At its meeting yesterday, the Supervisory Board of WestLB AG reaffirmed its support for the strategic direction agreed on August 6, 2003 for tackling the current issues facing the bank. Based on this 'three pillar model', the Managing Board will now accelerate the implementation of the necessary processes of change with the full support of the Supervisory Board.
At the same time, the Supervisory Board expects that the detailed next steps will be further developed, underpinned by quantitative assessments. In conjunction with the budget for 2004, adjusted to reflect the agreed approach for 2005, the Supervisory Board will discuss the further development of the strategy for the period after 2005 at its next meeting.
The purpose of the business model for 2005 is two-fold: First, to ensure that the bank has sufficient capital resources and is generating adequate returns to prosper as a self-standing entity in 2005 after the elimination of the state guarantees. Second, to ensure that the bank maximises business opportunities by expanding its business with medium-sized European customers and further developing its unique network of relationships with the savings banks. On the basis of close consultation with the owners, the strategic reorientation for the period after 2005 will build on this.
As part of the strategy, the bank aims to improve the efficiency, profitability and risk profile of its core international and corporate business, while using its skills in areas where it has clear competitive advantage to develop new customer offerings which will enable it to increase its share of the market in small and medium-sized businesses in Germany and Europe, public sector institutions and savings banks. The new business model will be broader, more diversified and have an inherently improved risk profile. Underpinning the new strategy is a medium-term programme whose key elements are:
- Focusing of International Business
- Exploiting Potential with the Mittelstand
- Expansion of Services for the Savings Banks
- Strengthening of the Capital Base and Further Reduction of Costs
Taken together, the bank believes the measures outlined above will enable it to achieve a tier one capital ratio of approx. 7% in 2005. In the short term, the bank expects to increase its profitability off a lower business volume.
Dr Johannes Ringel, Chairman of the Managing Board, said:
'WestLB is bank which has a strong market position as a provider of sophisticated financial services to blue chip customers in Germany, Europe and worldwide. The business model we have announced today, together with the improved risk control measures we have already embarked upon, will enable us to achieve our key target of a tier one capital ratio of 7%.'