuance programme with a volume of EUR 1 billion for MKB.
BayernLB acted as lead manager for the latter transaction.
MKB is the partner of choice for German saving banks in Hungary. A cooperative agreement with the largest German savings banks (known as the “G25” group) supports this
market strategy. Competent contact partners now staff a “Bayern Desk” dedicated to
serving the Bavarian savings banks and their customers.
In 2004, MKB’s total assets – including those stemming from the acquisition of Konzumbank – increased by 27.7 percent to reach EUR 5.9353 billion. At EUR 74.0 million, pretax profit was 10.0 percent up on the previous year’s figure.
For 2005, MKB anticipates increased demand in a number of areas, namely corporate
credit in the areas of import and export, state Public Private Partnership projects and
EU infrastructural funding. The principal objective for 2005, besides the acquisition of
new retail customers, is increasing the profitability of existing customer relationships.
Magyar Külkereskedelmi Bank Rt. (MKB) – Hungarian Foreign Trade Bank, Budapest
MKB is a universal bank, operating in all areas of corporate and private customer business. It is the third-largest
bank in Hungary. MKB further expanded its retail base by
acquiring Konzumbank in 2003, a merger which was officially concluded in 2004. For the Group and the savings
banks, MKB is a foothold and bridgehead in eastern
Europe (German Desk).
BayernLB 89.61 percent;
BAWAG, Vienna, 10.38 percent;
independently held 0.01 percent
Total assets
EUR 5.9353 billion
Equity
EUR 462.7 million
Number of employees
1,482
provisions
EUR 95.2 million
EUR 74.0 million
EUR 64.9 million
EUR 55.5 million
Number of customers
31. 12. 2004
Private customers: 149,094
Corporate customers: 33,037
Key ratios
Maintaining the strong market position in corporate
customer business. Further improving market position
in SME and private customer segments.
67
68
Banque LB Lux S.A., Luxembourg
Banque LBLux S.A. is a European bank with an international focus. It is held jointly by
BayernLB (75 percent minus one share) and Helaba (25 percent plus one share). The
bank concentrates on corporate banking in the Benelux region and international
private banking. These areas are supported by the Trading / Treasury Division, which
actively conducts proprietary trading. The bank is also an IT service provider serving,
amongst other customers, a number of entities of the BayernLB Group.
In corporate banking, the target customers are listed companies, large local companies
with a minimum sales volume of EUR 250 million, as well as real estate customers,
institutions and financial service providers in the Benelux region. Banque LBLux S.A.
offers its customers tailored financing and trading products, supplementing this range
with various products from its parent companies. In the 2004 financial year, the credit
volume in Benelux business increased slightly. The key focal points of the period under
review were reinforced acquisition activities in the Benelux region and the implementation of the Minimum Requirements for the Credit Business of Credit Institutions
(MaK). At the moment, the spotlight is on selective expansion of bilateral credit business, as well as cross-selling activities.
In private banking, Banque LBLux S.A. actively advises and serves high net worth customers. It focuses on international customers in the medium to high net worth segment. The bank places a key emphasis on the individuality and quality of its services,
which are tailored to each particular customer profile. It offers products in the areas
of investment consulting, portfolio management and financing / provisioning solutions. In 2004, the main priorities were expansion of the range of products and services, increasing the quality of service provided, and acquisition of new partners. To this
end, extensive training measures were taken in the area of financial planning. Furthermore, acquisition activities were increased, initiatives aimed at informing customers
were intensified, the range of languages offered was enhanced and Internet content
was completely reworked. In 2005, key focuses will include expansion of sales channels
and activities with a view to enhancing service quality even further. This, in turn, is
aimed at promoting customer loyalty as well as cultivating the acquisition of new
customers.
At Banque LBLux, risk control and monitoring is incorporated into the system employed by both of its parent companies. Locally, it is carried out on the basis of fully
coordinated, uniform procedures and methods.
Banque LB Lux S.A., Luxembourg
International financing / corporate customer business
(with Group responsibility for the Benelux countries),
trading / treasury, private banking and IT hub function
for foreign entities of the BayernLB Group.
BayernLB 75 percent minus one share
Helaba 25 percent plus one share
Total assets
EUR 12.649 billion
Equity
EUR 470.6 million
Number of employees
191
provisions
EUR 34.1 million
EUR 37.8 million
EUR 30.0 million, EUR 0
(due to advance dividend on 29. 12. 2004)
Number of customers
(private banking)
31. 12. 2004
9,752
Assets under management
(private banking)
31. 12. 2004
EUR 4.7 billion
Key ratios*
LBLux is pursuing a strategy of individual support,
tailored to each customer profile:
• in private banking, active and systematic targetcustomer oriented support
• in corporate banking, focus on listed companies and
large local companies in the Benelux region; relationship management
• in trading, short-term markets / products requiring
high levels of trading expertise; credit trading
* Applies to the operating profit as adjusted for special factors
69
70
LB(Swiss) Privatbank AG, Zurich
LB(Swiss) Privatbank AG concentrates primarily on international private banking. It is
held jointly by BayernLB and Landesbank Hessen-Thüringen (Helaba), who own 50 percent of its capital each. Its core business activities are asset management, investment
consulting and funds. Furthermore, it offers credit business services.
The bank’s prime objective is to offer HNW private customers of the Sparkassen-Finanzverbund an attractive range of private banking services, operating from a Swiss base.
This is intended to reinforce the market position of the savings banks in the highly competitive segment of HNW private customers.
Cooperation with BayernLB in the area of securities was further enhanced, particularly
in the sale of structured products.
Over the last year, further reduction of proprietary trading activities led to a slight drop
in total assets. LB(Swiss) Privatbank AG’s key earnings ratios are roughly the same as
the previous year’s figures.
LB(Swiss) Privatbank AG pursues a conservative risk policy. Credit, currency and market
price risks are measured in good time, and controlled within fixed parameters.
Due to the general economic situation, LB(Swiss) Privatbank AG expects the 2005 result
to be similar to that of the previous year, if there are no extraordinary influences thereupon.
Private bank; takes advantage of operating environment
in Swiss financial centre; asset management, investment
consulting and fund business for HNW private clients and
all associated banking business; credit and treasury business to a lesser extent. These core business activities are
to be further pursued over the coming years in a consistent manner.
BayernLB 50 percent
Helaba 50 percent
Total assets
EUR 1.4242 billion
Equity
EUR 74.6 million
Number of employees
80.1 (adjusted by part-time positions)
provisions
EUR 15.6 million
EUR 15.6 million
EUR 11.8 million
EUR 12.4 million
Number of customers
31. 12. 2004
6,014
Assets under management
31. 12. 2004
EUR 463.7 million
Total customer volume
31. 12. 2004
EUR 2.1996 billion
Key ratios
Increased cooperation with savings banks, particularly
in Bavaria, Hesse and Thuringia, reflecting the strategic
focus on the German market. Credit business will continue to be operated either as an add-on to private banking or in highly profitable niches.
71
72
Corporate governance
While BayernLB is an unlisted, public-sector company, it nonetheless places great
importance on effective and responsible corporate management and control. In
November 2003, the bodies of BayernLB approved its own Corporate Governance Principles, which came into effect on 1 January 2004. The Corporate Governance Principles
are largely based on the provisions of the German Corporate Governance Code drawn
up by the federal government’s dedicated commission. They comprise those regulations governing corporate management and control which apply to BayernLB pursuant
to binding or self-imposed stipulations.
The bodies of BayernLB adhere to these principles in fulfilling their mandates, thus
ensuring that the Bank is managed and controlled in a responsible manner that is
geared towards value creation. The Board of Management, Board of Administration
and General Meeting have established that there is nothing to indicate that the Bank
did not comply with the Corporate Governance Principles during the 2004 financial
year.
BayernLB interprets Corporate Governance as a continuous process. For this reason,
the Corporate Governance Principles are constantly checked and, if necessary, adjusted
in line with fresh experiences and new legal requirements, and in harmony with the
evolution of national and international standards. In this way, the further development
of Corporate Governance is safeguarded.
73
Corporate Services
The Corporate Services Support Operations are BayernLB’s central unit responsible for
all internal services worldwide. It comprises the Financial Market Services, International Corporate Services, and Corporate Organisation & IT Divisions, as well as the
Shared Services Division. Corporate Services uses its expertise and resources to offer
a wide range of service and support functions to BayernLB’s business areas and other
support operations.
Financial Market Services
The Financial Market Services Division performs traditional transaction banking services for the sales business areas and support operations. These tasks are allocated to
the trading, account, securities and payment transactions product segments. Securities
services are carried out in close cooperation with the subsidiary TxB Transaktionsbank
GmbH, which has carved out a position for itself in the transaction banking market
since mid-2002. Collaboration with the Bavarian savings banks was further reinforced
in 2004 with the consolidation of the previously separate clearing operations of Informatik-Zentrum Bayern — Software Gesellschaft der bayerischen Sparkassen GmbH &
Co. KG (IZB SOFT) and BayernLB. BayernLB is now the clearing bank for the Bavarian
Sparkassen-Finanzgruppe.
In 2004, trading and securities transaction volumes remained stable in comparison to
2003. In payment transactions, volumes continued to rise due to the additional clearing volumes taken over from IZB SOFT. More than 1.3 billion transactions were thus
processed in 2004 in tandem with the Bavarian savings banks.
In e-banking, the Internet-based solutions BayernLB e:Web and BayernLB Online:Banking were developed further. BayernLB e:Web offers flexible electronic banking with
multiple bank compatibility for rapid data transfer over the Internet. BayernLB Online:
Banking, on the other hand, allows customers to carry out global cash and securities
transactions online 24 hours a day, with direct access to their accounts.
Credit card business, an integral part of the Corporate Services Division since the end
of 2004, and BayernLB’s private customer business, were transferred to the business
area “Savings Banks and Bavarian Market” at the beginning of 2005. This move emphasises the importance of close cooperation with the savings banks for BayernLB.
Credit card business
In 2004, the Bank further reinforced its strong position in the credit card business. As
part of its co-branding business, BayernLB issues jointly-designed card products under
its partners’ brands. The BayernCard-Services GmbH subsidiary is the product manager.
In 2004, successful product changes were made to the most important card programmes. For the Corporate Card, for example, online settlement facilities, improved
insurance packages, and frequent flyer miles and transferral of travel expenses were
introduced. Such newly designed product features enhance the attractiveness and profitability of these credit cards. In 2004, the average number of credit cards issued rose
} BayernLB reinforces
clearing function
for Bavarian
Sparkassen-Finanzgruppe
74
by 3.5 percent to almost 830,000 cards. The 2004 transaction volume was EUR 4.17 billion. BayernLB has a 4.2 percent market share of the German credit card business in
terms of number of cards, while its share is 12.1 percent when measured in terms of
transaction volume.
Information technology
} Shared system
house for Bavarian
Sparkassen-Finanzgruppe to be
implemented step
by step
The 2004 joint “IT Bayern” project represents another important step in the cooperation of Bavarian savings banks and BayernLB with its dependent institutions Bayerische
Landesbausparkasse (LBS) and Bayerische Landesbodenkreditanstalt. The aim is to
bundle the information technology of the companies involved into IZB SOFT in order to
create a shared system house. The necessary legal and organisational requirements for
IT bundling will have been met by mid-2005. The next stage involves the step-by-step
transfer of systems and applications. This process takes into consideration the needs of
day-to-day business and projects to be implemented.
As computer services provider, Informatik-Zentrum München-Frankfurt am Main GmbH
& Co. KG is responsible for the provision and operation of large computer systems,
client / server systems and telecommunications technology. The company was founded
in 1993 by the Bavarian savings banks and BayernLB with the aim of sharing computer
resources. Since 2001 Landesbank Hessen-Thüringen (Helaba) also holds a stake.
Foreign entities
The optimisation of BayernLB’s foreign entities, initiated in 2003, is being further
pursued.
At the beginning of 2004, as part of the restructuring of the Corporate Services Division, the back office and IT units of the foreign entities were subsumed into the International Corporate Services Division under joint management.
This allowed efficient control and coordination of day-to-day operations. Furthermore,
it created the necessary processes for implementing change.
The structures and sizes of the Corporate Services units abroad are rapidly being harmonised with the new business model. Here, the focus is on the standardisation and
extensive centralisation of processes and IT systems in line with BayernLB’s strategic
orientation.
General services
The Shared Services Division provides general administrative and operational services.
This division initiates, carries out and manages outsourcing plans within its sphere of
responsibility. This, together with the identification of potential outsourcing targets,
aims to create lasting positive economic effects for BayernLB. So far, the companies BLB
Bankett Gastronomie GmbH, LB Corporate Services GmbH and Bayern Facility Management GmbH (BayernFM) have been launched onto the market.
75
BLB Bankett Gastronomie GmbH performs a broad range of catering services for
BayernLB and other customers. These services include corporate catering, vending
machines, and catering for conferences, parties and events, as well as leisure facilities.
Bayern LB’s operative marketing was outsourced to LB Corporate Services GmbH in
2004. This move allowed LB Corporate Services GmbH to enhance its function as a multiple service provider. In addition to the product areas of payroll, postal services, office
management and security services, the company now also offers BayernLB and others
services in the areas of event marketing, public relations and services, as well as concomitant consulting services.
The company BayernFM was founded in mid-2004 as part of the restructuring of
Facility Management. BayernFM is held jointly by Flughafen München GmbH and
BayernLB. Technical and infrastructural building management duties were transferred
to this company. BayernFM has taken over management of all of BayernLB’s domestic
office buildings, and performs facility management services at Munich Airport. There
are plans to expand business with third parties in Southern Germany.
Outlook
Future core tasks of the Corporate Services Division will include offering services tailored to demand and the market situation, as well as the expansion of all essential
services for BayernLB’s business areas and support operations.
A key focus for 2005 will be the continuation of intensive cooperation in the SparkassenFinanzgruppe within the scope of the “IT Bayern” project. To this end, IZB SOFT has
been established as the central IT service provider for the Sparkassen-Finanzgruppe
Bayern. The aim is twofold: to enhance the performance of Bavarian savings banks and
BayernLB and to achieve long-term cost advantages. The project is to be implemented
in a series of practicable steps, and is currently expected to be rolled out in 2008.
} BayernLB and
Flughafen
München GmbH
create joint facility
management
company
76
Risk Office
The Risk Office bundles together activities for the analysis of single borrowers, credit
administration, management of loans in need of restructuring, risk management and
risk controlling.
It is divided up as follows. The Corporates / Financial Institutions Division and the Real
Estate / Structured Financing Division are responsible for analysis. The systematic sector-oriented approach employed in these divisions has proved successful. The main
tasks of the Credit & Collateral Services Division comprise the drafting of agreements,
uniform monitoring of risk-relevant credit business as well as transaction- and serviceoriented portfolio management. In Credit Consulting, the chief feature is a greater
focus on workouts. The Risk Controlling & Procedures Division is entrusted with the
design, implementation and monitoring of management systems, in addition to the
implementation of more accurate methods for risk measurement and reporting.
The Credit Committee, delegated the highest level of responsibility below the Board of
Management, is the Bank’s central credit competence unit. It also provides the Board
with support on all issues of credit risk management. The comprehensive credit policy,
on which all credit-related decisions are based, provides a solid framework for this.
Risk management
Refining and elaborating risk management processes and methods represented a key
focus of the Risk Office’s activities in the 2004 financial year. As part of reorganisation,
credit administration activities were brought together under the Credit and Collateral
Services unit of the Risk Office. Meanwhile, Risk Offices abroad – in New York, London
and Hong Kong – were annexed to the Corporates / Financial Institutions Division.
Thus, their organisation is now in harmony with the structures and task allocation of
the Munich Risk Office.
} Target portfolio
defined as part of
credit risk strategy
For capital controlling purposes, the target portfolio was defined as part of the ongoing development of the bank-wide credit risk strategy. Consistent implementation of
cluster management led to a further improved diversification.
The rating system developed jointly with nine other landesbanks has already proved
to be of value. Using the DSGV (German Savings Bank Association) corporate customer
rating and establishing a shared credit process with the savings banks reinforces cooperation with the Bavarian savings banks in the area of underwriting business. Moreover, it supports the ongoing development of a uniform approach to risk, as well as
boosting the efficiency of collaborative work.
In covering the portfolio to the greatest degree possible by powerful, cutting-edge rating procedures, the Bank has achieved a further milestone on the way to meeting the
requirements of Basel II.
Outlook
For 2005, the focus is on developing the groundwork necessary for implementing the
requirements of Basel II. This involves weighting credit collateral in a way that eases
the burden on equity, defining specific criteria for transaction ratings and recording
the portfolio in line with IRB criteria. Further objectives include ongoing software
development for the early detection system to be used throughout the Bank, as well
as the refinement of risk-optimised procedures for the valuation, analysis and controlling of individual credit exposures.
77
78
Our staff
Downsizing measures brought to an early close
“Implementing the new business model in 2004 demanded a great deal of flexibility
and willingness to make sacrifices from BayernLB’s staff.” The above is a core message
from the Board of Management, taken from the latest of the “Shaping our future
together” series of talks. In this internal forum, members of the Board of Management
periodically tackle questions from the Bank’s staff.
Personnel communication measures are of particular importance at this time of strategic realignment. Management forums and staff events of this type afford the Board of
Management the opportunity of explaining the background behind current decisions.
They are also a good way of gathering direct feedback on staff morale. Immediate
internal communication has helped to ensure that all staff members understand the
necessity of the measures taken, as well as their importance for assuring job security.
It has helped to bring the staff fully on board for the Bank’s strategic realignment.
The strong performance in 2004 is essentially thanks to the staff of BayernLB, who have
shown exceptional commitment in implementing the new business model in their dayto-day work.
Far-reaching changes to the Bank’s structural and procedural organisation last year led
to staff restructuring measures, resulting in the termination of around 1000 jobs in
2003 and 2004. However, target figures were reached early, meaning that restructuring
could be brought to a close in 2004.
Optimisation of personnel management systems
BayernLB’s staff policy aims to create an environment in which employees can perform
well. To this end, personnel management systems also had to be revised and adjusted.
The remuneration systems were optimised and tied more closely to BayernLB’s business
performance. Employees under the Bank’s own pay scale have long had a performanceoriented and earnings-related bonus system. Now, a similar bonus system has also been
designed for employees with salaries based on the standard pay scale. This will help to
achieve BayernLB’s goal of rewarding individual performance and fostering the commitment and motivation of each employee in an individual and targeted manner.
Optimisation of “management by objectives” was initiated, with the aim of achieving
a target-oriented global management of BayernLB to safeguard business performance.
Both management and staff are to be given even fuller support in achieving not only
overall Bank objectives, but also the concomitant individual objectives of each employee.
A performance appraisal system is currently being developed to support this aim. It
will be used to identify employees with potential and will be accompanied by continuous successorship planning.
Change in staff capacity
For the period 1 January 2004 to 31 December 2004
Change
2004
2003
absolute
in %
8,940
9,061
– 121
– 1.3
36
146
24
34
164
22
+2
– 18
+2
+ 5.9
– 11.0
+ 9.1
5,047
5,543
– 496
– 8.9
563
120
32
16
778
699
138
24
19
768
– 136
– 18
+8
–3
+ 10
– 19.5
– 13.0
+ 33.3
– 15.8
+ 1.3
In the core Bank4
4,104
4,581
– 477
– 10.4
Average length of service
in the Bank (in years)
13.45
12.61
+ 0.84
+ 6.7
Average age in the Bank (in years)
40.13
39.60
+ 0.53
+ 1.3
688,720
656,481
+ 32,239
+ 4.9
499,803
493,485
+ 6,318
+ 1.3
76,439
112,478
81,192
81,804
– 4,753
+ 30,674
– 5.9
+ 37.5
8,742
9,029
– 287
– 3.2
Number of employees at year-end
in the Group1
of which
• top management2
• apprentices
• temporary trainees
in the Bank in Germany and
abroad3
of which
• abroad
• apprentices
• graduate trainees
• temporary trainees
• part-time staff
Personnel expenses in the Group
(EUR thousand)
of which
• wages and salaries
• social security contributions
and employee benefits
• pension scheme
Average number of staff
in the Group
1 The Group includes BayernLB.
2 Board of management, managing directors, board of directors and supervisory board
3 BayernLB in Germany and abroad, including Landesbodenkreditanstalt and Landesbausparkasse
4 BayernLB in Germany and abroad, excluding Landesbodenkreditanstalt and Landesbausparkasse
The Bank’s social commitment stretches beyond the active working life of its employees. For this reason, the pension scheme introduced in 2002 was revised and reoriented. It was replaced by a new pension scheme at the beginning of 2005. The main
features of the new scheme have changed little, but processing is now carried out by
a reinsured group support fund called ÖBAV Unterstützungskasse e.V. – S-Verbund
Versicherungskammer Bayern. This pension scheme is accessible to all employees
taken on since 1 January 2002. Employees who started with the Bank before 31 December 2001 are still covered by the old system, which is similar to the civil servant pension scheme.
79
80
Fostering talent and increasing qualification levels
Young, highly-qualified new employees represent an important investment in the
future of any company. BayernLB is therefore committed to training young, talented
and motivated people. The bank hired 50 trainees during the 2004 financial year. A
total of 31 graduates were taken on as part of the trainee programme. The increasing
demand for temporary traineeships clearly shows that BayernLB, as a training company,
is seen as a trusted and attractive option. Investment in cultivating fresh talent is
worthwhile. This is illustrated by the fact that in 2004, the majority of apprentices and
trainees who completed their training successfully were hired on a permanent basis.
In addition to proximity to the customers, further staff training and qualification remains
crucial for the Bank’s market success and optimum implementation of its business
strategy. For this reason, development of the professional and product-related competence of our staff was a key focus in 2004. A special series of seminars entitled
“Customer and Credit Analysis”, aimed at risk analysts and relationship managers,
was developed and successfully carried out jointly with the business areas. This special
series will be continued both at home and abroad during 2005.
Internal communication
A shared corporate identity that is truly felt by the employees is essential in order to
weather challenging economic conditions. The Board of Management and employees
of BayernLB can rely on a broad range of customer-tailored internal communication
instruments. Ensuring that all employees are equally well-informed means meeting
information needs as they arise. This is achieved thanks to fine-tuned interaction
between staff communication measures and print and online media.
Backing up staff communication with online and print media enhances the quality,
scope and transparency of internal messages. The Intranet has a key role in online
communication, providing staff with a communications and work platform. All employees worldwide have instant access to up-to-date information in English and German.
In addition, a bimonthly staff magazine offers employees their own forum, devoted
mainly to background reports, interviews and in-depth information.
Outlook for 2005
“We are one Bank, one team, and only together can we achieve our overall goals –
each in his or her own function.” This clarion call to the staff came from the Board of
Management at the end of 2004, expressing the importance of renewed future efforts
to breathe life into the Bank’s new structure. The day-to-day implementation of this
shared corporate culture, largely crafted by the Board of Management and executives,
will be one of the core tasks for 2005.
The introduction of a performance-oriented and earnings-related bonus system for
standard pay scale employees and the revised objectives agreement and evaluation
system represent a challenge for both employees and management, and one that they
are fully prepared to meet.
The most important objectives of any staff qualification initiative consist of reinforcing
the Bank’s market position, enhancing competitiveness and improving BayernLB’s earnings situation.
