Archive 2006 Press-/Ad-hoc Publications

DEPFA BANK with record quarterly result, strong revenue growth - Net profit of € 134 m in Q1 2006; RoE of 23% after tax

Press and Investor Relations Release

Dublin/Frankfurt, 28 April 2006.

DEPFA BANK plc today released its first quarter 2006 results. With a net profit of € 134 m (up 13% year-on-year) DEPFA achieved its best ever quarterly result. This corresponds to a return on equity after tax of 23% (pretax: 31%). The good start into the current financial year was sparked by strong client business activity across all regions and products. DEPFA BANK will continue to pursue its twin strategic objectives in 2006: expanding into carefully selected regions whilst building the product range with a particular focus on its clients’ needs. The results of the first quarter 2006 are already demonstrating a clear shift towards client driven revenues. Whereas Budget Finance, Infrastructure Finance and Client Product Services contributed to 59% of total operating income in 2005, this portion went up to 79% in Q1 2006.

The net profit in the first quarter was achieved largely on the back of a significant increase in operating income, which rose 24%. Net interest income fell modestly by 3% to € 107 m, due to lower contribution from Global Markets activities. Net fee and commission income, whose scope has been narrowed down considerably under IFRS compared to US-GAAP, rose slightly y-o-y to € 5 m and relate principally to income from liquidity facilities in the US.

The trading result of € 62 m, is up 38% y-o-y. Total expenditure rose by 9% to € 58 m due primarily to the higher costs of a bigger workforce that has grown more than 20% in the past year. The cost-income ratio fell to 24% from 27% in Q1 2005. Profit before taxes totalled € 186 m, an increase of 29% y-o-y.

On 21 April Paul Leatherdale was appointed to the Executive Committee. The appointment serves as recognition of his successful track-record in positioning DEPFA BANK as a leading provider of infrastructure finance. It also demonstrates the growing importance of this business segment in DEPFA´s drive to be the leading provider of all the financial needs of public sector authorities. Since joining DEPFA in 1999, Paul Leatherdale has successfully spearheaded DEPFA BANK’s move into off-budget infrastructure financing and he has, in addition to the Dublin Head Office, built up specialist teams in eight of DEPFA BANK´s offices worldwide that are in the forefront of developing infrastructure financing products in their respective local markets.

Company profile:
DEPFA BANK plc is a leading provider of financial services to public sector clients worldwide. It is a Dublin-based public limited company, incorporated under Irish law, with a network of subsidiaries and branch offices across Europe, as well as in the US, Japan and Hong Kong. DEPFA’s products and services cover the entire range of the public sector’s financing needs whether they be related to budget financing or funding of public infrastructure projects, advising on the rating process associated with the privatisation of public services, debt restructuring, supporting bond placements or extending credit lines.

WKN:                       765818 / ISIN: IE 0072559994
Exchange listing:     Frankfurt (MDAX)
Quote symbols:       DEPF.DE (REUTERS), DEP GR (Bloomberg)

 

Contacts Corporate Communications:

Managing Director
Hanno Strube
Phone: +49 69 92882-271
Hanno.Strube@depfa.com

Investor Relations
Marc Towner
Phone: +353 1 792-2084
Marc.Towner@depfa.com

Media Relations
Henrik Hannemann
Phone: +49 69 92882-275
Henrik.Hannemann@depfa.com

 

 

Segment Reporting

The Budget Finance segment comprises lending activities to public sector authorities. Operating income from this area is derived from a high grade portfolio of sovereign and sub-sovereign bonds and loans that are insulated from interest rate risk. Net interest income amounted to € 86 m in the first quarter, a 21% rise y-o-y. Non-interest revenues increased to € 69 m, as the bank optimised the return from its vast portfolio of assets. New commitments amounted to € 13 bn in the first quarter, and the public finance volume (drawn and undrawn) amounted to € 201 bn at quarter end. DEPFA has been able to tap into continued strong appetite for borrowing in its core European market. The fastest growth in the budget financing activities continues to be in the United States and in the space of just over two years its share of the Group’s total financing volume has risen to 15%. Investments in a variety of new product areas are also providing an additional route into lending opportunities with existing and new clients. Profit before taxes in the Budget Finance segment totalled € 131 m at the end of the first quarter, up 56% y-o-y.

	Q1 2006 €m	Q1 2005 €m	Variance €m	Variance %
Net Interest Income	86	71	15	21%
Non Interest Revenues	69	35	34	97%
Net operating income	155	106	49	46%
Operating expenses	-24	-22	-2	9%
Profit before income tax	131	84	47	56%
Balance Sheet:
Financing volume (on-balance sheet)	166,913	144,763	22,150	15%
Financing volume (off-balance sheet)	21,094	13,042	8,052	62%
Average Equity	1,326	994	332	33%
Ratios:
Cost Income Ratio	15%	21%
RoE (pre tax)	40%	34%

 

Infrastructure Finance comprises the financing of infrastructure projects, in particular involving arrangements between the public and private sector. Together with budget financing infrastructure lending contributes to the sizeable block of locked-in revenues of the bank. After a necessary build-up phase revenues in this segment are beginning to reflect greater success in securing arranger mandates. Operating income amounted to € 8 m in the first quarter 2006, up 33% y-o-y. The volume of commitments reached € 3.4 bn, but more importantly, given that the bank sells down a significant portion of business it originates, DEPFA closed 6 transactions in the first quarter, which compares well against 21 in 2005. The most important area of growth also for this segment is North America. A notable transaction that was closed in the first quarter was for the ‘Golden Ears’ Bridge project in Vancouver, Canada with a value of CAD 1.1 bn in which DEPFA acted as joint lead arranger. This is the biggest green-field PPP project in Canada to date. Profit before taxes in the Infrastructure Finance segment totalled € 4 m.

