apoBank: Foundation for future growth laid in 2012

Deutsche Apotheker- und Ärztebank (apoBank) closed 2012 with a net profit of €45.4 million, thus exceeding the result of the previous year (2011: €43.1 million). Subject to approval at the Annual General Meeting, it will pay out a dividend of 4% to its members and made an allocation to its reserves. The Bank also further strengthened its capital base by allocating €70.0 million to the fund for general banking risks.

The basis for the Bank’s good performance in 2012 was once again the positive development in its core business. Despite an already high level of market penetration, the number of customer accounts grew to around 365,000 (2011: 359,900). In addition, the Bank again issued loans amounting to over €4 billion for investments in business start-ups, practices and pharmacies, as well as in private projects.

In view of the Bank’s challenging environment, Herbert Pfennig, Spokesman of the Bank’s Board of Directors, expressed his satisfaction with the result, and confirmed that the Bank wants to extend its market position and to grow further. The Bank created the foundation for this in 2012 with its VorWERTs future programme and further refined its unique positioning: "We have pressed on with our focus on the health care professionals and have established dedicated support strategies for each stage of their lives, from university to their first job or practice, right up to retirement. This ‘specialisation in specialisation’ enables us to offer the health care professional the kind of individual advice that no other financial institution can match."

In 2013, the Bank intends to invest in further developing its specialised adviser capacity and in professional training of its employees. At the same time, it will continue the work on improving its cost structure that has been initiated as part of VorWERTs. The goal is to achieve lasting improvements in economic performance and to create that necessary financial leeway to finance the targeted growth in its core business.

"In 2012 we developed a new, state-of-the-art strategy for apoBank," says Pfennig. "This phase has been completed in the meantime. The focus for 2013 will be on implementation. However, it will still be 2014 before we can reap the full benefits of our efforts. At that point, with VorWERTs and the new customer support concept in place, we will gradually increase our revenues and enjoy further growth."

Particularly against the backdrop of continued difficult conditions in the banking sector, the Bank expects that a renewed increase in competition and the ongoing period of low interest rates will have a significant negative impact on revenues. Because of the investments in implementing the VorWERTs programme and increasing regulatory requirements, the Bank is also expecting administrative expenses to increase. On the whole, the Bank is planning to achieve a net profit for 2013 on a par with the previous year, which will permit it to continue paying dividends and to make allocations to its reserves.

In the 2012 financial year, apoBank increased its net interest income to €694.0 million, up 7.3% on the value for the previous year (2011: €646.7 million). This increase primarily results from the Bank’s lending business and from hedging measures taken by the Bank to deal with periods of low interest rates. The Bank recorded an increase in the volume of customer deposits, even though the actual contributions to profit were markedly affected by ongoing price competition.

Net commission income, at €116.2 million, was close to the level of the previous year (2011: €119.1 million). This trend reflects the continued reticence of private investors due to the EU debt crisis. Nevertheless, the Bank reported growth in consulting-based fees in private asset management and expanded its securities business with institutional customers.

Despite significant investments in the successful IT migration to the cooperative system bank21 and in the VorWERTs future programme, the Bank reduced its administrative expenses to €479.7 million (2011: €485.4 million). The measures introduced as part of the VorWERTs programme to optimise costs contributed to this decrease.

The operating result, i.e. the operating profit before risk provisioning, was primarily characterised by the positive trends in net interest income and administrative expenses. At €324.1 million, it was 15.6% up on the level of the previous year (2011: €280.4 million).

Risk costs and precautionary measures for financial instruments and participations declined by 26.3% to €92.1 million in 2012 (2011: €125.0 million). Risk costs and precautionary measures for the customer lending business, at €81.3 million, represented an increase over the value for the previous year (2011: €65.1 million), although this was still at a low level when compared to the industry as a whole.

The Bank again markedly improved its risk profile through measures such as consistently reducing risks associated with its past investments in structured financial products. In this area, the Bank brought down its volume to €1.8 billion (2011: €3.0 billion), exceeding the planned reduction.

In connection with this, the Bank was able to increase its equity ratio to 14.4% (2011: 13.0%) and its core capital ratio to 10.4% (2011: 8.5%), thus further improving its starting position with regard to the introduction of Basel III.