Press Release. Major Elements of the Consolidated Accounts. Balance Sheet

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1 Presse und Kommunikation MAIN TOWER Neue Mainzer Straße Frankfurt am Main Tel.: +49 (0) 69 / Wolfgang Kuß wolfgang.kuss@helaba.de Ursula-Brita Krück ursula-brita.krueck@helaba.de Helaba: Performance stable at a high Level - Group net profit before taxes amounts to EUR 398 million Owners to receive a dividend of 8 per cent - Tier-1 capital ratio rises to 9.6 per cent - Earnings increase intended in Perform EU Stress Tests only on the basis of prudential capital adequacy rules Frankfurt am Main The Group net profit before taxes of Helaba Landesbank Hessen-Thüringen was maintained at a high level and amounted to EUR 398 million (2009: EUR 408 million). The development of business activities and income in the year 2010 was characterised by the positive course of operating business, accompanied by an easing of the situation as regards loan loss provisions and stable administrative expenses. For Hans-Dieter Brenner, CEO of Helaba, the quality of group net profit is demonstrated by four factors: 1. Sustained return to the stable earnings levels seen before the financial markets crisis. Brenner: "Helaba is a customer-oriented credit institution that is intensively linked with the real economy and the region. This is the basis of our continuing success, which we intend to defend also in the future under all conceivable strategic scenarios." 2. Higher dividend and continued strengthening of resources. Brenner: "We have used the operating result, which has increased by more than 50 per cent, to further strengthen the capital base, after servicing the capital contributions by silent partners. About EUR 123 million were transferred to retained earnings to increase the Tier-1 capital of the Bank, and EUR 70 million were transferred to the Section 340f reserves. The owners of the Bank will benefit from an increase of the dividend from 3 per cent to 8 per cent." 3. Further strengthening of the capital base. At the end of 2010 the Tier-1 capital ratio for the Group rose from 9.1 per cent to 9.6 per cent, the total capital ratio was up from 13.5 per cent to 14.4 per cent. Profit retention and the realisation of imminent sales proceeds will further strengthen the Bank's Tier-1 ratio. Brenner: "The prudential requirements which are going to become stricter as a consequence of Basel III and market expectations have prompted us to continue gearing management and control of our business activities to the strengthening our capital base." 1

2 4. Robust condition. Pre-tax ROE is 7.9 per cent for the Group, the Cost-Income-Ratio amounts to 61 per cent. Meanwhile, the Internal Model of Helaba for the management of liquidity risks has been approved by the banking supervisory authority. This fact is evidence of the quality of our risk management systems. Major Elements of the Consolidated Accounts Balance Sheet The consolidated balance sheet total, amounting to EUR 166 billion, is slightly below the previous year's level. Brenner: "Over the past two years we have thus realised a focused and strategically intended strategic reduction of our trading assets and interbank receivables." Loans and advances to customers rose to EUR 88 billion. Including loans and advances to the cooperation partners of Helaba, loans and advances to customers account for roughly 60 per cent of the balance sheet total. "This percentage is evidence of the distinct customer orientation of Helaba", explained Dr. Detlef Hosemann, Chief Financial Officer, who presented the accounts of the Bank. This was mirrored on the liabilities side by the 9 per cent decline of trading liabilities. Securitized liabilities increased by roughly 5 per cent to about EUR 40 billion. Together with liabilities to customers (EUR 41 billion) these are the major sources of funding of the Group. "The intentional reduction of the balance sheet total and the increase of the share of loans and advance to customers improve our balance sheet. This also has positive effects on the Leverage Ratio that is applicable in the future and which is based on the portfolios without risk weighting being taken into account", said Dr. Detlef Hosemann, CFO of Helaba, when explaining the accounts. Income Statement Net interest income, amounting to more than EUR 1 billion, is at the previous year's level. The increase of net interest income generated from customer business offset the strains from the lower interest rate levels and the depreciation of the US dollar. The retail business of Frankfurter Sparkasse accounts for over one quarter of net interest income. Due to the fast recovery of the German economy, the risk provisioning requirements were significantly lower than expected: Loan loss provisions were down from EUR 487 million to EUR 285 million. Net commission income increased significantly in 2010, from EUR 227 to EUR 249 million. Part of this increase is due to the merger of the former Investitionsbank Hessen into WIBank in August Moreover, the net commission income of Frankfurter Bankgesellschaft (Schweiz) AG which has been fully consolidated since the end of 2009 was for the first time reported in the consolidated income statement. Net trading income amounts to EUR 148 million. The decline is due to the fact that write-ups in the year before which were made in the aftermath of the financial markets crisis, impacted the result. The national debt crisis in some countries of the euro zone resulted in a highly volatile development of net trading income. All in all, however, a very good net trading income was achieved. The 2

