Postbank moves over billion thresholds
For the first time, Deutsche Postbank AG moved over the threshold of EUR1 billion in terms of its pre-tax profit. Despite intensive competition in retail banking, the flat interest rate structure and ongoing jitters on the capital markets, Deutsche Postbank AG improved its pre-tax profit in 2007 by 6.7 pct year-on-year to EUR1,004 million, on an adjusted basis by as much as 9.8 pct year-on-year to EUR1,029 million.
The return on equity before taxes increased from 18.9 pct at the end of 2006 to 19.3 pct as of 31 December, 2007. The cost/income ratio of the whole bank improved to 67.2 pct (2006: 68.3 pct) and in the traditional banking business (without transaction banking) even reached 64.8pct (66.7pct). The financial market crisis originating from the US property market impacted Postbank only to a limited extent. Overall, it posted write-downs of EUR112 million. Due to a non-recurring effect resulting from the tax reform, net income increased by 25.2 pct to EUR 870 million (EUR 695 million).
Consolidated income statement
Including the gain on the disposal of the insurance holdings and despite negative non-recurring effects, total income improved year-on-year by 3.3 pct to EUR 4.25 billion.
Balance sheet-related revenues, comprising net interest income, net trading income and net income from investment securities, rose by 4.2 pct to EUR 2.82 billion.
Against the backdrop of a flat and since the summer at times inverted yield curve, net interest income increased year-on-year by a pleasing 4.0pct to EUR 2.24 billion. Despite challenging conditions on the capital market, net trading income at EUR 290 million was 9.8pct higher than the previous-year figure of EUR 264 million. Net income from investment securities was dominated by the disposal of the insurance holdings to Talanx.
In comparison to fiscal year 2006, which also included carrying amounts from the disposal of non-strategic holdings totaling EUR 84 million, at EUR 294 million it was at the level of the previous year (EUR 292 million). Net income from investment securities includes an impairment – taken on the basis of a cautious valuation approach – of EUR112 million on the holdings impacted by the subprime crisis.
Net fee and commission income was EUR 1.43 billion and thus 1.6pct up on the good previous-year figure of EUR 1.41 billion. The sales measures taken to the middle of the year to strengthen net fee and commission income are beginning to come into effect. The contributions from the securities business developed positively. As expected, growth was negatively impacted by the decline in income from the sale of postal services and "new services" in the branches. In addition, revenue from the insurance business, which were relatively high in 2006 due to a special effect with the "Riester pension", decreased in 2007.
At EUR 338 million, the allowance for losses on loans and advances was at the level of the previous year (EUR 337 million), although the number of customer loans moved up strongly by 12.8pct in the reporting year. This pleasing trend underlines the Postbank's conservative risk profile. At the same time, it also reflects the improved financial situations of companies and domestic house-holds in Germany.
Postbank was pleased by the development of administrative expenses. Against 2006, total costs increased by only 1.6pct to EUR2.86 billion. This development is all the more notable as it also includes for the first time the cost from the HypoVereinsbank payment transaction activities, as well as non-recurring expenses such as transaction costs in connection with the disposal of the insurance holdings or the costs of integrating BHW, as well as the financial burden from the VAT increase. Adjusted for these costs, administrative expenses declined. Postbank regards this a proof for its ability to imple-ment increasing volume in its customer business while maintaining stable costs.
Net other income and expenses totaled minus EUR55 million after minus EUR27 million in the previous year.
Total assets increased from EUR184.89 billion at the end of 2006 to EUR202.99 billion on 31 December, 2007.
Outlook
For 2008, Postbank is targeting return on equity before tax of over 20pct and a cost/income ratio (in the traditional banking business) below 63pct. For profit before tax, the bank retains its objective of posted a figure of EUR1,220 million. In its operating business, i.e. before non-recurring effects, It anticipates a profit before tax of between EUR1,100 million and EUR1,200 million.
By 2010, the Postbank wants to increase its profit before tax to between EUR 1,400 million and EUR 1,450 million and its profit from ordinary activities after tax to between EUR 980 million and EUR 1,015 million. It is intended to improve the cost/income ratio (in traditional banking business) to under 58pct by 2010.