Our thanks to our staff and the Staff Council
Without the commitment of each and every employee to our Bank, it would not have
been possible to put an end to job cuts earlier than scheduled. Nor would we have
been able to consolidate the business areas and support operations by the second half
of 2004.
The Staff Council has once again helped create a climate of trust, cooperation and
mutual respect. We would like to express our special thanks to these staff representatives for their loyal and responsible cooperation on all operational and social matters
during these difficult times. Especially in times of upheaval, the Board of Management
and all other managers are highly aware of the importance of staff representation that
is committed to the interests of the Bank as a whole, and of the necessity of cooperating in an atmosphere of trust.
81
82
BayernLB acknowledges its corporate responsibility in a variety of ways, whether by
promoting culture, the arts, education and science, or by furthering social causes and
protecting the environment.
Culture and the arts
“Arts and culture reflect an important basis of the social life of man. Our Gallery at
BayernLB is a means of bringing people together and supporting artists. Our numerous
loans of works of art open up the way for the public to participate in cultural life.”
BayernLB’s promotion of culture and the arts adds to Munich’s renown as a city of
culture. BayernLB’s Gallery at 20, Briennerstrasse in Munich gives contemporary artists
the opportunity to exhibit their work in a well-known forum that has gained widespread recognition in artistic and cultural milieus. Our exhibition marking the 100th
anniversary of Salvador Dali’s birth was one of the highlights of 2004. This project was
carried out jointly with Literaturhaus München. The Gallery’s participation in Munich’s
“Evening of Museums and Galleries” has become a tradition for BayernLB. This event
offers members of the public access to a wide range of museums and exhibitions at a
greatly reduced overall fee.
BayernLB also supports Munich’s famed Pinakothek art galleries and various other
Bavarian cultural establishments by donating valuable items on permanent loan.
In a press conference held on November 2004, the Palais Dürckheim, a building
belonging to BayernLB, was presented to the State Art Collections for cultural use from
2005. The mid-19th century building is to become a venue for lectures, workshops and
seminars organised by the Pinakothek der Moderne in the interest of disseminating
arts and culture. This cooperative initiative, set up as a Public Private Partnership,
enriches not only the three Pinakothek galleries, but also Munich as a cultural venue.
A particular highlight of BayernLB’s promotion of culture during 2004 was the presentation of a violin made by Antonio Stradivari to the first violinist of the Munich State
Orchestra. The violin was made by Stradivari in 1722, at the apogee of his career as a
creator of instruments. Its has been owned by BayernLB since 1976, but is always lent
to professional musicians. In this way, the instrument is made accessible to the public.
Deutsche Kreditbank AG (DKB), of which BayernLB holds 100 percent, has created its
own foundation under the name “DKB Stiftung für gesellschaftliches Engagement”.
The main objective of the foundation is to promote sports and the arts, as well as the
protection of historic buildings and monuments. The Hungarian company Magyar
Külkereskedelmi Bank Rt. (MKB), also held by the Bank, has been a major sponsor
of the Franz Liszt Chamber Orchestra, Budapest, for more than 15 years. Over the last
years it has also built up a collection of Hungarian art which has enjoyed a great deal
of attention.
Education and science
“The competitive potential of a nation is the education, knowledge and innovative power
of its people. By promoting education and science, we are taking full cognisance of this
fact.”
Since 1992, BayernLB’s commitment to education and science has been crystallised in
its yearly Academic Prize. In this area too, BayernLB is particularly involved in the promotion of regional education facilities. All eleven of Bavaria’s universities are invited
to submit pieces of research. The winners are selected by a specialist jury based on
dissertations and post-doctoral theses dealing with banking topics. In 2004, the main
prizes were awarded to Dr. Jutta Schmidt of Otto-Friedrich University in Bamberg for
her piece on “Investment decisions in the equity market – an experimental analysis
of the information and decision-making processes of individual investors”, and to
Dr. Klaus Wolf of the University of Bayreuth, whose dissertation was entitled “Risk
management in the context of value-based company management”. Ten sponsoring
prizes were also awarded.
A further academic prize is conferred by the Landesbank Saar Girozentrale Saarbrücken
(SaarLB), of which BayernLB holds 75.1 percent. At EUR 25,000, this prize is one of the
most generous in the Saarland. In 2004, it was awarded to the bioanalyst Dr. Joachim
Jose for his post-doctoral thesis entitled “Made-to-measure molecules”.
For seven years, BayernLB has been recognising and promoting innovative solutions in
the health care sector with its Clinic Sponsoring Prize. This award is not just limited to
Bavaria, but rather welcomes candidates from all over Germany. Particularly in these
increasingly difficult times for the health care sector, we feel it is important to support
structural change in the clinics. BayernLB thus sees its Clinic Sponsoring Prize as providing a stimulus for the development of future-oriented concepts. In 2004, the tinnitus centre of the Berlin-based Campus Charité Mitte received first prize in the competition. Using innovative new treatment solutions, and by virtue of an integrated concept
with a dedicated day clinic, this project greatly enhances the quality of life of tinnitus
sufferers. Moreover, it suggest treatment options to patients for everyday use and selfhelp.
Together with Schörghuber Stiftung & Co. Holding AG, BayernLB sponsors an endowment professorship for housing construction and development at the Architecture
Department of the University of Technology in Munich.
83
84
DKB and SaarLB are also actively involved in the area of university sponsorship, the
former with a student education fund, and the latter with an endowment fund for a
professorship in biotechnology, funded by the Saarland’s Sparkassen-Finanzgruppe.
Seven years ago, the Hungarian company MKB set up a scholarship to open the horizons of gifted children and young people from extremely poor backgrounds. To date,
MKB has funded more than 100 winners of this scholarship right up to degree level.
BayernLB has been building up a historical archive since mid-2003. This project involves
collecting and preserving all documents and materials relevant to BayernLB’s history.
All sources are verified and analysed. By charting its corporate history, BayernLB,
founded in 1972 with the merger of its predecessor Bayerische Gemeindebank (founded
in 1914) and Königliche Landeskulturrentenanstalt (founded in 1884), is thus taking
responsibility for recording its development as a company. BayernLB’s 25-year-old
collection of historical Bavarian securities continues to be expanded and documented,
as an integral part of Bavarian corporate history.
Social commitment
“People experiencing social hardship deserve our support. After all, any one of us could
find ourselves in a similar situation. We, BayernLB and staff, see ourselves as an integral
part of civil society. By making our mark at a regional level, through selected, particularly
beneficial projects, we are acknowledging our social responsibility.”
BayernLB has shown its commitment to furthering social causes in its environment for
several years. In this way, the Bank is helping to support people experiencing hardship.
Helping children is of particular importance to BayernLB. For over 10 years, the Bank,
together with the entire Sparkassen-Finanzgruppe Bayern, has been a partner of the
“Sternstunden – We help children” initiative. This programme offers medical, educational and social support to a great number of children. As partner, BayernLB bears
Sternstunden’s administrative costs and settles its payment transactions. It also provides office and communications facilities, thus ensuring that all contributions to
the programme go directly to the children without any deductions being made. Over
11 years, 950 projects in Bavaria, Germany and all over the world have been funded
by contributions totalling EUR 52 million.
The biennial exhibition of pictures by students at the Bavarian State School for Disabled People, which the BayernLB Gallery has hosted since 1999, is becoming a regular
event for the Bank. At the end of each exhibition, the pictures are auctioned off, and
the proceeds divided equally between the school and the Sternstunden project.
BayernLB also collects money and takes on the sponsorship of certain projects as part
of the Christmas initiative “Giving instead of Gift-giving”. Last but by no means least,
the personal commitment of numerous BayernLB employees is vital for the success of
the Sternstunden initiative.
Banque LBLux S.A., a majority holding of BayernLB and Helaba, has long been involved
in furthering social causes, in addition to promoting art, culture and sport. Amongst
other projects, it sponsors the foundation “Helping Children with Cancer”.
As part of the “Socially Responsible Purchasing” pilot project, suppliers of Bayerische
Landesbausparkasse (LBS) are obliged to disclose details of any child labour in sweatshops used throughout their manufacturing and trade chains. LBS then uses this
information as a selection criterion in its purchasing decisions.
BayernLB donated EUR 250,000 to a Sternstunden project in Sri Lanka as a first
response to the tsunami that devastated South East Asia at the end of 2004. This
money is being used to rebuild two destroyed outstations belonging to a children’s
home in this region. BayernLB is also involved in setting up and financing a Sparkassen-Finanzgruppe reconstruction fund for the countries affected by the disaster.
Environmental management
“Without an ecologically sound environment, neither business nor individuals could flourish. We strive to be the leaders in product ecology and corporate environmental protection.”
BayernLB’s environmental management system, certified by EMAS II, continued to be
further developed and revalidated during 2004.
Here, the key focus was indirect impact on the environment. BayernLB has explicitly
anchored ethical responsibility into its Group-wide credit risk strategy. The Bank
observes the World Bank’s ecological and social standards.
BayernLB is also reinforcing its commitment to climate protection. Together with its
subsidiary Energy & Commodity Services GmbH, BayernLB offers advisory services for
handling climate protection projects in line with the Kyoto protocol. Furthermore, the
Bank has pressed on with its product launch for trading with emission allowances in
Europe.
Scoris GmbH’s rating testifies to the fact that BayernLB is on the right track with
regard to its understanding of ecological and sustainable commitment. Forty-four
financial service providers were ranked as part of the company’s sustainability rating
of European bond issuers. BayernLB was the best German institution ranking second.
Outlook
In the future, corporate responsibility will remain an important factor for BayernLB.
We will thus continue along our established course of corporate responsibility, while
keeping an eye on new developments and adjusting our measures and objectives
accordingly. BayernLB will publish full details of this progress in a dedicated report on
sustainability. By incorporating topics of corporate responsibility, this new document
will go far beyond the previous environmental report, giving a full account of BayernLB’s performance in the area of sustainability.
85
A product is only as good as the tool that shapes it. Experience
is the key to it all – from customised planning to successful
implementation to the unique result. And the process is all
but a routine one: every new project signifies a new beginning.
You can’t buy the most valuable
tool in the world: experience.
Laoreet dolore magna aliquam erat volutpat. Ut wisi enim ad
minim veniam, quis nostrud exerci tation. Ut wisi enim ad minim
veniam, quis nostrud exerci tation. Lorem ipsum dolor sit amet.
 Report on the Bank
and the Group
Overview
90
Management report
93
Outlook
103
Risk report
106
90
Report on the Bank and the Group
Overview
Economy
After three years of stagnation, 2004 brought moderate economic recovery, with
Germany’s gross domestic product growing by 1.6 percent in real terms. Companies
with a large share of export business in particular were able to benefit from the ebullient rebound of the global economy. Nonetheless, private household consumption
was sluggish due to meagre income growth. This limited the potential of the economic
upswing. The fact that Germany was able to tap into Europe’s economic growth was
purely thanks to strong demand from abroad. Both global and domestic situations do
not point towards an economic revival for Germany in 2005. On the financial markets,
the year was marked by continued – albeit somewhat leisurely – recovery of the equity
markets, a surprising decline in interest rates in the second half, and not least by a
weak dollar.
New business model
The transformation of BayernLB’s business model, begun in 2002 and pursued with vigour throughout 2003 and 2004, is already proving successful. The turnaround has been
achieved.
In the year under review, BayernLB’s business model was consistently on – if not ahead
of – schedule. This allowed around 1,000 job cuts in the core Bank (BayernLB excluding
Bayerische Landesbausparkasse (LBS) and Bayerische Landesbodenkreditanstalt (Labo))
to be achieved before schedule. This personnel reduction measure had been approved
in 2003 and was originally planned for wrap-up by 2005 / 2006. BayernLB’s Board of
Management was reduced from nine members in 2003 to seven in 2005.
Optimisation of BayernLB’s foreign entities, begun in 2003, is right on schedule. The
Singapore-based BLB Asia Pacific Ltd., as well as the Singapore, Tokyo and Toronto
branches have been closed. Winding-up of the Labuan branch is also running according to plan. The London, Paris, Milan, New York, Hong Kong and Shanghai locations
together form an optimum network of foreign entities, which BayernLB can exploit to
support both its own customers and those of the Bavarian savings banks in their international business. It can also take advantage of selected business opportunities arising
on these particular financial markets.
} BayernLB Group
seizes opportunities in Eastern
Europe
As part of its business model, the BayernLB Group is pressing on with its strategy for
Eastern Europe, as well as continuing to expand its retail capability. A major aspect of
this is the support the Bank provides for the savings banks and their customers in the
Central and Eastern European (CEE) markets through high-quality consultation services
and a local network of cooperating partners. This network is currently being expanded.
The Budapest-based Hungarian Foreign Trade Bank (MKB), which enjoys an excellent
91
position and serves as a bridgehead in Hungary, is playing a decisive role in this process. Moreover, operating from its Munich head office outwards, BayernLB is seizing
its opportunities in the growing CEE and Russian markets. In addition to joint market
development with the savings banks in Bavaria, retail capability is also being further
expanded through LBS, Labo and the subsidiaries Deutsche Kreditbank AG, Berlin,
(DKB), Landesbank Saar, Saarbrücken, (SaarLB), MKB, Banque LBLux S.A., Luxembourg,
and LB(Swiss) Privatbank AG, Zurich, as well as through our extensive credit card
business.
BayernLB is now directing its full attention to the task of stabilising and raising profits.
Concomitant measures have been taken in the individual business areas. The Bank is
continuing to focus consistently on the market – together with the Bavarian savings
banks – and to pursue the implementation of strategic realignment in a target-oriented
manner.
Participations portfolio
In 2004, BayernLB continued with the streamlining of its participations portfolio.
Further realignment in Austria and Italy
At the beginning of July 2004, BayernLB sold its 46.4 percent participation in the
Vienna-based Bank für Arbeit und Wirtschaft AG (BAWAG) to the Austrian trade union
federation (ÖGB). In November 2004, the Bank sold its 100 percent participation in the
Austrian company Ruefa Reisen AG to Österreichische Verkehrsbüro AG. In July, it concluded the sale of its 10 percent participation in Südtiroler Sparkasse to Stiftung Südtiroler Sparkassen, Bolzano.
TxB Transaktionsbank GmbH
LB Transaktionsbank GmbH Frankfurt (Main) – München, a subsidiary founded jointly
with Helaba in 2002, has successfully established itself on the market. During 2004,
it managed to further consolidate its market position by merging with the Hamburgbased PLUS Bank AG, a wholly-owned subsidiary of HSH Nordbank.
Since 1 October 2004, the newly formed company has traded under the name TxB
Transaktionsbank GmbH (TxB). TxB, of which BayernLB holds 37.5 percent, boasted
around 210 mandates from the savings bank and private bank sector at year-end 2004.
It is the third-largest transaction bank in Germany for securities services. TxB’s shareholders are constantly exploring new practical strategic options in order to achieve
greater economies of scale in securities settlement.
} Merger between LB
Transaktionsbank
and PLUS Bank
completed
successfully
92
Our staff
Personnel reduction measures resolved in 2003 as part of the implementation of
BayernLB’s new business model, and originally planned for wrap-up by 2006, were
completed ahead of schedule in 2004.
BayernLB’s workforce at home and abroad was reduced by 496 positions year on year,
standing at 5,047 employees as at 31 December 2004. At Group level, the headcount
was down by only 121 staff to 8,940. This is largely due to the incorporation of
Konzumbank (+ 260 employees) into the Hungarian MKB.
In order to stabilise personnel expenses, the personnel management systems were
revised. Thus, agreements governing the remuneration system for employees working
under the Bank’s own pay scale were revised, and the new versions brought into effect
at year-end. A new performance-oriented and earnings-related bonus system was
designed for standard pay scale employees.
The number of new junior staff remained stable in comparison to the previous year:
80 new apprentices and trainees were taken on. The majority were welcomed to
BayernLB on a permanent basis following successful completion of their training.
Environmental protection
} BayernLB takes
active responsibility for environmental protection
As a financial institution, BayernLB is affected by climate change: both directly, through
its use of resources, and indirectly, through its customers. For this reason, BayernLB’s
environmental management system, certified by EMAS II (Eco-Management and Audit
Scheme), continued to be further developed and revalidated during the year under
review. With regard to indirect impact on the environment, BayernLB has explicitly
anchored ethical responsibility into its Group-wide credit risk strategy.
The EU Emissions Trading Scheme has been in force since 1 January 2005. In view of
the new scheme, BayernLB stepped up its consulting services in this domain in the year
under review. Together with its subsidiary Energy & Commodity Services GmbH, the
Bank also launched its product introduction process for trading with emission allowances. The European directive governing emissions trading entails a twofold risk for
companies affected. Firstly, there is a quantitative risk in connection with gaining
sufficient emissions trading allowances; secondly, these allowances entail a price risk.
BayernLB will assess these risks within the framework of credit standing assessment.
93
Management report
Assets, liabilities and earnings position
The annual accounts for 2004 were considerably influenced by BayernLB’s business
model. While the retail-oriented subsidiaries tended to be acquisition-oriented in their
market activities, the Bank itself continued to phase out large, higher-risk segments of
its customer credit business. At the same time, the Bank took comprehensive measures
} Annual accounts
marked by
BayernLB’s
business model
aimed at safeguarding and stockpiling liquidity for the time following the withdrawal
of the state guarantee mechanisms on 18 July 2005.
The balance sheet total for BayernLB (including LBS and Labo) increased by 4.7 percent
to EUR 285.6 billion. Once again, a weak US dollar tempered this amount in the equivalent of EUR 3.1 billion (1.1 percent). In Germany, the Bank’s business volume grew by
12.3 percent (to reach EUR 245.3 billion). International business, in contrast, reported
continuing decline (down 25.7 percent to EUR 40.3 billion).
The increase in the consolidated balance sheet total was more marked: up 6.3 percent
to EUR 333.1 billion. The largest subsidiaries were again DKB, posting a balance sheet
total of EUR 28.3 billion, followed by SaarLB (EUR 17.5 billion), Banque LBLux (EUR 12.6
billion) and MKB (equivalent to EUR 5.9 billion). LB(Swiss) reported a customer volume
of CHF 3.4 billion at year-end.
BayernLB
Group
EUR billion
31.12.2004
31.12.2003
Change
in %
31.12.2004
31.12.2003
Change
in %
Total assets
285.6
272.8
4.7
333.1
313.4
6.3
Business volume
300.6
289.9
3.7
349.8
331.9
5.4
The business volume, largely consisting of the balance sheet total plus liabilities from
guarantees and indemnity agreements, was EUR 349.8 billion at Group level (up EUR
17.9 billion) and EUR 300.6 billion for BayernLB (up EUR 10.7 billion).
} Balance sheet total
94
Credit operations
BayernLB
Group
31.12.2004
31.12.2003
Change
in %
31.12.2004
31.12.2003
Change
in %
128.5
110.8
15.9
124.7
105.7
18.0
– of which
savings banks
17.8
19.3
– 7.7
18.5
20.0
– 7.6
Due from
customers
87.4
91.9
– 4.8
127.8
128.8
– 0.8
Securities
52.8
51.4
2.8
64.7
60.9
6.2
205.8
192.2
7.1
242.0
224.0
8.0
EUR billion
Due from
banks
Credit volume*
* Due from customers and banks (without amounts due upon demand) excluding accrued interest plus discount credits
} Strong increase
in amounts due
from banks;
customer
receivables
unchanged
Amounts due from banks increased sharply (by 18 percent to EUR 124.7 billion in the
Group; by 15.9 percent to EUR 128.5 billion at BayernLB) due to the temporary investment of borrowed funds. Amounts due from savings banks, however, were down
EUR 1.5 billion at both Group and Bank level, totalling EUR 18.5 billion in the Group
and EUR 17.8 billion at BayernLB.
Customer receivables remained virtually unchanged at Group level (down EUR 1.0 billion to EUR 127.8 billion). Although BayernLB’s customer receivables declined once
again (down EUR 4.5 billion to EUR 87.4 billion), this was compensated by an increase
in the latter amongst the subsidiaries.
Due to the surge in amounts due from banks, the credit volume increased by EUR 18.0
billion to EUR 242.0 billion in the Group and by EUR 13.6 billion to EUR 205.8 billion at
BayernLB.
The overall securities portfolio was slightly up on the previous year. The Group’s securities portfolio increased by 6.2 percent (to EUR 64.7 billion), while BayernLB’s security
holdings were up by 2.8 percent (to EUR 52.8 billion). As in previous years, the entire
securities portfolio is valued in accordance with the strict principle of the lower of cost
or market.
The nominal volume of derivative transactions increased by EUR 82.9 billion to EUR
1,017.1 billion during the year under review. This growth was wholly due to the EUR
110.7 billion increase in interest rate-related transactions, which reached a total volume of EUR 804.4 billion. Currency-related transactions stood at EUR 168.2 billion at
year-end, down EUR 37.7 billion against the previous year. The credit risk equivalent
of the derivative transactions dropped 15.2 percent to EUR 3.8 billion.
95
Funding
BayernLB
Group
31.12.2004
31.12.2003
Change
in %
31.12.2004
31.12.2003
Change
in %
105.7
100.1
5.6
127.0
119.9
5.9
8.3
7.5
10.6
8.8
7.8
11.7
Due to customers
54.1
52.2
3.7
70.4
65.3
7.8
Securitised
liabilities
95.8
90.4
6.0
103.8
95.6
8.6
EUR billion
Due to banks
– of which
savings banks
The liabilities side, particularly longer-term items, was affected by liquidity-safeguarding measures undertaken by BayernLB.
} Liquidity-safeguarding measures
affect funding
Amounts due to banks increased by 5.9 percent to EUR 127.0 billion in the Group and
by 5.6 percent year on year to EUR 105.7 billion at BayernLB. There was a particularly
marked climb in amounts due to savings banks, which were up 11.7 percent to EUR 8.8
billion at Group level and up 10.6 percent to EUR 8.3 billion at BayernLB.
The Bank posted pleasing increases in amounts due to customers and securitised liabilities. Amounts due to customers rose by 7.8 percent to EUR 70.4 billion in the Group,
and by 3.7 percent to EUR 54.1 billion at BayernLB. Securitised liabilities, meanwhile,
were up 8.6 percent to EUR 103.8 billion at Group level, while BayernLB’s position
increased by 6.0 percent (to EUR 95.8 billion). BayernLB thus continues to be among
the leading tap issuers on both the national and international capital markets. New
issues totalling over EUR 16 billion were placed under the international issue programme. In January 2004, BayernLB started out in the jumbo benchmark bonds segment, issuing a ten-year EUR 1.5 billion bond. This was followed by a seven-year issue
with a total volume of EUR 1 billion in May. BayernLB continued to offer attractive
investment products in the form of structured bonds.
Due to the continuing decline in risk positions in accordance with Principle I (down
6.9 percent to EUR 127.7 billion), key banking regulatory figures continued on their
upward trend within the BayernLB Group. The core capital ratio was enhanced by
0.5 percentage points to reach 8.3 percent, while the own funds ratio was up 1.2 percentage points to 12.5 percent.
