apoBank starts turnaround

27.11.2009

  • Six-point programme agreed
  • Value adjustments for structured products in the low triple-digit million range
  • "Structured Financial Products" portfolio to be halved from Euro 5.4 billion to around Euro 2.5 billion by 2014
  • Sustainable hedging of equity ratios by the BVR
  • Recruitment of additional staff to strengthen the core business
  • Günther Herion, Chief Risk Officer, is leaving the Bank by mutual agreement

When Herbert Pfennig, new Spokesman of the Board of Directors of Deutsche Apotheker- und Ärztebank (apoBank), took up his post in July 2009, he announced that structured financial products would be subjected to intensive internal and external review in order to achieve complete transparency about the Bank's risk situation.

On the basis of first interim results, apoBank's Board of Directors presented a six-point programme at today's regular Supervisory Board meeting. The programme's goal is the sustained expansion of the stable and efficient operating business and at the same time the gradual reduction of the "Structured Financial Products" portfolio. The six points are:

  1. By the end of 2009, apoBank will make additional value adjustments in the low triple-digit million range on its known "Structured Financial Products" portfolio of Euro 5.4 billion. The exact amount will be announced with the presentation of the preliminary results for the first quarter of 2010.
  2. The value adjustments will be largely offset by the healthy operating core business. However, if there is an annual deficit, it could be offset many times by reserves of over Euro 700 million. Thus, the payments for the hybrid Tier I preferred securities (silent partnership) and for the Genussscheine is ensured.
  3. The portfolio will be gradually reduced while preserving its value in order to minimise the risk of loss. Already in 2014, the portfolio is to be halved from Euro 5.4 billion to around Euro 2.5 billion.
  4. In order to achieve a capital relief, the Federal Association of German Cooperative Banks (BVR) has pledged the necessary support to the Bank. The support in form of a guarantee by the protection scheme of the BVR, which is still subject to the usual approval of a committee, is aimed at sustainable and long-term hedging of the equity ratios expected in the capital market. apoBank's current equity ratios are at the half-year level. The guarantee in the amount of Euro 120 million provided by the BVR in August will expire on 20 December 2009 as the guaranteed securities fall due. In view of the current risk assessment of the guaranteed assets, it is not to be expected that the guarantee will be invoked.
  5. Under the guidance of the newly appointed Chief Representative, Dr. Thomas Siekmann (Generalbevollmächtigter), the Bank's interdisciplinary competences will be bundled in such a way that all options for a reduction in equity tied up can be exercised. The resulting free resources will be used to focus on the growth potential in the customer business.
  6. With the already initiated sales offensive and in strong cooperation with the Federal Association, apoBank will significantly expand its sustained good core business next year, both regionally and in view of the individual customer. Apart from strengthening its position in the field of asset management, the Bank will recruit additional advisors for its sales department in 2010. Furthermore, the opening of additional locations in Germany is under review.

Herbert Pfennig, Spokesman of the Board of Directors: "We adopted these measures today together with the Supervisory Board. With these measures, we will start the turnaround for apoBank. In a first step, as announced in summer, we had identified and adequately assessed the total amount of charges incurred in connection with the "Structured Financial Products" portfolio. Thus we have created transparency, also taking account of further charges in the second half of the year. In a second step, we have drawn up a concrete plan of measures, which helps us to gradually remove the portfolio from the Bank, improve our equity situation and expand the profitable core business in order to strengthen our earnings situation."

Beyond of the extraordinary charges, apoBank's operating business has continued its very positive development this year. At almost EUR 4.0 billion, new advances in the loans sector once again significantly exceeded the high level of the previous year. From today's point of view, net interest income will exceed the previous year's level and is well ahead of schedule. Herbert Pfennig: "This development clearly shows that our business model provides a stable basis for our sustained earnings power. We will build on this basis, to tie in with times of apoBank's good profitability. Our goals are focused on our customers from the medical professions with their individual demands made on the banking business; as THE bank in the health care sector, we will continue to offer them high competence, competitive products and quality service in all areas of banking."

In the context of the measures adopted by the Bank today, the Supervisory Board reached an agreement with Mr. Herion to cancel his contract. After almost seven years in the position as Chief Financial and Risk Officer, Mr. Herion is leaving the Bank by mutual agreement. The background for this decision is the reorientation of the Bank's business policy to be pursued in the future in view of the credit substitute business.