DGAP-News: IKB Deutsche Industriebank AG / Key word(s): Preliminary results
11.03.2022 / 08:00
The issuer is solely responsible for the content of this announcement.

Preliminary figures of IKB Deutsche Industriebank AG for the financial year 2021:
solid results despite a difficult environment

Please note: Figures shown for fiscal year 2021 are preliminary and may change upon publication of the annual report. The financial year 2021 can only be compared to the reference financial year 2020 to a limited extent, since the latter only comprises a period of nine months.

Consolidated net income before tax of 104 million euros

– Return on equity (ROE) after tax of 8.3%

– Administrative costs of €135m, cost/income ratio (CIR) 55%

– Provisions for risks of €12m and NPL ratio (EBA definition) of 1.9% at a low level

– No direct credit or derivative exposure to Russia, Belarus or Ukraine

– CET 1 ratio (fully phased in) 16.6%, pro forma CET 1 ratio according to Basel IV 17.5%

– Increase in the leverage ratio to 8.0%

[Düsseldorf, 11 March 2022] Despite the persistence of the COVID-19 pandemic and a difficult economic environment, IKB achieved a solid financial result during the 2021 financial year (from January 1 to December 31, 2021). Consolidated net income before tax amounted to 104 million euros, thus greatly exceeding that of the previous year (reference financial year of nine months 2020: 63 million euros). The operating result before provisions for risks (net interest and commission income less administrative expenses) reached 113 million euros (full year 2020: 82 million euros) and was mainly due to the low administrative expenses of 135 million euros. The cost/income ratio went from 56% to 55%.

Targeted increase in new financing activities for German mid-cap companies

FY2021 new business volume amounted to €3.0 billion (nine months prior year: €1.5 billion) and thus significantly exceeded the forecast published in the report 2020 annual report. This increase is driven by our close relationships with our customers. The share of business loans as a percentage of total volume has normalized at 66%.

Strong profitability in 2021

In the 2021 financial year, IKB achieved a consolidated net profit before tax of 104 million euros (2020 financial year: 63 million euros) despite a difficult economic environment. This is mainly explained by the decrease in administrative expenses to 135 million euros and a moderate risk provisioning of 12 million euros (financial year 2020: 20 million euros) as well as a stable client portfolio and a careful of risk. Consolidated net income after tax amounted to 86 million euros, impacted by a higher-than-expected tax charge of 18 million euros (financial year 2020: tax income of 10 million euros). As in the previous year, the return on equity was 8.3% (based on a CET 1 ratio of 12% calculated on the basis of average risk-weighted outstandings). At 1.78%, the net interest margin on the loan portfolio decreased compared to the previous year (financial year 2020: 1.93%) due to the higher volume of short-term loans granted.

Group administrative expenses reached €135 million during the reporting period, slightly above the expected figure of €130 million due to a number of one-off effects. The cost/income ratio stood at 55% during the period under review, compared to 56% during the 2020 financial year.

The prior provisioning of risks amounts to 12 million euros (financial year 2020: 20 million euros). This preliminary figure includes facts known at the date of publication, but is subject to change when the annual report is published due to possible adjustment events after the reference period. Despite the outbreak of the COVID-19 pandemic, the proportion of non-performing assets remains very low, with an NPL ratio (according to the EBA definition) of 1.9% (31 December 2020: 1.6%). This was mainly due to IKB’s resilient loan portfolio which has only low exposure to sectors particularly affected by the coronavirus pandemic. The total provisions for portfolio loan losses and provisions for individual loan losses amount to 154 million euros (31 December 2020: 169 million euros). IKB has no direct credit or derivative exposure to Russia, Belarus or Ukraine.

During the reporting period, €5.1 billion of IKB’s loan portfolio of €9.3 billion was refinanced with public program loans from KfW and other development banks with identical deadlines. This means that more than half of the loan portfolio does not require refinancing via deposits. IKB’s loan portfolio consists largely of loans to medium-sized German companies, ie companies with an annual turnover of more than 100 million euros. They are characterized by very solid business models and, in most cases, by high capital and liquidity ratios.

Solid capitalization and liquidity position

As of December 31, 2021, the CET 1 ratio (IKB group/fully phased) amounted to 16.6%, thus significantly exceeding the figure for the previous year (December 31, 2020: 14.3%). It exceeded minimum regulatory requirements by 8.1% under the Supervisory Review and Evaluation Process (SREP). Within the framework of the Basel IV regulations, the pro forma CET 1 ratio increased to 17.5%.