} Equity ratios
improve further
96
Key banking regulatory figures in accordance with the German Banking Act (KWG)*
BayernLB Group
EUR billion
Risk positions as per Principle I
Own funds
– of which core capital
Own funds ratio (at Group level)
Core capital ratio
31.12.2004
31.12.2003
127.7
137.2
16.0
9.4
15.5
9.6
12.5 %
11.3 %
8.3 %
7.8 %
* Based on the approved accounts
Earnings position
} Return to satisfactory operating
result after difficult
years
Following three difficult years – measured in terms of operating profit – marked by the
realignment of the credit and participations portfolios, the BayernLB Group once again
succeeded in achieving a satisfactory performance in 2004. This was due not least to
the Bank’s fundamental transformation of its business model.
Factors contributing to this encouraging performance included dramatically decreased
risk expenditure in credit business and, given the reduction of risk assets, consistently
high revenues and low administrative expenses. As part of the Group’s strategic reorientation, the participations portfolio was realigned and essential value adjustments
carried out. Net income for the year was affected by an extraordinary expense of
EUR 320 million. This amount represented a payment to the Free State of Bavaria upon
conclusion of the EU state aid proceedings regarding housing construction funds.
} Improved return
on equity
In 2004, return on equity was further enhanced both in the Group and at BayernLB.
The Group’s return on equity was 9.5 percent (up from 4.9 percent in the previous
year), while BayernLB’s was 8.0 percent (compared to 4.5 percent).
BayernLB
Group
EUR million
1.1. –
31.12.2004
1.1. –
31.12.2003
Change
in %
1.1. –
31.12.2004
1.1. –
31.12.2003
Change
in %
Net interest
income
1,398
1,608
– 13.1
2,030
2,169
– 6.4
240
253
– 5.0
340
343
– 0.7
92
105
– 12.9
126
105
19.7
Personnel
expenditure
– 475
– 472
0.6
– 689
– 656
4.9
Operating
expenditure
– 355
– 389
– 8.9
– 519
– 529
– 1.9
142
123
15.4
223
120
84.3
1,042
1,228
– 15.1
1,511
1,552
– 2.6
76
– 697
–
– 157
– 953
– 83.5
– 303
– 42
> 100
– 404
– 52
> 100
815
489
66.7
950
547
73.7
Extraordinary
expenses
– 357
– 127
> 100
– 358
– 127
> 100
Corporate
income tax
– 175
– 80
> 100
– 252
– 104
> 100
Partial profit
transfer
– 220
– 219
0.6
– 242
– 237
1.9
63
63
0
98
79
23.3
0
0
0
35
16
> 100
63
63
0
63
63
0
Net commission
income
Net result
from financial
transactions
Balance of other
operating income
and expenditure
Operating profit
before risk
provisions
Risk provisions
Revaluation result
Operating profit
Net income for
the year
Allocations to
revenue reserves /
profit share of
minority shareholders
Profit available
for distribution
97
98
} Net interest income
Net interest income was affected by both general economic conditions and companyspecific factors. Income from the investment of own funds shrank as a result of the sustained, historically low interest rate level. Currency-based interest income also suffered
under the still weak US dollar. Net interest income was also negatively affected by the
continuing reduction of risk assets, as well as by the fact that additional loans were
put on a non-accrual basis. The average margin dropped, due in part to the expansion
of low-margin interbank business with a view to stockpiling liquidity for the following
the abolition of the state guarantee mechanisms on 18 July 2005. On the other hand,
the Bank reported an enhanced margin in new customer credit business in 2004. Certain expenditure was incurred for closing liquidity gaps and stockpiling liquidity. These
future-oriented measures are designed to enhance performance in the coming years.
Net interest income at Group level totalled EUR 2.03 billion, down 6.4 percent on the
previous year’s figure of EUR 2.169 billion. At BayernLB, this position fell by 13.1 percent from EUR 1.608 billion to EUR 1.398 billion.
} Net commission
income
At EUR 340 million, the Group’s net commission income was virtually unchanged
(against the previous year’s EUR 343 million). BayernLB, on the other hand, reported
a 5 percent reduction to EUR 240 million. This was due to the further downsizing of
customer credit business as well as lower commissions from securities transactions.
} Financial result
In 2004, the financial markets were characterised by volatile interest markets that rallied strongly in the second half, buoyant and volatile equity markets and dynamic foreign exchange markets. Against this backdrop, BayernLB succeeded in generating
EUR 92 million in net income from financial transactions, compared to EUR 105 million
in the previous year. The Group’s financial result rose by 19.7 percent (up EUR 21 million) to EUR 126 million.
} Administrative
expenses
The varying performances of BayernLB and the Group are also reflected by administrative expenses. Group figures are affected, amongst other factors, by the merger of the
Hungarian Konzumbank into MKB, concluded on 1 July 2004. The slight increase in
administrative expenditure at Group level, by 1.9 percent to EUR 1.208 billion, contrasts with BayernLB’s further reduction of this position, namely by 3.7 percent to
EUR 830 million.
Group personnel expenses increased by 4.9 percent to EUR 689 million. In addition to
the acquisition-oriented activities of the subsidiaries, this can also be attributed to the
aforementioned merger of the newly acquired Konzumbank with MKB, which added
260 employees to the BayernLB Group headcount. At year-end 2004, the Group subsidiaries together had 375 employees more than at the end of the previous year. Personnel expenses at BayernLB were maintained at the previous year’s modest level
(EUR 475 million compared to EUR 472 million in the previous year). Remuneration
levels for both standard pay scale employees and those under the Bank’s own pay
scale were increased commensurately with the significantly improved earnings position. As per reference day, the headcount was down by 496 employees.
99
Group operating expenses were down slightly (by 1.9 percent), falling by EUR 10 million to EUR 519 million. Savings, achieved by measures such as the downsizing of
BayernLB’s network of foreign and domestic entities, helped to offset the upward
trend in operating expenses amongst the Group’s subsidiaries. In BayernLB, operating
expenses were down 8.9 percent to EUR 355 million. Compared to 2002, this represents a 25 percent reduction.
In 2004, the target cost-income ratio (CIR) of 45 percent was once again achieved. The
} Cost-income ratio
Group’s ratio was 44.4 percent (up 1.1 percentage points), while BayernLB achieved a
ratio of 44.3 percent (up 3.1 percentage points). As per the calculation formula currently used, the balance of other operating expenses and income was incorporated
into calculation of the CIR. The previous year’s figures were adjusted accordingly.
The balance of other operating expenses and income was up 84.3 percent to EUR 223
million in the Group, and 15.4 percent to EUR 142 million at BayernLB. This was largely
due to tax refunds in BayernLB’s favour, as well as one-off income posted by DKB. This
income was attributable to the revaluation of risks due to the early termination of payment obligations pursuant to the D-Mark-Bilanzgesetz (legislation created in connection with German reunification).
The low risk provisioning requirements in 2004 are attributable to the realignment of
the credit portfolio, essentially carried out in the preceding years, the new risk policy
and the thence lower risk costs arising from risk clusters. Risk provisioning expenditure
} Risk provisioning
and revaluation
result
amounted to EUR 157 million in the Group, compared to EUR 953 million in the previous year. BayernLB, meanwhile, posted an income of EUR 76 million, compared to the
previous year’s expenditure of EUR 697 million. Claims in respect of EUR 846 million
at Group level and EUR 720 million at BayernLB were charged off from provisions for
counterparty and country risks. As per 31 December 2004, provisions thus amounted
to EUR 4.382 billion at Group level, compared to EUR 5.038 billion in the previous year,
and EUR 3.384 billion at BayernLB, compared to EUR 4.249 billion in the previous year.
For the first time in three years, both BayernLB and the Group were in a position to
bolster reserves.
Following comprehensive realignment of credit risks over recent years, in 2004, the
participations portfolio was subjected to stringent assessment of its profitability.
Value adjustments and assumptions of losses led to a negative revaluation result of
EUR –404 million at Group level (compared to EUR –52 million in the previous year),
and EUR –303 million at BayernLB (EUR –42 million in the previous year).
After reinforcement of hidden reserves, the operating profit (after risk provisioning /
revaluation) was one of the highest ever posted in BayernLB’s history. Compared with
the previous year, there was an increase of around two thirds both at Group level and
in BayernLB. At EUR 950 million, the Group figure is 73.7 percent up on the previous
year, while BayernLB, with EUR 815 million, can report a 66.7 percent increase.
} Operating profit
considerably
improved
100
} Payment settles
EU state aid
proceedings
The operating result does not include extraordinary expenses amounting to EUR 358
million in the Group, and EUR 357 million at BayernLB. Of these figures, EUR 320 million relates to the payment to the Free State of Bavaria as part of the conclusion of the
EU state aid proceedings.
Due to the improvement of the result, tax expenses more than doubled both in the
Group and at BayernLB. The former incurred tax expenses of EUR 252 million compared
with EUR 104 million in the previous year; the latter EUR 175 million compared with
EUR 80 million in the previous year.
} Net income
for the year
After partial profit transfer, which includes interest expenses for capital contributions
of silent partners, and, standing at EUR 242 million in the Group and EUR 220 million at BayernLB, is comparable to the previous year’s levels of EUR 237 million and
EUR 219 million respectively, net income for the year is EUR 98 million for the Group
(compared with EUR 79 million in the previous year) and an unchanged EUR 63 million
for BayernLB. This enables a distribution of 4 percent on the nominal capital for 2004.
Segment results
In 2004, the individual segments contributed to the EUR 950 million consolidated operating profit as follows:
EUR million
31.12.2004
31.12.2003*
Corporates
485
133
Real Estate
62
– 250
Global Markets
76
279
Financial Institutions & Sovereigns
99
116
Savings Banks, Bavarian Municipals /
Corporates
86
– 11
Labo / LBS
109
173
Group’s strategic subsidiaries
421
127
– 388
– 20
Other
* Previous year figures adjusted based on the controlling system used in the year under review.
} Corporates
segment result
The Corporates segment reported a year-on-year increase of EUR 352 million in its
2004 operating profit. This increase is largely attributable to the net write-back of risk
provisions. The segment reported a very pleasing return on equity of 33 percent, compared to the previous year’s 10.9 percent, thus exceeding our targets. The cost-income
ratio increased year on year from 23.4 percent to 27.2 percent. The marked reduction
in average staff capacities from 377 to 228 positions is largely due to the outsourcing
of employees to the Risk Office Support Operations in conformity with the Minimum
Requirements for the Credit Business of Credit Institutions, as well as the closure of
both foreign and domestic entities.
In the 2004 financial year, the operating profit of the Real Estate segment totalled
EUR 62 million, compared to an operating loss in the previous year of EUR 250 million
101
} Real Estate
segment result
because of high risk provisioning requirements due to conservative assessments. In
addition to the reduction of risk provisions, this encouraging development was the
result of increased income thanks to a slight fall in administrative expenses. Return on
the average equity in 2004 stands at 13.8 percent and thus within the target range,
compared to the previous year’s –55.1 percent. The cost-income ratio improved year
on year from 29.9 percent to 26.7 percent. The considerable fall in average staff capacity from 234 positions in 2003 to 140 positions in 2004 is largely attributable to the
outsourcing of employees to the Risk Office Support Operations, in accordance with
the Minimum Requirements for the Credit Business of Credit Institutions.
With a 2004 operating profit of EUR 76 million, the Global Markets segment generated
a more modest contribution to the Group operating result than in the previous year
} Global Markets
segment result
(EUR 279 million). This downward trend was primarily due to the segment’s lower net
interest income. The result was also affected by expenditure on measures aimed at
preserving liquidity. The segment’s cost-income ratio stands at 70.3 percent, representing a significant increase on the previous year’s ratio of 44.7 percent. The return on
equity posted in 2004 was 12.5 percent, compared to 28 percent in 2003. The year-onyear decline in staff capacity, falling from 546 to 474 positions, was due to the closure
of foreign entities as well as to personnel fluctuations at home.
The Financial Institutions & Sovereigns segment reported a 2004 operating profit of
EUR 99 million, compared with the previous year’s EUR 116 million. This decline is
attributable to increased administrative expenses and a slight reduction in the net
interest income. Due to these factors, the cost-income ratio rose from 18.8 percent
} Financial
Institutions &
Sovereigns
segment result
to 31 percent. At 29 percent, the rate of return on the equity capital disclosed was
below that of the previous year (42.8 percent). Nonetheless, it still clearly exceeded
the Group target.
The segment Savings Banks, Bavarian Municipals / Corporates posted a much improved
operating profit of EUR 86 million, compared with the previous year’s result of EUR – 11
million. This was predominantly the result of the write-back of loan loss provisions
built up in previous years in credit business. Comparison with the previous year is only
} Savings Banks,
Bavarian Municipals / Corporates
segment result
possible to a limited degree due to portfolio realignment. The segment’s return on
equity of 24.1 percent, compared with the previous year’s – 4.1 percent, is a clear illustration of its successful business performance. Likewise, the cost-income ratio
improved significantly year on year from 77.3 percent to 65.3 percent.
The exclusively retail-oriented Labo / LBS segment generated a contribution of EUR 109
million to the consolidated operating profit in 2004, compared to EUR 173 million in
2003. While Labo posted a decline in its result due to increased expenditure on funding, LBS, on the other hand, reported yet another increase. The return on equity of the
segment as a whole was thus maintained at the level of the previous year, standing at
8.6 percent compared to 8.7 percent in 2003. At 49 percent, the cost-income ratio
posted represents an increase against 2003’s ratio of 44.5 percent.
} Labo / LBS
segment result
102
} The Group’s
strategic subsidiaries are strongly
retail-oriented
The segment consisting of the Group’s strategic subsidiaries encompasses the activities
of the BayernLB Group in the national and international banking sectors. These operations are divided up among the following majority holdings of the Bank:
• Deutsche Kreditbank AG, Berlin
• Landesbank Saar, Saarbrücken
• Banque LBLux S.A., Luxembourg
• Magyar Külkereskedelmi Bank Rt. (MKB), Budapest
• LB(Swiss) Privatbank AG, Zurich
• Bayern-Invest Kapitalanlagegesellschaft mbH, Munich
• BLB Asia Pacific Ltd., Singapore
In the 2004 financial year, the segment contributed roughly 44 percent of the Group’s
operating profit, compared with 23 percent in the previous year. The resulting return
on equity, standing at 14.1 percent, represents a significant increase compared to the
2003 figure of 4.3 percent. The enhanced ROE, coupled with a cost-income ratio for
2004 of 38.6 percent (47.1 percent in 2003), are a clear indication that the Group’s strategic subsidiaries enjoyed a successful financial year, especially in view of the strongly
retail-oriented nature of the segment. The year-on-year increase in average staff capacity from 3,411 to 3,610 employees is primarily due to the merger of MKB and the Hungarian Konzumbank.
The clearly negative operating result of EUR – 388 million posted by the Other / Consolidation segment, compared to EUR – 20 million in the previous year, is largely due to
value adjustments and assumptions of losses in participations that are not assigned to
any operational business area.
103
Outlook
The forecasts relating to the future performance of the BayernLB Group are estimates
that BayernLB arrived at using all the information available at the time when the report
on the Bank and the Group was drawn up. If the assumptions underlying our forecasts
prove incorrect, the actual results may differ from those currently anticipated.
Global economic forecast
The economic outlook for 2005 inspires only a limited degree of confidence. A self-sustaining upward trend is not yet in sight for Germany. During 2005, oil prices must gradually come back down if expansionary global trade is to continue: acceptable economic growth in Germany depends not least on the latter. Only if this happens will the
depressing factors afflicting the global economy be held in check. This applies equally
to the development of the euro exchange rate. Another strong revaluation of the euro
would take a serious toll, especially on the German economy, which is heavily dependent on foreign trade. Furthermore, volatile currency markets necessarily affect the
development of the capital markets. If oil prices remain high, there would be negative
repercussions for both bond and equity markets.
The following factors are also likely to affect BayernLB’s performance in the 2005 financial year:
Legal outlook
US veterans of the first Gulf War (in 1991) filed a lawsuit in September 2003 in the United States against a dozen industrial corporations (mostly from the chemicals sector)
as well as about 30 European and Asian banks, among them BayernLB. The plaintiffs
claim they have suffered bodily damage from chemicals illegally supplied to the former
Iraqi regime by these industrial corporations and that the delivery was financed – also
illegally – by the banks in question. Together with various other banks, BayernLB has
commissioned a renowned American law firm to protect its interests. In concurrence
with this firm, BayernLB continues to consider this charge unfounded. The Bank, together with all of the other banks in question has thus filed a motion to dismiss, with
a view to obtaining a summary judgement in favour of the banks. This would avoid a
long-drawn-out case. At the moment we are not in a position to make a statement
regarding the decision on this motion.
} Gulf War veterans’
class action
104
Liquidity
} Access to adequate
liquidity secured
at all times
The liquidity of both BayernLB and the Group were secured in 2004 at all times.
During the period under review, a new IT system was introduced to manage liquidity
in BayernLB. A follow-up project was rolled out with the objective of achieving more
timely liquidity management, as well as refining methods to this end.
In order to guard against future liquidity risks and increased funding costs after the
withdrawal of Gewährträgerhaftung (guarantee obligation) and Anstaltslast (maintenance obligation), a portfolio strategy was implemented for long-term funding. Realisation of this strategy will continue in 2005.
In this way, BayernLB is ensuring that once the guarantee mechanisms no longer apply
from July 2005, it will still have access to sufficient liquidity for planned business activities at all times.
Planned capital increase
} Owners firmly
behind BayernLB
Further reinforcement of the capital base represents one of BayernLB’s key objectives.
The Free State of Bavaria and the Association of Bavarian Savings Banks will make a
50 percent contribution each to a cash capital increase carried out through BayernLB
Holding AG. The transaction, totalling EUR 640 million, will be completed in two
tranches (2005 and 2006). This move will not affect BayernLB’s ownership structure.
The planned capital increase is a clear demonstration of the owners’ loyalty to
BayernLB. This, together with the planned conversion of the dated silent capital contributions into undated ones, is another major factor in ensuring BayernLB’s long-term
earnings after the abolition of the guarantee mechanisms in July 2005.
Regional guarantee fund
In addition to the cross-guarantee system of the Sparkassen-Finanzgruppe, which
spans the whole of Germany, a regional guarantee fund is to be created in order to further underpin the cooperation of the Sparkassen-Finanzgruppe within Bavaria. The
Bavarian guarantee fund, with a total volume of EUR 1 billion, will be endowed by the
Bavarian savings banks and BayernLB, according to a ratio based on the respective riskweighted assets.
105
Strategy / rating
Upon withdrawal of the state guarantee instruments for new liabilities on 18 July 2005,
BayernLB will receive valuations from the rating agencies for unguaranteed and uncovered liabilities for the first time. Both the results of the 2004 financial year and assessment of BayernLB’s business outlook are crucial to the rating agencies’ valuation.
Various indications of the future unguaranteed ratings were published in 2004 by
agencies such as Fitch Ratings (A +), Moody’s (A1 floor rating of the German Savings
} BayernLB well
prepared for
rating agencies’
valuations of
unguaranteed
and uncovered
liabilities
Bank Organisation) and Standard & Poor’s (A –). In view of these indications, BayernLB
is confident that it can achieve its target rating of at least A flat or A + from all major
rating agencies, all the more so given its performance in 2004.
As part of the new business model, the consistent implementation of measures aimed
at enhancing sustainable earnings, while taking into account the Bank’s risk and participations strategy, remains the single most important element of BayernLB’s target
framework. These measures include:
• targeted exploitation of market opportunities, particularly those aimed at generating higher commission income, by strengthening customer relationships while continually adapting the product range
• expansion of retail capability, together with the Bavarian savings banks and through
the Group’s subsidiaries at home and abroad
• stepping up collaboration with the savings banks based on the cooperation agreements signed with the latter; intensifying cooperative market development in the
core market of Bavaria is a key priority here
• enhancing global support for the savings banks in serving and assisting their customers in the Eastern European and Asian markets, particularly through the German
Centre in Shanghai
• seizing the opportunities offered by EU enlargement in CEE
• targeted exploitation of market opportunities in selected economic locations around
the world, while taking into account risk, return and costs
In addition, BayernLB will step up core internal projects aimed at optimising management and timely implementation of the Basel II and IAS / IFRS requirements.
The progress BayernLB has made in its strategic reorientation is flanked by its new
marketing image, through which the Bank informs both customers and the general
} BayernLB’s
reorientation
visually reflected
in new marketing
image
public about its competencies and range of services.
BayernLB anticipates a stabilisation of the operating result in 2005. Factors contributing to this will include an expected significant improvement of the revaluation result,
as well as normalised risk costs in the Bank’s credit business. Extraordinary charges
such as those experienced in the 2004 financial year are not anticipated, leading
BayernLB to expect a stabilisation of the overall performance.
} Stabilisation of
operating result
expected
106
Risk report
Risk monitoring and control
} Bank-wide
controlling concept
BayernLB employs uniform procedures to control and monitor its risks throughout all
of its business areas. The global objective is to optimise the Bank’s risk / return profile
for all of the various types of risk. Responsibility for risk identification, analysis and
assessment lies with the Risk Office Support Operations, which is also charged with
attending to, processing, monitoring and controlling risks on an ongoing basis.
} Organisational
basis of risk
management and
controlling
The organisational framework underlying the Bank’s risk controlling system takes into
account the Minimum Requirements for the Credit Business of Credit Institutions (MaK)
and the Minimum Requirements for the Trading Activities of Banks (MaH). During the
period under review, this framework was developed further. Thus, in 2004, responsibility for credit and collateral administration was delegated to the Risk Office Support
Operations.
Risk management principles are defined by the enhanced credit policy. This is supplemented by the credit risk strategy and specific policies governing items such as risk
provisioning.
The credit risk strategy defines standards for credit business as well as regulations
governing the Bank’s handling of credit and counterparty risks, on the basis of general
legal and supervisory terms and conditions. In particular, it sets key parameters for the
credit portfolio, and defines the Bank’s principles for risk capital controlling (focusing
on risk / return aspects). The Board of Management reviews the credit risk strategy on
a yearly basis.
Economic capital, which is measured using economic benchmarks, is becoming increasingly important for controlling and limitation purposes, as is the Value at Risk (VaR)
model. VaR is a method used for quantifying the risk potential that is offset by the
capital allocated for risk hedging in the risk capacity calculation.
The risk potential arising from country, market and operational risks is calculated,
limited and controlled using the VaR method. Up to now, counterparty risks were controlled by limiting the risk assets provided and using the expected losses as a basis. At
the same time, important experience was gathered within the context of pilot VaR calculation projects. In the future, the Bank will also employ the CreditRisk+ method to
control counterparty risks. For this method, in line with its target rating, BayernLB
assumes a confidence level of 99.96 percent (with a one-year holding period).
From the beginning of 2005, the economically assessed risk capital requirement has
been offset by the cover funds available as part of an ongoing monitoring process. This
is initially being carried out as a test phase. A buffer determined by the Board of Management helps to cover unusual market fluctuations (stress tests) and further risks that
fall outside the scope of the concept.
BayernLB’s subsidiaries (Hungarian Foreign Trade Bank, Budapest; Banque LBLux S.A.,
Luxembourg; Landesbank Saar, Saarbrücken; Deutsche Kreditbank AG, Berlin) implement risk controlling processes, strategies and procedures as well as risk management
in accordance with their own individual purposes.