3 decline of the result of hedges and derivatives from EUR 92 million in 2009 to EUR 5 million in 2010 also has to be seen against this backdrop. Income from non-current financial assets, including companies valued at equity, is negative at EUR 25 million, after a negative amount of EUR 18 million in the year before. The deterioration of the result was in particular due to depreciation on participations. The major constituents of the Other operating result are rental income and operating costs of property not used for owner occupancy and leasing income. It improved significantly on the year before, from EUR 290 million to EUR 357 million. The earnings contributions from real estate business rose noticeably, from EUR 114 million to EUR 140 million, which is due essentially to increases of the portfolios. As a result of changes among the group of consolidated companies, which for the first time had an effect on the consolidated income statement for the year 2010 as a whole, general administrative expenses were up by 2.7 per cent to roughly EUR 1.1 billion. Personnel expense increased from EUR 498 million to EUR 536 million. Adjusted for consolidation effects, administrative expense was down by EUR 25 million. The group employed on average 6,180 male and female staff. This is an increase by 290, which is exclusively due to consolidation. Hosemann expresses satisfaction with the earnings quality: "All in all, the past few years have shown that Helaba constantly generates good earnings under different market conditions. While extraordinarily high loan loss provisions in the year before that had been caused by the economic crisis were offset by excellent net trading income, the dimensions have normalised in the year This is why I am of the opinion that the quality of the result for 2010 is better." Success seen in the Business Year 2010 The management and control of the business development of the Group is above all marked by the strengthening of the earnings power and the safeguarding and expansion of the core capital base. Brenner: "This is why we do not participate in the competition for transactions that are concluded at inadequate terms and conditions." With medium- and long-term new business in an amount of EUR 10.5 billion, the Bank attained its envisaged target corridor. Of this total, real estate loans accounted for EUR 4.5 billion, Corporate Finance transactions for EUR 3.1 billion and the business with savings banks and the business with public-sector central, regional and local authorities to EUR 1 billion each. This focus on core business fields corresponds to the gearing of the Helaba Group to the real economy. The funds required funding the new business volume at matching maturities were obtained without problems in the market. All in all, Helaba placed Pfandbrief (mortgage bond) issues in an amount of EUR 3.8 billion. The unsecured funding volume amounted to EUR 7.2 billion. As regards the funding basis of the Group, customer deposits in the retail business contribute to the stabilisation and diversification of the funding structure. In Real Estate Lending, quality and the containment of risk together with appropriate earnings take precedence over volume growth. Against this backdrop, the business volume declined slightly, by 3

4 EUR 1.4 billion to EUR 36.2 billion. This business segment contributed EUR 189 million to Group net income. In the business segment Corporate Finance, the course of the prudent lending policy was pursued further. Accordingly, the business volume was down slightly to EUR 33.9 billion. This business segment made an earnings contribution of EUR 180 million. The business segment Financial Markets continued to develop positively despite the difficult and volatile market environment. Thanks to our prudent positioning, the effects of the national debt crisis in some countries of the euro zone remained limited. Business with customers benefited from the pronounced economic recovery in Germany. The business segment contributed EUR 156 million to Group net income before taxes. In the business segment Asset Management, Helaba Invest continued to expand its position as one of the leading capital investment companies. Meanwhile, the company has a market share (by assets under management) of 8.5 per cent. The business segment Asset Management made a contribution of EUR 27 million to Group net income. The business of Frankfurter Bankgesellschaft Zürich/Frankfurt has also started positively. In this company, Helaba with effect from 1 September 2010 bundled its products offered to savings banks in Private Banking and in portfolio management. The cooperation with the savings banks in Hesse and Thuringia remains at a high level, with an S- Group ratio of 75 percent. At the same time, the offer of S-Group products is meeting with a positive response nationwide. Here again, the principle applies that the Bank intends to be the partner of the savings banks and not their competitor. Via the new business segment "Verbundbank Überregional" (S-Group Bank/Nationwide Business") it is intended to systematically exploit the potential for new business outside our core region. The business volume of WIBank rose strongly in 2010, by 22 per cent to EUR 9.3 billion. Total assets increased by nearly 20 per cent to EUR 8.8 billion. This positive development is primarily due to the Hessian economic stimulus package. Frankfurter Sparkasse reports net income for the year under HGB in an amount of EUR 60 million. The savings bank will strengthen retained earnings by a transfer of EUR 20 million. The net profit for the year amounts to EUR 40 million. The savings bank has achieved its best pre-tax result since its formation. Challenges and Opportunities in 2011 The central strategic challenge of the coming years is posed for Helaba, as for the entire banking industry, is associated with the new Basel III regulations. As a consequence of the growing qualitative and quantitative demands placed by Basel III on the capital resources of credit institutions, Helaba further strengthened its capital base in 2010 and continued to enhance its ability to bear risk. Brenner: "We need a stable legal framework for the planning of our capital resource. As soon as this is available, we will take measures, together with the owners of the bank, which will lead to the permanent qualification of our silent partners' capital contributions as core Tier-1 capital under Basel III. I am positive that Helaba will fulfil the requirements appropriately and in time. 4

