HVB Group recorded good operating performance in the fourth quarter. Net interest income increased compared to the previous quarters, reaching a level of â¬1,475 million.
The bank saw a strong increase in net commission income versus the third quarter, chalking up the best performance in fiscal 2004 for this income component, too. The trading profit also improved substantially. As a result, total operating revenues climbed to their highest level in all four quarters of fiscal 2004. The trend in administrative expenses was very satisfactory, too; they declined significantly compared to all previous quarters. The trend in loan-loss provisions was in line with expectations. Consequently, HVB Group generated by far the highest operating profit of fiscal 2004 in the fourth quarter. Its operating profit nearly doubled compared to the previous quarter.
Dieter Rampl, Board Spokesman of HVB Group, comments: 'We are very satisfied with our operating performance in the fourth quarter. It underpins the success of our ´Growing with Europe´ program. Our operating profit came close to reaching our ambitious target range for fiscal 2004 as a whole, generating a marked earnings surge compared to the previous year. This shows that we are making progress in the operating business and are thus creating the basis for a gradual increase in our capitalization to a comfortable level with the help of our own earnings. In conjunction with the shielding of the riskencumbered legacy real estate exposures, which we announced in January, I am convinced that we will continue to considerably improve our profitability in the course of fiscal 2005 and, hence, further strengthen our competitive position in Europe.'
Detailed breakdown of the results in the fourth quarter:
Net interest income â" including one-time effects of â¬49 million â" came to â¬1,475 million in the final quarter of fiscal 2004, compared to â¬1,443 million in the third quarter. The previous quarter benefited from non-recurrent effects of â¬33 million. After adjustment for these effects, net interest income increased by 1.1%. This again confirms the sustainable earnings improvement. Net commission income stood at â¬761 million, noticeably exceeding the third-quarter performance (â¬691 million). At â¬163 million, the trading profit, too, clearly exceeded the level of the previous quarter (â¬111 million). The balance of other operating income and expenses declined to â"â¬16 million versus the third quarter (â¬26 million). Compared to the previous quarter (â¬2,271 million), total operating revenues increased appreciably, by nearly 5%, to â¬2,383 million.
Administrative expenses declined considerably, by â¬121 million, to a level of â¬1,442 million (Q3: â¬1,563 million). This is not only attributable to stringent overall cost management, but also to the fact that a number of IT projects were temporarily postponed against the background of the efficiency-boosting program PRO. In addition, positive one-time effects were recorded in connection with anniversary and pension provisions. The cost-income ratio for the fourth quarter, seen in isolation, stood at 60.5%. As expected, loan-loss provisions came to â¬450 million â" a figure that was more or less in line with the level recorded in the previous quarter (â¬459 million). At â¬491 million, the operating profit increased significantly versus the previous quarter (â¬249 million), reaching the highest level of fiscal 2004 in the final quarter. In the fourth quarter, net income from investments amounted to â"â¬21 million. Expenses for the amortization of goodwill came to â¬49 million. The additions to special provisions for bad debts has burdened our income statement in 2004 by the amount of â¬2,500 million. Furthermore, we included â¬250 million addition to restructuring provisions for the efficiency program PRO. The balance of other income and expenses of -â¬95 million includes pro-rata risk sheltering for Hypo Real Estate Group as well as pro-rate absorbed losses for companies attributabl