The Group Audit Division supports the Board of Management in its capacity as a process-independent unit within the internal monitoring system. Its activities are defined
} Group Audit
Division
by the Minimum Requirements for the Structure of Internal Audits at Banking Institutions (MaIR) issued by the BaFin.
Monitoring and controlling the various risk types
Counterparty risk
BayernLB defines counterparty risk as the potential loss resulting from a counterparty’s
} Definition
default or from a decreased value owing to an unforeseeable deterioration in a counterparty’s credit standing. Counterparty risks may be broken down into risks arising
from traditional credit business, issuer risks resulting from securities transactions and
counterparty risks from trading transactions.
BayernLB bases every credit extension on an individual analysis and assessment of the
borrower’s credit standing, using certain rating methods. In 2004, introduction of a
new 24-tier rating method was continued according to plan. This procedure is
designed to comply with the requirements of Basel II. The rated gross exposure of the
Group may be broken down as follows:
Gross exposure of the Group
by rating category
[%]
80
63 68
60
40
27 22
20
6
0
2003
2004
0 to 7
8 to 11
7
12 to 17
2
1
18 to 21
2
2
Default
categories
} Credit rating
107
108
} Bank-wide balance
sheet analysis and
early detection
systems
With a view to improving credit rating assessment, a uniform balance sheet analysis
system was introduced throughout the Bank, comprising all of the major accounting
standards (HGB, IAS, US-GAAP etc.). This system is being enhanced by the addition of
budgeted balance sheets and forecasts of future balance sheet changes. Furthermore,
the early detection procedure was revised and harmonised. The “intensive care” and
“handling of problem loans” sub-processes were also redesigned and adjusted to meet
these requirements.
} Customer and
portfolio limits
BayernLB limits potential losses depending on the risk profile of each product group
using approaches guided by book value or market value. As well as setting limits at
business partner level, the Bank carries out risk controlling at portfolio level with the
help of a target portfolio. Portfolio structure limits are thus defined, e.g. for sector,
country or rating category. Concentration risks in particular are taken into considera-
} Limiting risk
clusters
tion. A cluster limit is determined for each borrower or liability relationship. The target
portfolio is projected over several years, subjected to continual revision and, if necessary, changed in line with evolving business environments.
} Collateral
Losses resulting from a counterparty’s default are fundamentally limited by the
assumption and risk-oriented structuring of collateral customary in banking business.
In derivatives trading, master agreements are usually concluded for the purpose of
close-out netting. Some collateral agreements restrict the default risk associated with
individual trading partners to an agreed maximum and authorise the call for (additional) collateral should this maximum be exceeded.
} Credit risk model
In 2004, the framework for calculating expected loss was significantly enhanced by the
introduction of new scorecard and simulation rating methods. Furthermore, “loss
given default” values (statistical loss amount in a given case of default), calculated as
part of the project undertaken jointly by several German landesbanks, significantly
enhance the calculation of expected losses arising from specific transactions. In order
to cover unexpected loss, risks are backed by an appropriate amount of capital.
} RORAC
In 2004, with a view to safeguarding the Bank’s return / performance, the RORAC
(return on risk adjusted capital) ratio was introduced. In the current year, it was
adopted for overall portfolio management. Thus, the income from a transaction, customer relationship or business area is now determined relative to the risk capital utilised.
In the year under review, credit exposure in the Group was decreased by around EUR
0.9 billion (by EUR 7.2 billion at Bank level). In addition to the lacklustre economic
trend and concomitantly lower demand for credit, this was attributable to initiatives
aimed at decreasing clusters and concentrations in the credit portfolio.
109
Gross exposure
by Group entity
[%]
85 83
80
60
40
20
0
8
BayernLB
8
Deutsche
Kreditbank
4
4
SaarLB
2
3
Banque LBLux
1
2
MKB
2003
2004
Efficient and targeted portfolio management is based on reporting that is guided by
} Reporting
the Bank’s strategy and observes uniform standards while taking into account risk and
return aspects. In BayernLB, reports are prepared on credit and country risk, sector
portfolios, and problem exposures.
In the interest of economic controlling and strategic alignment of sector exposure,
BayernLB uses a grouping code based on risk and added value, which breaks down
exposure into 30 sector groups. Based on this system, exposure for the main sector
groups is classified as follows:
Gross exposure of the Group
by sector
[%]
60
48 53
40
20
14 13
10 10
16 13
4
3
0
Banks
2003
2004
Non-profit
Real estate
organisations
and sovereigns
Utilities
2
6
2
Automotive,
inc. suppliers
Other
6
Private
customers
} Sector portfolio
110
} Derivatives
business in 2004
BayernLB uses derivative instruments in order to reduce price and / or interest rate risks
associated with the conclusion of customer transactions, as well as those arising from
asset / liability management and the issuance of structured bonds. After these instruments have been used, any residual risks are subject to the risk limit and risk capital
controlling. Derivatives are principally used to diversify credit risks or as hedging
instruments. In addition to the use of derivatives, risk hedging is also carried out by
the active syndication of loans, or with the help of structured products such as asset
backed securities (ABS).
At Group level, the credit equivalent amount from derivative transactions, taking
account of netting agreements, totalled EUR 3.8 billion at year-end, which corresponds
to 0.38 percent of the nominal contract volumes (for detailed information on the entire
scope of derivatives business, see “Notes to the Accounts” in Section V).
} Risk provisioning
in 2004
All counterparty risks identified in this period were covered appropriately through risk
provisions. In 2004 on balance, EUR 222 million was allocated to provisions for counterparty and country risks at Group level (write-backs totalling EUR 92 million at Bank
level). Allocations were thus reduced by 83.5 percent year on year. In relation to the
average credit volume, the default rate in the credit business at Group level was 0.36
percent (0.38 percent at BayernLB alone). Direct write-offs on claims came to EUR 87
million at Group level and EUR 58 million at Bank level.
Provisions for counterparty and country risks*
Group
EUR million
2004
2003
2002
2001
As at 1 January
5,038
4,625
2,784
2,178
Write-backs
– 525
– 420
– 398
– 220
Utilisation
– 846
– 692
– 346
– 377
Allocations
748
1,766
2,659
1,166
Other changes**
– 33
– 241
– 74
37
4,382
5,038
4,625
2,784
As at 31 December
* excluding general loan loss provisions, other loan loss provisions, change in reserve pursuant to Sections 340f and 340g
German Commercial Code and credit standing-related write-downs on securities
** Change in group of consolidated companies, exchange rate changes and account transfers
111
Investment risk
Similarly to counterparty risk, investment risks (shareholder risks) represent potential
} Definition
losses arising from the provision of equity capital and related collateral to third parties.
BayernLB exerts an influence on the business and risk policies of its subsidiaries in par-
} Controlling
ticular through its representation on their shareholder committees and supervisory
bodies. Especially for its strategic participations, BayernLB aims to gain corporate control of these companies with a participation of more than 50 percent, or, alternatively,
by means of voting commitment agreements.
With regard to investment risk, the Bank has implemented clear functional segregation
} Outlook
between responsibility for profit contribution at Group level, or “making”, and responsibility for “monitoring” the profits. In terms of this functional segregation, major subsidiaries with strategic significance for the Group are defined as participations that are
responsible for their contribution to the consolidated results. All other participations
come under the responsibility of individual business areas / support operations. This
functional segregation is accompanied by individual monitoring of portfolio performance in each unit. Strategic and return-oriented realignment of the overall participations portfolio, a measure introduced in previous years, continues to be pursued.
Country risk
A country risk is the risk that, due to
} Definition
• a possible worsening of macro-economic conditions
• political or social upheaval
• the nationalisation or expropriation of assets
• the non-recognition by a government of cross-border liabilities
• foreign exchange control measures or
• currency depreciations or devaluations
in the country concerned, a borrower or the country itself is unable to fulfil its obligations at all or in due time.
In 2004, the country portfolio was influenced by the situation in Central and South
America as well as events in the Near and Middle East.
For the purpose of assessing the country risk, the economic situation of the respective
country and, more importantly, the ability to effect debt service payments are analysed
on an ongoing basis with the help of both quantitative and qualitative information.
} Influential factors
112
} Controlling
Country risks are controlled with the help of country limits derived from a model portfolio on the basis of the country risk capital provided. The limit structure is determined
by various factors, including country ratings, resulting default probabilities and LGDs
(loss given default values), as well as international trade flows. Concentrations in individual countries lead to increased drawings on risk capital. In the year under review, a
Value at Risk of EUR 670 million was calculated for BayernLB in terms of country risk,
based on a risk capital of EUR 881 million.
} Monitoring and
reporting
Central risk controlling monitors compliance with country limits on an ongoing basis.
} Risk structure
Ninety-two percent of BayernLB’s foreign exposures are in countries that do not have
Exceeded limits are reported directly to the Board of Management.
limits (usually countries in the top two rating categories). Countries with limits account
for 8 percent of the Bank’s exposures abroad. Thus, exposures in countries without
limits increased relatively to those with limits against the previous year.
Exposures in countries with limits at Group level increased by 5 percent to EUR 15 billion, while falling by 7 percent to EUR 12 billion in the Bank. Of foreign exposures,
85 percent at Group level and 84 percent in the Bank are classed in the good rating
categories 0 – 11, of which 42 percent (53 percent in the Bank) are rated in the very
good categories 0 – 7. Only 15 percent (16 percent in the Bank) are classified in the
rating categories 12 – 24.
} Situation and
outlook for the
regions
In Central and South American emerging markets, the economic rebound continued
in 2004. This has triggered a risk of inflation in some countries. Exposure in countries
with limits in this region remained roughly unchanged year on year (down 5 percent at
Group level, down 6 percent in the Bank).
In the Near and Middle East, the economic outlooks of the oil-producing countries
have brightened. Nonetheless, political risks linger in some parts.
Exposure in Asia was down 12 percent in 2004 (down 23 percent at Bank level). This
was due primarily to the closure of Asian branches.
The eight new EU members from Central and Eastern Europe continued to catch up in
terms of economic development during the year. The upward trend in these countries
is carried by both export activities and domestic economic activity. Central and Eastern
Europe and the CIS countries gained in importance in the country portfolio, increasing
by 39 percent in absolute terms at Group level, and 37 percent in the Bank alone.
Net exposure of the Group
by countries with limits
[%]
40
31 41
35 29
30
19 15
20
8
10
7
7
8
0
CEE / CIS
Asia
Latin America
Near and
Middle East
Other
2003
2004
All discernible country risks were accounted for by risk provisioning in the balance
} Country risk
provisioning
sheet. Due to the broad stabilisation of the global economy, BayernLB was able to
reduce country risk provisions to EUR 51 million in 2004. Neither at Group nor at Bank
level were there direct write-offs on claims.
Provisions for country risks:*
Group
2004
2003
2002
2001
Net exposure*
67
167
182
292
Country risk provisions
51
97
112
198
76.2 %
58.3 %
61.6 %
67.9 %
EUR million
Provision ratio
* Total of individual country-related exposures for which provisions were made
Liquidity risk
BayernLB defines liquidity risk as the risk of being unable to meet current or future
} Definition
payment obligations either fully or on time. Liquidity risk also encompasses the risk
that, in the event of a liquidity crisis, funding is only available at higher market rates
than anticipated; or that assets can only be sold below market rates.
Due to the impending withdrawal of the AAA rating as per 18 July 2005, availability of
liquidity at acceptable market rates was a prime focus for BayernLB in 2004. In order to
hedge against the possibility of higher funding costs in the future, BayernLB drew up a
portfolio strategy for long-term funds on the liabilities side.
} Risk situation
113
114
} Controlling
Management of the liquidity position and strategic liquidity management are the
responsibility of the Global Markets Business Area. The former task ranges from management of intraday cash flows to measures aimed at compliance with the supervisory
Principle II ratio. Strategic liquidity management, on the other hand, ensures mediumto long-term solvency, projected over a forecast period of up to 20 years.
In terms of safeguarding the liquidity position, according to supervisory requirements,
a bank’s liquidity is deemed sufficient if the weighted liquid funds available within
30 days cover the weighted payment obligations that are callable during this period.
In the year under review, the ratio was always between 1.18 and 1.36. The minimum
supervisory requirement of 1.0 was thus guaranteed at all times.
The Global Markets Business Area comprises management tasks relating to Principle Il,
all funding activities, as well as collateral management. The Bank ensures access to
the main international money and capital markets by placing certificates of deposit,
medium-term notes, bearer bonds, covered bonds (pfandbriefe) and local government
bonds or other funding instruments. Of particular importance here is collateral management, which both covers the necessary lines for trading partners and ensures the
superlative quality of BayernLB’s registers of cover.
Each subsidiary of the BayernLB Group balances its liquidity independently. Although it
is not stipulated under national law, each subsidiary reports its Principle II ratio to the
parent company. To disclose their structural liquidity positions, the subsidiaries submit
cash-flow redemption reports to the Bank’s Global Treasury and Funding Division.
To safeguard solvency even in times of crisis (worst case scenarios), the Bank has an
appropriate portfolio of highly liquid securities that can be disposed of. This means
that, even when markets are tight, BayernLB can procure sufficient liquidity by way of
repo and central bank tender deals. As a rule, intraday and overnight net liabilities
must be covered by access to central bank funds. The Bank has developed a special
scenario simulating a liquidity crisis, which reproduces the implications of such a crisis
for future cash flows.
} Reporting
During the regular Board meetings, the Global Treasury and Funding Division keeps
BayernLB’s Board of Management continuously informed of the current liquidity position.
115
Market price risk
Market risk comprises interest rate, currency, share price and commodity risks. The
} Definition
source of these market risks may be securities (or similar products), money market or
foreign exchange products, commodities, derivatives, currency or performance hedging, equity or quasi-equity or the Group Treasury.
Market risks at BayernLB are monitored by Market Risk Controlling, which is independ-
} Controlling
ent of Trading. The maximum loss permitted for the assumption of market risks is limited by a fixed amount of risk capital covering this risk type. Market risks are actively
managed and monitored using a limit system.
For market risks, BayernLB employs a Value-at-Risk method, which calculates all market
risks on the basis of historic market fluctuations (volatilities) and market correlations.
} Measuring market
price risk
They are determined anew on every day of trading. Moreover, the impact of extraordinary market price changes and extreme market situations or disturbances to normal
market situations are also analysed. Therefore, stress tests in the form of crisis scenarios and worst-case analyses are also carried out in addition to the traditional risk scenarios.
By means of backtesting, the soundness and quality of the individual risk methods are
verified. This entails a comparison of the risk forecast with the actual results (profit or
loss).
The forecasting quality of the risk model has been pronounced good under the Basel I
traffic light approach and Principle I: on no trading day was the prognosis for the overall risk exceeded as the result of a negative daily performance.
The responsible Board Member is informed daily on the Bank’s market risk and resulting performance situation. The whole Board of Management receives a monthly report
in which any peculiar developments are explained.
In the 2004 financial year, BayernLB’s market risk capital was set at EUR 709 million at
Bank level. EUR 554 million of this amount was allotted to the individual portfolios.
The remaining reserves amounted to EUR 155 million.
During 2004, the Bank’s market risk averaged EUR 42.2 million in the trading and
investment books (VaR with a holding period of one day). Over the course of the year,
it fluctuated between EUR 30.9 million and EUR 55.6 million.
} Backtesting
116
VaR in EUR million
60
50
40
30
2. 1. 2004
2. 2. 2004
2. 3. 2004
2. 4. 2004
2. 5. 2004
2. 6. 2004
2. 7. 2004
2. 8. 2004
2. 9. 2004
(Figures for the Bank; VaR with a holding period of one day)
The following table shows the Bank’s VaR for the various different risk factors:
VaR bank-wide for different risk factors
2004
2003
VaR
Average
VaR
Minimum
VaR
Maximum
VaR
End of
period
VaR
End of
period
Interest rate risk
36.15
23.67
50.38
29.60
40.94
Share price risk
4.45
0.10
8.47
3.83
7.76
Currency risk
5.58
2.15
15.15
12.47
4.91
Commodity risk
0.31
0.09
0.77
0.68
0.24
Volatility risk
0.35
0.19
0.97
0.89
0.27
EUR million
(Figures for the Bank; VaR with a holding period of one day)
The “market liquidity shortfall” scenario (simulation of a liquidity shortfall in the market) captures the risk at a 20-day holding period. At year-end, the Bank’s VaR for this
scenario stood at EUR 144.5 million. BayernLB’s risk capital of EUR 709 million was sufficient to cover potential losses at all times.
Test scenarios were created for MaH-relevant portfolios, based on situations such as a
rise in interest rates of up to 110 basis points, a 15 percent appreciation / depreciation
of the euro, or a 30 percent fall in share prices. These scenarios are based on the IMF’s
FSAP study conducted in 2003. For all of these scenarios, the Bank’s liable capital was
sufficient to cover all possible losses.
Operational risk
BayernLB defines operational risk (OpRisk) as the risk of an unexpected loss occurring
} Definition
as a result of human error, a process or control deficiency, a technical failure, a disaster
or any negative external factor. OpRisk also encompasses legal risks.
BayernLB has a central, independent OpRisk controlling unit which is entrusted with
} Controlling
the task of guiding the Group on all methods, processes and systems relating to
OpRisk controlling and management. Management of operational risks is the responsibility of the individual local OpRisk management units of the business areas and support operations.
The OpRisk controlling unit compiles operational loss data on a continuous basis as
} Reporting
part of an institutionalised reporting system. It also conducts qualitative assessments
in the business areas and support operations, calculates the operational Value at Risk
(OpVaR) using a special simulation technique known as Monte Carlo simulation, based
on historical internal and external loss data, and reports to the Board of Management
and the business areas and support operations. The report encompasses data on the
loss situations of major subsidiaries / participations.
During 2004, in the interest of early detection, risk indicators for operational risk were
introduced. These are known as key risk indicators, and are allocated to the core areas
of personnel (e.g. overtime factors, fluctuations), risk management (e.g. exceeded limits), IT (e.g. number of virus alerts) and transactions (e.g. cancellations / queries).
In 2004, the expected operational loss amounted to EUR 5.8 million at Bank level, compared to EUR 7.6 million in the previous year. The OpVar peaked at EUR 262 million,
} Development
of risks
compared to the previous year’s value of EUR 440 million, but had fallen to EUR 182
million by year-end. This decline can be attributed to the significant downward trend
in losses. Thus, in 2004, losses were down 49 percent to EUR 1.29 million. Losses of
EUR 2.09 million were reported at Group level.
In the area of legal risk, the EU state aid proceedings in relation to the transfer of capi-
} Legal risk
tal through the Free State of Bavaria in the form of special housing construction funds
has been resolved.
Major developments in 2005 will include a data consortium aimed at improving the
data basis for calculating OpVaR, and offering the opportunity of loss benchmarking
together with members of the Association of German Public Sector Banks, as well as
ongoing development of business continuity planning and reduction of the required
OpRisk capital by targeted use of insurances.
} Outlook
117
118
Summary and outlook
Efforts undertaken during 2004 and previous years in the area of risk controlling and
management also contributed to the Bank’s overall positive performance in the year
under review. Thanks to these efforts, risks threatening the portfolio, or jeopardising
performance at BayernLB, were identified in good time, assessed and controlled.
Other milestones were:
• optimisation of structural and procedural organisation for credit transactions, particularly the processes for handling problem loans
• enhancement of the risk policy and strategy (e.g. by the introduction of a loan loss
provisioning policy)
• improvement of the methods and tools used for risk analysis and assessment, particularly balance sheet analysis software and rating methods
• enhancement of the supervisory risk capacity calculation (in accordance with Principle I) by the introduction of economic controlling (using Value at Risk)
• reduction of risk clusters and concentration risks
BayernLB considers risk controlling and management, both internally at the Bank and
in cooperation with the savings banks associations, to be a crucial competitive factor
in the long term. Both the economic demands of competition and supervisory provisions will necessitate the further strengthening and refinement of risk controlling and
management procedures over the next years.
The fine-tuned assessment and adequate pricing of counterparty risks will remain the
main tasks. In addition, economic capital controlling will be pursued for all measurable
risks and at all controlling levels. Early detection of risks, coupled with targeted risk
reduction measures, will be developed further. The regulations and instruments necessary for these objectives are being developed on an ongoing basis.
119
Without a dynamic force there would be no evolution. When there is
dynamic activity, something new and better can evolve. Which factors
will play a more important role in the future? Putting our thoughts into
gear is essential – asking the right questions to find the right answers.
The driving force behind every
change: dynamic energy.
 Report by the Board of
Administration, accounts of
BayernLB and the BayernLB Group
and notes to the accounts
124
128
Consolidated balance sheet and profit
and loss account
134
Consolidated statement of changes
in shareholders’ equity
140
141
144
Notes to the acccounts and consolidated accounts
148
124
Report by the Board of Administration, accounts of BayernLB and the BayernLB Group and notes to the accounts
In addition to a difficult banking environment and still weak economic situation, the
2004 financial year was marked by high levels of insolvency as well as intense debate
on banking structures. The Board of Administration’s task of advising and supporting
the Board of Management on various issues, including the consistent implementation
of the Bank’s strategic realignment, was also marked by this challenging backdrop.
All of the Board’s efforts were particularly aimed towards strengthening the Bank’s
capital resources and increasing its profitability in view of the withdrawal of Anstaltslast (maintenance obligation) and Gewährträgerhaftung (guarantee obligation) in
July 2005.
We advised and supervised the Bank’s management on an ongoing basis in accordance
with our mandate as governed by law and the Bank’s statutes.
Engaging in open dialogue with the Board of Management, we discussed the planned
business policy, debated the Bank’s strategy and addressed fundamental questions of
corporate planning.
The Board of Management provided us with regular, comprehensive and up-to-date
information on the Bank’s performance, in both written and oral format. Particularly
important aspects included the Bank’s position with regard to earnings and expenditure, portfolio performance, the risk situation and risk management, significant findings of the internal auditors’ reports and important events and transactions. During
the Board of Administration’s eleven meetings, formal resolutions were passed where
prescribed by law or the Bank’s statutes. Procedures requiring the approval of the
Board of Administration were submitted and decided upon. Representatives of the
German Financial Supervisory Authority (BaFin) and of the Deutsche Bundesbank
also attended these meetings on a regular basis, thereby ensuring direct contact and
cooperation.
Furthermore, the Chairman and Deputy Chairman of the Board of Administration regularly discussed current developments and decisions of the Board of Management,
working particularly closely with the Chairman of the Board.
New strategy for BayernLB
As mentioned above, a key focus of our work was the consistent implementation of
the Bank’s new strategy and concomitant consolidation or improvement of July 2004’s
nominal shadow rating in the A category.
Measures initiated by the Bank were extensively conferred upon with the Board of
Administration. Furthermore, the Board of Management provided information on the
status of implementation of the new strategy on an ongoing basis.
Numerous aspects of the new business model were elaborated and refined. Key examples of this were the streamlining of the foreign entities network, further intensification and optimisation of the market development being carried out by the Bank in conjunction with the Bavarian savings banks, and BayernLB’s concomitant development as
network bank of the association. The Eastern European strategy was also re-examined
and revised.
The Board of Administration devoted considerable effort to continuing the enhancement of the earnings and cost situation. Thus, for example, the Bank was able to terminate personnel reduction plans before schedule.
We also worked intensively on optimising both the credit and participations portfolios.