5 From my point of view, it is particularly important that Basel III is implemented through the instrument of an EU-Directive rather than a regulation. Only then will it be possible to accommodate the special characteristics of the German banking system in the implementation." Due to its conservative risk profile, Helaba considers itself in principle well prepared for the upcoming EU-stress test. However, Brenner sees the risk of an arbitrary design of the rules of the game. This applies to the definition of capital that is used as the basis as well as to the minimum ratio to be complied with. Brenner: "For me, it goes without saying that solely the legally and prudentially valid capital adequacy requirements and ratios applicable during that period will apply in the simulated stress scenarios. Silent partners' capital contributions are at present and during the entire simulation period of the test unequivocally recognised as Tier-1 capital. This has clearly been laid down under European law in the CRD II and in Germany in the German Banking Act. Therefore I expect that they will also be taken into account and recognised accordingly." Prospects for Business Development in 2011 After the strong cyclical recovery seen in 2010, growth is expected to slow down in The Bank expects a steadying of operating earnings at the previous year's level. Continuous growth is intended for the major business segments. It is expected that new business will about attain the previous year's level. Through permanent cost management, an increase of administrative expenses shall be limited as far as possible. Considering the first two months of the current business year and on the assumption that the macroeconomic development will be accompanied by a sideways movement of risk provisions, Helaba expects earnings growth in the group in Brenner: "The positive course of our business and earnings development encourages me to issue this forecast." 5

6 Balance Sheet of Helaba Group under IFRS for the Period ending Dec. 31, Dec Dec Change in million in million in million in per cent Loans and advances to banks incl. cash reserve 14,848 15, Loans and advances to customers 87,698 87, Impairments on receivables -1,253-1, Assets held for trading 39,176 42,805-3, Positive market value of derivatives not held for trading 3,702 3, Financial assets, incl. companies accounted for using the equity method Real property; property, plant and equipment; intangible assets 17,750 16, ,922 3, Income tax assets Other assets 949 1, Total assets 166, ,900-3, Liabilities due to banks 31,679 33,214-1, Liabilities due to customers 40,896 41, Securitised liabilities 40,389 38,505 1, Liabilities held for trading 38,529 42,112-3, Negative market value of derivatives not held for trading 3,148 2, Provisions 1,190 1, Income tax liabilities Other liabilities Subordinate capital 4,488 4, Shareholders' equity 5,203 4, Total liabilities 166, ,900-3,

7 Income Statement * Change in million in million in million in million Net interest income 1,017 1, Provisions for losses on loans and advances Net interest income after provisions for losses on loans and advances Net commission income Net trading income Result of hedges /derivatives Net income from non-current financial assets (incl. assets valued using the equity method) Other operating result General administrative expenses -1,068-1, Group earnings before taxes Taxes on income Group net profit Statement of Recognised Income and Expense * 01 Jan.-31 Dec Jan.-31 Dec Change in million in million in million in per cent Group net profit Result recognised directly in equity, after taxes Comprehensive Income * The published consolidated figures are preliminary and have not yet been audited 7

8 Ratings of Helaba Moody s Investors Service FitchRatings Standard & Poor s Corp. Long-term liabilities Aa2 A+* A* Short-term liabilities P-1 F1+* A-1* Public Pfandbriefe Aaa AAA AAA Mortgage Pfandbriefe - AAA - Financial strength/individual rating C- B/C* - (*) Joint group rating of the Sparkassen-Finanzgruppe Hessen-Thüringen Financial Ratios in per cent in per cent Cost-income ratio Return on equity (before taxes) Total capital ratio Tier-1 capital ratio