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98 Report on the Bank and the Group
} Net interest income
} Net commission
income
} Financial result
} Administrative
expenses
Net interest income was affected by both general economic conditions and company-
specific factors. Income from the investment of own funds shrank as a result of the sus-
tained, historically low interest rate level. Currency-based interest income also suffered
under the still weak US dollar. Net interest income was also negatively affected by the
continuing reduction of risk assets, as well as by the fact that additional loans were
put on a non-accrual basis. The average margin dropped, due in part to the expansion
of low-margin interbank business with a view to stockpiling liquidity for the following
the abolition of the state guarantee mechanisms on 18 July 2005. On the other hand,
the Bank reported an enhanced margin in new customer credit business in 2004. Cer-
tain expenditure was incurred for closing liquidity gaps and stockpiling liquidity. These
future-oriented measures are designed to enhance performance in the coming years.
Net interest income at Group level totalled EUR 2.03 billion, down 6.4 percent on the
previous year’s figure of EUR 2.169 billion. At BayernLB, this position fell by 13.1 per-
cent from EUR 1.608 billion to EUR 1.398 billion.
At EUR 340 million, the Group’s net commission income was virtually unchanged
(against the previous year’s EUR 343 million). BayernLB, on the other hand, reported
a 5 percent reduction to EUR 240 million. This was due to the further downsizing of
customer credit business as well as lower commissions from securities transactions.
In 2004, the financial markets were characterised by volatile interest markets that ral-
lied strongly in the second half, buoyant and volatile equity markets and dynamic for-
eign exchange markets. Against this backdrop, BayernLB succeeded in generating
EUR 92 million in net income from financial transactions, compared to EUR 105 million
in the previous year. The Group’s financial result rose by 19.7 percent (up EUR 21 mil-
lion) to EUR 126 million.
The varying performances of BayernLB and the Group are also reflected by administra-
tive expenses. Group figures are affected, amongst other factors, by the merger of the
Hungarian Konzumbank into MKB, concluded on 1 July 2004. The slight increase in
administrative expenditure at Group level, by 1.9 percent to EUR 1.208 billion, con-
trasts with BayernLB’s further reduction of this position, namely by 3.7 percent to
EUR 830 million.
Group personnel expenses increased by 4.9 percent to EUR 689 million. In addition to
the acquisition-oriented activities of the subsidiaries, this can also be attributed to the
aforementioned merger of the newly acquired Konzumbank with MKB, which added
260 employees to the BayernLB Group headcount. At year-end 2004, the Group sub-
sidiaries together had 375 employees more than at the end of the previous year. Per-
sonnel expenses at BayernLB were maintained at the previous year’s modest level
(EUR 475 million compared to EUR 472 million in the previous year). Remuneration
levels for both standard pay scale employees and those under the Bank’s own pay
scale were increased commensurately with the significantly improved earnings posi-
tion. As per reference day, the headcount was down by 496 employees.