Presentations explaining the most important of the Bank’s strategic participations gave
the Board of Administration a more in-depth insight into the participations portfolio.
Further reduction of concentration risks was the principal objective in terms of realigning the credit portfolio.
Different measures aimed at reinforcing the Bank’s capital base represented another
key focus. This could be achieved by converting dated capital contributions of silent
partners subject to call into undated ones without accompanying calling rights.
Another option would be preparing the way for a capital increase.
Statutory and supervisory requirements
We continued to address the statutory and supervisory requirements incumbent on
the Bank on a regular basis. Thus, regarding the implementation of the Minimum
Requirements for the Credit Business of Credit Institutions (MAK), the Board of
Management provided us with comprehensive information in good time on the credit
risk strategy adopted, its implementation and further development, as well as on the
introduction, realisation and updating of the standardised, bank-wide credit policy.
EU proceedings regarding state aid
In addition, the Board of Administration was involved with the EU proceedings instigated against BayernLB on charges of illegal state aid, in conjunction with the recovery
of special-purpose assets belonging to the Free State of Bavaria. In October 2004, an
agreement was reached in respect of the level of interest to be levied on the special-
125
126
purpose assets. The restitution claim arising from the case was charged to expense
and deferred in 2004, and the repayment to the Free State of Bavaria effected in
January 2005.
This concluded the proceedings. In the first half of 2005, the Bank aims to come to an
amicable solution with the European Commission relating to the planned EUR 640 million capital increase. The capital increase, to which the Bank’s two owners are to contribute 50 percent each, is to be carried out in two tranches in 2005 and 2006. It will
help considerably to reinforce the Bank’s capital base.
Corporate Governance
BayernLB’s Corporate Governance Principles, which entered into force on 1 January
2004, serve as guidelines for collaboration between the Board of Management, Board
of Administration and General Meeting. They ensure responsible and transparent
administration and controlling, oriented towards sustained enhancement of the Bank’s
enterprise value.
In their meetings of 7 December 2004, the Board of Administration and the General
Meeting discussed compliance with BayernLB’s Corporate Governance Principles. Both
bodies, in harmony with the Board of Management, established that there is nothing
to suggest that the Bank does not comply with these principles.
Changes to the Board of Management
Certain changes were made to the Board of Management in the 2004 financial year.
With effect from 1 July 2004, we consented to Mr. Werner Strohmayr’s request to be
discharged from his duties as Member of the Board of Management. Dr. Ralph Schmidt
took on Mr. Strohmayr’s position from 1 July 2004. For the time being, his role is that
of Senior Executive Vice President entrusted with Board of Management tasks.
Having served nineteen years on the Bank’s Board of Management, Dr. Peter Kahn also
left the Board for personal reasons. He retired at year-end 2004. The Board has one
less member following Dr. Kahn’s retirement. His responsibilities have been taken over
by Dr. Rudolf Hanisch and Mr. Theo Harnischmacher.
We would like to thank both Mr. Strohmayr and Dr. Kahn for their excellent contribution to the Bank, and wish Dr. Ralph Schmidt all the best and every success in his
new role.
Auditing and approval of the 2004 annual accounts
The Bank’s annual accounts and consolidated accounts, as well as its summarised
report on the Bank and the Group, have been audited by KPMG Deutsche TreuhandGesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft. The audit of the
annual accounts and reports of Bayerische Landesbodenkreditanstalt and Bayerische
Landesbausparkasse, both of which are institutions of the Bank, has been conducted
by PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft. The
independence of the auditors was duly verified before we requested their approval by
the General Meeting. Unqualified audit certificates were granted upon completion of
the auditing process. The auditors’ reports were discussed thoroughly in today’s meeting of the Board of Administration, and by the derivative Financial Statements Audit
Committee in its meeting of 25 April 2005. Both meetings were attended in person by
the auditors, who explained the important findings of the audit and answered questions thereupon.
We approve the outcome of the external audits following the final outcome of our
internal audits, and upon the recommendation of the Financial Statements Audit
Committee. In today’s meeting, we adopted the annual accounts of the Bank as submitted by the Board of Management. We further approved the Board of Management’s
report on the Bank and the Group as well as the consolidated accounts. We then recommended to the General Meeting that the disclosed profit available for distribution
in the amount of EUR 63,400,193.28 be transferred to BayernLB Holding AG, which
holds 100 percent of the nominal capital of the Bank. This represents a return of 4 percent on the paid-in capital of the Bank.
This result reinforces our opinion that the Bank has successfully completed its turnaround, and that the transformation of its business model is right on track. We are confident that once the guarantee mechanisms have been abolished, the Bank will achieve
its targeted rating of at least A+ in the medium term.
We also proposed to the General Meeting that the Board of Management be discharged. The General Meeting today gave its approval to these proposals.
Our thanks to the Board of Management and staff
We would like to express our appreciation of the immense commitment of the Board
of Management and the employees of BayernLB, particularly in these challenging
times. This applies both to the day-to-day business of the Bank and to the implementation of strategic realignment, which has demanded a great deal of all those involved.
In the future, the Board of Administration will continue to be heavily involved in the
sustained enhancement of the earnings profile, and will do its utmost to support the
Bank in this aim. We wish the Board of Management and all of the Bank’s employees
continued success in the future.
Munich, 2 May 2005
The Board of Administration
Chairman
127
128
Report by the Board of Administration, accounts and notes to the accounts
Balance sheet – Bayerische Landesbank
as at 31 December 2004
Assets
EUR ’000
EUR ’000
EUR ’000
2004
2003
EUR ’000
EUR ’000
1. Cash reserves
a) Cash
b) Balance with central banks
of which:
with Bundesbank
c) Balances in postal giro accounts
10,695
326,855
12,172
744,521
—
285,672
—
756,693
318,398
337,550
2. Debt certificates issued by public entities
and bills of exchange eligible for refinancing
with central banks
a) Treasury bills and Treasury discountpaper and similar debt certificates issued
by public entities
of which:
eligible for refinancing at Bundesbank
b) Bills of exchange
of which:
258,500
472,592
476
472,592
20,695
149,548
476
258,976
20,695
493,287
3. Due from banks
a) Payable on demand
b) Other receivables
of which building loans of Home Loan division:
• building-saving loans
• preliminary and interim financing loans
• other building loans
8,613,607
119,858,243
128,471,850
14,767
—
—
110,836,540
87,427,039
91,862,521
12,409
—
—
4. Due from customers
of which:
• secured by mortgage
• public-debt loans
• building loans of Home Loan division:
– building-saving loans
– preliminary and interim financing
– other building loans
of which:
secured by mortgages
9,196,850
101,639,690
19,158,401
28,411,905
19,166,290
29,458,024
2,347,507
2,380,576
6,995
2,573,780
2,218,900
8,611
3,823,052
3,879,950
carried forward
216,495,415
203,949,041
carried forward
216,495,415
203,949,041
Liabilities
EUR ’000
EUR ’000
EUR ’000
129
2004
2003
EUR ’000
EUR ’000
1. Due to banks
b) With agreed maturities or periods of notice
c) Building-savers’ deposits with Home Loan division
of which:
• on terminated contracts
• on advanced contracts
9,355,183
96,296,028
22,063
7,990,370
92,069,381
23,756
—
6,475
105,673,274
—
5,166
100,083,507
2. Due to customers
a) Savings deposits
aa) with periods of notice
of three months
ab) with periods of notice
of more than three months
ac) Building-savers’ deposits with Home Loan
division
of which:
—
—
—
—
6,853,881
6,463,369
59,454
210,691
72,273
208,515
6,463,369
6,853,881
b) Other liabilities
ba) payable on demand
bb) with agreed maturities or
periods of notice
6,882,050
8,514,934
40,397,006
47,279,056
54,132,937
37,228,226
45,743,160
52,206,529
3. Securitised liabilities
a) Bonds issued
b) Other securitised liabilities
of which:
• money market instruments
• own acceptances and promissory
notes outstanding
88,729,478
7,075,016
6,877,845
6,748,524
—
4. Liabilities administered on behalf of third parties
of which:
loans for third-party account
81,391,518
8,966,897
95,804,494
73,044
90,358,415
8,079,498
8,428,769
8,029,607
8,372,013
5. Other liabilities
3,086,080
2,490,638
6. Deferred income
1,057,440
984,920
267,833,723
254,552,778
carried forward
130
Balance sheet – Bayerische Landesbank
as at 31 December 2004 (continued)
Assets
EUR ’000
EUR ’000
EUR ’000
2004
2003
EUR ’000
EUR ’000
5. Bonds and other fixed-interest securities
a) Money market instruments
aa) issued by public-sector borrowers
of which:
eligible as collateral at Bundesbank
ab) issued by other borrowers
of which:
398,585
24,642
324,859
—
475,514
398,585
—
500,156
36,099
723,444
b) Bonds and other debt securities
ba) issued by public-sector borrowers
of which:
bb) issued by other borrowers
of which:
c) Own debt securities
nominal value
3,674,387
33,171,086
50,099,595
13,425,677
47,089,429
1,338,665
1,306,975
48,928,250
2,687,939
2,422,602
998,744
2,069,959
45,896,697
3,479,454
3,438,507
225,553
—
8. Shares in affiliated companies
739,288
—
3,416,864
2,261,068
—
9. Assets administered on behalf of third parties
of which:
35,877,401
19,578,373
7. Investments
of which:
• in financial institutions
• in financial service providers
13,918,343
3,466,260
6. Shares and other non fixed-interest securities
of which:
10,019,296
3,210,910
2,409,162
—
8,079,498
8,029,607
8,428,769
8,372,013
10. Equalisation claims on public authorities
including bonds originating from the conversion
of such claims
17,945
35,889
11. Intangible assets
26,404
—
150,822
203,265
2,382,724
2,050,146
14. Deferred taxes
262,605
418,993
15. Deferred charges
964,901
1,053,881
285,583,456
272,771,705
12. Tangible assets
13. Other assets
Total assets
Liabilities
EUR ’000
EUR ’000
EUR ’000
carried forward
131
2004
2003
EUR ’000
EUR ’000
267,833,723
254,552,778
2,037,394
748,625
214,288
1,087,134
2,050,047
17,780
17,780
—
—
4,245,667
4,459,909
2,598,587
2,675,281
7. Provisions for liabilities and charges
a) For pensions and similar obligations
b) For taxes
c) Other provisions
805,548
168,917
1,062,929
7a. Reserve fund for Home Loan division
8. Special reserve
9. Subordinated liabilities
10. Profit-participation certificates
of which:
due in less than two years
380,912
434,598
11. Fund for general banking risks
220,154
385,759
12. Capital and reserves
a) Subscribed capital
aa) nominal capital
uncalled nominal capital
1,738,500
– 153,495
1,585,005
2,894,172
ab) capital contributions of silent partners
b) Capital reserve
of which:
specific-purpose reserve
c) Revenue reserves
ca) statutory reserves
cb) other reserves
d) Profit available for distribution
1,738,500
– 153,495
1,585,005
2,894,172
4,479,177
663,146
4,479,177
663,146
612,016
612,016
8,630,151
1,268,000
2,156,428
3,424,428
63,400
8,630,151
285,583,456
272,771,705
1,268,000
2,156,428
3,424,428
63,400
Total liabilities
1. Contingent liabilities
a) Contingent liabilities from the endorsement
of bills rediscounted
b) Contingent liabilities from guarantees and
indemnity agreements
(for further reference, please see the Notes)
c) Contingent liabilities from collateral furnished
for third-party obligations
—
4,522
14,967,541
17,145,150
—
14,967,541
—
17,149,672
49,734,117
—
—
50,475,618
50,475,618
2. Other obligations
a) Contingent obligations from non-genuine sale
and repurchase agreements
b) Underwriting and issuance facilities
c) Irrevocable loan commitments
—
—
49,734,117
132
Profit and Loss Account – Bayerische Landesbank
for the period from 1 January to 31 December 2004
EUR ’000
EUR ’000
EUR ’000
2004
2003
EUR ’000
EUR ’000
1. Interest income from
a) Credit and money market transactions
of which interest income of Home Loan division:
• from building-saving loans
• from preliminary and interim financing loans
• from other building loans
b) Fixed-interest securities and
debt-register claims
7,860,556
116,540
121,355
424
129,070
114,976
557
1,649,791
2. Interest expenses
of which:
for building-savers’ deposits
8,499,440
9,510,347
1,961,175
10,460,615
8,504,977
9,088,219
173,090
1,005,370
169,335
1,372,396
386,955
101,922
69,812
58,806
230,540
5,867
5,311
3. Current income from
a) Shares and other non-fixed
interest securities
b) Investments
c) Shares in affiliated companies
128,947
78,567
179,441
4. Income from profit-pooling agreements,
profit transfer agreements and partial profit
transfer agreements
5. Commission income
of which commission income of the Home
Loan Division:
• from concluding and procuring contracts
• from advanced contracts
• from providing and processing preliminary
and interim financing loans
556,121
45,106
13,736
62,828
16,491
—
—
6. Commission expenses
of which:
for concluding and procuring contracts by the Home
Loan division
592,605
315,967
339,890
68,699
7. Net income or net expenses from financial
operations
8. Other operating income
9. Income from write-back of special reserve
240,154
90,957
252,715
91,716
105,346
193,926
210,192
—
3,151
10. General administrative expenses
a) Personnel expenses
aa) salaries and wages
ab) social security contributions, pensions and
other employee benefits
346,419
331,953
125,950
472,369
143,316
475,269
of which:
pensions
b) Other administrative expenses
carried forward
788,818
72,822
338,878
811,247
1,135,170
1,368,404
94,928
313,549
133
2004
2003
EUR ’000
EUR ’000
1,135,170
1,368,404
11. Depreciation and valuation adjustments
on intangible assets and tangible assets
41,058
50,485
12. Other operating expenses
47,901
77,290
EUR ’000
EUR ’000
EUR ’000
carried forward
13. Write-downs of and valuation adjustments
on receivables and certain securities and
additions to provisions in credit business
of which:
allocation to the fund for general banking risks
—
—
14. Income from reversals of write-downs of
receivables and certain securities and from
write-backs of provisions in credit business
of which:
withdrawals from the fund for general banking risks
696,879
—
75,951
—
165,605
—
75,951
on investments, shares in affiliated companies
and securities treated as fixed assets
investments, shares in affiliated companies
205,272
696,879
40,245
—
205,272
—
40,245
17. Expenses from loss transfers
97,906
4,724
18. Allocation to special reserve
—
—
818,984
498,781
19. Result from ordinary activities
20. Extraordinary income
21. Extraordinary expenses
—
—
356,529
127,129
22. Extraordinary result
23. Taxes on income
24. Other taxes, unless disclosed under
position 12
356,529
175,233
79,804
3,645
25. Profits transferred under partial profit
transfer agreement
26. Net income for the year
127,129
178,878
9,545
89,349
220,177
218,903
63,400
63,400
—
—
—
—
63,400
63,400
27. Allocation from net income for the year
to revenue reserves
a) To the statutory reserve
b) To other reserves
28. Profit available for distribution
—
—
134
Consolidated balance sheet and profit and loss account
Consolidated balance sheet – Bayerische Landesbank Group
as at 31 December 2004
Assets
EUR ’000
EUR ’000
EUR ’000
2004
2003
EUR ’000
EUR ’000
1. Cash reserves
a) Cash
b) Balance with central banks
of which:
with Bundesbank
c) Balances in postal giro accounts
45,745
772,361
48,803
1,025,328
—
459,719
2,729
1,076,860
572,118
818,106
2. Debt certificates issued by public entities
and bills of exchange eligible for refinancing
with central banks
a) Treasury bills and Treasury discountpaper and similar debt certificates issued
by public entities
of which:
b) Bills of exchange
of which:
330,018
481,419
13,174
472,592
26,201
149,548
13,135
343,192
24,769
507,620
3. Due from banks
b) Other receivables
of which building loans of Home Loan division:
• building-saving loans
• preliminary and interim financing loans
• other building loans
9,060,855
115,620,482
carried forward
124,681,337
14,790
—
—
105,695,182
127,830,734
128,836,563
12,409
—
—
4. Due from customers
of which:
• secured by mortgage
• public-debt loans
• building loans of Home Loan division:
– building-saving loans
– preliminary and interim financing
– other building loans
of which:
secured by mortgages
9,228,685
96,466,497
29,375,153
38,502,048
27,672,073
39,108,466
2,483,381
2,591,204
241,135
2,718,091
2,426,082
225,383
4,332,585
4,372,959
253,673,369
236,116,225
Liabilities
EUR ’000
EUR ’000
EUR ’000
135
2004
2003
EUR ’000
EUR ’000
1. Due to banks
b) With agreed maturities or periods of notice
c) Building-savers’ deposits with Home Loan division
of which:
10,472,318
116,517,739
22,063
8,543,810
111,338,353
23,756
—
6,475
127,012,120
—
5,166
119,905,919
2. Due to customers
a) Savings deposits
aa) with periods of notice
of three months
ab) with periods of notice
of more than three months
ac) building-savers’ deposits with Home Loan
division
of which:
8,266
7,781
2,120
1,441
7,249,782
6,839,304
59,959
224,304
72,946
222,158
6,848,526
7,260,168
b) Other liabilities
ba) payable on demand
bb) with agreed maturities or
periods of notice
13,554,297
13,236,403
49,583,646
63,137,943
70,398,111
45,242,449
58,478,852
65,327,378
3. Securitised liabilities
a) Bonds issued
b) Other securitised liabilities
of which:
• money market instruments
• own acceptances and promissory
notes outstanding
96,252,100
7,581,321
7,384,151
6,748,524
—
4. Liabilities administered on behalf of third parties
of which:
86,630,258
8,966,897
103,833,421
73,044
95,597,155
8,267,329
8,632,267
8,124,006
8,472,501
5. Other liabilities
3,240,775
2,696,954
6. Deferred income
1,149,851
1,071,412
313,901,607
293,231,085
carried forward
136
Consolidated balance sheet – Bayerische Landesbank Group
as at 31 December 2004 (continued)
Assets
EUR ’000
EUR ’000
EUR ’000
carried forward
2004
2003
EUR ’000
EUR ’000
253,673,369
236,116,225
5. Bonds and other fixed-interest securities
a) Money market instruments
aa) issued by public-sector borrowers
of which:
ab) issued by other borrowers
of which:
398,586
24,643
424,672
—
479,216
398,586
36,099
—
503,859
823,258
b) Bonds and other debt securities
ba) issued by public-sector borrowers
of which:
bb) issued by other borrowers
of which:
10,990,272
14,543,801
41,039,568
3,872,188
38,408,669
4,050,117
24,720,272
61,006,284
17,255,988
52,952,470
4,105,304
4,022,259
57,561,633
6. Shares and other non fixed-interest securities
3,680,583
3,350,965
7. Investments
1,328,786
1,671,566
c) Own debt securities
nominal value
of which:
52,029,840
8,153,186
8,069,634
207,102
15,334
7a. Shares in associated companies
of which:
25,383
25,383
—
8. Shares in affiliated companies
of which:
586,867
586,867
—
1,084,824
44,574
17,678
9. Assets administered on behalf of third parties
of which:
253,513
14,108
1,326,336
79,105
16,204
8,267,329
8,124,006
8,632,267
8,472,501
10. Equalisation claims on public authorities
including bonds originating from the conversion
of such claims
17,945
118,803
11. Intangible assets
29,721
—
223,268
280,796
2,432,677
2,251,318
324,165
431,408
1,007,277
1,102,816
333,101,611
313,431,000
12. Tangible assets
13. Other assets
14. Deferred taxes
15. Deferred charges
Total assets
Liabilities
EUR ’000
EUR ’000
EUR ’000
carried forward
137
2004
2003
EUR ’000
EUR ’000
313,901,607
293,231,085
2,447,918
769,186
245,875
1,926,782
2,941,843
17,780
17,780
—
—
4,462,220
4,676,232
2,746,211
2,838,588
7. Provisions for liabilities and charges
a) For pensions and similar obligations
b) For taxes
c) Other provisions
829,210
250,382
1,368,326
7a. Reserve fund for Home Loan division
8. Special reserve
9. Subordinated liabilities
10. Profit-participation certificates
of which:
due in less than two years
380,912
451,749
11. Fund for general banking risks
385,367
550,962
12. Capital and reserves
a) Subscribed capital
aa) nominal capital
uncalled nominal capital
1,738,500
– 153,495
1,585,005
3,229,078
ab) capital contributions of silent partners
b) Capital reserve
of which:
specific-purpose reserve
c) Revenue reserves
ca) statutory reserves
cb) other reserves
d) Minority shareholders
e) Profit available for distribution
1,738,500
– 153,495
1,585,005
3,129,059
4,714,064
663,146
4,814,083
663,146
612,016
612,016
1,268,000
2,101,340
9,140,508
1,268,000
2,253,910
3,521,910
211,990
63,400
9,174,510
333,101,611
313,431,000
3,369,340
230,539
63,400
Total liabilities
1. Contingent liabilities
a) Contingent liabilities from the endorsement
of bills rediscounted
b) Contingent liabilities from guarantees and
indemnity agreements
(for further reference, please see the Notes)
c) Contingent liabilities from collateral furnished
for third-party obligations
—
4,522
16,655,432
18,510,496
—
16,655,432
—
18,515,018
53,441,533
—
—
53,963,280
53,963,280
11,985,439
13,338,978
2. Other obligations
a) Contingent obligations from non-genuine sale
and repurchase agreements
b) Underwriting and issuance facilities
c) Irrevocable loan commitments
3. 152 special assets managed on behalf of
shareholders (2003: 165)
—
—
53,441,533
138
Consolidated profit and loss account – Bayerische Landesbank Group
for the period from 1 January to 31 December 2004
EUR ’000
EUR ’000
EUR ’000
2004
2003
EUR ’000
EUR ’000
1. Interest income from
a) Credit and money market transactions
of which interest income of Home Loan division:
• from building-saving loans
• from preliminary and interim financing loans
• from other building loans
b) Fixed-interest securities and
debt-register claims
136,521
126,631
11,607
123,513
132,959
13,195
11,732,975
2,294,754
12,391,020
10,012,817
10,511,809
2,023,793
2. Interest expenses
of which:
for building-savers’ deposits
10,096,266
9,709,182
1,720,158
179,739
1,879,211
299,041
144,441
65,651
9,683
24,883
244,658
10,916
45,400
183,929
3. Current income from
a) Shares and other non-fixed
interest securities
b) Investments
c) Shares in affiliated companies
d) Shares in associated companies
159,667
57,308
12,870
69,196
4. Income from profit-pooling agreements,
profit transfer agreements and partial profit
transfer agreements
5. Commission income
of which commission income of the Home
Loan division:
• from concluding and procuring contracts
• from advanced contracts
• from providing and processing preliminary
and interim financing loans
706,200
47,643
14,776
66,643
17,585
—
32
6. Commission expenses
of which:
for concluding and procuring contracts by the Home
Loan division
723,666
366,364
381,402
71,583
339,836
95,594
342,264
7. Net income or net expenses from financial
operations
125,695
104,990
8. Other operating income
339,193
229,316
—
—
9. Write-back of special reserve
10. General administrative expenses
a) Personnel expenses
aa) salaries and wages
ab) social security contributions, pensions and
other employee benefits
499,803
493,485
188,917
162,996
656,481
688,720
of which:
pensions
b) Other administrative expenses
carried forward
112,478
1,152,857
81,804
466,080
1,122,561
1,681,982
1,723,278
464,137
EUR ’000
EUR ’000
EUR ’000
carried forward
11. Depreciation and valuation adjustments
on intangible assets and tangible assets
12. Other operating expenses
on receivables and certain securities and
additions to provisions in credit business
of which:
• withdrawals from the fund for general banking risks
• allocation to the fund for general banking risks
receivables and certain securities and from
write-backs of provisions in credit business
2004
2003
EUR ’000
EUR ’000
1,681,982
1,723,278
54,694
62,817
111,651
98,005
156,954
952,642
165,605
—
—
13,003
—
156,954
on investments, shares in affiliated companies
investments, shares in affiliated companies
139
305,014
—
952,642
47,113
—
305,014
—
47,113
17. Expenses from loss transfers
99,024
5,499
18. Allocation to special reserve
—
—
954,645
557,202
19. Result from ordinary activities
20. Extraordinary income
21. Extraordinary expenses
—
—
358,364
127,129
22. Extraordinary result
23. Taxes on income
24. Other taxes, unless disclosed under
position 12
358,364
252,386
127,129
103,219
4,390
256,776
10,237
113,456
241,823
237,389
97,682
79,228
—
—
—
—
18,039
—
4,522
4,522
29. Profit share of minority shareholders
16,243
11,306
30. Profit available for distribution
63,400
63,400
25. Profits transferred under partial profit
transfer agreement
26. Net income for the year
27. Withdrawls from revenue reserves
a) From the statutory reserve
b) From other reserves
—
—
28. Allocation from net income for the year
to revenue reserves
a) To the statutory reserve
b) To other reserves
—
18,039
140
Consolidated statement of changes
in shareholders’ equity
Changes in shareholders’ equity
Parent company
Uncalled outstanding
capital
Capital reserve
Generated consolidated
capital
Offsetting item
from foreign
currency
conversion
Other neutral
transactions
Equity
Minority capital
Offsetting item from
foreign currency
conversion
Equity
Consolidated equity
As at 31. 12. 2002
4,866
– 307
663
3,708
26
– 128
8,828
224
0
224
9,052
Dividends paid
– 57
Change in the group
of consolidated
companies
Other changes
(currency conversion,
consolidation effects
and other capital
changes)
Aggregated other
consolidated result
Subscribed capital
EUR million
Minority shareholders
2
154
0
Consolidated net
profit / loss
– 57
2
–3
9
8
–4
0
–4
4
72
– 37
–7
184
–6
–2
–8
176
68
11
11
79
–2
– 40
9
39
212
9,175
68
Other consolidated
result
– 40
2
Total consolidated result
As at 31. 12. 2003
4,868
– 153
663
3,725
– 14
– 126
– 63
Change in the group
of consolidated
companies
100
0
0
Consolidated net
profit / loss
–2
8,963
214
–2
– 63
– 63
– 307
0
113
– 194
0
0
0
– 194
131
– 29
2
204
22
–3
19
223
82
16
16
98
–3
83
13
181
231
9,141
82
Other consolidated
result
– 29
115
Total consolidated result
As at 31. 12. 2004
– 38
30
Dividends paid
Other changes
(currency conversion,
consolidation effects
and other capital
changes)
– 57
86
–3
168
4,968
– 153
663
3,486
– 43
– 11
8,910
As at 31 December 2004, EUR 63 million is available for distribution to the owners.
