German state-backed landesbank Norddeutsche Landesbank, or NordLB, is back in the black, turning a profit of EUR 236 mln last year, compared to an after-tax loss of EUR138 mln the previous year.

NordLB attributes the growth to an ‘upward turn in earnings’ and a ‘relaxation in terms of loss provisions’. ‘Last year saw us register steady revenue growth, as result of which we succeeded in raising our profit level continuously over the course of the year. We were thus able to more than iron out the preceding year’s profit dent,’ said Gunter Dunkel, chairman of the management board, in a statement.

Customer loans rose slightly to EUR 113.6 bn, up from EUR112.1 bn a year earlier, although NordLB declined to comment on the volume of new business generated. Real estate accounts for approximately 13% of the portfolio.

Interest income rose by 20% last year to EUR1.65bn. Commission income rose by 19% to EUR210 mln. However, profit/loss from investments accounted for using the equity method rose to -EUR 128 mln last year, due to pro-rata losses of EUR151mln arising from the Bank DnB Nord joint venture which was sold last year. Administrative expenses soared to EUR1.07bn, up from EUR986mln a year earlier, due to new IT infrastructure.

Loan loss provisions were reduced to EUR657 mln, down from EUR1.04bn in 2009. This includes a buffer of impairment provisions totaling EUR231 mln.

NordLB will also restructure its capital base to comply with European tests of lenders' capacity to withstand financial shocks, it said. The bank will turn EUR1.2 bn worth of so-called silent participations into solid equity capital by the end of the year in order to comply with the EU bank stress tests rules. (NordLB had the second-lowest result among 14 German lenders in European Union-wide stress tests last year, with a Tier 1 capital ratio of 6.2%, slightly above the limit of 6%. The European Banking Authority will publish the results of new stress tests in June this year.)

Sales last year also enabled the bank to free up EUR 400 mln of core capital. As such, the regulatory equity ratio rose to 11.1% last year, up from 9.7% in 2009 and the regulatory core capital ratio now stands at 9.1%, up from 8.7% in 2009.