BayernLB realigns business segments to more strictly divide core from non-core business in a move to further implement EU Commission ruling
23. November 2012
Munich - As of 1 January 2013, BayernLB will realign its business segments to systematically and fully segregate its core business activities from those which are being discontinued or disposed of under its new business strategy. The new segment structure will continue in force even after the conditions of the EU Commission's state aid ruling have been completely fulfilled.
The EU Commission's ruling on 25 July of this year has provided the planning certainty needed to more strictly than before divide the new BayernLB's core business from its non-core business.
The Restructuring Unit (RU), founded back in mid-2009 and containing a large number of lending and securities portfolio, will form the foundation of the new segregation plan. Also included are transactions which are still earning a decent return but which are no longer suitable to the Bank's business model. The current Restructuring Unit will be completely integrated into a new segment to be named the Non-Core Unit (NCU). In addition, shareholdings which have to be disposed of under the conditions of the EU state aid ruling will also be assigned to this new segment as well as other business lines which are still profitable but must be discontinued under the ruling.
In addition to a clear and transparent division of portfolios between the new BayernLB and the NCU, all earnings and expenses will also be allocated to one or the other. Whereas in the past part of the earnings and expenses from business activities which will form the new NCU have been reported under other segments, under the new segment alignment the core operating business will be strictly walled off from the areas being wound down. Expenses charged to the NCU will likewise melt away as shareholdings are disposed of and other business activities are run down or cut back.
At the same time, these measures will be supplemented by a programme to raise efficiency. The aim is to provide the new BayernLB with leaner, more efficient business processes as it continues to transform itself into a bank focused on serving customers. The basis for this streamlining process was established a few weeks ago when all back office activities were bundled into a single unit and the post of Chief Operating Officer was created.
Deutsche Kreditbank (DKB), the highly successful subsidiary serving retail and Mittelstand customers, is an integral part of the new core bank. Under the new plan it will be assigned to its own segment. This move gives proper recognition to the larger role DKB plays under BayernLB's new business model. Under the current segment organisation, DKB forms part of the Corporates, Mittelstand & Retail Customers segment.
Gerd Haeusler, BayernLB's CEO, said, "The division of the Bank into new segments is the next major step in realigning BayernLB following the agreement with the European Commission. The plan lets us see today what BayernLB will look like in 2015 after the EU Commission's conditions have been fulfilled."
Under the terms of the EU Commission's state aid ruling, BayernLB has agreed to cut its total assets to roughly half of the amount it held in 2008 and discontinue a number of profitable business activities. To do so, BayernLB will build on the success it has already achieved by focussing on its core business. Stakes in 30 businesses which are not part of the core business have already been disposed of. In addition, the volume of the lending and securities portfolios assigned to the RU has been systematically pared down from EUR 67 billion in 2009 to approximately EUR 20 billion at the end of September 2012.