S Financial Report 2010 Financial Report 2010 Finanzgruppe Deutscher Sparkassen- und Giroverband S www.dsgv.de KEY FINANCIALS of the Savings Banks Finance Group Selected balance sheet items As of 31 Dec. 2010 in EUR billion As of 31 Dec. 2009 in EURbillion Change in EURbillion Change in % Loans to banks (MFIs 1 ) 544.9 615.9 −71.0 −11.5 Loans to non-banks (non-MFIs 1 ) 1,214.3 1,200.5 +13.8 +1.2 Liabilities to banks (MFIs 1 ) 598.5 649.5 −51.0 −7.9 Liabilities to non-banks (non-MFIs 1 ) 1,164.7 1,160.1 +4.6 +0.4 Balance sheet total 2 2,601.7 2,582.8 +18.9 +0.7 for information: total assets (excluding trading derivatives) 2,455.7 2,582.8 −127.1 −4.9 Selected income statement items 2010 3 in EUR billion 2009 in EURbillion Change in EURbillion Change in % Net interest income 34.843 35.045 −0.202 −0.6 Net commission income 7.357 6.948 +0.409 +5.9 Net earnings from fi nancial transactions 0.517 1.079 −0.562 −52.1 Administrative expenses 26.022 26.936 −0.914 −3.4 Earnings before valuation 17.025 16.767 +0.258 +1.5 Valuation result (excluding equity interests) −6.172 −10.592 +4.420 – 5 Earnings after valuation 10.853 6.175 +4.678 +75.8 Balance of other and extraordinary income/expenses 4 −2.157 −6.463 +4.306 +66.6 Net income / loss for the year before taxes 8.696 −0.289 +8.985 – 5 Taxes on income 2.665 2.571 +0.094 +3.7 Net income / loss for the year after taxes 6.031 −2.860 +8.891 – 5 of which net income of Savings Banks after taxes 4.099 2.463 +1.636 +66.4 of which net income / loss of Landesbanken after taxes 1.810 −5.457 +7.267 – 5 of which net income of Landesbausparkassen after taxes 0.122 0.134 −0.012 −9.0 1 Monetary fi nancial institutions. 2 Total assets as at the end of December 2010 included derivative fi nancial instruments held in the trading portfolio (trading derivatives), due to the fi rst-time application of the German Accounting Modernisation Act (“ BilMoG”). Trading derivatives of EUR 146.0 billion were carried by Landesbanken and reported under “Other liabilities”. 3 Provisional data from partly non-audited annual fi nancial statements prepared in accordance with German GAAP (converted to conform with the system of the German Bundesbank). 4 Including the balance of gains on the sale of fi nancial investments and investments held as fi xed assets as well as write-downs/write-ups on fi nancial investments and investments held as fi xed assets. 5 Calculation is immaterial. IMPRINT Publisher Deutscher Sparkassen- und Giroverband Charlottenstrasse 47 10117 Berlin Germany Phone: +49-30-20225-0 Fax: +49-30-20225-250 www.dsgv.de Contact Financial Market Relations Dr Thomas Keidel Phone: +49-30-20225-5281 Fax: +49-30-20225-5285 Conception and design Kirchhoff Consult AG, Hamburg www.kirchhoff.de Photography Steffen Jänicke, Berlin Translation Ralf Lemster, Financial Translations GmbH Printing DCM Druck Center Meckenheim Copy deadline 20 June 2011 You can fi nd the online version of our Annual Report on: www.annualreport2010.dsgv.de 60 Savings Banks Finance Group market set-up | Financial Report 2010 SAVINGS BANKS FINANCE GROUP MARKET SET-UP As of 31.12.2010 Savings Banks Finance Group No. of companies 610 1 No. of branch offi ces 2 20,920 5 Employees 3 363,000 5, 6 Business volume 4 EUR 3,300bn 5 20,850 7 348,500 6, 7 EUR 3,080bn 7 4 Other leasing companies 8 Cost value EUR 49.9bn Employees 9 545 7 Investment companies of the Landesbanken Employees 250 DSV-Group (Deutscher Sparkassenverlag) Income EUR 0.87bn Employees 1,731 Finanz Informatik Employees 5,237 SIZ Informatikzentrum der Sparkassenorganisation Employees 87 429 Savings Banks Balance sheet total EUR 1,084bn No. of branch offi ces (incl. self-service) 15,626 Employees 248,137 Additional staff at directly held Savings Banks subsidiaries 9,239 75 Equity investment companies Equity interests 1,412 Total volume EUR 1.7bn Employees 230 3 Factoring companies Annual turnover EUR 16.5bn Employees 211 8 Consultancies advising corporate and municipal clients Employees 70 10 LBS property companies Property volume EUR 4.6bn Employees 450 Deutsche Leasing Group No. of contracts 363,000 Cost value EUR 26.8bn Employees 1,923 11 Public Primary Insurance Groups Gross premium income EUR 19.7bn Employees 30,000 1 0 Landesbausparkassen (LBS) (regional building societies) Balance sheet total EUR 54bn Employees 9,004 8 Landesbank Groups LBBW, BayernLB, LBB, HSH Nordbank, Helaba, NORD/LB (with Bremer Landesbank), SaarLB, WestLB Balance sheet total EUR 1,546bn Employees 48,925 DekaBank Deutsche Girozentrale Balance sheet total EUR 130bn Employees 3,683 No hierarchical presentation/no indication of shareholding/shareholder structure. 