Postbank grows further. Profit before tax rises 18.6 percent in the first nine months

Deutsche Postbank AG grew further in the first nine months. Compared with the first three quarters of 2005, its pre-tax profit climbed 18.6 percent to EUR 651 million (the comparable data for the first three quarters of 2005 are pro forma data in which BHW and the branches are included arithmetically). After adjustment for special effects, especially as a result of the integration, operating profit before tax increased in the first nine months by 31.1 percent year-on-year to EUR 720 million. The cost/income ratio improved from 75.2 percent to 70.1 percent. In the traditional banking business, i.e. excluding Transaction Banking, the ratio fell more sharply still from 74.0 percent to 68.6 percent. Return on equity before tax rose from 14.9 percent to 17.3 percent.

Total income improved further by 5.5 percent to EUR 3.0 billion. Balance-sheet related revenues – in other words the total of net interest income, net income from investment securities and net trading income – jumped 8.0 percent to EUR 2.0 billion. The growth driver here remained the net interest income which picked up pace again when compared over nine months. Supported by the expanded volume of customer loans, it increased by 9.1 percent to EUR 1.6 billion. Net income from investment securities rose by 2.2 percent to EUR 183 million and net trading income by 4.6 percent to EUR 181 million.

As expected, net fee and commission income grew only slightly in the first nine months by 1.3 percent to EUR 1.1 billion. The reason for this is the further diminishing share of paper-based payments in Transaction Banking and the focus on the sale of banking services in the branches and the fee and commission income from the rest of the services which is declining as a result. In both cases, this barely impacted profitability because the use of resources fell.

In the traditional banking business, Postbank again raised its net fee and commission income, this time by 12.5 percent to EUR 504 million.

Allowances for losses on loans and advances climbed 8.3 percent to EUR 234 million – a comparatively small increase as the credit volume grew by 13.9 percent in the same period.

Postbank is delighted with the development of its administrative expenses. Despite the integration and ongoing growth of the customer business, it succeeded in reducing its administrative expenses by EUR 34 million year-on-year or 1.6 percent to EUR 2.1 billion. The Postbank Group's strict cost culture is thus turning into a key earnings driver more and more. Cost synergies of EUR 13 million have already been generated from the integration of BHW.

At EUR 14 million, net other income and expenses were down EUR 72 million on the previous year's figure. In the year under review, they include integration costs of EUR 50 million.

Total assets amounted to EUR 183.4 billion as of September 30, 2006 and were thus hardly higher than the pro forma figure of EUR 180.3 billion at the end of 2005.

Growth in new customers and checking accounts accelerates
In the third quarter, Postbank gained 248,000 new customers. Overall, 715,000 new customers chose Postbank in the first nine months of the year. The Bonn-based bank is optimistic that it will reach its goal of 900,000 new customers overall in 2006.

The number of newly-opened checking accounts also rose in the third quarter to 136,000 – up from 98,000 in the previous quarter. Thus in the first nine months 355,000 new checking accounts were opened. Despite the integration, this is only slightly less than in the same period of the previous year (369,000). The mobile advisers also make a continuously increasing contribution to this.

Private loans boom

The new business among private customers climbed by 33 percent in the first nine months to EUR 1.0 billion. The total portfolio grew to just under EUR 2.3 billion as a result. For the fourth quarter, Postbank anticipates excellent development again based on the advance effects resulting from the run-up to the VAT increase. This, however, is likely to be followed by a slowdown in the New Year. In the medium-term, the Company sees significant potential in this product area. Motivated to no small extent by the sound sales success of its branches, it intends to expand the new business volume in 2008 by up to EUR 2 billion.

Corporate Banking grows

In Corporate Banking, profit before tax increased in comparison with the first nine months of 2005 by 14 percent to EUR 122 million. The expansion in the lending business was particularly pleasing. The number of loans for corporate customers grew by 14.7 percent year-on-year to EUR 13.2 billion as of the end of the quarter. In the lending business Postbank reacted proactively to the changing requirements of SMEs by extending its product range. Along with the investment credit product, which has already been successfully introduced, the Company also plans to offer its corporate customers the brokerage of development loans. Products for risk management, particularly interest and currency hedging instruments, are to follow. Postbank wants to intensify its existing relationships with SMEs in this way and further boost the income from Corporate Banking.

Outlook

In the fourth quarter, Postbank expects further improvement in earnings. In 2007, it will conclude its operational integration measures. Postbank is retaining its target for 2008 of achieving a return on equity of more than 20 percent before taxes and a cost/income ratio of less than 63 percent.