OLB successfully expands customer business

Oldenburg | 02. März 2021

• Operating income increased - operating result improved
• Effects of coronavirus pandemic still moderate
• Strategic transformation systemically implemented

Oldenburg, March 2, 2021 – Oldenburgische Landesbank AG (OLB) successfully demonstrated its performance in a very challenging 2020 and continued its growth course in customer business. The bank increased operating income to 449.7 million (m) euros as of December 31, 2020 (previous year 420.8 m). As a result, its net operating result improved to 135.5 m euros (previous year 128.8 m euros). OLB responded to the effects of the coronavirus pandemic with comprehensive measures in the organization of its business operations and a focus on consistent risk management. "With our business model, we are profitable and fit for the future - even under these difficult conditions," says Dr. Wolfgang Klein, Chairman of OLB's Board of Managing Directors. 

Advice and liquidity protection especially in demand in pandemic situation
In its contact with customers and in the Bank's internal processes, OLB adapted very quickly to the new requirements in the pandemic situation. Customers were particularly interested in competent advice and financial support to safeguard liquidity. By the end of 2020, OLB had arranged public subsidies, such as KfW Corona aid, with a total volume of around EUR 300 m, and had received commitments from the public agencies involved. 

In its advisory services, OLB is increasingly relying on contact by telephone or video chat, which has been well received by customers, since this means that a personal contact person is available from 7:00 a.m. to 10:00 p.m. Monday through Friday. Opening hours for the general public at the branches are still limited. At the Bank, the imperative is to work from home whenever possible - up to 80 percent of OLB employees use remote working. "With our strategic transformation into a modern ‘Digitalbank Plus’, we are consistently focusing on the digitization of contact channels, product offerings and internal processes," says Dr. Wolfgang Klein, "so we are also now mastering the challenges of this crisis and offering our customers our unrestricted high performance."

Oldenburg advisory center as the backbone of ‘Digitalbank Plus’
The backbone of OLB's multi-channel offering is the Oldenburg Advisory Center, which opened as planned in September 2020 at the new location in downtown Oldenburg. Here, bank employees work on the digital elements of online and mobile banking and in telephone customer service. In addition, as soon as the Corona location will allow, the Oldenburg Advisory Center will offer a meeting place with advice and experience under one roof, with an integrated café and event space.

Successful customer business in all business areas
OLB reached a milestone in the Private Customers segment with the launch of the new advisory center. With more than 5,000 customers, OLB concluded new private construction financing transactions totaling EUR 1.1 billion (bn), an increase of 21 percent (%) over the previous year. The total volume of private construction financing in the portfolio amounted to 6.1 bn euros (previous year: 5.7 bn euros). The volume of installment loans in the portfolio increased by 9% year-on-year to EUR 255.7 m despite a slight decline in new business. Many customers were also active in the securities business in 2020. The 38% year-on-year growth in net fee and commission income from securities business and asset management was driven in particular by the integration of the business of the former Wüstenrot Bank AG Pfandbriefbank.

Overall, after the integration of Bremer Kreditbank AG and Bankhaus Neelmeyer AG, and the merger of Wüstenrot Bank AG Pfandbriefbank into OLB, fiscal 2020 was the first full period of combined business operations under one roof. The effects were also felt in the other business segments. 

In the Corporate & SME segment, securing liquidity had clear priority over investments. Despite this, it was possible to increase operating income by around five percent. The new football financing unit got off to a successful start, achieving a business volume well above expectations in its first year.

In the Specialized Lending business area, which includes acquisition financing, commercial real estate financing and ship financing, restrained business in the wake of the coronavirus pandemic in the first half of 2020 was offset by significant recoveries in subsequent months.

The earnings performance reflects the success in the customer business. OLB continued its growth in the customer lending business. Total customer lendings expanded to EUR 15.5 bn (previous year: EUR 15.1 bn), largely due to growth in mortgage lending and special financing. In terms of customer deposits, the long-standing trend toward deposits with daily maturities continued due to the persistently low level of interest rates. Overall, customer deposits amounted to EUR 13.0 bn (previous year: EUR 12.7 bn). 

Despite the low level of market interest rates, net interest income increased by 6.0% to EUR 336.3 m (previous year: EUR 317.2 m) as a result of the expansion in business volume. Here, the fact that OLB was able to consistently push through higher margins paid off in particular. Net commission income developed positively, with the securities business as the main driver, and increased by 9.4% to EUR 113.3 m (previous year: EUR 103.6 m). 

The significant increase in operating income totaling EUR 449.7 m (previous year: EUR 420.8 m) was offset by a decrease in operating expenses to EUR 295.1 m (previous year: EUR 311.3 m). At year-end 2020, OLB had 2,019 employees (previous year: 2,106). Personnel expenses decreased to EUR 173.2 m (previous year: EUR 177.6 m). OLB continued to invest in modernizing its offerings, services and processes. Expenses for mergers of institutions, on the other hand, were eliminated. Overall, other administrative expenses were reduced to EUR 108.1 m (previous year: EUR 119.0 m). The cost-income ratio improved significantly to 65.6% (previous year: 74.0%). 

Provisions already made for possible loan losses
Since the beginning of the coronavirus pandemic, OLB has continuously and very intensively dealt with the economic impact on its lending business. In the period under review, the pandemic's impact on affected customers did not lead to any noticeable increase in loan deferrals or significantly higher valuation allowances. The bank has accounted for the uncertainties in estimates regarding the further course of the coronavirus pandemic by recognizing an additional risk provision of EUR 23.7 m, bringing the total gross risk provision to EUR 50.7 m as of December 31, 2020. The release of reserves from the fund for general banking risks in accordance with Section 340g of the German Commercial Code (HGB) in the amount of EUR 20.0 m has a compensating effect. In total, the effective net burden of risk provisioning therefore amounts to 30.7 m euros (previous year: 6.8 m euros).

Net income from financial assets decreased to 8.0 m euros, after the previous year had been strongly influenced by realization gains (previous year 41.3 m euros). Extraordinary result of EUR -20.6 m (previous year: EUR 2.0 m) mainly reflects provisions that OLB has set aside for the further implementation of its transformation into ‘Digitalbank Plus’. Profit before taxes was EUR 114.9 m (previous year: EUR 151.0 m).

Very good liquidity position and robust capital base support further growth
OLB's liquidity position was solid at all times in 2020. OLB took advantage of the European Central Bank's TLTRO III program (Targeted Long-Term Refinancing Operation) to raise some EUR 1.79 bn in additional liquidity. OLB thus strengthened its basis for the planned growth in lending. As of December 31, 2020, total assets increased to EUR 21.5 bn (previous year: EUR 19.6 bn). At 12.7%, the tier 1 capital ratio remained well above the regulatory minimum of 8.56% required for OLB. The common equity tier 1 capital ratio rose to 12.2% (previous year: 11.8%). "On the one hand, we are well prepared for further burdens from the coronavirus pandemic, and on the other, our capital strength and earning power put us in a position to realize further growth in the current fiscal year and beyond," says Chief Financial Officer Dr. Rainer Polster.

Forecast dependent on development of coronavirus pandemic
The forecast for fiscal 2021 is largely dependent on the further course of the coronavirus pandemic. Currently, OLB expects net income for fiscal year 2021 to be in a corridor moderately around the earnings level for fiscal 2020.

The figures stated in this release are based on the audited annual financial statements. Publication of the approved annual financial statements on OLB's website is scheduled for Friday, March 26, 2021.