· Created Date: 4/2/2020 7:11:38 PM

Munich, 3 April 2020

Annual Results Press Conference

BayernLB Group 2019Solid earnings – basis for new strategy bolstered

Stephan Winkelmeier (CEO) and

Dr Markus Wiegelmann (CFO, COO)

Contents › Highlights› Results of operations

› Strategy & outlook

2

› Profit before taxes at EUR 653 m in 2019, at the upper end of the forecast,

consolidated profit after taxes at EUR 453 m

› Earnings once again driven partly by one-off income, although this was

lower than the previous year

› Net interest and net commission income on par with FY 2018 at approx.

EUR 2 bn

› DKB and real estate business are key earnings drivers

› Capital base remains sound, risk profile improved further

› Distribution to owners postponed for now in line with the recommendation

by the European Central Bank

› Strategic realignment launched successfully

Where we stand: sound operating performance, financially robust, on the right track strategically

HIGHLIGHTS

› Satisfactory earnings, but market conditions remain tough and the banking sector is still facing huge challenges

› Solid foundation for new strategy, which we have been working on implementing since the beginning of the year

› BayernLB is still the stable, reliable partner its customers have come to expect, even in tough times

3

How our segments performed in 2019 – and how we are strategically positioning them

Profit before taxes in EUR m

161

13

2018 2019


284 298

20192018


12

(21)

2018 2019


317 301

2018 2019

Corporates & Mittelstand Real Estate & Savings

Banks/Association

Financial Markets DKB

STREAMLINING GROWTH REALIGNMMENT GROWTH

FUTURE STRATEGIC POSITIONING IN THE GROUP

4

5

We will continue to be a reliable

partner to our customers in

Bavaria and Germany.

We will remain the principal bank

to the Free State of Bavaria and

strong partner to the public

sector.

We will still be the central bank of

the Bavarian savings banks, firmly

rooted in the S-Finanzgruppe.

We will invest in infrastructure

and IT at the core Bank and DKB

and will set ourselves up as

modern and secure.

At the same time we will

considerably reduce our cost

base, especially in the core Bank.

We will increase the efficiency of

the platform in Munich and thereby

also support the ongoing growth of

our subsidiary, DKB.

We will further expand our position

in real estate finance and

structured asset finance.

We will focus on profitable and

future-oriented sectors in our

corporates and capital market

business.

We will double our customer base

in DKB’s retail business.

We will focus our business more

closely on sustainability.

How we will achieve sustainable success on our own terms in future

We are focusing on our

STRENGTHS

We are improving our

EFFICIENCY

We are a strong

PARTNER

“Our strategic goal:

we are building the BayernLB

bank of the future and developing

the Group into a streamlined,

specialised and innovative digital

bank.”

6



7

Earnings in line with our expectations, decrease due to lower one-off income

652869

653

20182017 2019

Profit/loss before taxes

EUR mConsolidated profit/loss

EUR m

CIR

In %

RoE

In %

677822

463

20192017 2018

59,9 61,9 65,8

20182017 2019

7,49,4

6,7

2017 2018 2019

8

9

Solid capital base despite moderate growth

Total assets

EUR bnRWAs

EUR bn

CET1 capital

EUR bn

CET1 capital ratio

in %

2017

214.5

2018

226.0

2019

220.2 64.665.6

20182017

61.4

2019

2017

10.1 1

2018 2019

10.09.4 15.2

20192017

15.3

2018

15.6 1

1 CET1 ratio for 2019 as reported

Net interest and net commission income on par with FY 2018 at approx. EUR 2 bn

› Net interest income in line with our expectations in

an intensely competitive environment and

unchanged year on year

› Increase of approx. 6% driven in particular by

income from fund business at Real I.S. and

BayernInvest

Net interest income

EUR m

Net commission income

EUR m

1.659 1.742 1.733

2017 2018 2019

263 270 287

2017 2018 2019

10

Gains or losses on fair value measurement, hedge accounting and financial investments, and other income and expenses

