Skandinaviska - Re BfG Bank's Results
February 17 2000 - 11:47AM
UK Regulatory
RNS Number:7807F
Skandinaviska Enskilda Banken
17 February 2000
BfG Bank AG - Press Conference 2000 on annual results
SEB:
Record results for 1999
Continued expansion as European e-bank
Asset management considerably expanded
BfG Bank:
Focus on growth areas
Asset management and Internet
Aiming at 15% return on equity
Financial statement for 1999 shows new orientation
At the press conference held by BfG Bank AG in Frankfurt on 17 February
2000 to publicise the annual results, Dr. Lars H Thunell, President and
CEO of SEB, explained the active expansion strategy pursued by the
Swedish financial concern. Dr. Thunell: said "Nineteen ninety-nine was
the year in which a number of critical steps were taken to transform SEB
from Nordic to European, from a universal bank to a Group centred around
the Internet, from being product orientated to being guided by customer
needs within two main customer groups - business-intensive private
customers and Nordic customers." Since 1997 SEB has been concentrating on
the investment market and on asset management, as well as building up its
Internet banking side. The end of 2004 is planned to see a fivefold
increase in the assets managed by the SEB Group and the number of
Internet customers is planned to grow to five million.
In the financial year just ended SEB enjoyed record results totalling
EUR 877 million (previous year: EUR 423 million). Operating results
reached EUR 597 million (previous year: EUR 272 million).
Assets under management rose by 41 per cent or EUR 21 billion to EUR 83
billion. SEB, Dr. Thunell emphasised, is top of the international league
when it comes to Internet banking. Even now 25 percent of all SEB clients
in Sweden are using the Internet. This high and rising number of Internet
clients -currently 380,000 in Sweden and a further 35,000 in Estonia - is
already having definite effects on client business. The number of client
visits to branches is declining steeply; against this background, SEB has
announced the closure of some 50 branches in Sweden (out of a total of
260) in the first six months of 2000. The Internet, said Dr. Thunell, was
leading not just to cost savings. Internet clients make more transactions
than non-Internet clients, thus creating higher revenue. Dr. Thunell
announced a new Internet initiative for Europe this year. The new
Pan-European Internet bank will be starting up in Denmark at the end of
March, and in Germany in the third Quarter of 2000 - the latter under the
overall control of BfG Bank.
Karl-Heinz Hulsmann, Chairman of the Management Board of BfG Bank AG,
said he was satisfied with the course of business in 1999. The bank, he
said, had coped well with the strains imposed by speculation about its
future - speculation which had been going on for nearly two years. It had
been announced at the beginning of 1998 that the former majority
shareholder, Credit Lyonnaise, had to divest itself from BfG Bank in
pursuance of EU Commission rules. The purchase of BfG Bank by the Swedish
financial group SEB at the end of October 1999, Hulsmann continued, had
had a liberating effect on the bank. Both staff and clients had welcomed
the change in shareholder.
Private-client business grew again last year. Growth leaders were
investment funds and loans for building and construction. The volume of
BfG Invest's public-access funds grew by 52% to EURO 3.8 billion;
including special institutional funds, BfG Invest was managing a volume
of EUR 8 billion.
Fund assets of BfG Immolnvest reached EUR 2.0 billion. Loans for
building and construction showed an increase of 11 percent. The bank has
made a successful start with its Internet service. The number of Internet
clients rose constantly over 1999, reaching nearly 29,000 at the end of
January 2000. Last autumn Teletrust Deutschland, which includes such
famous companies as Microsoft and IBM, awarded the Bank the Innovation
Prize for early and successful implementation of the HBCI Standard. BfG
Bank was the first cross-regional bank to have introduced this security
standard.
Institutional business also showed satisfactory growth. Investment volume
grew from EUR 8.8 billion to EURO 9.2 billion and the volume of managed
depositories from EUR 12.8 billion to EUR 13.9 billion.
Corporate-client business remained difficult, against a background of low
margins and continuing high risks. The bank divested itself of any
further commitments in 1999. Loan volume in this sector shrank by EUR
1.2 billion to EUR 3.1 billion. A conservative risk policy was also
maintained for real-estate business. This sector showed moderate growth
in loan volume from EUR 0.3 billion to EUR 4.5 billion.
The repositioning of BfG Bank means that asset management and Internet
banking are undergoing targeted development in close co-operation with
SEB. Corporate-client business will be oriented still further towards
clients with a house-bank function. Considerable cost savings -
especially in the back-office area and in central functions - will be
achieved by process optimisation, by exploiting new technology and by
using IT, as well as through integration into SEB activities.
