report of the managing board
introduction
2007 was a challenging year for NIBC and the banking industry as a whole. The instability in the credit markets had a major impact on the pricing of risk and the number of transactions coming to market.
In August NIBC sold its entire US sub-prime related portfolio, removing any further losses from this area of the business. Furtermore, the US commercial real estate securities were transferred by NIBC Bank to NIBC Holding. In NIBC Bank, the results on both these portfolios are presented as discontinued operations. Also in August, Kaupthing Bank hf. and the consortium of shareholders of NIBC entered into an agreement to purchase the entire share capital of NIBC Holding. In January 2008, due to the instability in the financial markets, NIBC and Kaupthing Bank hf. determined not to proceed with the announced acquisition of NIBC by Kaupthing, as the current market conditions brought the benefits of the acquisition under pressure and no longer formed a solid base on which to build a combined future.
The bank continued to execute transactions successfully while reducing its credit and market risk and diversifying its business mix to more liquid assets. Despite these challenging transitions, NIBC core business operations delivered a robust performance during the year.
Overall performance in 2007 from continuing operations showed a solid performance. Profit after tax from continuing operations amounted to EUR 242 million, while net profit attributable to parent shareholders declined to EUR 98 million.
The positive performance of our continuing operations further underscores NIBC's commitment to income diversification and successful execution. Additionally, NIBC maintained a strong Tier-I ratio of above 10% throughout the year. We also made significant headway in the key growth areas where we have implemented important business initiatives.
Highlights
- Since opening an office in Frankfurt in 2005, NIBC has seen its Germany office grow from strength to strength. With activities in the product areas of leveraged finance, infrastructure, residential and commercial real estate finance, and private equity and mezzanine finance, our performance in the German market has exceeded expectations and will continue to be a strong area of focus going forward;
- In preparation for the anticipated initial public offering in 2007, NIBC implemented important organisational changes aimed at further enhancing the operational efficiency of our strategic business units. As a result, reporting lines were further shortened and internal processes were streamlined;
- NIBC received authorisation from the Dutch central bank in November 2007 to adopt the Advanced Measurement Approach in the implementation of the Basel II framework for capital requirements.
Outlook
Going forward as an independent merchant bank, NIBC believes its sound strategy and diversified business model will guide it through the continuing challenging market conditions.
We will prepare ourselves for continuing changing market conditions and a new pricing environment by managing our revenue streams accordingly and resetting our risk parameters. We will further extend our in-house credit risk-assessment skills and procedures into Financial Markets so that all these activities come from the centre of NIBC's skill set and are not overly reliant on third party ratings.
As a medium-sized merchant bank, NIBC has a unique value proposition based on superior sector knowledge and customer intimacy in our focus on the mid-cap market. NIBC has the ability to bring the skills of a leading investment bank in a seamless way to the ambitious entrepreneurial clients for whom these are most relevant.