At 8.0%, the leverage ratio significantly exceeds the level of the previous year (31 December 2020: 7.4%). The liquidity coverage ratio as of December 31, 2021 reached 274% (December 31, 2020: 271%) for the IKB group, thus also significantly exceeding the minimum regulatory requirements. IKB’s loan-to-deposit ratio – calculated as the loan portfolio excluding government program loans to total retail and corporate customer deposits and promissory note loans – stood at a solid 88 % as of December 31, 2021 (December 31, 2020: 70%).

Outlook
The global tensions caused by the war in Ukraine and its difficult to assess consequences as well as the uncertain evolution of the COVID-19 pandemic could have an impact on the risk situation and the economic performance of the Bank in 2022. Consequently, IKB will continue to resolutely apply its high lending standards in the current environment and further develop its risk profile. IKB expects net interest and commission income for the 2022 financial year to be slightly lower than the previous year. The Bank also assumes that at around 3 billion euros, new credit business will remain stable compared to the previous year.

Based on the experience acquired during the previous financial year and the careful monitoring of our customers, the Bank plans to provision risks of up to 25 million euros during the 2022 financial year.

Ongoing cost reduction and optimization measures are expected to reduce administrative expenses to just under 130 million euros in fiscal 2022. IKB expects a cost-income ratio lower than the level of the previous year . According to the Bank, it will be necessary to further improve cost efficiency in the medium term to further reduce administrative expenses to around €105 million in order to achieve a target cost/income ratio of around 40%.

In addition, IKB plans to reduce market price risks. This will help strengthen the Bank’s profitability and improve its risk bearing capacity. During the 2022 financial year, the Bank anticipates exceptional effects of these adjustments resulting from the related recognition of unrealized losses through the income statement. However, this effect will be offset by a partial release of the fund’s reserves for general banking risks. The net impact of these exceptional effects on the Bank’s results will be neutral.

The Bank expects a net profit before tax of around 85 million euros for the IKB group (IKB AG: around 60 million euros) and an ROE of around 9% after tax for the financial year 2022. In the medium term , it aims for an ROE of more than 10%.
IKB expects a CET 1 ratio of around 13% for the Group (IKB AG: more than 13.5%) as of December 31, 2022. The decrease from the current year-end level will be mainly attributable to the measures above-mentioned extraordinary risk management measures as well as an increase in risk-weighted assets from anticipated new business creations. IKB considers it to be sufficiently capitalized, which also allows for changes to institution-specific regulatory capital requirements, especially since IKB has significant additional flexibility with respect to capital management options. .

Given the current market situation and risks, IKB intends not to pay dividends to its owner for the 2021 financial year. The bank aims to distribute regular dividends equivalent to 60% to 80% of the consolidated net income after tax of the Group in the medium term.

The Bank expects an LCR consistently above 100% and a leverage ratio for the IKB group of around 7% for the 2022 financial year.

Table: IKB income statement for the financial year 2021 (consolidated, according to German GAAP – HGB)

in millions of euros

Jan 1, 2021 – Dec 31 2021

Apr 1, 2020 – Dec 31 2020

Apr 1, 2019 – Mar 31, 2020

Net interest income

221

165

201

Net fee and commission income

26

20

40

Total bank product

247

186

241

Administrative expenses

-135

-104

-156

Personal expenses

-78

-65

-81

Other administrative
expenses

-56

-39

-75

Operating profit before provisions for risks

113

82

85

Provisioning net of risk

-12

-20

-30

Operating result

101

63

56

Other net income

4

1

-47

Profit before tax

104

63

9

Tax burden/income

-18

ten

-1

Net profit after tax

86

73

8

Any differences in totals are due to rounding effects.

Further details on developments in fiscal 2021 are available in the Investor Presentation at https://www.ikb.de/en/investor-relations/reports-and-presentations.

Contact:
Armin Baltzer, phone: +49 211 8221 6236, email: [email protected]
Andreas Misiek, phone: +49 211 8221 4073, email: [email protected]

IKB Deutsche Industriebank AG supports medium-sized companies with loans, capital market services and advisory services.

11.03.2022 Broadcast of a Corporate News, transmitted by the DGAP – a service of EQS Group AG.
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