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PRESS RELEASE: IKB Deutsche Industriebank AG: 6-Month Figures for the 2010/11 Financial Year

IKB Deutsche Industriebank AG  / Key word(s): Half Year Results 

26.11.2010 16:35
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- IFRS consolidated net loss reduced by more than 50% to EUR 233 million
- Significant reduction in provisions for possible loan losses
- Extraordinary factors with negative net effect of EUR 154 million
- Tier I ratio above 10%
- Growth in business with Mittelstand clients 

[Düsseldorf, 26 November 2010] The consolidated net loss of IKB Deutsche
Industriebank for the first half of the year declined to EUR 233 million
(previous year: consolidated net loss of EUR 475 million). 

The consolidated income statement for the first half of 2010/11 is as
follows: 

Table: IKB income statement for the first half of 2010/11
(1 April 2010 to 30 September 2010)in EUR million 

1 April 2010 to 30 Sep 2010 / 1 April 2009 to 30 Sep 2009* / Change
Net interest income 71.5 94.1 -22.6
Provisions for possible loan losses 37.7 210.0 -172.3
Net interest income after provisions for possible loan losses 33.8 -115.9
149.7
Net fee and commission income -44.5 -13.0 -31.5
Net income from financial instruments at fair value -57.8 -365.2 307.4
Net income from investment securities 37.2 12.6 24.6
Net income from investments accounted for at equity  0.0 -1.1 1.1
Administrative expenses 145.8 145.7 0.1
Personnel expenses 76.9 81.4 -4.5
Other administrative expenses 68.9 64.3 4.6
Other operating result -63.9 140.3 -204.2
Operating result -241.0 -488.0 247.0
Tax expenses/income -8.1 -13.0 4.9
Consolidated net loss -232.9 -475.0 242.1 

Some totals may be subject to discrepancies due to rounding differences.
* Figures for the previous year adjusted in line with IAS 8 (see annual
report 2009/10 and notes of the 6-month report 2010/11) 

Net interest income amounted to EUR 72 million, down EUR 23 million on the
previous year. This was primarily due to the reduction in market price and
volatility risks, which resulted in lower earnings contributions from
proprietary trading, as well as the reduction in interest-bearing lending
business and portfolio investments required by the EU as part of the Bank's
restructuring. 

Provisions for possible loan losses amounted to EUR 38 million, down around
80% on the prior-year figure of EUR 210 million. This decrease of EUR 172
million is primarily attributable to the tangible improvement in the
economic situation. Provisions for possible loan losses include an expense
of EUR 9 million from asset disposal largely aimed at fulfilling the EU
requirements. 

At EUR -45 million, net fee and commission income was EUR 32 million lower
than in the previous year. This was primarily due to the guarantee
commission payable to SoFFin in the amount of EUR 64 million (previous
year: EUR 27 million). Adjusted for guarantee commission, net fee and
commission income for the first half of 2010/11 amounted to EUR 19 million,
up EUR 5 million on the adjusted prior-year figure. 

Net income from financial instruments at fair value amounted to
EUR -58 million, up EUR 307 million on the previous year. In particular,
this development reflects the remeasurement effects arising from the
European government debt crisis, which led to the expansion of credit
spreads and a reduction in long-term interest rates. Accordingly, net
income from financial instruments at fair value contains negative earnings
contributions primarily resulting from the remeasurement of long-term
investments, liabilities and derivatives in the amount of EUR -255 million.
Conversely, the expansion of the IKB spread led to remeasurement gains on
certain of IKB's liabilities in the amount of EUR 189 million. Portfolio
investments also saw positive changes in fair value (and earnings
contributions) totalling EUR 7 million. 

Net income from investment securities improved by EUR 25 million
year-on-year to EUR 37 million. This development is almost entirely
attributable to extraordinary factors such as positive changes in fair
value and disposals, particularly of portfolio investments and long-term
investments. 

Administrative expenses remained at the previous year's level of EUR 146
million. Personnel expenses declined by EUR 5 million as a result of the
reduction in the average number of employees of 141 to 1,529. The EUR 5
million rise in other administrative expenses is due in particular to the
Bank's re-alignment as well as process optimisation costs. 

