LBBW Reiterates Full-Year Target as Nine-Month Profit Rises 15%

Landesbank Baden-Wuerttemberg, Germany’s biggest state-owned lender, reiterated its forecast for higher profit this year after earnings rose 15 percent in the first nine months.

Net income climbed to 281 million euros ($361 million) from 245 million euros a year earlier, LBBW said in a statement today. The company set aside 153 million euros in provisions for risky loans after a release of 7 million euros a year ago.

The lender repeated that 2012 net income should be higher than the 87 million euros of profit posted last year.

LBBW, led by Chief Executive Officer Hans-Joerg Vetter, sold its stakes in German insurers Wuestenrot & Wuerttembergische AG (WUW) and SV SparkassenVersicherung Holding AG in the last two months as part of a restructuring agreement with the European Commission.

The lender returned to full-year profit in 2011 as lower provisions for risky loans helped snap three years of losses. The firm is cutting about 2,500 jobs by 2013 and agreed earlier this year to sell its LBBW Immobilien real estate unit as part of the restructuring agreement.

LBBW’s Tier 1 capital ratio, a measure of capital strength, improved to 14.9 percent by Sept. 30 from 12.9 percent at the end of 2011, the Stuttgart, Germany-based company said.

The bank also plans to convert its owners’ silent-partner contributions into common equity Tier 1 capital and further reduce risk assets “to ensure adequate capitalization in accordance with the more stringent future requirements,” LBBW said.

As part of the conversion plan, the savings banks in Baden- Wuerttemberg are the first of the three owners to have agreed to this conversion, LBBW said. The lender said it’s “currently in good and constructive negotiations” with the state of Baden- Wuerttemberg and the city of Stuttgart.

To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Edward Evans at eevans3@bloomberg.net

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