› Unfavourable market performance weighed on

gains or losses on fair value measurement

› This was offset by good gains on financial

investments

› Previous-year figure included a high extraordinary

gain from a restructuring exposure

Sum of gains or losses on FV measurement,

hedge accounting and financial investments

EUR m

87111

18

2017 20192018

› Other income and expenses benefits from high

income from interest on tax receivables

Other income and expenses

EUR m

91 76

156

20192017 2018

11

Expenses for the bank levy and deposit guarantee scheme and gains or losses on restructuring

› Rise due to strategic realignment of the business

model, including restructuring the capital market

business

Gains or losses on

restructuring

EUR m

2 2 (217)

2017 20192018

› Expenses for the bank levy approx. EUR 56 m

(FY 2018: EUR 52 m)

› Expenses for the deposit guarantee scheme approx.

EUR 79 m (FY 2018: EUR 51 m); increase reflects

cost of support measures

Expenses for the bank levy and deposit

guarantee scheme

EUR m

(98) (103) (134)

20182017 2019

12

Higher administrative expenses; very low risk provisions

Risk provisions

EUR m

› Higher expenses for major regulatory projects and

investments in sales activities, digitalisation and

Group-wide strategic initiatives

› Increased expenses also at DKB due to faster-than-

planned customer growth

› Improved cost efficiency key goal of the strategy

project

Administrative expenses

EUR m

(-1.258) (-1.356) (-1.446)

2017 2018 2019

› Risk provisions buoyed by high releases and

recoveries on written down receivables

› NPL ratio remains very good at 0.7%

(94)

135

251

2017 2018 2019

13

Major earnings contributions from real estate business and DKB

DKB

317 301

Corporates &

Mittelstand

161

13

Real Estate &

Savings Banks/

Association

284 298

Central Areas &

Others

96 63

Profit before taxes by segment

EUR m

Financial Markets

12 (21)

2018 2019

› The tough market environment and measurement

losses weighed on performance in Financial

Markets; restructuring capital market business is a

focus of the new strategy

› Earnings at DKB fell slightly as a result of

persistently low interest rates coupled with strategic

investment in digitalisation and customer service

with a view to continual customer growth

› Corporates & Mittelstand posted lower earnings in a

very challenging market environment. Earnings in

the previous year were favoured by high releases of

risk provisions

› Real Estate & SB/Association posted a climb in

operating earnings, largely due to good new

business in the Real Estate Division; in addition

there was a release of risk provisions from large

restructuring exposures

14

Corporates & Mittelstand

› Profit before taxes fell to EUR 13 m (FY 2018:

EUR 161 m) as a result of high releases of risk

provisions and recoveries on written down

receivables amounting to EUR 55 m in the year

before

› Performance was stable overall in a difficult

market environment

› Net interest and net commission income

unchanged year on year despite high pressure

on margins and a challenging competitive

environment

› Income from the sale of Financial Markets

products to customers exceeded that of the

previous year

› Administrative expenses were higher, driven by

Bank-wide capex for sales and projects

› Lower RWAs year on year already reflect the

new, streamlined strategy

RoE

In %

CIR

In %

73,8 77,3

2018 2019

6,3

0,4

2018 2019

EUR m 2019 2018

Net interest income 265 265

Risk provisions in the credit

business(81) 55

Net commission income 103 108

Other earnings components 42 29

Administrative expenses (318) (297)

Profit/loss before taxes 13 161

Risk-weighted assets (RWAs) 19,854 20,971

15

Real Estate & Savings Banks/Association

› Profit before taxes rose to EUR 298 m (FY

2018: EUR 284 m), largely driven by good new

business and positive operating performance in

the Real Estate Division

› Earnings from net interest and net commission

income were up year on year at approx.