Lars Lundquist, Deputy Chairman of BfG Bank management Board, introduced
the annual financial statement for 1999. This has been heavily influenced
by the bank's continuing strategic re-orientation. In 1999 the Group
balance-sheet total rose by EUR 1.7 billion to EUR 44.2 billion. Client
receivables grew by 3.2 percent to EUR 25.7 billion and total client
liabilities by 9.2 percent to EUR 32.0 billion. This growth was due in
particular to the dynamic expansion of BfG Hypothekenbank AG.
Interest surplus fell slightly in comparison with the previous year to
EUR 581 million (previous year: EUR 601 million). The main reasons for
this were pressure an margins and cessation of revenue from the
subsidiary WTB, which was sold at the end of 1998. The satisfactory rise
in commission surplus of 12.5 percent to EUR 180 million resulted from
considerable improvement in securities transactions.
Trading profit is 51.7 percent higher than the previous year, standing at
EUR 44 million. The rise in administration costs of 7.4 percent is due
to higher staff expenditure and to project costs, particularly for the
Y2K changeover- The balance for other operating revenue and expenditure
showed a planned decline of EUR 56 million. 1998 saw increased
extraordinary revenue, resulting from the sale of two shareholdings.
Due to high provisions made in connection with the strategic
re-orientation and the restructuring measures which this has involved,
the profit and loss account shows an annual deficit of EUR 168 million;
this is compensated by withdrawals from profit reserves. Restructuring
costs amount to EUR 83 million. Further provisions, shown under Risk
Provisions and Shareholding Write Downs, amount in total to EUR 203
million.
Lars Lundquist further explained the measures being taken to raise return
on equity to 15 percent. These foresee increasing revenue by some EUR 80
-100 million, such increases to be achieved by developing asset
management and Internet banking. At the same time it is planned to
implement cost savings of EUR 80-100 million. Non-strategic divisions
will be restructured, sold or closed. In connection with this
re-orientation on the part of the Bank, Lundquist mentioned the loss of
at least 500 jobs and the closure of Deutsche Handelsbank AG of Berlin.
However, as Lundquist summed up, BfG Bank's repositioning was
concentrating on a clear growth strategy, focussing on asset management.
For BfG, a multi-channel bank, the Internet would become increasingly
important as a marketing channel.
Communication and Economic Research
Your contact officer: Heinrich Schaumburg
Telephone: +49 69 258 6400, fax: +44 69 258 6409
e-Mail: hschaum@bfg.de
Frankfurt 17 February, 2000
(Provisional figures)
Breakdown of the profit and loss account
of BfG Group
for the period January 1 to December 31, 1999
1999 1998
Changes
EUR million EUR million EUR million %
Net interest received 581 601 -20 -3.3
Net commission received 180 160 20 12.5
Profit from leasing operations 21 26 -5 -19.2
Net income from financial operations 44 29 15 51.7
Administrative expenditure 694 646 48 7.4
Balance of other operating income
and expenditure 29 85 -56 -65.9
Operating result before
provisions for risks 161 255 -94 -36.9
Provisions for risks 184 65 119 182.9
Operating result -23 190 -213 -
Depreciation on investments in
subsidiaries and associated companies -55 3 -58 -
Extraordinary items -85 -7 -78 -
Taxes -5 -2 -3 -
Net loss for the year
(previous year: net profit) -168 184 -352 -
(Provisional figures)
Balance sheet of BfG Group
as at December 31, 1999
1999 1998
Changes
EUR million EUR million EUR million %
Cash reserves 370 321 49 15.3
Due from credit institutions 11,822 11,602 220 1.9
Due from customers 25,713 24,916 797 3.2
Securities
fixed-interest 5,455 4,698 757 16.1
non-fixed-interest 109 133 -24 -18.0
Fixed assets 444 576 -132 -22.9
Other assets 316 304 12 3.9
Total assets 44,229 42,550 1,679 3.9
Due to credit institutions 9,106 9,990 -884 -8.8
Due to customers 19,378 19,144 234 1.2
Certificated liabilities 12,631 10,167 2,464 24.2
Contingency reserves 693 597 96 16.1
Subordinated liabilities
and participatory capital 662 606 56 9.2
Funds for general risks
in banking 131 131 0 0
Shareholders' equity 1,302 1,491 -189 -12.7
Other liabilities 326 424 -98 -23.1
Total assets 44,229 42,550 1,679 3.9
ANALYSIS OF PROFIT AND LOSS ACCOUNTS OF BfG GROUP 1999
EUR million
"Normal" operating profit 61
Brady Bonds income +62
Provision for Holzmann exposure -23
Operating Profit 100
One-offs and restructuring costs -152
Reserve allocations -111
Taxes -5
Net result 1999 -168
END
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