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 GermanyÃÂ´s second largest bank still recorded a red figure below the line, booking losses of Ã¢âÂ¬ 77m after tax. Pre-tax profits stood at Ã¢âÂ¬ 24m, sligthly below analystsÃÂ´ 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 Ã¢âÂ¬ 300 m to Ã¢âÂ¬ 600 m for the full year. HVB cut provisions for bad loans and advances by Ã¢âÂ¬ 187 m or 19.7 per cent compared with last year. It still expects to record total risk provisions of just over Ã¢âÂ¬ 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 Ã¢âÂ¬ 45 m to this quarter, should reduce the bankÃÂ´s risk assets by about Ã¢âÂ¬ 57 m alone. The bank said it had already reduced risk assets by Ã¢âÂ¬ 9 bn in the first quarter and was aiming to reduce the total by Ã¢âÂ¬ 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 groupÃÂ´s equity base. HVB is EuropeÃÂ´s 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 Ã¢âÂ¬11.61 in mid-morning trading in Frankfurt.
Source: Financial Times