EUR 416 m (FY 2018: EUR 385 m)

› The significantly positive risk provisions in the

previous year were matched by income of a

similar amount from the sale of a restructuring

exposure measured at fair value in other

earnings components

› The increase in administrative expenses is the

result of Bank-wide capex for sales and

projects

› Earnings at BayernLabo climbed to EUR 51 m

(FY 2018: EUR 45 m), partly due to higher net

interest income

› Operating earnings at Real I.S. climbed to

EUR 16 m (FY 2018: EUR 13 m)

RoE

In %

CIR

In %

50,561,8

2018 2019

27,422,7

2018 2019

EUR m 2019 2018



business117 17


Other earnings components 59 156




16

Financial Markets

› Profit before taxes fell to EUR –21 m (FY 2018:

EUR 12 m), mainly as a result of measurement

losses on issues and derivatives, which were

positive in the previous year

› Profits from trading and transactions with

financial institutions were higher in spite of a still

difficult market environment

› The earnings from Financial Markets products

on behalf of the other customer-serving

business segments were up; they continued to

be reported under the relevant segments

› Administrative expenses rose due to the

increase in costs to meet regulatory

requirements

› RWAs declined due to lower volumes and

market values of derivatives, lower money

market volume at the end of the year and

methodical optimisation measures

› Profit before taxes at BayernInvest was up year

on year at EUR 8 m (FY 2018: EUR 7 m)

RoE

In %

CIR

In %

93,8

2018 2019

>100.0 1,1

-1,6

2018 2019

EUR m 2019 2018



business2 (3)


Other earnings components (36) 20


Profit/loss before taxes (21) 12


17

DKB

› Profit before taxes fell to EUR 301 m (FY 2018:

EUR 317 m), driven mainly by higher admini-

strative expenses from strategic investments in

digitalisation and customer service and increased

costs for meeting regulatory requirements

› Expected drop in net interest income due to

market-related narrowing of the interest margin

was more than offset by measurement gains on

funds and investments

› Other earnings components were subdued by

expenses for the bank levy and deposit guarantee

scheme (FY 2019: loss of EUR 47 m; FY 2018:

loss of EUR 37 m)

› Risk provisions improved on the previous year at

EUR 58 m (FY 2018: EUR 105 m) due to the good

economy and better portfolio quality

› Profit before taxes of Bayern Card-Services

declined to EUR 10 m (FY 2018: EUR 14 m), as

the year before included income from a sale of an

equity investment, operating performance was

stable

RoE

In %

CIR

In %

52,4 58,7

2018 2019

10,58,9

2018 2019

EUR m 2019 2018



business(58) (105)

Net commission income (2) 0

Other earnings components (22) (49)




18

Central Areas & Others

› Profit before taxes was EUR 63 m (FY 2018:

EUR 96 m), largely driven by high recoveries

on written down receivables in risk provisions of

EUR 271 m

› Other income and expenses was impacted by

Gains from one-off tax-related income

Restructuring provisions of EUR 217 m were

made in relation to the strategic streamlining

of BayernLB

Expenses for the bank levy rose to

EUR 87 m (FY 2018: EUR 65 m)

› Administrative expenses fell to EUR 27 m (FY

2018: EUR 56 m) due to extraordinary

writedowns and one-off expenses in the

previous year

EUR m 2019 2018



business271 171

Net commission income (8) (7)

Other earnings components (216) (78)




19

20

CET1 ratio well above SREP minimum ratios

4,50%

2,00%

2,50%1,00%

10.00%

2019

CET1 ratio

2020

CET1 SREP requirement

15.60%1

› Fully loaded CET1 ratio of 15.60% on 31 December

2019 was well above the SREP minimum ratio for

2020 of 10.0%

› The minimum CET1 ratio set by the CRR (Pillar 1

requirement) is 4.50%

› On top of that is an individual premium (Pillar 2

requirement) of 2.00% for 2020

› Additional capital buffers:

