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DZ Bank weighs options for transport-focused unit DVB as FY'17 profit dips

Germany-based DZ Bank AG said it is considering "all strategic options" for transport-focused unit DVB Bank SE after the latter's losses more than doubled year over year in 2017.

DVB Bank posted a pretax loss of €774 million for 2017, up from the year-ago loss of €278 million. The result reflected significantly higher allowances for losses on loans and advances relating to its maritime portfolio on the back of a further increase in overcapacity in the market.

Among firms said to be interested in potentially acquiring DVB Bank are Bank of China Ltd. and Industrial & Commercial Bank of China Ltd., Reuters reported earlier in February.

DZ Bank reported full-year 2017 net profit of €1.10 billion under International Financial Reporting Standards, down from €1.61 billion in 2016.

Pretax profit for the year came in at €1.81 billion, down from €2.20 billion in 2016, but the lender said the result is within its long-term target range of €1.5 billion to €2 billion.

Net interest income ticked up year over year to €2.94 billion from €2.66 billion, which it said was driven by "stable customer business and favorable merger effects." Net fee and commission income also increased over the period, to €1.86 billion from €1.70 billion.

Allowances for losses on loans and advances stood at €786 million, up from the year-ago €569 million, driven by higher allowances from DZ Bank.

Gains on trading activities declined on a yearly basis to €506 million from €780 million, while gains on investments came in at €10 million, down from €127 million in 2016. Other gains on valuation of financial instruments, meanwhile, rose to €289 million from the year-ago €51 million.

The bank's net income from insurance activities reached €907 million in 2017, an increase from €760 million in 2016.

DZ Bank's common equity Tier 1 capital ratio on a fully loaded CRR basis stood at 13.9% at 2017-end, up by 0.9 percentage point from that at the end of June 2017 and down from 14.5% at 2016-end. The leverage ratio was 4.4% at 2017-end, compared to 4.1% at the end of 2016.

CEO Wolfgang Kirsch said the bank aims to boost its corporate banking by making further investments in the direct business and in joint credit business. It will also add digital products and services to its portfolio while tapping into new sources of income.

The company noted that it had completed its post-merger integration activities in December 2017, earlier than planned. In 2017, DZ Bank combined mortgage subsidiaries DG Hypothekenbank AG and Westfälische Landschaft Bodenkreditbank, or WL Bank, as part of efforts to streamline its operations following the merger with WGZ Bank.