IKB Deutsche Industriebank AG : IKB: Half-year figures 2013/2014

? Reporting in accordance with HGB

? Consolidated net income of ? 8 million (H1 2012/13: consolidated net loss

of ? 51 million)

? ? 128 million addition to fund for general banking risk (common equity tier

1 capital) from current earnings

? Tier I capital ratio of the IKB Group rises to 11.2% (31 March 2013: 9.6%)

? Participation in ECB's comprehensive assessment leads to complex

management issues and high costs

? IKB target for common equity tier I ratio (CET I): more than 8% by

31 December 2013

? Regulatory environment and consequences of debt crisis still significant risk factors

[Düsseldorf, 9 December 2013] In the first six months of the 2013/14 financial year (1 April to 30 September 2013), IKB Deutsche Industriebank AG generated consolidated net income of ? 8 million and allocated ? 128 million to the fund for general banking risk. The consolidated net loss in the same period of the previous year (first half of 2012/13 financial year, 1 April to
30 September 2012), the consolidated net loss had amounted to ? 51 million.
The consolidated income statement for the first half of the 2013/14 financial year is as follows:
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Table: Income statement of IKB (Group, HGB)

Some totals may be subject to discrepancies due to rounding differences.

* Prior-year figures calculated in accordance with HGB for the first time

** Incl. ? 128 million addition to fund for general banking risk (expense in net other income);

the common equity tier I capital of IKB (including in accordance with Basel III) was increased by a corresponding amount.

The Group's net interest and lease income rose by ? 49 million in the reporting period to ? 140 million (previous year: ? 91 million). Lower refinancing costs, the reduction of non-strategic assets and profitable new business enabled the increase in net interest income despite the lower level of new business. In the past half-year, new business amounted to ? 1.3 billion (previous year: ? 1.5 billion) as credit demand in Germany was low and competitive intensity was high, while pricing by credit providers was not
always adequate to risk. IKB maintained its lending standards.
Net fee and commission income amounted to ? +14 million (previous year:
? -11 million). A key reason for this increase was the absence of SoFFin commission expenses in connection with the final repayment of the SoFFin guarantees in the 2012/13 financial year (previous year: expenses of
? 29 million). Increasing commission income proved to be difficult. Business
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with capital market products developed satisfactorily, while commission income from M&A business declined.
Administrative expenses (personnel expenses, other administrative expenses and depreciation, amortisation and impairment losses) declined by ? 6 million to ? 139 million. Personnel expenses increased by ? 2 million to ? 79 million due in particular to recruitment in front office. Administrative expenses declined by ? 7 million to ? 61 million. The drop is essentially due to the significant reduction in legal and advisory costs.
Net other income amounted to ? -63 million (previous year: ? +23 million).
This was primarily due to the allocation to the fund for general banking risks in the amount of ? 128 million, which is included in net other income as an expense. The common equity tier 1 capital of IKB was increased by a corresponding amount. Income totalling ? 83 million was also recognised on financial instruments.
Net risk provisioning increased to ? 59 million in line with planning (previous year: ? 6 million). The prior-year figure was significantly below the long-term average. In particular, the higher additions to risk provisioning reflect the risks that still exist in connection with the aftereffects of the European debt crisis.
Tax income amounted to ? 110 million in the period under review (previous year: tax expense of ? 4 million). The recognition of deferred taxes in profit or loss resulted in income of ? 83 million. The reversal of tax provisions no longer required led to income of ? 31 million. The expenses for current and other taxes amounted to ? 4 million.
Total assets amounted to ? 25.8 billion as at 30 September 2013, down on the figure as at 31 March 2013 (? 27.6 billion). As at 30 September 2013, the
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IKB Group had a tier I capital ratio of 11.2% (31 March 2013: 9.6%) and an overall capital ratio of 14.8% (31 March 2013: 13.8%).

Outlook

IKB generated consolidated net income in the first half of 2013/14 and significantly increased its tier I capital. Current developments show that IKB's restructuring is largely complete. The difficulties and restrictions arising from crises that cost a great deal of time and money in the past have now been overcome. Monitoring in connection with the EU's guarantee controlling has been discontinued since IKB fulfilled its conditions. IKB returned the last SoFFin guarantees almost one year ago, and major legal risks resulting from the crisis have been settled.
IKB is further stepping up its focus on the needs of its SME customers.
Despite intensive competition for customer lending, the Bank is maintaining its price and risk standards, and creating value added through expertise and solutions that are tailored to the customer. IKB is building on its long-standing customer relationships and experience. It provides customers with support as a lender, advisor, risk manager and a link to the capital markets. As part of its focus on core business, IKB expects to see a further reduction in total assets
and risk-weighted assets. Thanks to strong demand on the capital market, IKB
is also making good progress in the reduction of non-strategic assets.
Participation in the comprehensive assessment under the European Central Bank's single supervisory mechanism ("balance sheet test") came unexpectedly for IKB, and has resulted in complex management issues, the need to commit significant resources and therefore costs. Among other things, the minimum tier I capital ratio (plus a mark-up of 1% for system relevance) of
8% that was originally to be met by 2019 under the established Basel III
regulations must now be met by the end of 2013. The timeframe was reduced
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surprisingly harshly in a notification from the ECB on 23 October 2013, leaving little opportunity for banks to react. Nonetheless, the Bank plans to comply
with this benchmark as at 31 December 2013. At 11.2%, IKB clearly meets the existing minimum tier I capital ratio of 4%.
The equity and liabilities side of the balance sheet will be characterised by more diverse funding, in which deposit-taking business will be an important component. IKB now has around 50,000 private customers. According to planning, liquidity is ensured with a sufficient buffer.
In particular, the further reduction in administrative expenses will be made more difficult by the expenses for the ECB's comprehensive assessment, which are disproportionately high precisely for a relatively small bank. With total assets of ? 25.8 billion at present, IKB is the smallest participating German bank and will take greater efforts to compensate for these additional administrative costs.
If the positive trend on the capital markets essentially remains intact, the Board of Managing Directors expects the fundamentally positive development seen in the past six months to continue. Over the coming years, the Bank will generate positive operating results from income in its operating business and gains on the realisation of financial instruments that will be used to strengthen common equity tier I capital through the recognition of section 340g HGB reserves. Servicing the compensation agreements of a total amount of
? 1,151.5 million and the value recovery rights of the hybrid investors mean that IKB AG will probably not report any, or only minimal, profit for a long time
to come, even if operating activities are profitable.
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Further details on developments in the first half of the 2013/14 financial year can be found in 2013/14 half-year financial report at
https://www.ikb.de/en/investor-relations/financial-reports.

IKB Deutsche Industriebank AG supports medium-sized enterprises in Germany and Europe with loans, risk management, capital market services and advisory services.

Dr. Jörg Chittka, tel: +49 211 8221-4349;

Armin Baltzer, tel: +49 211 8221-6236, e-mail: presse@ikb.de
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