1 Including associations and other institutions; numbers rounded. 2 Branches/advice centres. 3 Number of staff employed in internal functions/in the mobile sales force, excluding part-time sales staff; numbers rounded. 4 Business volume, defi ned as: total assets/aggregate holdings/ fund assets/volume of shareholdings; numbers rounded. 5 Including international branches, plus domestic and international subsidiaries of Landesbank Groups. 6 Including 3,434 employees of associations, related institutions and other institutions. 7 Excluding international branches, as well as domestic and international subsidiaries of Landesbank Groups. 8 Including three companies which form a group. 9 Excluding staff numbers included in Landesbanken consolidated fi gures. PRESIDENT’S REPORT THE SAVINGS BANKS FINANCE GROUP The Savings Banks Finance Group Our business model Our mission Our partners within the Group The Joint Liability Scheme Marketable ratings 2010 IN REVIEW MANAGEMENT REPORT Economic environment Major markets and positioning Business development and fi nancial position Staff report Social involvement report Risk report Outlook 2 5 5 6 8 9 10 11 12 15 15 17 21 34 36 38 48 CONTENTS The Savings Banks Finance Group unites around 610enter prises, collaborating closely in order to pro vide fi nancial services and support to all sections of society. We apply the profi ts not required to strengthen our reserves to our varied commitment in the regions in which we operate AGGREGATED FINANCIAL STATEMENTS EXPLANATORY NOTES ON AGGREGATION DEUTSCHER SPARKASSEN- UND GIROVERBAND (DSGV) SAVINGS BANKS FINANCE GROUP MARKET SET-UP 51 54 55 60 2 With a successful year behind it, the Savings Banks Finance Group proved in no uncertain terms that it had done more than successfully weather the fi nancial markets crisis during 2010. In fact, the 429 Savings Banks were able to signifi cantly increase their operating profi ts – once again posting notable growth in their capital bases, and reaffi rming the value of their principles of decentralisation with a business focus on local regions and the real needs of the local population, even in diffi cult times. Throughout the most challenging economic crisis in Ger- many’s post-war period, the Savings Banks held true to their roots – a sustainable business philosophy oriented towards the common good. Working together with fellow Group mem- bers, they consistently provided SMEs with suffi cient capital, thereby playing a pivotal role in Germany’s rapid and unparal- leled recovery. The Savings Banks did not retreat when the storm raged – quite the contrary. They once again extended signifi cantly more new loans to companies and the self-employed – total- ling EUR64.2 billion – and strengthened regional structures with uninterrupted funding, to the benefi t and welfare of the people living there. As such, it comes as no surprise that numerous surveys high- light the considerable trust that is placed in the Savings Banks, and that their value for economic and social develop- ment is widely – and increasingly – recognised. The fi nancial markets crisis made the general public and decision-makers alike aware of the importance of acting according to sound principles, and it also led to a marked realignment in social values. The concept of maximising profi ts without taking account of people’s needs, desires and concerns is now seen to have been an expensive error of judgement. Customer orientation, social responsibility, security and sustainability are once again in demand. These core values have held true for the Savings Banks for more than 200 years. The present and profound resonance of the values by which we have lived, and the wider acceptance of our business mod- el, motivate the Savings Banks to steadfastly and effi ciently meet the diverse challenges that our Group currently faces. This applies fi rst and foremost to a new and effi cient Landes- bank structure. The capacity of the Landesbanken must be reduced to a size that can be fully utilised by stable business segments. This should also alleviate the pressure to venture into overly risky business segments due to excess capacity. PRESIDENT’S REPORT President’s report | Financial Report 2010 59Financial Report 2010 | Deutscher Sparkassen- und Giroverband Members of the Board of Managing Directors DekaBank Deutsche Girozentrale Franz S. Waas, PhD Chairman of the Management Board of DekaBank Deutsche Girozentrale, Berlin and Frankfurt/Main Bundesverband öffentlicher Banken Deutschlands e. V. (Association of German Public Sector Banks) Dr Gunter