WestLB profit to disappoint
GERMAN state-backed bank WestLB expects earnings in the fourth quarter of 2009 to be below average, mainly because of the cost of restructuring to hive off assets into an €85bn (£76.2bn) “bad bank”.
In an update ahead of its fourth quarter results, the bank said all the decisions on splitting the bank into a core operation and a ring-fenced bad bank were due to be made by the end of November.
It has already had €6bn of assets guaranteed by German bank rescue fund Soffin in the first step of the plan, for which WestLB provided a pro-rata counter guarantee of €4bn. The entire portfolio is expected to be ring-fenced by 30 April 2010, with retroactive effect as of 1 January 2010.
Chairman Dietrich Voigtländer said: “With the agreements signed in September, we have now passed an important milestone in reducing our risk and streamlining the balance sheet significantly.
“We are currently engaged in constructive talks regarding a permanent ring-fenced solution, which are due to be concluded by the end of November. The core bank, which will focus on profitable business with customers, is now beginning to take shape.”
It posted pre-tax profits of €262m for the first nine months of the year, down from €604m for the same period last year. However last year’s figures were boosted by the transfer of €962m impaired structured securities portfolios to a special purpose vehicle, the bank said.
This year’s figures had been hit by impairment charges but cutting administrative expenses by 17 per cent boosted operating income by 39 per cent year-on-year to €1.7bn.