Other operating result deteriorated by EUR 204 million year-on-year to
EUR -64 million. The main reason for this development was the remeasurement
gain of EUR 132 million in the previous year due to the debt waiver by LSF6
Europe in exchange for a compensation agreement and the lower present
values resulting from measurement in accordance with IAS 39 AG8
(extraordinary factor). 

At EUR -241 million, the operating result was up EUR 247 million
year-on-year. 

After a tax result of EUR 8 million, the unadjusted consolidated net loss
for the period amounted to EUR 233 million, EUR 242 million less than the
prior-year figure of EUR 475 million. The adjusted consolidated net loss
after extraordinary factors improved significantly year-on-year to EUR 79
million (previous year: EUR 214 million). 

Earnings per share amounted to EUR -0.37 (previous year: EUR -0.78). 

Total assets amounted to EUR 35.8 billion as at 30 September 2010, almost
unchanged as against the figure on 31 March 2010 (EUR 35.7 billion).
The Tier I ratio of the IKB Group amounted to 10.2% as at 30 September
2010, while the overall capital ratio amounted to 14.7%. 

Outlook 

Lone Star, IKB's largest shareholder with a stake of 91.5%, announced in
October 2010 that it was looking for a strategic partner for IKB to press
ahead with the development of the Bank now that the restructuring is
largely complete. The Board of Managing Directors of IKB is providing
constructive support for this project. A long-term partner and shareholder
can contribute to and benefit from a more rapid implementation and
continued development of IKB's business model. 

IKB's customer relationships have been largely maintained and expanded in
spite of the crisis. The fundamental changes to the business model are now
complete following the expansion of lending activities to include capital
market and advisory services (including M&A, restructuring consultancy,
risk management and placements). With this broader product range, IKB can
offer its customers comprehensive and individually tailored financing
solutions. 

Due to restructuring costs, however, it will take some time before the
reorientation is also reflected positively in the income statement. In
addition, although the financial and economic crisis is subsiding,
uncertainty remains due to the government debt crisis in Euro member
states, economic development in the USA and the possibility of an economic
slowdown in Germany, all of which could lead to earnings volatility in
IKB's business development. There is also a degree of uncertainty
concerning the large number of proposals for the re-regulation of the
German banking sector. 

A crucial factor for the continuation of IKB as a going concern will be the
extent to which the new business model - especially the expansion of
business with derivatives, customer-oriented capital market products and
consultancy services - gradually leads to success. To date, the development
of new business and the growth in net fee and commission income from
customer lending and derivatives business has been in line with forecasts.
New lending business increased to EUR 1.2 billion in the first half of
2010/11 (previous year: EUR 1.0 billion), while the new business margin
rose to 2.29% (1.28%). 

The successful implementation of the business model includes borrowing
sufficient funds for the planned business activities. Liquidity is
currently assured for the next 18 months even without further measures. Due
to the change in its business model, the Bank's liquidity requirements will
already be lower than at present when the SoFFin guarantees start to expire
in 2012. The prospects for asset-based, secured refinancing on the capital
markets have also improved over recent months, while brisk customer deposit
business will make a further contribution to stabilisation. 

IKB's ability to continue as a going concern also depends on compliance
with the requirements stipulated 

- by SoFFin for the provision of guarantees,
- by the European Commission for the approval of state aid, and
- by the Deposit Protection Fund of the private banks. 

The Board of Managing Directors expects that the EU requirements will be
met in good time, the economic conditions will be fulfilled, the new
business model will continue to be successfully implemented, refinancing
will be assured, the good economic situation in Germany will continue and
the regulatory environment will not deteriorate dramatically. 

IKB expects to have a different earnings structure in future, with a lower
over-all level of income as in the financial years prior to 2007/08
accompanied by reduced risk. The limitations and burdens imposed by the
fulfilment of the EU requirements (until September 2011) will be gradually
removed. With a solid, high-margin lending business, reduced provisions for
possible loan losses, rising net fee and commission income thanks to the
expanded service range and lower fair value fluctuations in investment
securities, the Board of Managing Directors of IKB expects to return to
operating profitability in the medium term. 

Dr Jörg Chittka, Tel.: +49 211 8221-4349;
Dr Annette Littmann, Tel.: +49 211 8221-4745, Fax: +49 211 8221-2745,
E-mail: presse@ikb.de 

26.11.2010 Dissemination of a Corporate News, transmitted by DGAP -
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