Dunkel Chairman of the Management Board of Norddeutsche Landesbank Girozentrale, Hanover/Braunschweig/Magdeburg Deutscher Sparkassen- und Giroverband e. V. (German Savings Banks Association) Dr Karl-Peter Schackmann-Fallis Executive member of the Board of Management of Deutscher Sparkassen- und Giroverband, Berlin Werner Netzel Executive member of the Board of Management of Deutscher Sparkassen- und Giroverband, Berlin Bernd M. Fieseler Executive member of the Board of Management of Deutscher Sparkassen- und Giroverband, Berlin Elected members of the Board Dr Christian Badde Chairman of the Management Board of LBS Westdeutsche Landesbausparkasse, Münster Michael Breuer President of Rheinischer Sparkassen- und Giroverband, Düsseldorf Carsten Claus Chairman of the Management Board of Kreissparkasse Böblingen Gerhard Grandke Executive President of Sparkassen- und Giroverband Hessen-Thüringen, Frankfurt/Main and Erfurt Claus Friedrich Holtmann Executive President of Ostdeutscher Sparkassenverband, Berlin Dr Heinz-Werner Schulte Chairman of the Management Board of Kreissparkasse Ludwigsburg Georg Sellner Chairman of the Management Board of Stadt- und Kreis-Sparkasse Darmstadt Beate Läsch-Weber President of Sparkassenverband Rheinland-Pfalz, Budenheim Hans-Jörg Vetter Chairman of the Management Board of Landesbank Baden-Württemberg, Stuttgart/Karlsruhe/Mannheim Dietrich Voigtländer Chairman of the Management Board of WestLB AG, Düsseldorf Alexander Wüerst Chairman of the Management Board of Kreissparkasse Köln 3 This process is underway. The total assets of the Landesbanken, as well as their risk-weighted assets and number of employ- ees, have already been reduced considerably. The objective of the Savings Banks is to decrease the number of their associ- ated Landesbanken, and ultimately to reduce risk-weighted assets signifi cantly through mergers. Similarly, the current discussions regarding tighter fi nancial market regulation, or changes to the banking supervision regime, are of fundamental importance to the Savings Banks Finance Group. It would be a fatal economic error to hold the institutions that contributed greatly to quickly overcom- ing the crisis fi nancially liable – such as the Savings Banks – whilst those who caused the crisis get off lightly and return to testing the limits of the fi nancial markets. It falls to us to continue actively shaping the Group’s continued viability. The changing needs of a digital society demand intelligent answers – from regionally anchored Savings Banks in particular. Without relinquishing the benefi ts offered by local decision-making, we will take advantage of the synergy potential afforded by a stronger network to further unleash the combined strength of the Savings Banks Finance Group in the interest of our customers. The past few years have borne witness to the fact that the Savings Banks are highly effi cient pillars of economic and social responsibility. In 2010, they laid a solid foundation for continued success for 2011. These are excellent reasons to greet the challenges that confront us with optimism and determination. With kind regards, Berlin, June 2011 Heinrich Haasis President of the German Savings Banks Association Heinrich Haasis, President of the German Savings Banks Association (DSGV) Financial Report 2010 | President’s report by the Savings Banks in 2010. EUR2.5 billion of this was in the form of income tax and around EUR500 million from funding and sponsorships within the framework of their social commitment. This tangible contribution to German society is higher than for any other segment of the German fi nancial services sector. It provides concrete support towards improving living conditions in municipalities and regions. Moreover, Savings Banks are the largest employer in the German banking sector, and the largest non-government sponsor of culture and sports in Germany. We are where life happens – close to the people. WERE RAISED FOR SOCIETY 5Financial Report 2010 | The Savings Banks Finance Group THE SAVINGS BANKS FINANCE GROUP Joint strength The business model of the Savings Banks Finance Group once again demonstrated its solid reliability in 2010. With approxi- mately 363,000 employees, 610 independent enterprises and a business volume of roughly EUR3,300 billion, the Savings Banks Finance Group is one of the largest fi nancial services groups in the world. For more than 200 years, the 429 Savings Banks – the heart of the Group – have been active in the German market and rooted in small communities. As at 31 December 2010, the Savings Banks had total assets of roughly EUR1,084 