Munich, 16 August 2019

BayernLB Group financial report H1 2019 BayernLB continues to post solid performance

Contents › Results of operations

› Detailed charts

2

3

Solid capital base:

CET1 ratio at 14.1%1

H1 2019 Earnings boosted by one-off

income, which was, however,

lower than the year-before

period

Operating income on target – net

interest and net commission income on

par with H1 2018 at over EUR 1 bn

Good profit before taxes of EUR 315 m

after charges for the bank levy and deposit

guarantee scheme of EUR 119 m

Good portfolio quality results in low risk

provisions; NPL ratio remains very low

at 0.7%

1 Before acceptance of the positive effects from the half-yearly financial statements by the supervisory authorities

4

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

452

315

H1 2019 H1 2018

Profit before taxes

EUR m Consolidated profit/loss

EUR m

CIR

In %

RoE

In %

342 294

H1 2018 H1 2019

H1 2018 H1 2019

59.5 61.2

H1 2018 H1 2019

10.0

6.5

5

Sound capital base enables moderate growth

Total assets

EUR bn RWAs

EUR bn

CET1 capital

EUR bn

CET1 capital ratio

in %

Dec 2018

240.3

Jun 2019

220.2 65.6

Dec 2018 Jun 2019

67.6

Jun 2019 Dec 2018

10.0 9.6 1

Dec 2018

14.1 1

Jun 2019

15.2

1 Before acceptance of the positive effects from the half-yearly financial statements by the supervisory authorities

6

Net interest and net commission income on par with H1 2018 at approx. EUR 1 bn

› Net interest income in line with our expectations in

an intensely competitive environment

› Net interest income rose at BayernLB, while it fell

slightly at DKB

› Increase of some 7%

› Positive contribution from Group subsidiaries

Net interest income

EUR m

Net commission income

EUR m

879 870

H1 2019 H1 2018

132 141

H1 2018 H1 2019

7

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

› Other income and expenses boosted by one-off

income related to a tax credit

Sum of gains or losses on FV measurement,

hedge accounting and financial investments

EUR m

Other income and expenses

EUR m

24 20

H1 2019 H1 2018

52

130

H1 2018 H1 2019

8

Higher administrative expenses; very low risk provisions

› Higher expenses for major regulatory projects and

investments in sales activities, digitalisation and

Group-wide strategic initiatives

Administrative expenses

EUR m

-644 -713

H1 2019 H1 2018

› Very low risk provisions; year-before period buoyed

by high releases and recoveries on written down

receivables

› NPL ratio remains very good at 0.7%

Risk provisions

EUR m

103

-10

H1 2018 H1 2019

9

Major earnings contributions from real estate business and DKB

Profit before taxes by segment

EUR m

DKB

204 147

Corporates &

Mittelstand

181

57

Real Estate &

Savings Banks/

Association

73 105

Central Areas &

Others

-26 -9

Financial Markets

21 15

H1 2018 H1 2019

› The very tough market environment and

measurement losses weighed on performance in

the FM segment. The previous year included

measurement gains

› DKB’s earnings fell as expected, due to the low

interest rate environment, higher costs of meeting

regulatory requirements and strategic investments

in digitalisation

› Corporates & Mittelstand posted stable operating

performance in a challenging market environment.

Earnings in the year-before period were favoured

by high releases of risk provisions

› Operating earnings in Real Estate & Savings

Banks/Association were positive thanks to good

performance of new business in the Real Estate

Division. Earnings also benefited from releases of

risk provisions

10

Corporates & Mittelstand

› Profit before taxes fell to EUR 57 m (H1 2018:

EUR 181 m) as a result of high releases of risk

provisions and recoveries on written down

receivables in the year-before period

› Performance was stable overall in a difficult

market environment

› Net interest income and net commission

income unchanged year on year

› Income from the sale of Financial Markets

products to customers was also on par with

H1 2018

› Administrative expenses were higher, driven by

Bank-wide capex for sales and projects

› RWAs swelled due to new business activities

RoE

In %

CIR

In %

72.4

H1 2019 H1 2018

76.2

H1 2018 H1 2019

14.6

3.8

EUR m H1 2019 H1 2018

Net interest income 132 131

Risk provisions in the credit business 9 125

Net commission income 52 53

Other earnings components 15 18

Administrative expenses -152 -147

Profit/loss before taxes 57 181

Risk-weighted assets (RWAs) 21,709 20,499

11

Real Estate & Savings Banks/Association

› Profit before taxes rose to EUR 105 m

(H1 2018: EUR 73 m) due to positive operating

performance, driven in particular by good new

business in Real Estate and releases of risk

provisions

› The positive performance is most evident in net

interest and net commission income, which

stood at EUR 205 m (H1 2018: EUR 187 m)

