A4 für Copyshop GB.indd - Bayerische Landesbank

Group operating expenses were down slightly (by 1.9 percent), falling by EUR 10 mil-
lion to EUR 519 million. Savings, achieved by measures such as the downsizing of
BayernLB’s network of foreign and domestic entities, helped to offset the upward
trend in operating expenses amongst the Group’s subsidiaries. In BayernLB, operating
expenses were down 8.9 percent to EUR 355 million. Compared to 2002, this repre-
sents a 25 percent reduction.
In 2004, the target cost-income ratio (CIR) of 45 percent was once again achieved. The
Group’s ratio was 44.4 percent (up 1.1 percentage points), while BayernLB achieved a
ratio of 44.3 percent (up 3.1 percentage points). As per the calculation formula cur-
rently used, the balance of other operating expenses and income was incorporated
into calculation of the CIR. The previous year’s figures were adjusted accordingly.
The balance of other operating expenses and income was up 84.3 percent to EUR 223
million in the Group, and 15.4 percent to EUR 142 million at BayernLB. This was largely
due to tax refunds in BayernLB’s favour, as well as one-off income posted by DKB. This
income was attributable to the revaluation of risks due to the early termination of pay-
ment obligations pursuant to the D-Mark-Bilanzgesetz (legislation created in connec-
tion with German reunification).
The low risk provisioning requirements in 2004 are attributable to the realignment of
the credit portfolio, essentially carried out in the preceding years, the new risk policy
and the thence lower risk costs arising from risk clusters. Risk provisioning expenditure
amounted to EUR 157 million in the Group, compared to EUR 953 million in the previ-
ous year. BayernLB, meanwhile, posted an income of EUR 76 million, compared to the
previous year’s expenditure of EUR 697 million. Claims in respect of EUR 846 million
at Group level and EUR 720 million at BayernLB were charged off from provisions for
counterparty and country risks. As per 31 December 2004, provisions thus amounted
to EUR 4.382 billion at Group level, compared to EUR 5.038 billion in the previous year,
and EUR 3.384 billion at BayernLB, compared to EUR 4.249 billion in the previous year.
For the first time in three years, both BayernLB and the Group were in a position to
bolster reserves.
Following comprehensive realignment of credit risks over recent years, in 2004, the
participations portfolio was subjected to stringent assessment of its profitability.
Value adjustments and assumptions of losses led to a negative revaluation result of
EUR –404 million at Group level (compared to EUR –52 million in the previous year),
and EUR –303 million at BayernLB (EUR –42 million in the previous year).
After reinforcement of hidden reserves, the operating profit (after risk provisioning /
revaluation) was one of the highest ever posted in BayernLB’s history. Compared with
the previous year, there was an increase of around two thirds both at Group level and
in BayernLB. At EUR 950 million, the Group figure is 73.7 percent up on the previous
year, while BayernLB, with EUR 815 million, can report a 66.7 percent increase.
Report on the Bank and the Group
99
} Cost-income ratio
} Risk provisioning
and revaluation
result
} Operating profit
considerably
improved