billion. With 15,626 branch offi ces, they are present throughout Ger- many to provide local service to their 50 million customers. The institutions within the Savings Banks Finance Group work together with combined strength. They act as independent institutions, but jointly coordinate their range of services. This enables a single Savings Bank to offer lending, investment, building society and retirement provision services to meet virtually all the needs of every demographic group, without having to organise and furnish every aspect of the service itself. This network of different partners makes it possible for us to offer integrated advisory and fi nancing solutions for start-ups, cross-border support for export-oriented com- panies, and assistance in complex municipal development projects. Unlocking these synergies is at the heart of the Group’s focus, effi ciency and strength. The integrated Group comprises  Savings Banks,  Landesbanken and the DekaBank Group,  Landesbausparkassen (regional building societies),  public primary insurance groups, as well as  leasing and factoring companies, equity capital providers and consultancies. In 2009, the Savings Banks ensured the provision of fi nancing despite the crisis in the fi nancial sector and the real economy, and thus successfully prevented a credit crunch in Germany. In 2010, they worked with their partners to fi nance the eco- nomic recovery, while further expanding their market lead in fi nancing businesses. The Savings Banks and Landesbanken provided the German economy with aggregate new loans in excess of EUR64 billion in 2010 – 3.4% more than in 2009. 6 The Savings Banks Finance Group | Financial Report 2010 Regional focus, retail orientation and solidarity are the core values underpinning the Savings Banks Finance Group’s business model. A business model that has endured for more than 200 years, not only on the market but also as the very fi bre that binds our Group. It defi nes our structure and how we see ourselves and also, increasingly, what people have come to expect from our institutions. Savings Banks are, by nature, decentralised institutions. Decisions are made locally and thus close at hand to our customers. Their local nature makes it possible for quick deci- sions to be reached in the best interests of their respective business area; decisions that take into account their know- ledge of the political, economic and social issues of their differ ent regions. It is a union of customer proximity, effi - ciency and a high level of expertise. Within the defi ned business area of each Savings Bank, their specifi c and legally defi ned task is to provide every demo- graphic group and all businesses with the services of a uni- versal bank, and to offer them fi nancial planning options. The mission of the Savings Banks also encompasses contributing to the economy and overall prosperity of their region. Savings Banks compete with other German credit institu- tions on a daily basis. They are also subject to a tremendous amount of public attention – not only from their 50 million customers. Their business model therefore brings high re- quirements with regard to customer orientation and effi - ciency. Both are shaped by a commitment to sustainability:  Savings Banks refi nance themselves predominantly with their customers’ deposits; they must therefore earn their trust on an ongoing basis. They succeeded in doing so impressively in 2010: customer deposits increased by EUR15.6 billion to a total of nearly EUR768 billion.  Savings Banks are members of a community of solidarity, as are Landesbanken and Landesbausparkassen, namely the Joint Liability Scheme of the Savings Banks Finance Group. The Joint Liability Scheme assures the continued existence of our institutions and ensures that they will always be able to meet their commitments.  Their regional roots make Savings Banks effi cient; they afford a keen insight into their customers’ needs and risk situations. This local effi ciency also makes it possible to optimally tailor products and react swiftly.  