Westdeutsche ImmobilienBank AG (WestImmo) posted good results in the first half of 2010 in what continues to be a difficult general economic climate.
At 81.5 mln., the operating result (earnings components less general administrative expenses) exceeded the figure for the first half of 2009 (76.1 mln.) by 7.1%. Net interest income, which at 120.5 mln. was some 27% above the result for the same period last year (95.2 mln.), showed a particularly positive trend.
Peter Knopp, Chairman of the Managing Board of WestImmo, said: "I am satisfied with this result. It underlines the operative strength of WestImmo in client business and demonstrates that the bank is a successful business even in these difficult times and under the harsh conditions that still prevail on the capital markets. Nevertheless, WestImmo will continue to apply its very high standards for new business in the future. Quality and security go above quantity."
Pre-tax earnings came to 35.5 mln., down 19.5% on the figure for the same period last year (44.1 mln.). After eliminating taxes, consolidated net income for the year was 24.8 mln., a fall of 19.6% on the previous year (30.8 mln.). The downturn in earnings was due largely to special effects associated with the economic transfer of the private construction financing portfolio to Erste Abwicklungsanstalt (EAA). This was particularly reflected in net fee and commission income, which at 5.1 mln. was below the figure for the first half of 2009 (13.9 mln.), and the balance of other operating income and expenses (-11.8 mln. compared with -0.1 mln. in the comparable period in the previous year).
On June 30, 2010 the risk provision for credit losses was in line with projections (PY: -21.0 mln.). Net income from non-current financial assets improved on the first half of 2009 (-11.0 mln.) to -1.3 mln. The trading result stood at 4.9 mln. at the half-year mark and thus in line with projections; the figure for the previous year (11.0 mln.) had been skewed by a one-off valuation effect. The increase in general administrative expenses to 49.0 mln. (PY: 44.0 mln.) can be attributed almost entirely to one-off expenses associated with the current sale process.
The key income ratios of the bank were also distorted by the one-off expenses and the transfer of the portfolio. The return on equity employed (RoE) came to 7.2% at the halfway point in 2010 (whole of 2009: 7.9%) and the ratio of costs to income (Cost-Income Ratio, CIR) rose to 41.3% (whole of 2009: 37.7%), but still well within WestImmo's target corridor.
Private construction financing portfolio transferred to EAA The economic transfer of the private construction financing portfolio to EAA, completed in the first half of the year, was particularly significant for WestImmo. It means that WestImmo has taken a major step forward in its strategy of focusing on the commercial real estate lending business. Of the portfolio, which has a volume of some 4.2 bln., construction financing loans of around 500 mln. were transferred to EAA in a demerger. The remaining portfolio (about 3.7 bln.) is to remain with WestImmo and will be protected by a finance guarantee from EAA.
New business volumes reach 2.1 bln.
Although there are varying indications from the regions that the real economy is recovering from the crisis, the financial and real estate markets remain in a fragile state of health. While the bottom seems to have been reached or is at least in sight in some of the most important commercial real estate markets, the trend is varying by region and segment, which suggests no relaxation in the risk-conscious approach to new business.
In the first half of 2010 WestImmo committed 2.1 bln. in commercial real estate financing compared with 3.1 bln. in the same period last year. This is a satisfactory volume given the much more intense competition on the markets and the continuing difficulties in refinancing, particularly in uncovered refinancing.
Position in syndicate business strengthened
In the first half of 2010