OLB increases pre-tax profit to 69.1 million euros
- Oldenburg, 27. August 2021
- Operating income expanded
- Cost-income ratio improved
- Focus on increasing profitability
- Outlook: Stable development and consistent transformation
Oldenburg, August 27th, 2021 – Oldenburgische Landesbank AG (OLB) significantly expanded its income and further improved its profitability in the first half of 2021. The operating result as at 30 June 2021 grew by 14.3 percent to EUR 81.1 million (previous year: EUR 71.0 million). The bank increased its profit before taxes by 23.0 per cent to EUR 69.1 million compared to the previous year (previous year: EUR 56.2 million).
The cost-income ratio was improved to 65.0 percent (previous year: 69.3 percent) and the return on equity after taxes increased to 7.6 percent (previous year: 6.5 percent), which already visibly expresses the effects of OLB's transformation to date. "We will continue to work consistently on exploiting all the potential available in the Bank. We want to further increase our profitability, achieve our return targets as quickly as possible and thus strengthen OLB's future viability," says Stefan Barth, who will take over as Chairman of the OLB Board of Managing Directors on September 1st, 2021.
The multi-channel offering was successfully continued and expanded. Not least during the ongoing coronavirus pandemic, OLB customers were able to receive competent advice, conclude products or access services as needed via all digital and personal contact channels.
Successful customer business
The success in customer business in the year to date was based on strong activity in all business segments. Demand for private mortgage financing was particularly brisk. By mid-year, OLB had concluded new mortgage loans totaling EUR 655.4 million (previous year: EUR 539.0 million) with 2,770 customers (previous year: 2,439). With a portfolio volume of construction financing of EUR 6.3 billion as at 30 June 2021 - an increase of around 9 percent compared to the previous year (EUR 5.8 billion) - OLB was once again the strong financing partner for the acquisition of residential property. The portfolio volume of instalment loans rose by 13.8 percent to around EUR 280 million (previous year: EUR 246 million). Business with commercial customers also recorded sustained demand. Loans granted to medium-sized corporate and business customers rose in the first half of the year by around EUR 230 million to a portfolio volume of more than EUR 5.8 billion. Overall, OLB expanded its customer lending volume to EUR 16.1 billion (31 December 2020: EUR 15.5 billion).
Customer deposits remained at a high level of EUR 13.1 billion (31 December 2020: EUR 13.0 billion).
Operating income increased - stable cost and risk management
Net interest income increased to EUR 178.6 million (previous year: EUR 169.2 million). Interest income from the lending business declined slightly despite the increased lending volume. The main reason for this was that expiring higher-interest business was replaced by lower-interest new business due to the persistently low level of market interest rates. OLB compensated for this trend by sustainably reducing refinancing costs (reduced interest expense). Interest margins thus remained stable overall and could be expanded even further, especially in the specialized lending segment. In addition, the Bank benefited from interest collected in this context through its renewed participation in the TLTRO programme (Targeted Long-Term Refinancing Operation) of the European Central Bank. OLB increased net commission income to EUR 60.3 million (previous year: EUR 57.4 million). The good performance in the specialized lending business was reflected, among other things, in the increase in loan commissions from this segment to EUR 8.6 million (previous year: EUR 5.7 million). The contribution to earnings from customer investments also improved significantly. In total, OLB increased its operating income by 5.4 percent to EUR 238.9 million (previous year: EUR 226.7 million).
On the other hand, operating expenses were reduced by 1.2 percent to EUR 155.3 million (previous year: EUR 157.1 million). As expected, the reduced personnel requirements led to a decrease in personnel expenses to EUR 84.2 million (previous year: EUR 89.2 million). The one-off expenses and investments planned for the implementation of strategic projects were the reason for the increase in other administrative expenses to EUR 64.5 million (previous year: EUR 61.1 million).
The net burden from risk provisioning of EUR 2.8 million was significantly below the previous year's value of EUR 14.8 million. So far, it has not been necessary to increase the additional risk provision for the consequences of the pandemic shown in the 2020 annual financial statement. The very favorable development in the first half of 2021 cannot be extrapolated to the year as a whole. OLB will continue to analyze the effects of the coronavirus pandemic in the coming months and intensively monitor its credit portfolio for identifiable risks.
The result of EUR -7.6 million (previous year: EUR 2.5 million) recorded in the first half of the year from the valuation of securities in the liquidity reserve will turn positive again if the investments mature as planned.
The net operating result increased by 14.3 percent to EUR 70.8 million (previous year: EUR 58.7 million). Net income for the first six months improved by 21.2 percent to EUR 44.9 million (previous year: EUR 37.0 million).
Total assets as at 30 June 2021 rose to EUR 22.8 billion (31 December 2020: EUR 21.5 billion). In the reporting period, OLB expanded its liquidity reserve by EUR 0.5 billion to EUR 2.2 billion by participating in another tranche of the TLTRO programme. The Bank's financial and asset situation was very stable.
During the first six months of the year, OLB presented itself successfully on the capital market. Thus, both the Pfandbrief debut in the sub-benchmark segment and the first issue of regulatory Additional Tier1 (AT1) capital generated high demand. "National and international investors are taking note of our development with great interest," says Dr. Rainer Polster, Chief Financial Officer, "this response already reflects the success of our strategic orientation and implementation. Now we also want to take advantage of our further opportunities in the market and implement our ambitious goals."
The Common Equity Tier 1 capital ratio, excluding the pro-rata recognition of interim profit, was 12.3 per cent (31 December 2020: 12.2 per cent). The core capital ratio also increased slightly to 12.8 per cent (31 December 2020: 12.7 per cent). "Taking into account the planned retention, this would result in a CET1 capital ratio of 12.7 per cent and a core capital ratio of 13.2 per cent, which makes us very comfortable and well equipped for future growth, even with normalized risk provisions," says Dr Rainer Polster. As a result of the successfully placed AT1 issue, the Bank's core capital increased further in July to around EUR 1.24 billion (31 December 2020: EUR 1.10 billion).
Outlook and strategic goal
In its operating business, the Bank expects stable development for the rest of the year, in line with forecast expectations.
OLB will resolutely continue its ongoing transformation and implement further steps towards capital market readiness. "We have a strong foundation in the customer business and outstanding cost and risk management," says Stefan Barth, "we are building on this and want to write sustainably profitable business with our customers: with the right support and the right products via the right contact channel."
In the private client segment, advisory competence makes up the core of the client connection. In the competence centers and branches, by telephone or video chat, OLB's advisors are available to their customers for personal discussions at least 45 hours a week on all questions related to investments, securities business, private construction financing, loans, insurance or retirement planning. As a result of the many alternatives offered by digitalization and the positive experience of conducting banking transactions flexibly and securely, even in the context of the coronavirus pandemic, customers' requirements and needs in online and mobile banking are increasing. With its multi-channel presence, OLB is available to customers both digitally and in person. In the area of corporate and business customers, OLB will gear its support more differentiated to the respective needs. Individual, personal support from a regional location will continue to be available for all companies that require complex advisory services, such as financing options, liquidity management, export business or entrepreneurial issues. In addition, the range of services and products via digital channels will also be successively expanded for commercial customers.
Overall, a continuing consolidation process is to be expected in the dynamic German and European banking market, which is not least expected and demanded by the central banks. "Our goal is quite clear," says Stefan Barth, and all of the Bank's measures are geared to this, even if this can sometimes involve uncomfortable decisions, "we want to take an active role in the wave of consolidation and successfully position OLB as an independent institution in the long term."
The entire Interim financial report as of June 30, 2021 can be found here