OLB reaps benefits of its streamlining measures starting with a strong financial performance into the year
- Oldenburg | 05. Mai 2022
Summary
- First quarter profit after tax reached EUR 40.4 million (according to IFRS projections), resulting in return on equity (RoE) after tax of 13.1 percent
- Operating income increased to EUR 133 million driven by a solid increase of the established customer business as well as an expansion of (new) growth areas
- Cost-income ratio (excluding regulatory charges) reduced to 44.5 percent, with the restructuring program starting to show full effect
May 5, 2022 – Oldenburgische Landesbank AG (“OLB”) further improved its profitability in the first quarter of 2022.1 OLB achieved a profit after tax of EUR 40.4 million, which resulted in an increased RoE after tax of 13.1 percent. OLB has made significant progress through its continued focus on cost discipline and sustainable growth, with its restructuring program starting to show full effect. Regarding the branch restructuring, OLB has already achieved the 2022 year-end target of 40 branches as of the end of March. The number of FTEs stands at 1,381 as of the end of March and is on track towards the year-end target of 1,250. In the reporting period, the cost-income ratio (excluding regulatory charges) improved significantly to 44.5 percent, compared to 55.4 percent at the end of last year. Moreover, the bank has an additional cost efficiencies program in place to ensure continuous cost management in view of current inflationary trends.
Strong financial performance with a well-balanced, streamlined business model
“Our strong first quarter results clearly underline that OLB delivers strong financial performance across all metrics. After the successful completion of our transformation, OLB is well positioned for future growth and the continued, sound development of our customer business. Moving forward, we will benefit from the restructuring efforts and a reduced cost base,” says Chairman of OLB’s Management Board Stefan Barth. “On that strong basis, we are confident that we will sustainably achieve our new mid-term ambitions.”
In the first quarter of 2022, OLB was able to further grow the private customer as well as the established corporates business. The bank also expanded the credit volume and business activities in its growth areas such as Football Financing and International Diversified Lending. The total loan volume increased by 1.2 percent to EUR 17,146 million compared to year-end 2021. The bank’s operating income grew to EUR 133 million, with net interest income (NII) and net commission income (NCI) having equally contributed to the increase.
Robust balance sheet and disciplined risk management
Due to OLB’s active balance sheet management and strong capital generation, the bank has further bolstered its solid capital position. OLB’s risk-weighted assets (RWA) decreased from EUR 9.5 billion at the end of last year to EUR 9.1 billion at the end of the first quarter 2022, mainly driven by the introduction of F-IRBA in the Corporates & Diversified Lending segment. Consequently, the common equity tier 1 (CET 1) capital ratio increased to 12.6 percent.
OLB supports its strategic growth course by actively diversifying its refinancing base over and beyond the strong customer deposit base. Most recently, the bank successfully placed another mortgage covered bond (Pfandbrief) with a total volume of EUR 350 million.
“OLB stands out in the market with a robust balance sheet which it can build on going forward. Our strong funding and capital position nurtures our growth ambitions. Over the past months, we have successfully extended our capital market presence and attracted investor interest, as evidenced by strong demand for our recently issued covered bond,” says Rainer Polster, OLB’s Chief Financial Officer.
Given the considerable uncertainty caused by macroeconomic events and despite not having any material exposure in Russia or Ukraine, OLB maintains risk provisions at a moderate and cautious level. The accumulated loan loss provision (LLP) reached EUR 6.4 million within expectations, despite the current macro-economic environment. From the macro adjustments under IFRS 9 booked in 2020 for potential consequences of the Corona crisis, the bank reallocated the amount of EUR 17.3 million to possible second-round effects that could result from Russia’s invasion of Ukraine and affect the German economy.
Outlook
Considering OLB’s continued growth path, the bank’s management team has identified new medium-term ambitions to deliver best-in-class financial performance with a cost-income ratio (excluding regulatory charges) around 40 percent and a RoE (after tax) of between 13 and 15 percent. Based on OLB’s strong financial results, the management team of OLB expects to sustain a CET 1 ratio of at least 12.25 percent, maintaining a solid buffer to OLB’s latest SREP regulatory requirement.
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