HVB Group has returned to operational profit in the first quarter, buoyed by a decline in administrative costs and cuts in provisions for bad loans. But Germanyôs second largest bank still recorded a red figure below the line, booking losses of â⬠77m after tax. Pre-tax profits stood at â⬠24m, sligthly below analystsô expectations.
Dieter Rampl, chief executive, was confident that the operational turnaround was taking hold. He said: 'We are cautiously optimistic about the year as whole.'
The bank reaffirmed its guidance to post pre-tax profits of â⬠300 m to â⬠600 m for the full year. HVB cut provisions for bad loans and advances by â⬠187 m or 19.7 per cent compared with last year. It still expects to record total risk provisions of just over â⬠3 bn for the full year.
As part of the restructuring program, administrative costs cut be cut by 12.2 per cent, leading to an improvement in the cost-income ratio to 66 per cent from 69.1 per cent at year-end 2002. HVB is also planning to spin off its loss-making commercial real estate subsidiary in the fourth quarter.
HVB Real Estate Group, which contributed a loss of â⬠45 m to this quarter, should reduce the bankôs risk assets by about â⬠57 m alone. The bank said it had already reduced risk assets by â⬠9 bn in the first quarter and was aiming to reduce the total by â⬠100 bn by year end, including the spin-off of real estate.
The group also said it was planning to execute an IPO of up to 25 per cent if its holding in Bank Austria Creditanstalt via a capital increase aimed at bolstering the groupôs equity base. HVB is Europeôs biggest corporate lender and has been heavily exposed to the malaise in the German economy.
HVB shares, which have fallen by 65 per cent over the year, fell another 5 per cent to ââ¬11.61 in mid-morning trading in Frankfurt.
Source: Financial Times