› Other earnings components (EUR 22 m) was

marked by measurement effects from interest

rate hedges (BayernLabo) and the conclusion

of derivatives

› The increase in administrative expenses is the

result of Bank-wide capex for sales and

projects

› Earnings at BayernLabo jumped to EUR 28 m

(H1 2018: EUR 19 m), operating earnings were

stable

› Operating earnings at Real I.S. climbed to

EUR 9 m (H1 2018: EUR 6 m)

RoE

In %

CIR

In %

H1 2018 H1 2019

61.6 62.7

H1 2018

14.6

H1 2019

16.3

EUR m H1 2019 H1 2018

Net interest income 140 125

Risk provisions in the credit business 18 -5

Net commission income 65 62

Other earnings components 22 20

Administrative expenses -140 -130

Profit/loss before taxes 105 73

Risk-weighted assets (RWAs) 9,465 8,176

12

Financial Markets

› Profit before taxes dropped to EUR 15 m

(H1 2018: EUR 21 m) as a result of

measurement gains in the year-before period

› Net commission income rose due to increasing

business activities with financial institutions,

which also account for most of the increase in

RWAs

› Other earnings components was mainly

impacted by measurement losses at Group

Treasury. The year-before period included

measurement gains

› The earnings from Financial Markets products

on behalf of the other customer-serving

business segments were higher, despite the

tough market conditions; they continued to be

reported under the relevant segments

› Profit before taxes at BayernInvest was up year

on year at EUR 5 m (H1 2018: EUR 3 m)

RoE

In %

CIR

In %

H1 2019

83.9

H1 2018

87.9

2.2

H1 2018 H1 2019

4.0

EUR m H1 2019 H1 2018

Net interest income 99 83

Risk provisions in the credit business 0 0

Net commission income 26 17

Other earnings components 1 32

Administrative expenses -111 -110

Profit/loss before taxes 15 21

Risk-weighted assets (RWAs) 9,743 8,318

13

DKB

› Profit before taxes fell to EUR 147 m (H1 2018:

EUR 204 m) dampened by the decline in net

interest income and higher risk provisions and

administrative expenses

› The decrease in net interest income was in line

with expectations and stems from tightening in

the interest margin as a result of market

pressure

› Other earnings components was marked by high

expenses for the bank levy and deposit

guarantee scheme of EUR 32 m (H1 2018:

EUR 29 m) and measurements gains, for

example from funds

› Administrative expenses rose to EUR 288 m

(H1 2018: EUR 248 m), mainly driven by

regulatory costs and strategic investment in

digitalisation

› Bayern Card-Services posted profit before taxes

of EUR 2 m; figure of EUR 12 m in the year-

before period was boosted by the sale of a

shareholding

RoE

In %

CIR

In %

H1 2019 H1 2018

49.2 56.6

H1 2018 H1 2019

13.3 8.8

EUR m H1 2019 H1 2018

Net interest income 480 511

Risk provisions in the credit business -42 -23

Net commission income 2 4

Other earnings components -5 -41

Administrative expenses -288 -248

Profit/loss before taxes 147 204

Risk-weighted assets (RWAs) 23,970 24,543

14

Central Areas & Others

› Other earnings components included high

expenses for the bank levy and deposit

guarantee scheme of EUR 87 m (H1 2018:

EUR 61 m), which were offset by one-off tax-

related gains

› Administrative expenses jumped to EUR 23 m

(H1 2018: EUR 10 m) due to higher

mandatory contributions and an unfavourable

US dollar

EUR m H1 2019 H1 2018

Net interest income 20 29

Risk provisions in the credit business 5 5

Net commission income -5 -3

Other earnings components -5 -47

Administrative expenses -23 -10

Profit/loss before taxes -9 -26

Risk-weighted assets (RWAs) 2,757 2,833

Performance in 2019 – forecast confirmed

We still expect that BayernLB will post a profit before

taxes in the mid-triple-digit million range for the full

year.

15

Outlook

Strategy process

BayernLB is working from a position of strength on

shaping the Bank’s future strategic direction. In

doing so, we are responding to the challenging

market environment with low interest rates set to

persist for years to come, intense competition and

continuously growing regulatory requirements.

The goal of the strategy process is to focus our

business, in order to optimally position the Group

for the future in the interests of our customers and

owners. As a first step, the decision has been

taken to combine the two segments Corporates &

Mittelstand and Financial Markets.