236
–5
Cash flow statement
2004
2003
98
79
602
1,438
– 494
25
changes to other items not affecting the cash flow
389
– 33
gains on the disposal of fixed and financial assets
– 45
–7
– 1,176
– 1,859
– 626
– 357
– 18,991
1,080
2,297
8,795
EUR million
Annual net income
Items under annual net income not affecting the cash flow
and transition to the cash flow from operating activities
write-downs, LLPs and write-ups on receivables,
fixed and financial assets
changes to provisions
other adjustments (balance)*
Sub-total*
Changes to assets and liabilities from operating activities
after revision for components not affecting the cash flow
due from
banks
customers
securities (unless financial assets)
– 7,518
8,065
other assets from operating activities
– 251
1,137
due to
banks
customers
7,106
5,098
– 15,495
1,210
securitised liabilities
8,236
– 12,577
58
388
Interest and dividends received*
12,043
12,681
Interest paid*
– 9,593
– 10,060
0
0
– 38
0
– 252
– 103
– 3,648
– 4,019
other liabilities from operating activities
Extraordinary cash inflow
Extraordinary cash outflow
Income tax payment
Cash flow from operating activities
141
142
Cash flow statement (continued)
2004
2003
6,886
12,596
6
31
– 2,675
– 6,700
– 15
– 20
cash inflow from the sale of consolidated companies and
other business units
0
38
cash outflow resulting from the acquisition of
consolidated companies and other business units
0
–1
– 19
0
Cash flow from investment activities
4,183
5,943
Cash inflow from allocations to equity
0
77
– 63
– 57
– 689
– 770
Changes in financial resources resulting from
subordinated capital and other hybrid capital (balance)
– 206
– 923
Cash flow from financing activities
– 958
– 1,673
Change in the financial resources affecting the cash flow
– 423
252
Exchange-rate, consolidation-group and revaluation-related
change in the financial resources fund
– 168
– 19
Financial resources balance at end of previous period
1,572
1,339
981
1,572
EUR million
Cash inflow from the sale of
financial assets
fixed assets
Cash outflow for the acquisition of
financial assets
fixed assets
Effects resulting from the change in the group of
consolidated companies
Change in financial resources resulting from other
investment activities (balance)
Disbursements to company owners and minority shareholders
dividend payments
other disbursements
Financial resources balance at end of period
* Previous year’s figures have been adjusted
Comment on the cash flow statement
The DRS 2 – 10 standards (German Accounting Standards) issued by the DRCS (German
Accounting Standards Committee) were duly observed when the cash flow statement
was drawn up.
The cash flow statement shows the cash flows of the financial year classified into
“operating activities”, “investment activities” and “financing activities”.
The financial resources balance disclosed comprises the cash balance and deposits
with central banks, along with debt instruments issued by public-sector entities and
bills of exchange eligible for funding at the Deutsche Bundesbank. Financial resources
are not subject to any drawing restrictions. EUR 1 million of the financial resources are
apportionable to consolidated companies on a pro rata basis.
The change in other items not affecting the cash flow includes also the net write-back
of deferred taxes and the revaluation result of the trading and liquidity portfolio.
During the financial year, EUR 3 million was paid for the acquisition of participations
and affiliated companies, with the whole amount being taken from financial resources.
Sales proceeds of EUR 654 million were posted, of which EUR 282 million was allocated
to financial resources.
143
144
Principles of segmentation
Primary segmentation is based on BayernLB’s business model and represents the business areas, the dependent entities Labo and LBS, and the consolidated subsidiaries.
Profit contributions are allocated to the segments according to the causation principle.
The “Other / Consolidation” segment shows consolidation effects and profit contributions which are not attributable to the business areas. This includes in particular the
profit contributions made by the support operations, unless these can be allocated to
the operational units according to the causation principle.
Corporates
Real Estate
Global Markets
& Sovereigns
Savings Banks,
Bavarian Municipals /
Corporates
Labo / LBS
Subsidiaries
strategic to the
Group
Other /
Consolidation
Group
Segment report as per 31 December 2003 1 / 2
Net interest income
496
194
591
104
102
286
601
– 205
2,169
Net commission
income
107
27
11
38
0
30
90
39
343
– 139
– 65
– 304
– 27
– 83
– 144
– 325
– 99
– 1,185
0
0
76
0
5
0
0
24
105
– 10
–2
0
0
0
7
0
124
120
– 323
– 404
– 96
0
– 35
–6
– 238
97
– 1,005
133
– 250
279
116
– 11
173
127
– 20
547
Segment assets
38,130
18,379
116,709
38,804
31,654
23,055
61,527
– 14,829
313,431
Risk positions
38,115
14,238
31,209
8,472
8,459
4,307
28,214
4,227
137,242
Av. equity capital
disclosed
1,217
455
997
271
270
1,979
2,912
– 1,771
6,328
Return on equity
(RoE in %)
10.9
– 55.1
28.0
42.8
– 4.1
8.7
4.3
—
4.9
23.4
29.9
44.7
18.8
77.3
44.5
47.1
—
43.3
Av. staff capacity
377
234
546
111
222
877
3,411
3,020
8,797
EUR million
Administrative
expenses
transactions
Other operating
result
Risk provisioning /
revaluation result
Operating result
1 In the previous year, the capital contributions of silent partners were also allocated to business areas / support operations. In 2004, in contrast, only the
sum total of nominal capital, capital reserves (excluding appropriated reserves), revenue reserves and the amount governed by Section 340g of the German
Commercial Code (defined as equity capital disclosed) was allocated. For ease of comparison, in the segment report of 31 December 2003, the return on
equity is adjusted to the allocation method employed in the year under review.
2 In the year under review, in accordance with BayernLB’s control systems, Bayern-Invest Kapitalanlagegesellschaft mbH and BLB Asia Pacific Ltd. were included in
the segment Subsidiaries strategic to the Group. In the previous year, these had been included under the Global Markets segment. For ease of comparison, the
segment report of 31 December 2003 as presented here has been adjusted accordingly.
145
Corporates
Real Estate
Global Markets
& Sovereigns
Savings Banks,
Bavarian Municipals /
Corporates
Labo / LBS
Subsidiaries
strategic to the
Group
Other /
Consolidation
Group
Segment report as per 31 December 2004
Net interest income
413
215
330
95
109
262
763
– 156
2,030
Net commission
income
112
26
8
38
21
29
100
5
340
– 144
– 64
– 297
– 41
– 89
– 146
– 378
– 49
– 1,208
transactions
0
0
86
0
6
0
34
0
126
Other operating
result
3
–3
–2
0
0
8
83
133
223
Risk provisioning /
revaluation result
101
– 113
– 49
7
39
– 43
– 180
– 323
–561
Operating result
485
62
76
99
86
109
421
– 388
950
Segment assets
31,910
16,858
125,047
38,878
32,444
22,583
65,488
– 106
333,102
Segment liabilities
30,340
16,296
124,575
38,514
32,049
21,100
62,626
2,211
327,711
Risk positions
32,751
13,616
28,356
7,789
8,726
3,841
36,284
– 3,673
127,689
Av. equity capital
disclosed
1,471
527
830
341
370
1,389
2,711
– 2,089
5,550
Return on equity
(RoE in %)
33.0
13.8
12.5
29.0
24.1
8.6
14.1
—
9.5
27.2
26.7
70.3
31.0
65.3
49.0
38.6
—
44.4
Av. staff capacity
228
140
474
100
231
857
3,610
2,852
8,493
EUR million
Administrative
expenses
For the purposes of internal controlling, an average equity capital disclosed is allocated to the business areas and support operations of each segment, in accordance
with their risk positions, i.e. the risk assets and market risks to be covered according
to the banking supervisory Principle I relating to Section 10 KWG.
The RoE and CIR ratios are used in the segment report to assess the business areas’
performance. The RoE reported is the quotient of the operating result and the allocated average equity capital disclosed. The CIR is the quotient of administrative
expenses and the sum total of the net interest income, net commission income, result
from financial transactions and other operating result. In the 2004 financial year, the
other operating result was included in the CIR for the first time. For ease of comparison, given this change, the figures for the previous year have been adjusted accordingly in the segment report of 31 December 2003 as presented here.
146
Note on delimitation of segments in accordance with DRS 3.25
(German Accounting Standards)
The Corporates segment serves large SME corporate customers in Germany as well as
multinationals in Germany and in the Bank’s core markets of Europe, North America
and Asia.
The Real Estate segment comprises BayernLB’s commercial and residential real estate
customers at both national and international levels.
The Global Markets segment bundles all trading and issuing activities as well as the
BayernLB Treasury.
The Financial Institutions & Sovereigns segment encompasses worldwide business relations with banks, insurance companies and other institutional customers, as well as
government and non-Bavarian municipal customers.
The Savings Banks, Bavarian Municipals / Corporates segment, acting as an interface,
comprises all of BayernLB’s activities in supporting the Bavarian savings banks as well
as Bavarian municipal and corporate customers.
The Labo / LBS segment is made up of BayernLB’s legally dependent institutions,
Bayerische Landesbodenkreditanstalt (Labo) and Bayerische Landesbausparkasse (LBS).
The segment Subsidiaries strategic to the Group encompasses all consolidated subsidiaries of the BayernLB Group, including the capital investment company Bayern-Invest.
The business activities of the Bank’s subsidiaries are focused on universal banking business, including retail / private banking and investment consulting.
The Other / Consolidation segment comprises, in addition to consolidation effects, the
profit contributions of our Corporate Center, Risk Office and Corporate Services Support Operations, which are not allocated to the business areas according to the causation principle. Primarily concerned here are the results of participations allocated to
the support operations, as well as expenditure on the management of these participations. This segment also includes cross-divisional transactions whose contribution to
the overall profit is allocable to neither business areas nor support operations.
147
In order to provide a breakdown of BayernLB’s regional business activities, primary
segmentation has been extended to include secondary segmentation by region. In
regional segmentation, activities are broken down by the systematically formulated
focal points of our business worldwide. The regional segments generated the following individual profit contributions:
Av. staff capacity
Group
Risk positions
Consolidation
Operating result
Asia / Pacific
Risk provisioning / revaluation result
America
Result before risk provisioning / revaluation result
Europe
(excl. Germany)
EUR million
Germany
Segment report by region as per 31 December 2003
795
368
322
107
– 40
1,552
– 803
13
– 147
– 40
– 28
– 1,005
–8
381
175
68
– 68
547
106,832
26,887
10,658
5,650
– 12,784
137,242
53.3
33.2
14.6
19.0
—
43.3
6,491
1,869
217
220
—
8,797
Av. staff capacity
Group
Risk positions
Consolidation
Operating result
Asia / Pacific
Risk provisioning / revaluation result
America
Result before risk provisioning / revaluation result
Europe
(excl. Germany)
EUR million
Germany
Segment report by region as per 31 December 2004
915
427
244
61
– 136
1,511
– 599
–1
62
96
– 120
– 561
317
426
306
157
– 256
950
97,191
27,091
8,938
2,879
– 8,410
127,689
50.4
34.0
15.0
17.7
—
44.4
6,170
1,978
185
160
—
8,493
Within the framework of BayernLB’s control systems, equity is not allocated to regions,
but rather exclusively to business areas and support operations.
148
Notes to the accounts and consolidated accounts
The notes below relate to both the annual accounts at Bank level and the consolidated
annual accounts of Bayerische Landesbank (BayernLB) pursuant to Section 298, Subsection 3 of the German Commercial Code (HGB). Unless otherwise stated the notes
apply to both accounts. All figures are shown in millions of euros.
The annual accounts at Bank level and the consolidated annual accounts have been
prepared in accordance with the provisions of HGB and the Ordinance Regulating the
Accounting Requirements for Financial Institutions and Financial Service Providers
(RechKredV). The layout of our balance sheets and our profit and loss accounts corresponds to the forms pursuant to the RechKredV Ordinance and also includes the items
stipulated for building societies (Bausparkassen).
Accounting policies
The valuation of assets and liabilities adheres to the general valuation provisions of
Section 252 ff. HGB, taking account of the special provisions applicable to banks (Section 340e ff. HGB).
Claims are reported at the nominal amount or at cost. Low-interest or non-interest
bearing claims are discounted, if necessary. All recognisable risks have been taken into
account through the setting up of specific loan loss provisions. Moreover, hidden credit
risks are covered by general loan loss provisions. To provide for general banking risks,
reserves have been built up pursuant to Section 340f HGB. All loan loss provisions and
reserves have been netted against the corresponding items on the assets side. In addition, a fund for general banking risks exists pursuant to Section 340g HGB.
Liabilities are generally reported at their repayment amount. Bonds issued at a discount and similar liabilities are reported at their present values.
Premiums and discounts on claims and liabilities are included in deferred charges and
income and amortised on a pro rata basis.
The securities portfolios have been valued according to the stringent principle of lower
of cost or market by observing the requirement of reinstating original values. In some
cases, securities have been combined with their hedging instruments to form separately documented valuation units.
Investments and shares in affiliated companies have been valued in accordance with
the rules applying to fixed assets at historical cost or, in the case of an anticipated permanent decrease in value, at the lower of cost or market as per the balance sheet date.
Intangible assets and fixed assets have been valued at historical cost or cost of production or, if subject to depreciation, reduced by scheduled depreciation reflecting their
useful lives. Depreciation has been generally based on the permissible tax rates. Assets
of low value are fully depreciated in the year of acquisition. From 2004, system and
application software, previously included under tangible assets, is accounted for under
intangible fixed assets.
Tax deferrals will be based on the temporary differences between the results under
German commercial law and tax law in as much as these differences will probably converge in subsequent years. The volume of deferred taxes is geared to the probable tax
liability / tax relief effective in the immediately subsequent business years. Deferred tax
assets and liabilities are netted.
Provisions for pensions have been set up in line with actuarial principles, taking
account of Section 6a EStG (German income tax law) and the 1998 guidelines
(Richttafeln, i.e benchmark tables) and of comparable foreign regulations.
Derivative financial transactions (forward transactions, swaps, options, credit derivatives) are allocated to a hedging or trading portfolio depending on their intended use.
As forward transactions, they are never disclosed in the balance sheet. Option premiums paid or received are shown under “Other assets” or “Other liabilities”.
Hedging transactions and hedged transactions are combined to form revaluation units
and treated pursuant to the principles of the hedged transaction. The revaluation of
trading transactions is performed individually by applying the imparity and realisation
principle.
Unrealised profits and losses are netted within trading portfolios which have been
combined to adequately reflect risks. Remaining profit balances are not taken into
account, whereas provisions are established for loss balances.
As a rule, profits from trading transactions are disclosed under net income from financial transactions. Interest paid on securities of the trading portfolio is recorded in interest income.
Currency translation
Currency translation has been based on the principles of Section 340h HGB and the
expert opinion of the BFA (banking committee) 3 / 95. Assets denominated in foreign
currencies and treated as fixed assets, without hedging in the same currency, are translated at historical exchange rates. Other assets and liabilities denominated in foreign
currencies and outstanding spot deals are translated at year-end spot rates, while
outstanding forwards are translated at the year-end forward rates. When forward
exchange transactions serve to hedge balance sheet items generating interest, the
swap amounts are accrued pro rata temporis. The spot price differences resulting from
149
150
the translation of these balance sheet items are disclosed as a balance under “Other
assets” or “Other liabilities”. Gains from the translation of other transactions hedged in
the same currency are only taken into account in so far as they compensate for temporary losses from the translation of hedging transactions (Section 340h, sub-section 2,
sentence 3 HGB), whereas translation losses are always taken into account as revenue
expenditure.
The translation of currencies in the annual accounts of the subsidiaries and joint ventures included in the consolidated accounts is based on the same principles. In the
consolidated accounts, the balance sheet items and the expenses and income of our
foreign subsidiaries and joint ventures, unless their annual accounts have been prepared in euros, are translated at the spot exchange rates as per the balance sheet date.
Translation gains and losses resulting from the consolidation of equity capital are set
off within the revenue reserves.
Group of consolidated companies
The consolidated accounts include BayernLB and the nine companies shown under I in
the inventory of shareholdings. In 2004, on the basis of new findings, the number of
companies included in the group of consolidated companies was adjusted by three
entities. The resulting adjustments of EUR 196 million were set off against the revenue
reserves of the Group. LB(Swiss) Privatbank AG, Zurich, is included in proportion to its
shares.
Pursuant to Section 296, Sub-section 1, No. 2 HGB, one affiliated company has not
been included in the consolidated accounts due to substantial and persistent restrictions affecting long-term the exercising of rights with relation to assets and management. The remaining subsidiaries have neither been consolidated nor valued according
to the equity method because they are of subordinate importance with respect to the
financial position of the Group and the results of its operations. The non-consolidated
combined balance sheet total of these subsidiaries comes to around 1.6 percent of the
consolidated balance sheet total.
Consolidation principles
The consolidated accounts have been drawn up in accordance with the accounting and
valuation methods applicable to the annual accounts of BayernLB. The balance sheet
profit disclosed in the consolidated accounts is identical with that shown in the parent
company’s individual accounts.
Capital consolidation has been effected according to the book value method, using the
values at the time of acquisition or first consolidation of the subsidiary. Assets-side and
liabilities-side balancing items remaining after the allocation procedure laid down in
Section 301, Sub-section 1, Sentence 3 HGB are netted, the balance being transferred
to revenue reserves. The asset-side balancing item resulting from first-time consolida-
tions amounts to EUR 1 million for the year under review. Claims and liabilities as well
as expenses and income among the integrated group companies have been consolidated. Intra-group results from transactions within the Group have been eliminated in
so far as they are not of minor significance. Joint ventures, included on a pro-rata basis
in the consolidated accounts, are treated according to the same principles.
Pursuant to Section 312, Sub-section 1 HGB, TxB Transaktionsbank GmbH, AschheimDornach was valued in accordance with the book value method, on the basis of values
stated at the time of first integration. The valuation method applied by the company
has not been adjusted to the standard valuation provisions applicable to the Group.
Bank für Arbeit und Wirtschaft AG, Vienna, previously included in the consolidated
accounts according to the equity method, was sold on 30 June 2004. An assets-side
balancing item of EUR 113 million, charged during first-time consolidation with no
impact on the operating result, was set off against revenue reserves at the time of final
consolidation, also with no impact on the operating result.
