2008 first half-year results
Lower profit for the first half of 2008
SATISFACTORY LENDING FIGURES AND HIGHER REALISED NET INTEREST INCOME
In the first half of 2008, Nederlandse Waterschapsbank N.V. realised satisfactory lending figures. Total lending amounted to € 3.2 billion during this period, which was lower than the historical record of € 3.5 billion reported in the first half of 2007. However, in view of the funding requirement in the public sector, this was a sound result. The Bank's large market share was maintained. As in previous years, lending concentrated on social housing corporations. The Bank was also successful in doing business with water boards, municipal authorities, provincial authorities and healthcare institutions. The total credit portfolio increased by 7.5% from € 33.0 billion at 30 June 2007 to € 35.5 billion at 30 June 2008.
The Bank's profit for the first half of 2008 fell to € 23.5 million (first half of 2007: € 42.9 million). This meant a considerable decrease in profit of 45.2%, mainly caused by the decline in the value of the market value portfolio resulting from the relatively substantial interest rate fluctuations during the period under review. In addition, the higher financing charges in connection with the non-recurring payment to shareholders of € 250 million charged to the general reserve on 2 July 2007 put pressure on the results.
The decrease in value of the market value portfolio amounted to € 20.6 million, compared with a gain of € 10.1 million in the same period of the previous year. This related to the unrealised revaluation result recognised in the income statement in accordance with IFRS. As a consequence of IFRS rules, the Bank will also face potentially greater fluctuations in its result in the future than used to be the case. The Bank's policies on risk control and management will remain as robust as usual. By improving the Bank's interest rate margin, the realised net interest income increased by 6.5% to € 60.6 million in the first six months of 2008 (first six months of 2007: € 57.0 million). This increase reflects the upward trend of the Bank's lending operations.
Operating expenses were down 15% from € 5.6 million to € 4.7 million. The higher expenses in 2007 were caused by non-recurring software costs. For 2008, the cost trends are in line with those of previous years. Total operating expenses represented 7.8% of net interest income in the period under review (first half of 2007: 9.5%). Income tax came to € 7.9 million (first half of 2007: € 14.7 million). Like last year, a € 4.0 million contribution was made to Stichting NWB Fonds. Using this foundation, water boards share their knowledge with water management projects in countries that need support in this area.
The Bank's funding was very successful in the first half of this year. Owing to the current credit crisis, the Bank was able to benefit from the "flight to quality" thanks to its AAA ratings. The supply of short-term and medium-term loans, in particular, was very substantial. This allowed the Bank to realise its funding at sharper prices. A total of € 5.2 billion in bonds, medium-term notes and private placements were issued in the international capital market. Two benchmark loans of € 1.0 billion each were placed in the market, one with a 3-year term and one with a 10-year term. In addition, a US dollar benchmark loan was issued with a 3-year term. The Bank mainly obtained its long-term funding under its outstanding Debt Issuance Programme with a maximum of € 40.0 billion.
A € 10.0 billion Euro Commercial Paper Programme is used for the Bank's short-term funding. An amount of € 4.7 billion in commercial paper was issued this year up to and including 30 June, compared with € 5.3 billion for the whole of 2007. The commercial paper was mainly issued in US dollar and euro. Thanks to this ample supply of short-term funds, the Bank's liquidity position is excellent.
At 30 June 2008, equity amounted to € 1,074 million, somewhat less than the balance as at year-end 2007 (€ 1,091 million). This change was caused by the payment of € 40 million in dividends for the 2007 financial year and the € 23.5 million profit recorded for the current financial year. At 30 June 2008, total assets amounted to € 38.3 billion, up € 1.9 billion from a year earlier, resulting in a capital ratio of 2.7%. Based on the Basel II risk weightings, the solvency ratio was 81%, well above the minimum ratio of 8% prescribed by the Dutch Central Bank. The change on the BIS Tier I ratio of 96% as at 31 December 2007 is explained by Nederlandse Waterschapsbank N.V. maintaining 15% additional capital under Basel II for operational risks. The high solvency ratio, calculated on the basis of the capital requirements for the credit and operational risks, is characteristic of the low risk profile of Nederlandse Waterschapsbank N.V. as the bank of and for the public sector.
The expectation that profit for the whole of 2008 will be lower, as published in the 2007 Annual Report, is maintained.
The Hague, 1 September 2008
