Landesbank Baden-Wuerttemberg, Germany’s biggest state-owned lender, posted a 67 percent fall in first-quarter pretax profit after one-time gains on investments weren’t repeated.
Pretax profit fell to 150 million euros ($198 million) from about 455 million euros a year earlier, the Stuttgart-based company said in a statement today. Last year the bank was helped by about 200 million euros of valuation gains.
The lender had a “satisfactory” start this year and sticks to its target to increase its earnings this year if there are no “dramatic dislocations” in capital markets, Chief Executive Officer Hans-Joerg Vetter said at a press conference in Stuttgart today.
LBBW said last month it returned to an annual profit of 87 million euros in 2011 as reduced provisions for risky loans helped snap three years of losses. LBBW booked charges of about 940 million euros related to the sovereign-debt crisis last year. Earnings of more than 500 million euros could be realistic for LBBW once the restructuring is completed, Vetter said.
As part of a restructuring agreement reached with the European Commission, the lender is cutting about 2,500 jobs by 2013 and agreed this year to sell its LBBW Immobilien real estate unit to a group led by Patrizia Immobilien AG for 1.44 billion euros.
“We aim to complete the job reduction by a large extent this year,” Vetter said today. The lender has cut 2,000 positions so far. Of planned cost reductions of about 700 million euros by 2016, 380 million euros have already been achieved, Vetter said.
Talks with LBBW’s owners about a conversion of capital instruments to make them compliant with Basel III rules for banks are ongoing and are expected to be resolved in summer, Vetter said, adding that “he doesn’t see a need to raise additional capital.”
Bayerische Landesbank, Germany’s second-biggest state-owned lender, said last month that net income declined 84 percent to 104 million euros in 2011 because of a loss at its Hungarian MKB Bank subsidiary. BayernLB is the last of Germany’s so-called Landesbanken to await a verdict from European Commission on conditions for its 2008 bailout by the German state of Bavaria.
“We want to expand our corporate banking business in Bavaria and North-Rhine Westfalia and our business relationships with selected large corporations in German speaking countries,” Vetter said.