Capital conservation buffer: 2.50%: may be

temporarily undershot due to the corona crisis

Buffer for national, systemically important

institutions: 1.00%

Buffer for national system relevance

Capital conservation buffer

Pillar 2 requirement

Pillar 1 requirement

1 CET1 ratio for 2019 as reported



21

Our capital base: strongcornerstone of the BayernLB bank of the future

24,7

39,6

~ 32.0

0.3

~ 35.5

20242019

~0.5

~ 68.064.6

RWAs

EUR bn

15.6 >14CET1 ratio

in %

Focus

› Maintain volume of RWAs on

par with today in the target

vision

› Include investment and

restructuring costs in capital

planning

› Grow capital base, mainly via

retention of earnings

› Finance growth at DKB from the

Bank’s own resources

› Ensure ongoing ability to pay a

dividend

DKB

BayernLB core Bank

Other subsidiaries

6.7 ~ 8RoE

in %

22

Our future structure:three strong segments

Corporates & Markets DKBReal Estate /

Savings Banks & FI

› Special lender with in-depth expertise in sectors of the

future

› Advanced structuring expertise in financing:

structured asset finance and

debt capital markets (DCM)

› Streamlined offering of Financial Markets’ risk

management products

› Reliable real estate lender with special consulting expertise

in Germany and selected

foreign markets

› Central bank of the Bavarian savings banks and a strong

partner to the public sector and

financial institutions

› Innovative tech bank,which inspires its customers as

a digital companion and

sustainable partner

(#geldverbesserer)

› Strong earnings growththrough its target to double

customer numbers to 8 million

23

Corporates & Markets: bundled expertise for our corporate customers

Leaders in structured asset finance

› Extensive product expertise in structured asset finance with a focus

on Germany and Europe

› Support for customers in capital market transactions, particularly in

the entire range of debt capital markets (DCM) solutions

Advanced consulting and product

competence from a single source

› Customers served by specific

sector teams that combine all the

related consulting and product

competence

› The sector teams’ complete

responsibility creates real added

value for customers

Special lender with in-

depth expertise in sectors

of the future

Firmly anchored in Germany’s

sectors of the future

› Leading sector expertise in

mobility, energy, technology,

mechanical engineering, and

construction and basic

materials

› Focused on the megatrends of

decarbonisation and

digitalisation – support for our

customers during the

transformation

24

2019

City of Nuremberg

Construction loan and long-

term financing for Bertold-

Brecht-Gymnasium

Nuremberg

EUR 127 m

August 2019

Gebhardt-Stahl GmbH

Werl

Leveraged buyout

financing for

Bencis Capital Partners

EUR 40 m

Mandated Lead Arranger,

Facility & Security Agent

October 2019

Krones AG

Neutraubling

Syndicated loan

EUR 500 m

Bookrunner,

Mandated Lead Arranger

February 2019

Datagroup SE

Pliezhausen

Schuldschein

EUR 69 m

Tenor 5 and 7 years

Joint Lead Arranger

2019

Infineon Technologies AG

Neubiberg

M&A facility

EUR 5.1 bn

USD 3.3 bn


September 2019

Go-Ahead

Verkehrsgesellschaft

Deutschland GmbH

Berlin

Financing of 56 Siemens

trains for

“E-Netz Augsburg 1”

EUR 389 m


July 2019

EnBW Energie Baden-

Württemberg AG

EUR 500 m/500 m

1.125% - 1.625%

60.25NC5.25/60NC8

Joint Lead Arranger

August 2019

Porsche AG

Stuttgart

Green Schuldschein

EUR 1 bn

Tenor 5, 7 and 10 years

Joint Lead Arranger

October 2019

E.ON SE

Syndicated loan

EUR 3.5 bn

Bookrunner,


Our expertise in the focal sectors: selected mandates & transactions

Logo Logo Logo

Logo

ENERGY MOBILITY TECHNOLOGY MECHANICAL

ENGINEERING

CONSTRUCTION AND

BASIC MATERIALS

2019

Voestalpine AG

Linz

ESG-linked

syndicated loan

EUR 1 bn

Mandated Lead Arranger,

Facility Agent

Tombstones in Abstimmung

25

Real estate: strong basis and high potential

Reliable real estate lender with

special consulting expertise in

Germany and selected foreign

markets

Great expertise

› Experience and understanding of customer needs thanks to long-

standing relationships

› Strong expertise in credit structuring

› Skills over and above simple real estate financing (360° real estate

expertise)