Disclosures relating to the balance sheet and the consolidated balance sheet
(excluding accrued interest, unless otherwise stated)
Assets
Due from banks
BayernLB
EUR million
Group
2004
2003
2004
2003
46,671
27,280
26,865
19,042
11,935
34,254
22,224
25,792
19,370
14,074
48,266
25,926
25,471
15,957
164
35,781
19,612
24,921
16,152
169
188
17,837
1,162
290
19,316
1,226
202
18,462
1,094
263
19,977
1,169
110
104
113
109
This item includes:
• Other receivables with a residual
maturity of
– up to three months
(including accrued interest)
– over three months up to one year
– over one year up to five years
– over five years
• Due from affiliated companies
• Due from companies in which
investments are held
• Due from affiliated savings banks
• Subordinated receivables
Committed but not yet disbursed
building saving loans of Home
Loan division
• from allotment
151
152
Due from customers
BayernLB
EUR million
Group
2004
2003
2004
2003
15,141
7,801
26,147
36,472
15,051
10,061
27,243
37,708
19,416
10,527
35,198
59,194
18,778
12,712
35,194
58,812
1,866
399
1,800
404
3,496
1,351
3,341
1,203
586
46
628
29
674
112
691
86
6
6
6
7
396
395
424
425
71
—
121
—
76
8
127
10
This item includes:
• Receivables with a residual
maturity of
– over five years
• Receivables without a fixed date of
maturity
• Due from affiliated companies
• Due from companies in which
• Subordinated receivables
• Overdue interest and redemption
payments from building saving loans
of home loan division
Committed but not yet disbursed
building saving loans of home
loan division
• from allotment
• for preliminary and interim financing
purposes
• other
Bonds and other fixed interest securities
BayernLB
EUR million
Group
2004
2003
2004
2003
6,559
9,676
9,243
11,213
3,299
2,252
—
—
—
9
—
10
194
54
23
10
34,780
14,669
28,515
19,403
44,688
15,530
35,394
21,024
This item includes:
• Amounts falling due in the following
year (including accrued interest)
• Securitised receivables from
associated Corporates
• Securitised receivables from
companies in which investments
are held
• Subordinated securities
• Marketable securities, of which
– listed
– unlisted
Shares and other non-fixed interest securities
BayernLB
EUR million
Group
2004
2003
2004
2003
7
10
14
16
226
8
262
22
247
646
304
634
This item includes:
• Subordinated securities
– listed
– unlisted
Investments
BayernLB
EUR million
Group
2004
2003
2004
2003
—
55
—
606
29
39
1
644
This item includes:
– listed
– unlisted
Shares in affiliated Corporates
BayernLB
EUR million
Group
2004
2003
2004
2003
5
1,824
17
1,824
5
292
17
250
This item includes:
– listed
– unlisted
Assets administered on behalf of third parties
BayernLB
EUR million
Group
2004
2003
2004
2003
248
7,781
272
8,101
341
7,876
375
8,201
45
5
51
5
45
5
51
5
This item mainly includes housing
loans granted by Bayerische Landesbodenkreditanstalt and breaks down
as follows:
• Due from banks
• Due from customers
• Bonds and other fixed interest
securities
• Other assets
153
154
Tangible assets
BayernLB
EUR million
Group
2004
2003
2004
2003
104
47
107
94
153
64
158
115
This item includes:
• Land and buildings used for own
operations
• Office furniture and equipment
Other assets
BayernLB
EUR million
Group
2004
2003
2004
2003
737
574
738
574
693
573
694
573
176
433
160
450
This item includes:
• Premium claims from credit
derivatives
• Premium from credit derivatives not
yet received
• Claims on the German Tax
Authorities
Deferred taxes
BayernLB
EUR million
Deferred taxes
Group
2004
2003
2004
2003
263
419
324
431
At BayernLB, deferred taxes have been disclosed pursuant to Section 274 HGB. At
Group level, deferred taxes have been combined pursuant to Sections 274 and 306
HGB. The figures have been computed on the basis of the income tax rates which apply
in the case of the respective consolidated companies.
The deferred taxes are largely due to the fact that the impact of the German Tax Relief
Act 1999 / 2000 / 2002 and the non-recognition for tax purposes of provisions for anticipated unrealised losses have been taken into account.
Deferred income
BayernLB
EUR million
Group
2004
2003
2004
2003
306
280
356
395
324
301
378
419
This item includes:
• Premium on receivables
• Discount on liabilities
155
Investment
securities
Other fixed assets
+ 206
3,417
3,211
– 3,807
10,157
13,964
Transfers
—
17
5
102
—
88
26
—
14
571
6
42
– 102
—
282
151
203
28
22
—
—
—
—
5
17
17
—
Group
Changes +/ – *
Investments
– 343
1,329
1,672
Investments
in associated
companies
– 562
25
587
Shares in affiliated
companies
– 241
1,085
1,326
– 4,114
11,911
16,025
Investment
securities
Intangible assets
Tangible assets
Other fixed assets
Depreciation /
write-downs for
financial year
2,070
Depreciation /
write-downs
(accumulated)
999
Appreciation
Net book value
31. 12. 2003
Shares in affiliated
companies
Tangible assets
– 1,071
Changes +/ – *
Investments
Intangible assets
Net book value
31. 12. 2004
BayernLB
Disposals
Additions
EUR million
Purchase /
manufacturing costs
Changes in fixed assets and investments
—
20
8
118
—
100
30
—
17
746
17
48
– 118
—
374
223
281
40
24
—
—
—
—
5
19
19
—
* The aggregation option pursuant to Section 34, Sub-section 3 RechKredV was utilised.
156
Genuine sale and repurchase agreements
BayernLB
EUR million
Book values of assets transferred under
sale and repurchase agreements
Group
2004
2003
2004
2003
12,118
6,121
12,180
6,841
Assets in foreign currency
BayernLB
EUR million
Total amount of assets denominated
in foreign currency
Group
2004
2003
2004
2003
67,401
74,233
74,946
81,017
Assets held as cover
BayernLB
EUR million
Group
2004
2003
2004
2003
7,192
8,139
7,192
8,139
302
9,673
5
10,836
302
9,673
5
10,836
2,783
2,702
2,783
2,702
47,038
50,152
47,038
50,152
32,895
22,080
29,035
21,725
32,895
22,080
29,035
21,725
100
—
100
—
8,037
608
8,037
608
For bonds to be covered pursuant
to the law on covered bonds
(pfandbriefe) and related bonds issued
by public-law banks
• Covered bonds and Landesbodenbriefe
Cover contained in:
– Due from banks
– Due from customers
Excess cover
• Public-debt bonds
Cover contained in:
– Due from banks
– Due from customers
– Bonds and other fixed interest
securities
Excess cover
Shareholdings (extract)
The complete inventory of shareholdings pursuant to Section 285, No. 11, Section
313, Sub-section 2 and Section 340a, Sub-section 4, No. 2 HGB has been lodged with
the Munich Register of Companies.
Name and legal domicile
of the affiliated company
Letter of
comfort 1
Percentage held
Equity 2 in
EUR ’000
Result in
EUR ’000
Õ
75.0
470,627
30,000
100.0
15,641
842
100.0
118,746
7,630
I. Subsidiaries included in the
consolidated accounts
• Banque LBLux S.A., Luxembourg
• Bayern-Invest Kapitalanlagegesellschaft mbH, Munich
• BLB Asia Pacific Ltd., Singapore
Õ
• BLB-Beteiligungsgesellschaft
Jota mbH & Co. KG Nr. 1, Munich
49.0 3
257,069
– 33,145
49.0 3
37,056
737
49.0 3
237,928
2,098
100.0
1,240,342
139,432
75.1
504,254
14,000
89.6
593,319
64,849
50.0
83,475
13,106
37.5
67,779
– 9,260
• Deutsche Kreditbank
Aktiengesellschaft, Berlin
• Landesbank Saar, Saarbrücken
Õ
Õ4
• MKB – Magyar Külkereskedelmi Bank
Rt., Budapest
II. Joint Ventures
• LB(Swiss) Privatbank AG, Zurich
Õ
III. Associated companies
• TxB Transaktionsbank GmbH,
Aschheim-Dornach
Comments:
Amounts in foreign currency were converted to euro at the respective spot exchange rate on 31 December 2004.
1 For the wording of the Letter of Comfort, please see “Contingent liabilities and other liabilities”.
2 Equity as defined in Sections 266 and 272 HGB.
3 Percentage held based on mandatory capital contribution
4 Valid for the period following withdrawal of Gewährträgerhaftung (guarantee obligation) as per 18 July 2005.
157
158
Liabilities
Due to banks
BayernLB
EUR million
Group
2004
2003
2004
2003
46,539
16,227
19,286
14,244
957
46,081
15,249
17,083
13,656
1,703
58,146
18,529
22,336
17,507
52
56,659
18,024
19,737
16,918
47
71
8,308
51
7,514
155
8,757
213
7,841
This item includes:
• Term liabilities with a residual
maturity of
– over five years
• Due to affiliated companies
• Liabilities to companies in which
• Due to affiliated savings banks
Due to customers
BayernLB
EUR million
Group
2004
2003
2004
2003
13,562
3,654
7,143
16,038
151
12,409
2,642
7,148
15,029
135
19,969
4,152
7,930
17,533
279
18,006
3,113
7,800
16,323
290
299
190
325
200
This item includes:
• Other term liabilities with a residual
maturity of
– over five years
Securitised liabilities
BayernLB
EUR million
Group
2004
2003
2004
2003
15,094
19,219
17,586
19,724
3,075
3,968
32
—
469
5,645
3,262
60
—
446
3,531
4,018
32
—
—
5,645
3,262
60
—
3
6
17
1
10
This item includes:
• Bonds issued
– amounts falling due in the
following year
• Other securitised liabilities with
a residual maturity of
– over five years
Liabilities administered on behalf of third parties
BayernLB
EUR million
Group
2004
2003
2004
2003
73
8,001
5
92
8,332
5
81
8,181
5
101
8,526
5
This item breaks down as follows:
• Due to banks
• Due to customers
• Other liabilities
Other liabilities
BayernLB
EUR million
Group
2004
2003
2004
2003
797
645
803
650
788
791
788
791
645
515
646
515
320
—
320
—
This item includes:
• Premium liabilities from credit
derivatives
• Covering obligation resulting from
the sale of securities borrowed
• Premiums from credit derivatives
not yet paid
• Payment to the Free State of Bavaria
upon conclusion of the EU state aid
proceedings
159
160
Deferred income
BayernLB
EUR million
Group
2004
2003
2004
2003
139
150
167
182
This position includes:
• Discount on receivables
Subordinated liabilities
BayernLB
EUR million
Group
2004
2003
2004
2003
3
—
—
—
220
244
232
256
This item includes:
In the year under review interest
expenses amounted to:
On the balance sheet date, funds exceeding 10 percent of the total amount of subordinated liabilities had not been raised.
All subordinated liabilities are issued under the following terms: In the case of the Bank’s
insolvency or liquidation, repayment shall not take place until all non-subordinated creditors have been satisfied. An obligation to make premature repayment at the creditor’s
request cannot arise. The prerequisites under which these subordinated liabilities can be
counted as liable capital pursuant to Section 10, Sub-section 5a German Banking Act
(KWG) are fulfilled.
Equity
Of the capital contributions of silent partners included in the consolidated capital,
EUR 83 million are from minority shareholders.
Liable capital
BayernLB
EUR million
The following unrealised reserves count
as part of the liable capital pursuant to
Section 10, Sub-section 2b, Sentence 1,
No. 7 KWG:
Group
2004
2003
2004
2003
59
46
64
59
Liabilities in foreign currency
BayernLB
2004
2003
2004
2003
67,811
70,163
75,409
77,403
EUR million
Total amount of assets denominated
in foreign currency
Group
Contingent liabilities and other liabilities
Neither of these items, disclosed below the bottom line of the balance sheet, contains
any elements which have a significant bearing on the Bank’s overall activities.
Letter of comfort
For all financial institutions and other companies which are stated to be covered by the
letter of comfort in the inventory of Group shareholdings, we shall ensure, proportionate to the size of our respective equity interest, that – with the exception of cases of
political risk – they will be in a position to fulfil their contractual obligations.
Assignment of collateral for the Bank’s own liabilities
BayernLB
EUR million
Group
2004
2003
2004
2003
10,898
—
26
7,907
—
30
16,738
451
30
12,694
401
33
Assets have been assigned as collateral
in the case of the following liabilities:
• Due to banks
• Due to customers
• Contingent liabilities
The provision of collateral for the Bank’s own liabilities predominantly concerns open
market transactions with the European System of Central Banks.
Additionally, securities with a nominal value of EUR 2.668 billion at BayernLB and
EUR 2.731 billion at Group level have been deposited as collateral in connection with
transactions on EUREX, EEX, Clearstream Banking Frankfurt / Main, Clearstream Banking Luxembourg, Euroclear and other stock exchange and clearing systems.
161
162
Other financial obligations
Other financial obligations notably arise from rental, use, service and maintenance
contracts, and from consulting and marketing agreements.
On the balance sheet date, there were call commitments for capital not fully paid up
of EUR 45 million at BayernLB and EUR 47 million at Group level. There were uncalled
liabilities from limited partnership relationships of EUR 51 million, and joint liabilities
pursuant to Section 24 German Law on Limited Liability Companies (GmbHG) in respect
of EUR 18 million. Moreover, there were additional funding obligations amounting to
EUR 39 million at BayernLB and EUR 50 million at Group level, as well as a directly
enforceable guarantee for the funding obligation of shareholders of the Frankfurt /
Main-based Liquiditäts-Konsortialbank GmbH, who are members of Deutsche Sparkassen- und Giroverband e. V. Amounts due to affiliated companies amounted to
EUR 84 million at BayernLB and EUR 86 million for the Group.
Pursuant to Section 157 Conversion law, there is a secondary liability for the Berlinbased Deutsche Kreditbank Aktiengesellschaft in respect of liabilities.
On the balance sheet date, BayernLB’s liability as a member of the guarantee fund of
the landesbanks came to EUR 88 million and that of the Group to EUR 93 million.
Under the terms of the statutes of the deposit insurance fund run by the Association
of German Public-Law Banks (VÖB), the Bank has undertaken to exempt the VÖB from
any losses which may be suffered due to measures taken in favour of two credit institutions which are majority-owned by the Bank. As members of deposit protection
schemes, individual consolidated institutions are also liable under the provisions
governing those schemes.
163
Changes in the portfolio of building-saving contracts and contract amounts of our
Home Loan Division (Landesbausparkasse)
Not allotted
Allotted
Total
No. of
contracts
Contract
amounts
EUR million
No. of
contracts
Contract
amounts
EUR million
No. of
contracts
Contract
amounts
EUR million
1,583,043
32,845
447,556
9,860
2,030,599
42,705
• New contracts (effective)
• Transfers
• Waivers and revocations
of allotment
• Splits
• Allotments
• Other
252,381
14,865
5,994
303
—
2,789
—
59
252,381
17,654
5,994
362
10,976
1,684
—
11,645
180
—
—
257
—
56
95,993
583
—
—
1,769
14
10,976
1,740
95,993
12,228
180
—
1,769
271
Total
291,551
6,734
99,421
1,842
390,972
8,576
Allotments
Reductions
Write-backs
Transfers
Consolidations
Contract expiries
Waivers and revocations
of allotment
• Other
95,993
—
117,527
14,865
—
3,668
1,769
213
1,928
303
—
33
—
—
38,232
2,789
6,577
79,940
—
6
661
59
—
1,718
95,993
—
155,759
17,654
6,577
83,608
1,769
219
2,589
362
—
1,751
—
12,056
—
374
10,976
510
180
9
10,976
12,566
180
383
Total
244,109
4,620
139,024
2,633
383,133
7,253
47,442
2,114
– 39,603
– 791
7,839
1,323
1,630,485
34,959
407,953
9,069
2,038,438
44,028
4,514
96
722
18
5,236
114
A. Portfolio at end of
previous year
B. Additions in financial year
through
C. Reductions in financial year
through
•
•
•
•
•
•
•
D. Net additions / reductions
E. Portfolio at end of
financial year
Of which: building-savers outside
the Federal Republic of Germany
No. of contracts
Contract amounts
EUR million
7,351
47,475
237
1,197
Portfolio of contracts not yet effective
• Concluded prior to 01. 01. 2004
• Concluded in 2004 financial year
As far as changes in the individual tariffs are concerned, please refer to the annual report of our
Home Loan division.
164
Changes in the volume of the allotment fund of our Home Loan division
EUR million
A. Additions
Brought forward from previous year (surplus):
Amounts not yet disbursed
3,874
Additions in financial year
• Building-savers’ deposits (incl. building-saving premiums)
• Redemption amounts1 (incl. building-saving premiums)
• Interest on building-savers’ deposits
1,539
754
174
Total additions
6,341
B. Reductions
Reductions in financial year
• Allotted amounts, if disbursed
a) Building-savers’ deposits
b) Building loans
• Repayment of building-savers’ deposits on building-saving contracts not
yet allotted
830
521
500
Additions surplus (amounts not yet disbursed) at end of financial year 2
4,490
Total reductions
6,341
Comments:
1 Redemption amounts are the proportions of the redemption amounts which are purely used for redemptions.
2 The additions surplus includes, among other items:
a) Building-savers’ deposits not yet disbursed relating to allotted building-saving contracts: EUR 217 million
b) Building loans not yet disbursed relating to allotments: EUR 506 million
165
Changes in the portfolio of building-saving contracts and contract amounts of our
Home Loan division and of the Landesbausparkasse Saar
Not allotted
Allotted
Total
No. of
contracts
Contract
amounts
EUR million
No. of
contracts
Contract
amounts
EUR million
No. of
contracts
Contract
amounts
EUR million
1,682,387
34,733
480,658
10,465
2,163,045
45,198
• New contracts (effective)
• Transfers
• Waivers and revocations
of allotment
• Splits
• Allotments
• Other
269,318
15,247
6,322
314
—
2,861
—
61
269,318
18,108
6,322
375
14,420
1,742
—
12,412
229
—
—
272
—
56
105,968
1,200
—
—
1,927
15
14,420
1,798
105,968
13,612
229
—
1,927
287
Total
313,139
7,137
110,085
2,003
423,224
9,140
Allotments
Reductions
Write-backs
Transfers
Consolidations
Contract expiries
Waivers and revocations
of allotment
• Other
105,968
—
125,504
15,247
—
3,668
1,927
218
2,061
314
—
33
—
—
39,945
2,861
7,749
85,632
—
6
685
61
—
1,816
105,968
—
165,449
18,108
7,749
89,300
1,927
224
2,746
375
—
1,849
—
13,213
—
399
14,420
1,082
229
28
14,420
14,295
229
427
Total
263,600
4,952
151,689
2,825
415,289
7,777
49,539
2,185
– 41,604
– 822
7,935
1,363
1,731,926
36,918
439,054
9,643
2,170,980
46,561
7,496
161
1,252
31
8,748
192
A. Portfolio at end of
previous year
B. Additions in financial year
through
C. Reductions in financial year
through
•
•
•
•
•
•
•
D. Net additions / reductions
E. Portfolio at end of
financial year
Of which: building-savers outside
the Federal Republic of Germany
No. of contracts
Contract amounts
EUR million
8,351
50,203
260
1,258
Portfolio of contracts not yet effective
• Concluded prior to 01. 01. 2004
• Concluded in 2004 financial year
As far as changes in the individual tariffs are concerned, please refer to our Home Loan division’s annual
report and the annual report of Landesbausparkasse Saar.
166
Changes in the volume of the allotment fund of our Home Loan division and
that of the Landesbausparkasse Saar
EUR million
A. Additions
Brought forward from previous year (surplus):
Amounts not yet disbursed
4,107
Additions in financial year
• Building-savers’ deposits (incl. building-saving premiums)
• Redemption amounts1 (incl. building-saving premiums)
• Interest on building-savers’ deposits
1,636
798
184
Total additions
6,725
B. Reductions
Reductions in financial year
• Allotted amounts, if disbursed
a) Building-savers’ deposits
b) Building loans
• Repayment of building-savers’ deposits on building-saving contracts not
yet allotted
Additions surplus (amounts not yet disbursed) at end of financial
year 2
Total reductions
885
556
533
4,751
6,725
Comments:
1 Redemption amounts are the proportions of the redemption amounts which are purely used for redemptions.
2 The additions surplus includes, among other items:
a) Building-savers’ deposits not yet disbursed relating to allotted building-saving contracts: EUR 239 million
b) Building loans not yet disbursed relating to allotments: EUR 539 million
Derivative transactions
The table below shows interest rate-related and foreign currency-related forward transactions as well as other forward transactions and credit derivatives not yet settled as
per the balance sheet date. The majority of the deals was concluded to hedge fluctuations in interest rates, exchange rates or market prices and trading on behalf of customers.
Derivatives transactions within BayernLB – presentation of volumes
Positive
market 1
values
Nominal values
Negative
market 1
values
2004
2003
2004
2004
• Interest rate swaps
• FRAs
• Interest rate options
– purchases
– sales
• Caps, floors
• Exchange-traded contracts
• Other forward transactions
582,540
9,959
21,804
8,951
12,853
19,062
155,567
991
532,923
28,061
12,456
4,219
8,237
20,886
86,160
721
15,602
629
180
180
—
104
60
—
14,582
104
704
—
704
103
58
91
Interest rate risks – total –
789,923
681,207
16,575
15,642
• Forward exchange transactions
• Currency swaps /
cross currency swaps
• Foreign exchange options
– purchases
– sales
124,753
158,341
2,646
2,813
38,760
2,626
1,300
1,326
—
251
40,474
5,204
2,691
2,513
—
215
3,125
73
73
—
—
21
3,300
46
—
46
—
—
Currency risks – total –
166,390
204,234
5,865
6,159
• Forward share transactions
• Index options
– purchases
– sales
• Share options
– purchases
– sales
24
710
372
338
1,840
939
901
297
388
—
464
125
339
1,358
743
615
421
217
—
12
12
—
88
88
—
4
6
—
13
—
13
86
—
86
1
5
Share and other price risks – total –
3,259
2,460
110
105
• Credit default swaps
– protection buyer
– protection seller
• Credit linked notes
• Total return swaps
• Credit spread options
38,579
20,415
18,164
899
899
—
1,294
647
647
365
—
365
30,642
16,737
13,905
586
586
—
474
237
237
392
—
392
142
34
108
—
—
—
2
1
1
—
—
—
138
124
14
—
—
—
—
—
—
—
—
—
Risks from credit derivatives – total –
41,137
32,094
144
138
EUR million
Interest rate risks
Currency risks
Share and other price risks
Risks from credit derivatives
167
168
Derivatives transactions within the BayernLB Group – presentation of volumes
Positive
market 1
values
Nominal values
Negative
market 1
values
2004
2003
2004
2004
• Interest rate swaps
• FRAs
• Interest rate options
– purchases
– sales
• Caps, floors
595,735
10,026
21,809
8,951
12,858
19,692
156,122
991
544,716
28,119
12,461
4,224
8,237
21,486
86,160
747
15,761
629
180
180
—
112
60
—
14,961
104
704
—
704
104
58
91
Interest rate risks – total –
804,375
693,689
16,742
16,022
• Forward exchange transactions
• Currency swaps /
cross currency swaps
• Foreign exchange options
– purchases
– sales
126,241
159,728
2,666
2,855
39,000
2,674
1,312
1,362
—
251
40,704
5,226
2,698
2,528
—
215
3,125
73
73
—
—
21
3,348
46
—
46
—
—
Currency risks – total –
168,166
205,873
5,885
6,249
• Forward share transactions
• Index options
– purchases
– sales
• Share options
– purchases
– sales
71
829
428
401
1,842
941
901
297
388
94
470
128
342
1,384
768
616
421
218
—
12
12
—
88
88
—
4
6
—
13
—
13
86
—
86
1
5
Share and other price risks – total –
3,427
2,587
110
105
• Credit default swaps
• Credit linked notes
• Total return swaps
• Credit spread options
38,605
20,421
18,184
899
899
—
1,294
647
647
365
—
365
30,642
16,737
13,905
586
586
—
474
237
237
392
—
392
142
34
108
—
—
—
2
1
1
—
—
—
138
124
14
—
—
—
—
—
—
—
—
—
Risks from credit derivatives – total –
41,163
32,094
144
138
EUR million
Interest rate risks
Currency risks
Share and other price risks
Risks from credit derivatives
169
Derivatives transactions within BayernLB – maturities structure
Nominal values
Interest rate risks
Currency risks
Share and other
price risks
Risks from credit
derivatives
2004
2003
2004
2003
2004
2003
2004
2003
Residual terms
• up to three months
• up to 1 year
• up to 5 years
• more than 5 years
74,769
234,501
287,937
192,716
78,344
175,721
248,753
178,389
66,650
57,253
24,049
18,438
79,087
68,716
32,672
23,759
1,317
844
843
255
1,169
506
407
378
112
833
21,381
18,811
5,304
403
14,749
11,638
Total
789,923
681,207
166,390
204,234
3,259
2,460
41,137
32,094
EUR million
Derivatives transactions within the BayernLB Group – maturities structure
Nominal values
Interest rate risks
Currency risks
Share and other
price risks
Risks from credit
derivatives
2004
2003
2004
2003
2004
2003
2004
2003
Residual terms
• up to three months
• up to 1 year
• up to 5 years
• more than 5 years
76,262
237,241
293,177
197,695
80,275
178,026
253,033
182,355
67,751
57,723
24,116
18,576
79,899
69,279
32,811
23,884
1,459
870
843
255
1,207
595
407
378
112
833
21,407
18,811
5,304
403
14,749
11,638
Total
804,375
693,689
168,166
205,873
3,427
2,587
41,163
32,094
EUR million
170
Derivatives transactions within BayernLB – counterparty structure
Positive
market 1
values
Nominal values
EUR million
OECD banks
Non-OECD banks
Public-sector entities within the OECD
Other counterparties*
Total
Negative
market 1
values
2004
2003
2004
2004
739,684
4,779
4,809
251,437
735,880
4,895
4,642
174,578
18,436
25
213
4,020
17,488
18
43
4,495
1,000,709
919,995
22,694
22,044
Derivatives transactions within the BayernLB Group – counterparty structure
Positive
market 1
values
Nominal values
EUR million
OECD banks
Non-OECD banks
Public-sector entities within the OECD
Other counterparties*
Total
* including exchange-traded contracts
Negative
market 1
values
2004
2003
2004
2004
755,027
4,779
4,909
252,416
749,622
4,895
4,642
175,084
18,623
25
213
4,020
17,958
18
43
4,495
1,017,131
934,243
22,881
22,514
Derivatives transactions within BayernLB – trading transactions2
Positive
market 1
values
Nominal values
Negative
market 1
values
2004
2003
2004
2004
Interest rate-based contracts
Currency-based contracts
Share-based contracts
Credit derivatives contracts
649,565
123,915
2,166
27,805
537,145
152,901
1,311
20,132
11,899
3,798
94
125
11,697
4,145
90
115
Trading transactions – total
803,451
711,489
15,916
16,047
EUR million
Derivatives transactions within the BayernLB Group – trading transactions 2
Positive
market 1
values
Nominal values
Negative
market 1
values
2004
2003
2004
2004
Interest rate-based contracts
Currency-based contracts
Share-based contracts
Credit derivatives contracts
650,342
124,133
2,214
27,805
538,003
153,924
1,344
20,132
11,903
3,811
94
125
11,705
4,160
90
115
Trading transactions – total
804,494
713,403
15,933
16,070
EUR million
Comments:
1 Market value is the amount at which derivatives may be bought or sold on the balance sheet date. Market value is calculated
either on the basis of quoted market prices or using generally recognised valuation models (e. g. present value and option
pricing models) based on current market parameters.