Their ties to a specifi c business community means that Savings Banks have a personal stake in its future wel- fare. This makes them committed supporters of structural change, cultural and social projects, and underpins their commitment as “the provider of fi nance to German SMEs”. Broad business support geared towards abiding long-term values Savings Banks are catalysers of “regional economic cycles”. They transform locally generated customer deposits into loans to fi nance housing construction and corporate invest- ments within their business area. The returns generated are ultimately put towards enhancing their capital base, and public welfare-oriented projects. As one of Germany’s largest taxpayers, the Savings Banks and Landesbanken also make an important contribution to municipal budgets. Savings Banks’ funds remain in their regions, securing the foundation of their business. OUR BUSINESS MODEL Regional focus, retail orientation and solidarity 7Financial Report 2010 | The Savings Banks Finance Group Importantly, Savings Banks can be found everywhere in Ger- many – not merely in strong economic regions, but nation- wide. They function according to the principle that what is good for the region is good for the Savings Bank. This is why it is in Savings Banks’ own best interests to aim their business activities towards the common good, as their mission state- ment makes clear. The steadily rising esteem that the Savings Banks have enjoyed in the wake of the fi nancial crisis testifi es to how strongly they are anchored in the minds of the German pub- lic. According to a recent survey, 1 Savings Banks are seen as especially trustworthy partners compared with other bank- ing service providers. 2 Whilst the reputation of private banks suffered greatly as a result of the fi nancial crisis, Savings Banks were held in signifi cantly higher regard in 2010; 68%of the German public believe that the Savings Banks are “important” or “very important” for the stability and future viability of the German economy. 3 In order to remain reliable, long-term partners, Savings Banks are profi t-oriented institutions. Their objective is to gener- ate stable returns with a moderate risk profi le. Savings Banks believe in profi tability, dependability and reliability. They offer customer proximity and secure customer confi dence. The results of the 2010 business year attest to the success of the unwavering pursuit of this strategy. 1 Source: Forsa survey commissioned by stern magazine, January 2011. 2 With a score of 49%, they enjoy signifi cantly higher approval than private banks with 26%. 3 Source: Forsa survey commissioned by DSGV, June 2010. Our sustainable business model The Savings Banks Finance Group Employer Taxpayer Sponsor and supporter Partner of business Public legal structure Municipal trusteeship Public service obligation Regional principle 8 The widespread attention currently devoted to the redis- covered importance of conducting business according to “sustainability” and “values” affi rms our strategic orientation. Both principles are at the very heart of our success and are part of the Savings Banks Finance Group’s long tradition. The root of the Savings Bank philosophy lies in the desire to put fi nancial planning and independence within reach of people without large incomes, whilst providing them with secure interest rates on their deposits. The Savings Bank philosophy focuses on people and their needs. In an age where globalisation and extreme fl uctuations on the money and capital markets are shaking people’s sense of security, many of these old, yet still salient ideas are undergoing a renaissance. The Savings Bank philosophy has proved over the last two centuries that it not only carries with it the power of social cohesion, but that it also adds economic value. Once formed by citizens and founded as “banks of the com- mon man”, Savings Banks have always been more than mere credit institutions. In many communities, they have remained important institutions in public life to this day. Back in the 19th century, the Savings Banks helped to cushion the industrial revolution socially and improve living standards signifi cantly for the individual and for society as a whole. Products such as the bank book made it possible to make the saver’s “small money” grow. Providing affordable, nationwide fi nancial services and meet- ing the needs of SMEs is and remains our core duty. Respon- sible lending and growing deposits are central elements of this. Savings Banks are also committed to training the next generation of the workforce. They offer skilled jobs, even in regions where they are hard to come by. Economic success is essential for the companies within the Savings Banks Finance Group, also in terms of achieving their greater goal: to preserve the future prospects of coming gen- erations. First and foremost, this includes concentrating on a sound and sustainable business model. Our clear objective is to foster growth and prosperity in society in an economically, ecologically and socially viable way. One consequence that is already visible can be seen in our increased range of sus- tainable and “green” products that add ecological and social value, in both execution and design. OUR MISSION Sustainability from the very start The Savings Banks Finance Group | Financial Report 2010 [...]