› Strong growth potential

Reliable partner

› Support for customers throughout

the entire process

› Personal support and tailor-made

solutions in accordance with

customer needs

Worldwide network

› Strongly rooted in Germany,

especially in Bavaria

› Experts and personal contact

persons from BayernLB also

available locally at our foreign

branches

26

Selected real estate finance deals in 2019

27

Savings banks & FI: stable pillar

A strong and reliable partner to the

(Bavarian) savings banks

› Central bank function for Bavarian

savings banks with a traditionally

strong network in the sector and long-

standing customer relationships

› Reliable support based on in-depth

knowledge of the specific

requirements and competitive product

offering

Good network of financial

institutions

› Good access to institutional

investors, esp. financial

intermediaries

› High-quality support for all

financial institutions

customers from a single

source

Central bank of the Bavarian

savings banks and strong

partner to the public sector

and financial institutions

High-quality, competitive product

offering in key areas

› Competitive product offering in key

areas to provide the best possible

support to the (Bavarian) savings

banks

› Great expertise in selected products

for financial institutions (market leader

in LoC business for insurers)

A dependable partner to the

public sector

› Principal bank for the Free

State of Bavaria

› Close support for municipal

companies and

municipalities outside

Bavaria and other public-

sector institutions

28

DKB: top growth driver

Strict focus on customers

› Strong customer orientation as a

fundamental part of the DKB DNA

› Many years of stable customer

growth as the basis for scaling up:

customer base to be doubled by

2024

Outstanding product offering with a

strong sustainability focus

› Attractive products for retail customers

(e.g. free account) and business

customers (e.g. tailor-made loans)

› Range of sustainable products and

targeted investment in sustainable

projects under the #geldverbesserer

model

We are actively shaping

the future in line with our

slogan #geldverbesserer

(“your money can

do more”)

Strong partner for business

customers

› Partner for business customers

with regional roots, close network,

particularly of municipal

companies

› Many years of in-depth expertise

in the segments we are

concentrating on (housing,

renewable energy, healthcare,

agriculture, education, etc.)

Innovative partner for customers

› Digital companion for retail and

business customers

› Providing inspiration and gaining

new customers via a competitive

digital offering with an strong

customer experience

29

DKB’s strategic focus – on the way to a tech bank

Increase customer base to >8 million as the basis for long-term earnings potential

Strong

growth

Strong customer experience

Create excellence in all key touch points with our customers for a captivating user experience and incorporate this into the brand experience –sustainability as a USP

Refine the organisational design and the cross-functional cooperation in the DKB Group to be more agile

Viable organisation

Enhance the current process landscape, e.g. provide for automatic transaction processing and faster credit decisions

Scalable and accelerated

business

Secure long-term viability

by investing in four key

areas

30

› BayernLB’s commitment to sustainability issues dates

back more than 20 years

› Environmental protection, social aspects and transparent

corporate governance are firmly entrenched among all

Group members as a common understanding of a

sustainable BayernLB

› Leading ESG rating agencies regularly confirm that

BayernLB's commitment to sustainable development is

clearly above average when compared with the industry

as a whole. The Group has once again achieved a top

10 ranking and therefore oekom prime status, out of

95 international banks rated by ISS-ESG

› Rated separately, DKB is rated best in its sector and has

been granted the title Industry Leader by ISS-ESG;

BayernLabo also qualifies for the coveted prime status

Committed to sustainability

Sustainability is a shared interest with customers as a

contribution to the climate protection goals under the public

mandate and as a strategic growth driver in the BayernLB Group31

Sustainability: green finance as a strategic growth driver for the BayernLB bank of the future

