DVB Bank Group (DVB), the specialist in international transport finance, reported a consolidated net loss before taxes of €83.8 million in the first quarter of 2017 (previous year: net income of €25.9 million). This was heavily influenced by a negative net result from financial instruments in accordance with IAS 39 (€–61.3 million). Furthermore, reflecting market developments, additional allowance for credit losses was recognised in the amount of €65.9 million.
Ralf Bedranowsky, CEO and Chairman of DVB Bank SE’s Board of Managing Directors, commented on the Bank’s consolidated results:
“On a positive note, income generated by our operating activities continued to show a stable development. Specifically, net interest income (before allowance for credit losses) was up 4.7%, to €60.5 million, net fee and commission income rose 20.0%, to €32.4 million, and net other operating income/expenses improved from €4.4 million, to €10.0 million. In particular, we originated 36 new international transport finance transactions, with an aggregate volume of €1.0 billion (previous year: 27 new financings with a total volume of €1.2 billion).
Due to the persistent structural excess tonnage capacity, the continued deterioration in vessel values and charter rates (especially in container shipping), and the challenging environment for the offshore industry – caused by low oil prices – allowance for credit losses required predominantly for legacy exposures in the Shipping Finance portfolio, and for financings in the Offshore Finance portfolio, rose by €29.6 million to €65.9 million (previous year: €36.3 million).
As mentioned, the net result from financial instruments in accordance with IAS 39 amounted to €–61.3 million (previous year: €27.9 million); this was largely driven by the measurement of cross-currency swaps, which the Bank is not allowed to include in its hedge accounting. Based on prudent economic risk management, these derivatives form hedging relationships with the related hedged items, whereby measurement gains and losses reported on a particular record date are neutralised over the entire term of the financings extended.”
The detailed items of the interim financial statements are as follows:
Net interest income increased by 4.7%, from €57.8 million to €60.5 million. Allowance for credit losses amounted to €65.9 million (previous year: €36.3 million). New allowance recognised for credit losses totalled €103.0 million, €98.9 million of which in Shipping Finance and Offshore Finance. Conversely, allowance for credit losses of €36.9 million was reversed, of which €32.8 million in Shipping Finance and Offshore Finance. Net interest income after allowance for credit losses amounted to €–5.4 million (previous year: €21.5 million). Total allowance for credit losses (comprising specific allowance for credit losses, portfolio-based allowances for credit losses, and provisions) rose to €679.1 million, up 7.3% from year-end 2016 (€633.1 million).
Net fee and commission income, which primarily includes fees and commissions from new Transport Finance business, asset management fees, and fees generated from Corporate Finance advisory mandates, was up 20.0%, from €27.0 million to €32.4 million.
Results from investments accounted for using the equity method stood at €–0.6 million (previous year: €–0.2 million).
Net other operating income/expenses amounted to €10.0 million (previous year: €4.4 million), largely due to two non-recurring effects.
Moreover, DVB managed to keep general administrative expenses of €47.0 million stable and in line with the previous year (€46.2 million) – in spite of continued high expenses incurred from regulatory-driven projects. Staff expenses increased by 5.1%, to €28.8 million (previous year: €27.4 million), whilst non-staff expenses (including depreciation, amortisation and write-downs) were down 3.2%, from €18.8 million to €18.2 million.
Net result from financial instruments in accordance with IAS 39 (comprising the trading result, the hedge result, the result from derivatives entered into without intention to trade, and the result from investment securities) amounted to €–61.3 million (previous year: €27.9 million).
Consolidated net income/loss before bank levy, BVR Deposit Guarantee Scheme, and taxes totalled €–71.9 million (previous year: €34.4 million). Estimated bank levy charges of €7.5 million for 2017 (2016: actual bank levy of €6.4 million) as well as €4.4 million in expenses for the Deposit Guarantee Scheme of the National Association of German Cooperative Banks (2016: actual expenses of €4.7 million) needed to be deducted from consolidated net income/loss before taxes already at the beginning of the year.
Consolidated net income/loss before taxes declined from €25.9 million to €–83.8 million, whilst consolidated net income/loss (after taxes) amounted to €–72.9 million (previous year: €19.2 million).
DVB’s total assets increased to €27.8 billion as at 31 March 2017, up 0.4% from the 2016 year-end (31 December 2016: €27.7 billion).
DVB’s nominal volume of customer lending (the aggregate of loans and advances to customers, guarantees and indemnities, contingent liabilities from irrevocable loan commitments, and derivatives) declined by 3.9% to €24.9 billion. In US dollar terms, it was down by 2.6%, to US$26.6 billion.
Key financial indicators developed as follows:
Return on equity (before taxes) decreased to –5.4% (previous year: 1.3%). The Bank managed to lower its cost/income ratio by 4.2 percentage points, to 50.1% (previous year: 54.3%). Risk-adjusted Economic Value Added amounted to €–48.1 million (previous year: €–21.2 million).
DVB discloses capital ratios determined in accordance with Basel III (Advanced Approach). On this basis, DVB’s common equity tier 1 ratio as at 31 March 2017 was 11.3% (31 December 2016: 13.2%), whilst the total capital ratio amounted to 18.8% (31 December 2016: 20.7%).
Source: DVB Bank SEPrevious Next