EAA Interim Report as of 30 June 2017
The EAA continues to operate in the black and is making good progress in reducing WestLB legacy positions
Düsseldorf, 23 August 2017. The EAA concluded the first half of the 2017 fiscal year with a net profit of EUR 9.6 million. In doing so, it was able to further reduce the credit and securities portfolio transferred for wind-up by around 10% from January to June to a notional amount of EUR 26.8 billion, and derivative financial products in the trading portfolio by around 14% to EUR 223.5 billion. “The notional wind-up and the result achieved in the first half of 2017 were again more positive than expected within the scope of our planning,” said Matthias Wargers, Spokesman of the EAA Managing Board.
The fast-progressing portfolio reduction has inevitably led to a contraction in the EAA’s earning base, with the surplus from ongoing interest and commission payments falling between January and June by a total of EUR 31.3 million to EUR 64.2 million compared with the same period last year. However, the EAA was able to largely offset these losses through cost savings: administrative expenses fell by EUR 28.3 million to EUR 86.7 million, which is almost 25% below the prior-year figure.
In addition to substantial cost reductions, favourable capital market developments and the completion of long-term restructuring measures contributed to the net profit in the first half of the year. The successes were partly reflected in the results from financial assets and shareholdings (EUR +52.9 million) and partly in the result of risk provisions (EUR -17.4 million), as allowances established in previous periods were reversed and offset against risk provision allocations.
Reduction in total business volume amounts to around EUR 9 billion and reflects the successful wind-up of risk
The EAA benefited in particular from capital gains in its securities portfolio, including the sale of Irish government bonds and bonds from Spanish financial institutions. It also achieved success in the disposal and early repayment of ongoing non-performing loans, for example loans for companies in the ore and aluminium industry in various emerging countries. It exploited opportunities such as favourable short-term price developments on secondary markets. The liquidation of EAA Japan K.K. further contributed to the positive result in the first half of the year. This step both reduced the EAA’s shareholding portfolio and enabled it to close a location abroad as announced.
“The performance in the first half of the year provides a good basis for us to push ahead with our plans for an early end to the wind-up process,” stated Wargers. Considering the progress already made in reducing the portfolio, the EAA is aiming to conclude its work much earlier than planned. The planning previously covered the period up to 2027. In view of the objective of accelerated risk reduction, it is important for the EAA that the notional wind-up in the first half of 2017 was coupled with a significant decline in total assets, which fell by around EUR 6 billion to EUR 54.6 billion. The business volume, which in addition to total assets comprises contingent liabilities (for example from guarantees and letters of comfort) and irrevocable loan commitments, contracted by almost EUR 9 billion to EUR 61.7 billion. The wind-up progress is accompanied among other factors by the dissolution of complex guarantee structures, which further facilitates the ongoing reduction of legacy positions of the former WestLB.