› BayernLB already offers the entire green finance product range

› Our expertise is evident in our acclaimed solutions, such as the

first social corporate Schuldschein and the market’s largest

green Schuldschein to date at EUR 1 bn, both of which were

named MTNI deal of the year

› DKB’s #geldverbesserer initiative, which has met with an

excellent response, shows how customers and banks can have

a joint impact on sustainable issues

› Three separate Group units – BayernLB, LABO und DKB – act

as issuers of green bonds and social bonds

› Corporate citizenship with attractive solutions: DKB’s

successful blue social bond and crowd financing solution;

BayernLB as the mandated lead arranger for the issue of the

Munich city bond

› 100% ESG integration in BayernInvest’s investment process for

new business

› Sustainability as a potential earnings driver: opens up new

business potential with existing customer groups and markets

of the future, strengthens the funding base, further improves

portfolio quality

We will support the

transformation of the

real economy with

sustainability-related

products

32

Major investment in the future...

› Core Bank: Invest in further increasing sector expertise in

business with corporate, real estate and special

customers; in addition, invest a triple-digit million

sum in infrastructure and IT to significantly

increase the efficiency of the platform in Munich

› DKB: Invest EUR 400 m in growth and in the future over

the next five years, both to modernise and

upgrade the IT systems and to achieve

considerable growth in retail and business

customers

Considerably reduce costs in the core Bank by 2024

› Streamline activities in the capital market and

corporate lending business, incl. reducing the range

of products and complexity in the trading and credit

processes

› Generate savings in the central areas and in IT costs

by significantly simplifying the IT landscape

› As announced in 2019, more socially responsible job

cuts will be required on top of the 400 already

mentioned, although it is not yet possible to put a

number on this. BayernLB is currently developing a

range of measures to optimise costs, which will only

be fleshed out in full in the next few weeks. However,

the Bank has ruled out redundancies until autumn

2022

INVESTMENT COSTS

…and efficiency improvements

33

Our transformation: systematic implementation to follow successful start

› Transformation programme spanning

several years set up for BayernLB core

Bank

› Growth initiatives at DKB and expansion

of IT launched

› Growth initiatives in the core Bank in real

estate finance and structured asset

finance started

› Streamlining in Corporates business

underway

› Realignment of Financial Markets put in

motion, new structures established

Implementation has already begun

› Modernisation and development of IT at DKB

and transformation of IT at the core Bank will

be pushed forward in 2020

› Targeted growth of sector expertise in the

Corporates business will be gradually rolled out

in this year

› Increase in product expertise in real estate and

structured asset finance is progressing as

planned

› Additional levers to cut costs, optimise

processes and improve efficiency in the core

Bank will be identified as another priority this

year and beyond

Important next steps (excerpts)

34

Global economy in its deepest recession since the Second World War

Forecast from BayernLB Research

› The global economy has taken a hard hit and will probably shed

2% in 2020

› Assuming the pandemic can be contained in Q2, the huge

rescue packages in monetary and fiscal policy should help the

economy to recover in the second half of the year

› As the high level of uncertainty persists, performance on the

financial markets will remain very volatile following the tremor in

March and high-risk assets are likely to hit new lows after their

rally at the end of last month

› In this phase, both the Fed and the ECB will put into effect the

increased liquidity and purchase programmes they have signified

› In addition, the longer the pandemic lasts, the more likely it is

that the fiscal packages will be expanded

Impact of the corona pandemic

35

Outlook

The BayernLB Group faces a period of exceptionally high uncertainty during

2020, especially on account of the corona virus pandemic. Nevertheless it is

already evident that the negative impact on global economic output in the

first half of the year will be colossal, and this will become even more

pronounced the longer the pandemic lasts.

Considering the potential impact on the Bank’s finances, it is not possible to

make a serious earnings forecast for 2020 at the moment.

Furthermore, the transformation programme will entail higher capex than the

previous year and additional charges for the second stage of reducing the

workforce.

36

“Our very sound capital base and

liquidity puts us in a good position to

handle the corona crisis and stand by

our customers as a reliable partner.

With our transformation we will create

the conditions for sustainable success

on our own terms.”

37

Thank you for

your attention

38

Documents

· Created Date: 4/2/2020 7:11:38 PM