Annual Report 2011 (separate financial statements)

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But the Corporates segment is expected to continue to perform relatively independently of the
sovereign debt crisis, and the economies that are key for BayernLB’s core business should enjoy
further growth, albeit at varying rates, in 2012. The Bank therefore essentially expects no major
restrictions on its core business activities; however, negative effects or charges as a result of
additional risk provisioning or potential haircuts as part of rescue packages for individual states
cannot be ruled out.
Other exceptional charges may emerge, in particular from the absence of any economic recovery
in eastern and south-eastern Europe and the ongoing uncertainties associated with the macroeconomic
and political situation in Hungary. These factors may affect business performance and
profitability at subsidiary MKB in 2012 and even 2013. As well as the continuing gloom about
economic prospects, the disappearance of part of the lending business as the Foreign Currency
Loan Repayment Act is implemented will also affect the future earnings prospects at MKB, with
corresponding consequences for BayernLB.
The financial transactions tax currently being mooted could, in conjunction with the disproportionately
high existing bank levy, hamper the competitiveness of German banks if the tax is not
introduced worldwide.
Despite the turbulent performance of the capital markets, BayernLB assumes it will again be able
to meet its refinancing needs as scheduled and relatively cheaply. Given the relative high amount
of excess liabilities, the Bank expects the refinancing need in 2012 and 2013 to be below the level
of the previous year. Instead of setting target volumes, liquidity management will therefore focus
on implementing strategic measures to improve the quality and composition of liabilities.
Preparations for the future ratios under Basel III are also being proactively driven forward. The
cheap liquidity the central banks have pumped into the markets has generally pushed spreads
down to very low levels. In the case of BayernLB they fell below the level seen before the Moody’s
downgrade, so the Bank expects no negative impact on its liquidity situation in 2012.
For additional information on the likely future trends in the risk situation, we refer you to the
relevant section of the risk report.
Despite the uncertain environment over the outlook period indicated above, the Bank is confident
overall that it has taken the measures needed to improve its financial performance and position
in 2012 and 2013 through its new business model and the changes implemented in its wake.
The core capital ratio is expected to be stable and remain above 10 percent. The possibility cannot
be excluded that any change in the conditions underlying the outlook may affect BayernLB,
and its financial position and performance.
BayernLB . 2011 Annual Report and Accounts