Norddeutsche Landesbank Girozentrale’s maritime portfolio is no longer a threat to Germany’s Federal State Bank, as its decline is proceeding as planned despite the COVID-19 pandemic, CEO Thomas Bürkle said on March 25.
NordLB’s performance in 2020 was solid despite the impact of the pandemic, with all business segments recording operating profit, although slightly below initial expectations, Bürkle told reporters during a presentation of the annual results.
The bank has switched to a full year consolidated income of 25 million euros compared to a loss of 103 million euros in 2019, mainly due to lower costs and improvement in net interest income and income on financial assets.
The old maritime loans, most of them non-performing, have led NordLB on the verge of collapse two years ago as its loan loss provisions skyrocketed, pushing the group to a loss of 2.35 billion euros and sliding its core capital ratio below regulatory minimums. The bank was eventually recapitalized by its owners – the states of Lower Saxony, Saxony-Anhalt and several savings bank associations – and a restructuring was initiated to help it exit shipping, downsizing. and diversify its business model.
Summary of the expedition book
Since 2018, NordLB has succeeded in reducing its transport exposure by more than 8 billion euros thanks mainly to significant sales of non-performing loans. In 2020, the bank had 2.1 billion euros in maritime loans on its books, of which 900 million euros were non-performing.
The market volatility triggered by the pandemic has been a blessing in disguise for NordLB as it has helped the bank shrink its shipping portfolio at a rapid pace and at a good price, Chief Risk Officer Christoph Dieng said during the presentation. This trend continued in the first quarter of 2021.
The bank will continue to reduce the shipping portfolio over the next few years and aims to get rid of the remaining 900 million euros in nonperforming loans by the end of 2021, Dieng said. The nearly halving of the shipping portfolio reduced the ratio of non-performing loans to the group’s total loans to 1.3% in 2020, from 2% in 2019, he said.
If we exclude the 900 million euros of maritime NPL remaining, the ratio of NPL 2020 would be 0.8%, Dieng noted.
NordLB is closely monitoring its aircraft portfolio as the 50% to 80% drop in air traffic amid the pandemic makes it the area most exposed to COVID-19, said Dieng. The aircraft portfolio represents 255 million euros out of the 426 million euros of risk provisions set up by the group in 2020.
The aircraft portfolio was reduced from around € 1 billion to € 3.7 billion during the year 2020, but there are no plans to reduce it further in 2021, Dieng said. He is Importantly, 55% of the portfolio is backed by state guarantees and securitizations, leaving around 1.7 billion euros of unsecured assets in this part of the business, he said. declared.
NordLB is on track to meet its 2024 restructuring targets and reduce total assets to € 110 billion and costs to € 638 million, said Bürkle. From a current standpoint, there is no reason to believe the bank would fail to do so, he said.
The planned downsizing, which will eliminate nearly half of the group’s existing positions by 2024, is also on track. All measures are on a voluntary basis and are already contractually agreed upon, the CEO said.
The bank has got off to a good start in 2021 and is satisfied with the current level of new business volume, said Bürkle. However, given the uncertainty that remains over the duration and total impact of the pandemic, it is too early to make projections for 2021, he said. Although the 2021 risk provisions are expected to remain below the 2020 level, they will remain large, Dieng said.