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BayernLB begins repaying state aid to Bavaria

23 November 2012

Munich - BayernLB's Board of Management has informed the Board of Administration that the Bank today made its first payment in the amount of EUR 350 million to the Free State of Bavaria for state aid received in 2008. BayernLB has thus begun to fulfil one of the major conditions laid down by the EU Commission in its ruling on state aid issued at the end of July 2012.

"This first repayment tranche is an important signal to Bavaria's taxpayers. It underscores the fact that BayernLB is on the right track financially and is able to repay the state aid it received. This is also the result of the changeover to a much smaller but more customer-oriented and lower-risk business model. BayernLB will continue to follow this path in the coming years," said Dr Markus Söder, Chairman of BayernLB's Board of Administration and Bavarian Minister of Finance.

To comply with the terms of the EU decision, BayernLB must pay back a total of nearly EUR 5 billion to the Free State of Bavaria by 2019. Bavaria injected a total of EUR 10 billion in capital into BayernLB at the end of 2008 and guaranteed it against losses in its ABS portfolio by means of the "Umbrella" CDS.

BayernLB CEO Gerd Haeusler stated, "Today's announcement of the first repayment is visible proof that our business model as a smaller, highly capable financier to corporate and real estate customers and reliable partner of the savings banks is bearing fruit. The Board of Management is pleased that BayernLB is able to begin repaying Bavaria's taxpayers only a few months after the EU Commission handed down its ruling on state aid. This is another major step in implementing the EU Commission's tough conditions."

The repayment is being made from provisions established in 2010 and 2011 which have already been fully disclosed in BayernLB's financial reports. In mid-November BayernLB reported pre-tax earnings of EUR 271 million for the first nine months of 2012, thus underlining the positive trend in its core and customer-related business. Moreover, the Bank currently expects to also report positive IFRS earnings for full-year 2012.

The Board of Administration and Board of Management both agree that a solid capital base is a prerequisite for repayments to the Free State of Bavaria. As at 30 September 2012, BayernLB had solid capital base with a core tier I ratio of 10.9 percent as defined by the European Banking Authority (EBA).


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