... −6 −0.5 −4.7 −6 −6 2008 2009 2010 20111 1 2 2008 2009 2010 20112 2011 forecast for global industrial production taken from the International Monetary Fund’s World Economic Outlook of April 2011 2011 forecasts for Germany from the Spring Forecast of the Economic Research Institutes, 7 April 2011 2008 2009 2010 20112 2008 2009 2010 20112 Financial Report 2010 | Management report 17 Major markets and positioning... persons during 2010 The market share held by the Landesbanken alone in this segment has exceeded the market share of private banks for years This economic performance is our contribution to the success of the German economy – today, tomorrow and beyond Financial Report 2010 | Management report 15 MANAGEMENT REPORT Economic environment Macro-economic situation The German economy grew by 3.6% in 2010, posting... Scheme encompasses thirteen guarantee funds: eleven regional Savings Bank guarantee funds, the guarantee fund of the Landesbanken and Girozentralen and the guarantee fund of the Landesbausparkassen Each guarantee fund is interlinked with the others Should a fund lack sufficient resources to cover its particular institution, it is supplemented by other guarantee funds Banking supervisors and the financial... to decline, while growth was reported for savings deposits (+4.3%) and current account balances (+6.6%) Business performance of Savings Banks 2010 Number of Savings Banks Balance sheet total (in EUR billion) 2009 Change Change in % 429 431 −2 −0.5 1,084 1,073 +11.0 +1.0 Management report | Financial Report 2010 24 The customer securities trading segment did not recover in 2010, despite the economic upswing... −5.6 −7.1 –2 Management report | Financial Report 2010 28 Net sales were positive for both fixed-income securities (EUR 1.3 billion) and equities (EUR 0.7 billion) so the negative net sales balance is attributable to the decrease of investment funds alone (down EUR 3.0 billion) The negative development was evident above all in fixed income funds (EUR –4.7 billion) and money market funds (EUR –2.3 billion),... report | Financial Report 2010 Equity In 2010, Landesbanken equity declined considerably by 10.2%, and amounted to EUR 61.1 billion as of the balance sheet date This reduction is mainly due to the net losses of some Landesbanken incurred in the 2009 financial year, and recognised in the past financial year of 2010 Profitability Overall, the operational business of the Landesbanken progressed well in 2010, ... billion (+4.6%) 10.95 Total agreements outstanding (number in millions) 265 259 Total agreements outstanding (volume of savings under home loan and savings agreements in EUR billion) 54.290 51.551 Total assets (EUR billion) 2010 2009 34 Management report | Financial Report 2010 Staff report Our employees With roughly 348,500 employees, the Savings Banks Finance Group is one of Germany’s most important employers... write-downs/write-ups on financial investments and investments held as fixed assets Calculation is immaterial Financial Report 2010 | Management report 23 In the customer lending business, the Savings Banks Finance Group reported growth again within the scope of a significantly better environment in 2010, following a marginal decline the year before Claims due from non-banks increased by 1.2% to EUR 1,214.3... Rating long-term BFSR Fitch Floor Rating * DBRS Floor Rating long-term short-term * Newly introduced in 2010 1 The Fitch and Moody’s ratings were awarded in May 2011 At the submission deadline for this report, the DBRS rating for 2011 had not yet been published 2010 in review | Financial Report 2010 12 IN REVIEW The review of a difficult 2009 dominated the picture at the start of the year Discussions... for the year was EUR 4.1 billion in 2010 and thus as much as EUR 1.6 billion (or 66.4%) up on the previous year’s figure of EUR 2.5 billion Pre-tax return on equity rose to 11.5% compared with 8.5%, despite the fact that equity was further increased (from EUR 55.6 billion on average in 2009 to EUR 57.6 billion on average in 2010) Management report | Financial Report 2010 26 Lending business Along with . S Financial Report 2010 Financial Report 2010 Finanzgruppe Deutscher Sparkassen- und Giroverband S www.dsgv.de KEY FINANCIALS of the. excess capacity. PRESIDENT’S REPORT President’s report | Financial Report 2010 5 9Financial Report 2010 | Deutscher Sparkassen- und Giroverband Members