Metzler's tier 1 ratio of over 20% way above Basel III requirement - Very good start to 2011

25.5.2011 “2010 has been another successful year”, reported Friedrich von Metzler at the bank's annual press conference on 25th May in Frankfurt am Main. “Our independence has been and will remain the cornerstone of our success in all areas of our business. We are not reliant on external shareholders, institutions or interests, either economically or legally, or in the way we think or the way we act”, von Metzler continued.

As always Metzler will be making a total dividend payment of just EUR 2.3 m to its shareholders. In the reporting year, Metzler made a fresh allocation of a sizeable EUR 32.2 m to the fund for general bank risks, bringing the total of this fund to EUR 42.2 m. This allocation was made from after-tax profits and from transferring a section of the reserves previously attributed to the liable equity capital in accordance with section 340f HGB (Commercial Code). "From now on, our regulatory capital base consists solely of hard tier 1 capital. The tier 1 ratio and the now identical total capital ratio lie above 20% both on the group level as well as on the bank level", underscored Friedrich von Metzler. The regulatory capital base thus way exceeds both the current requirement of the Solvency Ordinance as well as the future Basel III requirements. Furthermore, Metzler’s risk acceptability concept is based on the notion of being able to cope with so-called "unexpected losses" without having to resort to the regulatory capital and, by extension, without implications for the business model. It is therefore based exclusively on after-tax undisclosed reserves which are not allocated to the regulatory capital.

Net interest income declined in the reporting year as expected to EUR 21 m in response to the changing interest rate environment, and has thus moved back to the "normal" level of past years. Net commission income climbed to EUR 132 m compared with EUR 128 m in the previous year. Due, however, to the first time application of the German Accounting Law Moder­nization Act (BilMoG), a one-off recognition had to be made of sections of the net commission income in the extraordinary profit. The net income from the trading portfolio came to EUR 2 m compared with EUR 5 m in the previous year. General administrative expense declined from EUR 128 m to EUR 126 m due above all to a reduction in personnel expense.

The balance of loan loss provisions encompasses the allocation to the fund for general bank risks, a further allocation to the reserves pursuant to section 340f HGB as well as the result from the securities portfolio of the liquidity reserve and of the lending business. Last fiscal year expenses were reported in this balance of EUR 15 m. Total assets and business volume of the group climbed noticeably to EUR 3.7 bn and EUR 3.8 bn respectively compared with EUR 2.5 bn reported in each case in the previous year. The consolidated balance sheet currently once again features a greater number of large-volume but risk-free project transactions. This marked rise is attributable above all to the new recognition of securitized liabilities of EUR 1.4 bn which serve entirely to secure the corresponding increase in loans to clients.

A successful fiscal 2010 was reported for the Asset Management division. Assets under management rose from EUR 37 bn at the end of 2009 to EUR 41 bn at the end of 2010. Furthermore, growth was reported in all segments – both in the business with institutional clients as well as in the mutual funds area. This was achieved by a highly-satisfactory influx of capital combined with the positive development on capital markets. In 2010, the Metzler equity funds achieved above-average value growth, with portfolio management concentrating on actively-managed specialties as well as on innovative, forecast-free and risk-limiting strategies in the quantitative area.

The alternative investment strategies segment has grown especially strongly in past years, driven by the accelerating demand for market-independent returns. In the meantime, more than 20 colleagues are managing portfolios worth EUR 8 bn. The volume of the fund platform Metzler Fund Xchange has risen from EUR 10 bn at the end of 2009 to EUR 11.5 bn at the end of 2010. Business with institutional clients can boast of especially strong growth.

Faced with still difficult background conditions, the Corporate Finance division managed to hold out well. Activities focused on providing advice in the context of sales mandates with international participation or sales from insolvencies. For example, the sale process started up in 2009 of the divisions of the medium-sized automobile supplier AKsys has been successfully completed. Furthermore, Metzler advised the Dräxlmaier Group, one of Germany’s leading automobile suppliers, in the sale of its Decorative Design business to mutares AG – and it also advised the insolvency administrator commissioned by the Arcandor Group in the sale of 100% of the shares of Primondo GmbH in Home Shopping Europe GmbH to the French financial investor AXA Private Equity. In addition, Metzler Corporate Finance supported the French Faurecia Group in the acquisition of six German production sites of the insolvent German automobile supplier Plastal GmbH from the insolvency administrator.

Friedrich von Metzler continued his report by announcing that the Equities division had managed to further strengthen its market position in 2010. In spite of the uncertainty and reluctance of many institutional asset managers in response to the euro and public debt crisis, Metzler Equities still succeeded in expanding its business with important institutions, especially on the home market. Three factors proved crucial in this regard: Metzler’s strict alignment to clients’ interests, its policy of not engaging in any own-account equity trading and the independent and consistently high quality of the bank’s research activities.

Metzler’s services in the equities business are backed by the recommendations of the independent equity research team which are based on in-depth analyses. This year, the equity research team once again received important accolades for its equity recommendations and forecast accuracy: Metzler Equities was proclaimed the best research company for German equities by Handelsblatt newspaper and the US research company Starmine. For the past five years Metzler has constantly ranked among the Top Ten in these analyst ratings. This exceptional achievement was confirmed by a further accolade: In the analyst ratings of Börsen-Zeitung, Metzler Equities came in at second place in the overall rating "Best Research Company" and ranked first in the category "Large Cap Recommendations". In addition, the research team was awarded third place in the Continuity Prize in recognition of its consistently good performance. As Friedrich von Metzler stressed, "We are especially pleased about these accolades as they underscore the continuous quality of our equity research".

According to von Metzler, business in the Financial Markets division has also developed well despite the fact that, for the first time in 2010, market players seriously examined the ratings of debtors from the eurozone as well as the euro itself. Backed by its independent advice model and long years of research skill, Metzler was able to successfully counter the uncertainty among investors which had been spawned by this. "Our accurate interest rate forecast – we were one of the very few companies at the beginning of 2010 to forecast ten-year yields falling way below 3% – formed the basis for highly-satisfactory business dealings with institutional investors on the bond market", von Metzler continued.

Metzler made consistent use of the opportunities arising time and again on money and capital markets in 2010 to align itself to the renewed slight rise in short-term interest rates in coming months, even at the expense of lower net interest surplus. Von Metzler completed his report on Financial Markets by confirming that, as in the previous year, none of the books contained any "toxic assets".

Friedrich von Metzler ended his speech by giving a report on the Private Banking division where business relations to existing clients have been strengthened and expanded and a highly-satisfactory number of new clients has been gained. As a result, the total of managed assets was significantly upgraded again last fiscal year. Moreover, impressive investment results were achieved compared to the relevant benchmark indices, backed by the active investment decisions of the portfolio management team in Private Banking. Von Metzler completed his report by providing an optimistic outlook for fiscal 2011.

Press contact:
Jörg-Matthias Butzlaff
Phone (+ 49 69) 21 04 - 49 75
E-mail MButzlaff@metzler.com

Please download Fiscal 2010 here.