2 Trading transactions in derivative instruments include transactions carried out within the framework of the Bank’s business
strategies and limits by the competent trading units with the aim of achieving own-trading gains.
171
172
Disclosures relating to the profit and loss statement of the BayernLB
and the consolidated profit and loss statement
Other operating income and expenses
The main items included under Other operating income are earnings from tax refunds
of EUR 140 million for BayernLB and EUR 145 million for the Group (EUR 142 million
for the BayernLB and EUR 145 million for the Group in the previous year) as well as
earnings from the write-back of other provisions worth EUR 23 million at BayernLB and
EUR 26 million at Group level (EUR 27 million and EUR 30 million respectively in the
previous year).
Other operating income also includes one-off earnings of EUR 123 million posted by
Deutsche Kreditbank Aktiengesellschaft, Berlin. This amount resulted from the early
termination of payment obligations under the D-Markbilanzgesetz (DMBilG – legislation created in connection with German reunification) and, consequently, the necessary review of reserves and valuation of residual risks at the Bank.
The main items included under Other operating expenses constitute expenditure on
provisioning measures affecting holdings of the Deutsche Kreditbank Aktiengesellschaft, Berlin.
Extraordinary expenses
This position includes in particular the payment of EUR 320 million to the Free State of
Bavaria upon termination of the EU state aid proceedings.
Taxes on income and earnings
Taxes disclosed on income and earnings relate to the result from ordinary business.
The tax position is also influenced by the writing back of tax deferrals.
Geographical markets
BayernLB
Group
EUR million
2004
2003
2004
2003
The total amount of income disclosed
in items 1, 3, 5, 7 and 8 breaks down
into the following geographical
markets:
• Germany
• Europe (excluding Germany)
• Americas
• Asia
8,766
919
818
236
9,058
1,119
1,095
327
10,233
1,913
818
239
10,351
1,917
1,094
332
Supplementary information
The administrative bodies of BayernLB*
Board of Management
Werner Schmidt
Chairman
Chairman
State Minister, Bavarian State Ministry
of Finance
Dr. Siegfried Naser
First Vice Chairman
Executive President of the
Association of Bavarian Savings Banks
Second Vice Chairman
of the Interior
Third Vice Chairman
Dr. Peter Kahn
(until 31. 12. 2004)
Deputy Chairman
Werner Strohmayr
(until 30. 06. 2004)
Dr. Rudolf Hanisch
Dieter Burgmer
Theo Harnischmacher
Stefan W. Ropers
of the District of Dachau
Josef Deimer
Lord Mayor of the City of Landshut
Alois Hagl
Georg Schmid
Permanent Secretary,
of the Interior
Klaus Weigert
Deputy Secretary, Bavarian
State Ministry of Finance
Prof. Hubert Weiler
Dr. Otto Wiesheu
of Economic Affairs, Infrastructure,
Transport and Technology
* Relevant for the period from 1 January
to 31 December 2004.
173
174
Remunerations of the governing bodies of BayernLB
BayernLB
EUR thousand
Group
2004
2003
2004
2003
4,542
4,857
4,778
5,113
320
317
350
360
4,046
3,910
4,082
3,938
5
—
14
—
36,177
34,115
36,177
34,115
Total remunerations of the financial
year:
• Members of the Board of Management
of BayernLB
• Members of the Board of Administration of BayernLB*
• Former members of the Board
of Management of BayernLB and
their surviving dependants
• Former members of the Board
of Administration of BayernLB
and their surviving dependants
• Pension provisions set up for former
members of the Board of Management of BayernLB and their surviving
dependants
* Previous year’s figures have been adjusted.
Loans to the governing bodies of BayernLB
BayernLB
EUR thousand
Group
2004
2003
2004
2003
2,189
1,600
2,234
1,645
488
419
488
419
Total amount of advances, loans and
guarantees granted to members of the
Board of Management and the Board
of Administration:
• Members of the Board of
Management of BayernLB
• Members of the Board of
Administration of BayernLB
Mandates held by legal representatives or by other employees
of the BayernLB Group*
Name
Mandates held in supervisory bodies to be constituted under
German law for major incorporated companies
(including all credit institutions)
At BayernLB:
Board of Management
Werner Schmidt
DekaBank Deutsche Girozentrale, Frankfurt / Main
Deutsche Kreditbank Aktiengesellschaft, Berlin
Deutsche Lufthansa AG, Cologne
Drees & Sommer AG, Stuttgart
Herrenknecht AG, Schwanau
Jenoptik AG, Jena
Landesbank Saar, Saarbrücken
Liquiditäts-Konsortialbank GmbH, Frankfurt / Main
Wieland-Werke AG, Ulm
Dr. Peter Kahn
Banque LBLux S.A., Luxembourg
Bayern-Invest Kapitalanlagegesellschaft mbH, Munich
Deutsche Kreditbank Aktiengesellschaft, Berlin
Ed. Züblin AG, Stuttgart
GBWAG Bayerische Wohnungs-AG, Munich
GEWOFAG Gemeinnützige Wohnungsfürsorge AG, Munich
Knaus AG, Jandelsbrunn
Warema Renkhoff Holding AG, Marktheidenfeld
Dr. Rudolf Hanisch
CDC IXIS S.A., Paris
E.ON Energie AG, Munich
Dieter Burgmer
BayernLB International Fund Management S.A., Luxembourg
BLB Asia Pacific Ltd., Singapore
Theo Harnischmacher
Resba GmbH (until 31.0.2004 SchmidtBank AG), Hof
Stefan W. Ropers
Deutsche Factoring Bank Deutsche Factoring GmbH & Co., Bremen
MKB – Magyar Külkereskedelmi Bank Rt., Budapest
debis Air Finance B.V., Amsterdam
Formula One Administration Ltd., London
Formula One Management Ltd., London
* This information is valid as per 31 December 2004.
175
176
Name
of Management tasks
Dr. Ralph Schmidt
TxB Transaktionsbank GmbH, Aschheim-Dornach
Employee
Oliver Becker
RUEFA Reisen AG, Vienna
Harald Glöckl
Formula One Administration Ltd., London
Formula One Management Ltd., London
Ernst Holland
mfi Management für Immobilien AG, Essen
Georg Jewgrafow
Bürgerliches Brauhaus Ingolstadt AG, Ingolstadt
Thomas Neher
Andreas Nerantzakidis
Haupt Pharma AG, Berlin
Dr. Bernhard Oswald
TxB Transaktionsbank GmbH, Aschheim-Dornach
Michael Schmittlein
trans-o-flex Schnell-Lieferdienst GmbH, Weinheim
Dr. Franz Wirnhier
DKB Immobilien AG, Berlin-Charlottenburg
In the Group:
Board of Directors of
Deutsche Kreditbank
Aktiengesellschaft
Günther Troppmann
Hertha BSC KG mbH aA, Berlin
MITEC Automotive AG, Eisenach
Rolf Mähliß
Landesbank Saar
Dr. Max Häring
DekaBank Deutsche Girozentrale, Frankfurt / Main
Deka Immobilien Investment GmbH, Frankfurt / Main
Deutsche Factoring Bank Deutsche Factoring GmbH & Co., Bremen
Höll AG, Saarbrücken
Saarländische Investitionskreditbank AG, Saarbrücken
Saarstahl AG, Völklingen
SKG BANK GmbH, Saarbrücken
Werner Severin
Eifelhöhen-Klinik AG, Bonn
SKG BANK GmbH, Saarbrücken
Jürgen Müsch
Deka Investment GmbH, Frankfurt / Main
FinanzIT GmbH, Hannover
Frank Peter Eloy
Société Alsacienne de Développement et d’Expansion S.A., Strasbourg
Name
Management of
LB(Swiss) Privatbank AG
Walter Nötzli
Deka Swiss Privatbank AG, Zurich
MKB – Magyar Külkereskedelmi Bank Rt.
Dr. Imre Balogh
Giro Elszámolásforgalmi Rt., Budapest
Csilla Bolla
Giro Elszámolásforgalmi Rt., Budapest
József Janik
Dunaferr Lörinci Hengermü Kft., Budapest
Extermetal Ltd., London
Dr. Sándor Patyi
Hitelgarancia Rt., Budapest
Number of employees
(annual average)
Women
Men
Total
BayernLB
2,460
2,607
5,067
Consolidated companies
2,241
1,434
3,675
Group
4,701
4,041
8,742
16
24
40
of which: consolidated companies on a pro rata basis
(in proportion to participation)
The total includes 1,083 part-time employees, whose working hours correspond to those
of 670 full-time employees. Our 141 trainees are not included.
Munich, 15 March 2005
The Board of Management
Schmidt
Dr. Hanisch
Harnischmacher
Burgmer
Ropers
Dr. Gribkowsky
177
178
Independent Auditor’s Report
We have audited the annual financial statements, together with the bookkeeping system, of Bayerische Landesbank (hereinafter called “Bank”), a corporation established
under public law, Munich, as well as the consolidated financial statements consisting
of the Balance Sheet, P / L statement, Statement of Changes in Shareholders’ Equity, Cash
Flow Statement, Segment Reporting and Notes to the Accounts and its report on the
position of the Bank and the Group prepared by the Bank for the financial year from
1 January to 31 December 2004. The preparation of these documents in accordance with
German commercial law and supplementary provisions in the Law on Bayerische Landesbank in the version officially published on 1 February 2003 and its Statutes is the responsibility of the Bank’s management. Our responsibility is to express an opinion on the
annual financial statements, together with the bookkeeping system, as well as on the
consolidated financial statements and the report on the position of the Bank and the
Group based on our audit.
We conducted our audit of the annual and consolidated financial statements in accordance with Section 317 HGB (German Commercial Code) and the German generally
accepted standards for the audit of financial statements promulgated by the Institut der
Wirtschaftsprüfer (IDW). Those standards require that we plan and perform the audit
such that misstatements materially affecting the presentation of the net assets, financial
position and results of operations in the annual and the consolidated financial statements as well as the cash flows within the Group in accordance with the principles of
proper accounting and in the report on the position of the Bank and the Group are
detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Bank and the Group and evaluations of possible
misstatements are taken into account in the determination of audit procedures. The
effectiveness of the internal control system relating to the accounting system and the
evidence supporting the disclosures in the books and records, the annual and consolidated financial statements and the report on the position of the Bank and the Group
are examined primarily on a test basis in line with the framework of the audit. The audit
includes assessing the accounting and consolidation principles used and significant
estimates made by management, as well as evaluating the overall presentation of the
annual and the consolidated financial statements and the report on the position of the
Bank and the Group. We believe that our audit provides a reasonable basis for our
opinion.
Our audit has not led to any reservations.
In our opinion, the annual and the consolidated financial statements give a true and fair
view of the net assets, financial position and results of operations of the Bank and the
Group respectively as well as the cash flows within the Group during the Group’s financial year, in accordance with the principles of proper accounting. On the whole the report
on the position of the Bank and the Group provides a suitable understanding of the
Bank’s and the Group’s position and suitably presents the risks of future development.
Munich, 29 March 2005
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Wohlmannstetter
Ufer
Auditor
Auditor
179
Great things are made up of many small details. And the sum of
the parts is greater than the whole. Security plays an essential
role here: precise performance controls and modern technology
are indispensable to the big picture. And to individual success.
Complex enterprises demand
reliability.
 Advisory Boards and addresses
Trustees
184
Economic Advisory Council
185
Savings Bank Advisory Council
187
188
184
Advisory Boards and addresses
Trustees*
Dr. Werner Böhme
First Deputy
Senior Assistant Secretary (retired)
Norbert Schulz
Taxetstraße 41
Senior Assistant Secretary
85737 Ismaning
Odeonsplatz 3
80539 München
Second Deputy
Dr. Manfred Seume
Senior Assistant Secretary (retired)
Mozartstraße 8
87740 Buxheim
* For the period from 1 January to 31 December 2004
Economic Advisory Council*
Dr. Ferdinand Graf von Ballestrem
Erwin Horak
Member of the Board of Directors
President
MAN Aktiengesellschaft
Staatliche Lotterieverwaltung
Munich
Munich
Willi Berchtold
Dr. Gerhard Jooss
Essen
ZF Friedrichshafen AG
Friedrichshafen
Dr. Eng. h.c. Volker Jung
Chairman of the Supervisory Board
Karl J. Dersch
MAN Aktiengesellschaft
Munich
Munich
Dipl.-Kfm. Heinz-Werner Götz
Daniel Just
Auditor
Director of the Verband Bayerischer
Bayerische Versorgungskammer
Wohnungsunternehmen e.V.
Munich
Munich
Alfred H. Lehner
Dipl.-Kfm. Fritz Haberl
Utting am Ammersee
Munich
Dr. rer. pol. Dieter Nagel
Dr. Max Häring
Member of the Supervisory Board
Chairman of the Board of Management
Thüga Aktiengesellschaft
Landesbank Saar Girozentrale
Munich
Saarbrücken
Dr. Georg Graf von Schall-Riaucour
Dipl.-Ing., Dipl.-Wirtsch.-Ing.
Chief Executive Officer
Peter Hamberger
Wittelsbacher Ausgleichsfonds
Manager
Munich
Hamberger Industriewerke GmbH
Rosenheim
Rudolf W. Schmitt
Willi Hermsen
LfA Förderbank Bayern
Ottobrunn
Munich
185
186
Dipl.-Kfm. Dieter Schön
Dr. Wolfgang Weiler
Managing Director
Board Member
Schön-Klinik Verwaltung GmbH
HUK-Coburg
Prien
Coburg
Stefan Schörghuber
Dr. rer. pol. Walter Wübben
Proprietor of
Managing Partner
Unternehmensgruppe Schörghuber
ABG Allgemeine Baubetreuungs-
Munich
gesellschaft
Cologne
Dr.-Ing. Dieter Soltmann
Honorary President of the
Chamber of Industry and Commerce
for Munich and Upper Bavaria
Munich
Dr. Péter Stotz
Deputy Chief Executive
Hungarian Foreign Trade Bank Ltd.
Budapest
Dieter Teichmann
Deputy Chairman
of the Board of Directors
Bayerische Versorgungskammer
Munich
Karl-Heinz Trautmann
President of the Association
of Saar Savings Banks
Saarbrücken
Prof. Dr. h.c. Ignaz Walter
Walter Unternehmensgruppe
Augsburg
Savings Bank Advisory Council*
Dieter Bartke
Johann Reiter
Kreis- und Stadtsparkasse Erding
Sparkasse Landsberg-Dießen
Erding
Landsberg
Rudolf Faltermeier
Siegmund Schiminski
Vice President
Munich
Sparkasse Bayreuth
Bayreuth
Günter Götz
Hans Schmittner
Stadtsparkasse Weiden
Weiden i.d.Opf.
Sparkasse Miltenberg-Obernburg
Miltenberg
Rainer Heller
Josef Waschinger
Sparkasse Fürth
Fürth
Sparkasse Freyung-Grafenau
Freyung
Alfons Maierthaler
Kreissparkasse Augsburg
Augsburg
Werner Netzel
Vice President
Munich
187
188
Domestic
Subsidiaries
Munich
Berlin
BayernLB (Head Office)
Deutsche Kreditbank Aktiengesellschaft
Brienner Straße 18
Kronenstraße 8 / 10
80333 München
10117 Berlin
Tel +49 89 2171-01
Tel +49 30 20155-0
Fax +49 89 2171-23579
Fax +49 30 20155-465
SWIFT BIC: BYLA DE MM
SWIFT BIC: BYLADEM 1001
info@bayernlb.de
zentrale@dkb-bank.de
www.bayernlb.de
www.dkb.de
Nuremberg
Saarbrücken
BayernLB
SaarLB
Lorenzer Platz 27
Ursulinenstraße 2
90402 Nürnberg
66111 Saarbrücken
Tel +49 911 2359-0
Tel +49 681 383-01
Fax +49 911 2359-383
Fax +49 681 383-1200
SWIFT BIC: BYLA DE 77
SWIFT BIC: SALADE 55
nuernberg@bayernlb.de
service@saarlb.de
www.bayernlb.de
www.saarlb.de
15 Sales Offices of LBS-Bayern
with locations in:
Ansbach, Bad Tölz, Bamberg,
Bayreuth, Erding, Erlangen,
Fürstenfeldbruck, Ingolstadt,
Landshut, Munich, Neumarkt,
Neu-Ulm, Nuremberg,
Oberviechtach, Würzburg
and
111 additional advisory centres in Bavaria
International
New York
BayernLB
Branches
560 Lexington Avenue
(as per 1 January 2005)
New York, N. Y. 10022 / USA
Tel +1 212 310-9800
Hong Kong
Fax +1 212 310-9841
BayernLB
SWIFT BIC: BYLA US 33
19 / F., Standard Chartered
Bank Building
Paris
4A Des Voeux Road Central
BayernLB
Hong Kong / Hong Kong
203, rue du Faubourg Saint-Honoré
Tel +852 2978-8333
F-75380 Paris Cedex 08
Fax +852 2877-3817
Tel +33 1 442114-00
SWIFT BIC: BYLA HK HH
Fax +33 1 442114-44
hongkongbranch@bayernlb.de
SWIFT BIC: BYLA FR PP
London
Shanghai
BayernLB
BayernLB
Bavaria House · 13 / 14 Appold Street
17 / F., Hua Du Manison
GB-London EC2A 2NB
828-838 Zhang Yang Road
Tel +44 20 7247-0056
Pudong
Fax +44 20 7955-5173
Shanghai 200122 / PR China
SWIFT BIC: BYLA GB 22
Tel +86 21 6876-6600
info.london@bayernlb.co.uk
Fax +86 21 6876-7700
shanghaibranch@bayernlb.de
Luxembourg
BayernLB
Labuan*
3, rue Jean Monnet
BayernLB
L-2180 Luxembourg
Licensed Offshore Bank (940028C)
Tel +352 43 3122-1
Unit 14-C, Level 14
Fax +352 43 3122-4599
Block 4, Office Tower
SWIFT BIC: BYLA LU LB
Financial Park Labuan, Jalan Merdeka
direction.nlblb@lblux.lu
87000 Federal Territory of
Labuan / Malaysia
Milan
Tel +60 87 591-000
BayernLB
Fax +60 87 422-175
Via Cordusio, 2
SWIFT BIC: BYLA MY KA
I-20123 Milano
blblab@tm.net.my
Tel +39 02 86390-1
* due to be closed in 2005
Fax +39 02 864216
SWIFT BIC: BYLA IT MM
info@bayernlb.it
189
190
Subsidiaries
Budapest
Hungarian Foreign Trade Bank
Luxembourg
MKB – Magyar Külkereskedelmi Bank Rt.
Banque LBLux S. A.
Váci u. 38.
3, rue Jean Monnet
1056 Budapest
L-2180 Luxembourg
Tel +36 1 327-8600
Tel +352 42 434-1
Fax +36 1 269-0959
Fax +352 42 434-5099
Telex 22-6941 extr h
SWIFT BIC: BYLA LU LL
SWIFT BIC: MKKB HU HB
bank@lblux.lu
mkb@mkb.hu
www.lblux.lu
www.mkb.hu
Zurich
LB(Swiss) Privatbank AG
Börsenstrasse 16
Postfach
CH-8022 Zürich
Tel +41 1 26544-44
Fax +41 1 26544-11
SWIFT BIC: BYLA CH ZZ
privatebanking@lbswiss.ch
www.lbswiss.ch
Editorial details
Publisher
Brienner Straße 18
80333 München
Tel +49 89 2171-27176
Fax +49 89 2171-23579
Telegramm Bayernbank München
Teletex +89 8827 GZMtex
Reuters Monitor BLAX, BAYA-B
SWIFT BIC: BYLA DE MM
info@bayernlb.de
www.bayernlb.de
Text / editorial staff / production
BayernLB
Corporate Center Support Operations
Corporate Development / BoM Support division
Concept and Layout
MetaDesign
Printed by
Lipp GmbH, Graphische Betriebe
Photography
Norbert Hüttermann
Page 27: Jens Weber, Munich
Architect: Stephan Braunfels
The annual report is printed on environmentally compatible non-chlorine bleached
cellulose. The annual report is also available
in German and can be downloaded as a pdf
file from www.bayernlb.com under
Press / Facts and Figures.
Editorial deadline: 22.03.2005
Brienner Strasse 18
80333 München
www.bayernlb.de

Annual Report 2004

Transcription

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