The Berlin-based online subsidiary contributed more than 85 percent of the pre-tax profit of €1.38 billion last year. "When you look at it, it always seems as if DKB has a sidekick called Landesbank. You could see it that way," said Group CEO Stephan Winkelmeier on Thursday in Munich. With an unusually high core capital ratio of 20.9 percent, the group is well-prepared for "growth, especially in Berlin, but also here in Munich."
Winkelmeier had forecast a pre-tax profit of up to €1.3 billion for the group in 2025. The result now achieved, €1.38 billion, is above this mark but 12.9 percent below last year's figure. Net profit shrank by 16.2 percent to €1.03 billion. "Despite the lower interest rate environment, we have achieved solid overall earnings," Winkelmeier explained.
With 5.9 million customers, DKB is Germany's second-largest direct bank after ING-Diba. The BayernLB subsidiary, which originated from the state bank of the former GDR, increased its pre-tax profit by 5.3 percent to a record €1.18 billion. This was partly due to DKB reducing its risk provisions for bad loans by 25.4 percent to €135 million. Contrary to the trend, DKB's net interest income rose by 0.6 percent to €1.86 billion, thanks in part to strong new business. However, the online bank's commission income fell by 6.5 percent to €201 million due to weaker card business.
Winkelmeier has tasked DKB with increasing its pre-tax profit to €1.6 billion by 2030. By expanding its securities business, DKB aims to strengthen its commission income and reduce its dependence on volatile interest income. DKB CEO Sven Deglow announced further expansion in a Reuters interview in February.
Winkelmeier is unconcerned that BayernLB could potentially compete with its co-owners, the Bavarian savings banks. "As long as well over 60 percent of customers out there are still being served by other banks, there is enough potential for all involved, both savings banks and us, to hunt in other regions first," said Winkelmeier. If "one or another savings bank customer" switches to DKB, at least they are not lost to the public-sector segment in favor of private banks. BayernLB is owned 80 percent by the Free State of Bavaria and 20 percent by regional savings banks.
Separation from DKB is out of the question, Winkelmeier reaffirmed: "DKB is an integral part of this group." The traditional core of the Landesbank will continue to operate as a specialist financier, "with activities that are important for Bavaria and Germany as business locations." BayernLB issues loans, among other things, for the transformation of the energy sector and in the mobility industry.
In corporate banking, BayernLB has already increased its provisions for bad loans, causing the pre-tax profit of this division to plunge by 41.4 percent to €140 million. Conversely, a decline in risk provisions in the real estate business boosted pre-tax profit in the real estate and savings banks segment by 80.8 percent to €226 million.
For the current year, BayernLB expects another decline in group profit. Pre-tax profit is projected to be in the range of €1.1 to €1.3 billion. "Given significant geopolitical risks and economic challenges, the forecast is subject to a higher degree of uncertainty," the state bank emphasized. Should the war against Iran not last longer than four weeks, the impact on the German economy could be limited to a "slight downturn," Winkelmeier said.
(Report by Jörn Poltz in Munich, with contributions from Klaus Lauer in Berlin, edited by Ralf Banser. For inquiries, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)
