Helaba Defies Market Turbulence - Operating Result Up After the First Nine Months (1)

FRANKFURT, Germany, November 1 /PRNewswire/ --

-- Cross-reference: Results of Operations are available at

http://www.presseportal.de/dokumente

-- New business grows by almost 20 %

-- Annual results expected to beat last year

-- No exposures in the sub-prime sector

Provisional data at 30 September 2007 gives the Helaba Group an operating result before risk provisioning and valuation adjustments of EUR329.2 m, which represents an increase of 0.4 % over the same period last year. The operating result after risk provisioning and valuation adjustments stands at EUR274.1 m, which is EUR5 m or 1.9 % up on last year's figure. Dr. Günther Merl, Chairman of the Board of Managing Directors, believes the institution is still firmly on track: "Operating business remains most lively despite the turbulence in the markets, and growth in medium- and long-term new business is running at just short of 20 %, which is very much in line with our ambitious annual plan. We incorporated the spread-related valuation adjustments for securities holdings fully into our results figures on 30 September 2007, and I remain optimistic that come the end of the year, our operating result will top even last year's impressive performance."

The Helaba Group, as was explained in the half-yearly financial report, has absolutely no on- or off-balance-sheet exposures linked to the sub-prime segment of the US mortgage market. The Helaba Group's operational and structural liquidity is secure thanks to its long-term liquidity-building program and consistently rigorous risk management.

The prevailing market conditions influenced the various key earnings components as follows: net interest income, the most important source of earnings, rose by 5.6 % period on period to EUR698.9 m despite the higher liquidity costs applying since late summer; and net commission income increased by 2.1 % to EUR166.3 m.

Net income from financial transactions dropped by EUR61.5 m to -EUR7.8 m as compared with the same period last year. The corresponding figure at the end of the second quarter of 2007 was still EUR48.6 m. Results from trading operations remain positive, with the negative swing being attributable solely to spread-related valuation adjustments affecting the securities portfolio held in the trading book. Helaba holds securities worth around EUR43 bn in the trading book, which is used chiefly in liquidity management to provide collateral for obtaining liquidity through repo and collateral loan transactions in the interbank market and with central banks. The valuation losses reported on the balance sheet date will be recuperated economically when spreads recover and at the latest on maturity of the securities. The positive effects of October's market recovery have already begun to make their mark.

The balance of other operating expenses and income rose to EUR160 m, in part as a result of the consolidation of Hannover Leasing. General administrative expenses rose by 10.1 % to EUR787 m for the same reason, and would actually have fallen without the Hannover Leasing effect.

The risk provisioning and valuation result remains largely unchanged from last year at EUR55.1 m. This position has been affected not only by a reduced provision for lending risks, but also by the valuation result for securities held in the liquidity reserve. Helaba, as Dr. Merl is keen to make clear, intends to continue applying the valuation at market price principle consistently: "We have not made any reallocations to fixed assets or 'held to maturity' positions either, and have incorporated the full valuation adjustment required on the balance sheet date." Group-wide, the valuation losses across all securities holdings amount to a total of EUR87.7 m. The Group's provisions in accordance with section 340f HGB have been augmented again.

The Helaba Group reported a business volume of EUR251.8 bn at 30 September 2007. This equates to a gain of EUR11.8 bn or 4.9 % as compared with year-end 2006. The balance sheet total shows an increase of 4 % to EUR174.4 bn. Helaba has been reducing loans and advances to banks for some time, and the recent turbulence in the markets has only accelerated this trend. Overall, loans and advances to banks have fallen by 24.5 % to EUR21 bn since the start of the year, but loans and advances to customers, boosted in part by rapidly expanding new business, have risen by 6 % to EUR82.5 bn over the same period. The 14.9 % rise in the securities and shares portfolio, which is now worth EUR60.8 bn, reflects the Bank's policy, in line with its long-term liquidity management program, of actively exploiting available market opportunities. The year has offered particularly attractive margins, especially in the third quarter, and the Bank has taken advantage of these to increase its holdings.

Outlook: operating result before risk provisioning and valuation adjustments above the previous year's level

Helaba doubled its operating result in the years 2004 to 2006, though it would be unrealistic to expect such rapid growth to persist through 2007. "Provided the market does not have to cope with any further setbacks in the final quarter, we expect the Group's operating result before risk provisioning and valuation adjustments for the year as a whole to exceed the previous year's level. The development of results in October gives cause for optimism," Dr. Merl confirms.

    
    Results of operations, Helaba Group, to 30 September 2007
                             01.01.2007 -    01.01.2006 -         Change
                               30.09.2007      30.09.2006
                                   in EUR          in EUR    in EUR     in %
                                  million         million   million
    1.Net interest income(1)        698.9           662.0      36.9    5.6
    2.Net commission income         166.3           162.9       3.4    2.1
    3.Net income from                
      financial transactions         -7.8            53.7     -61.5  <-100
    4.Result from real      
      estate business                98.8           103.5      -4.7   -4.5
  
    5.Other operating        
      surplus                       160.0            60.7      99.3   >100
    6.Income from operations      1,116.2         1,042.8      73.4    7.0
    7.General administrative
      expenses                     -787.0          -714.8     -72.2   10.1
    8.Operating result      
      before risk
      provisioning/valuation
      adjustments                   329.2           328.0       1.2    0.4
    9.Risk                  
      provisioning/valuation
      result                        -55.1           -58.9       3.8   -6.5
    10.Operating result after
       risk
       provisioning/valuation
       adjustments                  274.1           269.1       5.0    1.9  

    (1) The return paid on capital contributions by silent partners
    (EUR70.7 m at 30 September 2007) is reported as a partial appropriation
    of profit

    
    Financial ratios
                          01.01.2007 - 30.09.2007    01.01.2006 - 30.09.2006
                                    in %                       in %
    Cost/income ratio             70.5                       68.1
    Return on equity
    (before taxes)                13.4                       19.1
    Total ratio(2)                12.0                       11.2
    (1) The return paid on capital contributions by silent partners is
    reported as a partial appropriation of profit
    (2) In accordance with the Solvency Directive; aggregated capital ratio
    in accordance with the German Banking Act (KWG) in the previous year

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