Contents › Results of operations

› Detailed charts

16

17

Year-on-year earnings comparison

EUR m H1 2019 H1 2018 Change in %

Net interest income 870 879 -1.1

Risk provisions in the credit business -10 103 -

Net interest income after risk provisions 859 982 -12.5

Net commission income 141 132 6.8

Gains or losses on fair value measurement -23 35 -

Gains or losses on hedge accounting -7 -44 -84.8

Gains or losses on derecognised financial assets 3 -6 -

Gains or losses on financial investments 50 33 51.2

Administrative expenses -713 -644 10.6

Expenses for the bank levy and deposit guarantee scheme -119 -90 31.9

Other income and expenses 130 52 >100.0

Gains or losses on restructuring -7 2 -

Profit/loss before taxes 315 452 -30.3

Income taxes -21 -105 -79.6

Profit/loss after taxes 294 347 -15.4

Profit/loss attributable to non-controlling interests 0 -5 -

Consolidated profit/loss 294 342 -14.1

18

Quarterly earnings comparison

EUR m Q2 2019 Q1 2019

Net interest income 447 423

Risk provisions in the credit business -18 7

Net interest income after risk provisions 429 430

Net commission income 72 70

Gains or losses on fair value measurement -11 -13

Gains or losses on hedge accounting 5 -12

Gains or losses on derecognised financial assets 3 0

Gains or losses on financial investments 19 31

Administrative expenses -347 -366

Expenses for the bank levy and deposit guarantee scheme -26 -93

Other income and expenses 126 4

Gains or losses on restructuring -7 0

Profit/loss before taxes 264 51

Income taxes -14 -7

Profit/loss after taxes 250 44

Profit/loss attributable to non-controlling interests 0 0

Consolidated profit/loss 250 44

19

Segment overview

EUR m

Corporates

&

Mittelstand

Real Estate

& Savings

Banks/

Association

Financial

Markets DKB

Central

Areas

& Others

Group

Net interest income 132 140 99 480 20 870

Risk provisions in the credit business 9 18 0 -42 5 -10

Net interest income after risk provisions 141 158 99 437 24 859

Net commission income 52 65 26 2 -5 141

Gains or losses on fair value measurement 15 17 -55 14 -14 -23

Gains or losses on hedge accounting 0 2 3 -4 -7 -7

Gains or losses on derecognised fin. assets 0 0 0 2 0 3

Gains or losses on financial investments 1 2 48 11 -13 50

Administrative expenses -152 -140 -111 -288 -23 -713

Expenses for the bank levy and deposit guarantee scheme 0 0 0 -32 -87 -119

Other income and expenses -2 1 4 5 123 130

Gains or losses on restructuring 0 0 0 0 -7 -7

Profit/loss before taxes 57 105 15 147 -9 315

Return on equity (RoE) (%) 3.8 16.3 2.2 8.8 - 6.5

Cost/income ratio (CIR) (%) 76.2 61.6 87.9 56.6 - 61.2

20

Segment overview H1 2018

EUR m

Corporates

&

Mittelstand

Real Estate

& Savings

Banks/

Association

Financial

Markets DKB

Central

Areas

& Others

Group

Net interest income 131 125 83 511 29 879

Risk provisions in the credit business 125 -5 0 -23 5 103

Net interest income after risk provisions 257 120 83 488 34 982

Net commission income 53 62 17 4 -3 132

Gains or losses on fair value measurement 19 18 4 7 -13 35

Gains or losses on hedge accounting 0 0 -3 -34 -6 -44

Gains or losses on derecognised fin. assets 0 0 0 -6 0 -6

Gains or losses on financial investments 0 2 25 6 1 33

Administrative expenses -147 -130 -110 -248 -10 -644

Expenses for the bank levy and deposit guarantee

scheme 0 0 0 -29 -61 -90

Other income and expenses 0 -1 7 16 31 52

Gains or losses on restructuring 0 0 0 0 1 2

Profit/loss before taxes 181 73 21 204 -26 452

Return on equity (RoE) (%) 14.6 14.6 4.0 13.3 - 10.0

Cost/income ratio (CIR) (%) 72.4 62.7 83.9 49.2 - 59.5

21

Balance sheet overview

EUR bn Jun 2019 Dec 2018 Change in %

Loans and advances to banks 44.4 36.6 21.2

Loans and advances to customers 144.6 138.9 4.1

Assets held for trading 15.9 12.3 29.0

Financial investments 25.3 25.5 -0.8

Total assets 240.3 220.2 9.1

Liabilities to banks 59.7 54.1 10.5

Liabilities to customers 103.0 93.5 10.2

Securitised liabilities 46.1 45.5 1.5

Liabilities held for trading 11.3 8.2 36.8

Subordinated capital 2.1 1.9 8.2

Equity 11.4 11.3 1.6

22

Key capital figures

Fully loaded Jun 2019 Dec 2018

CET1 capital (EUR bn) 9.61 10.0

CET1 ratio (%) 14.11 15.2

Total capital (EUR bn) 10.91 11.2

Total capital ratio (%) 16.11 17.0

RWAs (EUR bn) 67.6 65.6

Leverage ratio (%) 3.71 4.1

LCR (%) 178 143

1 Before acceptance of the positive effects from the half-yearly financial statements by the supervisory authorities

Disclaimer

23

The information in this presentation constitutes neither an offer nor an invitation to subscribe to or purchase securities or a

recommendation to buy. It is solely intended for informational purposes and does not serve as a basis for any kind of obligation,

contractual or otherwise.

Rounding differences may occur in the presentation.

The Bavarian bank for the German economy.