	Q1 2006 €m	Q1 2005 €m	Variance €m
Net Interest Income	6	5	1
Non Interest Revenues	2	1	1
Net operating income	8	6	2
Operating expenses	-4	-3	-1
Profit before income tax	4	3	1
Balance Sheet:
Financing volume (on-balance sheet)	1,986	1,660	326
Financing volume (off-balance sheet)	1,414	741	673
Average Equity	138	109	29
Ratios:
Cost Income Ratio	50%	50%
RoE (pre tax)	12%	11%

 

Client Product Services (CPS) encompasses products and structured transactions that provide an added value for the client. In particular, the bank has developed competencies in derivative products, structured transactions, securitisation and advisory, creating a much wider net from which to capture ancillary business that flows from the bank’s lending transactions as well as generating completely new opportunities. The first quarter marked an important breakthrough in this segment’s profitability; operating income amounted to € 25 m, representing a significant improvement against the previous quarter Q4 2005 (€ 8 m). All the individual businesses performed well. The bank’s interest rate specialists have teamed up with the lending side to arrange a number of deal-driven as well as stand-alone swap transactions for clients. Contributions from products that are at an earlier stage in their development such as the securitisation of receivables, the structuring of Collateralised Debt Obligations (CDO) and the Guaranteed Investment Contract (GIC) business have been encouraging. Profit before taxes in the Client Product Services segment totalled € 19 m.

	Q1 2006 €m	Q1 2005 €m	Variance €m
Net Interest Income	-2	-	-2
Non Interest Revenues	27	4	23
Net operating income	25	4	21
Operating expenses	-6	-3	-3
Profit before income tax	19	1	18
Balance Sheet:
Financing volume (on-balance sheet)	-	-
Financing volume (off-balance sheet)	-	-
Average Equity	22	9	13
Ratios:
Cost Income Ratio	24%	75%

 

The Global Markets segment consists of market activities in which a portion of the public sector assets are deployed with a view to taking advantage of movements in interest rates and credit spreads. In addition, this segment includes bond trading and Credit Default Swap activities based on the bank’s insights as a specialist lender in the sovereign and sub-sovereign sector. As anticipated, operating income declined in the first quarter, revenues went down by 36% y-o-y to € 48 m. The reason for the clear fall in revenues in the first quarter compared to the average quarterly level in 2005 was due to a changed market environment that has seen interest rates rising. Revenues have in the past two years been skewed towards asset sales due to low interest rate and credit spread levels, allowing DEPFA to make significant profits from gains in valuation of assets, which in turn has helped the bank strengthen its equity base. Profit before taxes in the Global Markets segment totalled € 40 m.

	Q1 2006 €m	Q1 2005 €m	Variance €m	Variance %
Net Interest Income	22	32	-10	-31%
Non Interest Revenues	26	43	-17	-40%
Net operating income	48	75	-27	-36%
Operating expenses	-8	-10	2	-20%
Profit before income tax	40	65	-25	-38%
Balance Sheet:
Financing volume (on-balance sheet)	11,248	8,911	2,337	26%
Financing volume (off-balance sheet)	-	-
Average Equity	768	453	315	70%
Ratios:
Cost Income Ratio	17%	13%
RoE (pre tax)	21%	57%

 

Besides consolidation items the Corporate Centre of DEPFA contains overhead costs, project costs as well as the residual property portfolio of the Pfandbriefbank. The segment recorded a deficit of € 8 m before taxes (vs. € -9 m in Q1 2005).

	Q1 2006 €m	Q1 2005 €m	Variance €m	Variance %
Net Interest Income	-5	2	-7
Non Interest Revenues	13	4	9	225%
Net operating income	8	6	2	33%
Operating expenses	-16	-15	-1	7%
Profit before income tax	-8	-9	1	-11%
Balance Sheet:
Financing volume (on-balance sheet)	5,252	8,690	-3,438	-40%
Financing volume (off-balance sheet)	-	-
Average Equity	115	366	-251	-69%

 

 

DEPFA BANK plc: group figures first quarter 2006 according to IFRS

Earnings	Q1 2006 € m	Q1 2005 € m	Change
Net interest income	107	110	-2.7%
Net fee and commission income	5	4	25.0%
Net trading income	62	45	37.8%
Gains less losses from financial assets	70	35	100.0%
Other operating income	-	3
Total operating income	244	197	23.9%
Operating expenses	-58	-53	9.4%
of which personnel expenditure	-37	-36	2.8%
of which other administrative expenditure	-18	-15	20.0%
of which depreciation and amortisation	-2	-2
of which other expenditure	-1	-
Profit before taxation	186	144	29.2%
Taxation	-52	-25	108.0%
Profit for the quarter	134	119	12.6%
Key ratios	Q1 2006	Q1 2005
Cost/Income ratio	23.8%	26.9%
Earnings per share accord. to IFRS in €	0.39	0.35
RoE after taxes	22.6%	24.7%
Key balance sheet items	31 Mar 2006	31 Dec 2005
Public Finance Volume    of which drawn (incl. public sector related)    of which undrawn	205,677 183,169 22,508	202,970 181,499 21,471	1.3% 0.9% 4.8%
Shareholders´ Capital	2,433	2,304	5.6%
Total assets	221,613	228,630	-3.1%

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