Business performance up on previous year LBBW delivers strong result in the first half of the year

CEO Rainer Neske: “The half-year result shows that LBBW is strategically well positioned, high-performing and resilient. With Berlin Hyp under the umbrella of our universal bank, we have also created the leading CRE competence center and further strengthened our market position. We understand our customers’ needs and have the financial strength to stand by them as a partner even in difficult times.”

The good result was driven by a strong core operating business with rising income and a stable risk situation with slightly declining allowances for losses on loans and securities. Despite the uncertain geopolitical and economic environment, all four operating segments increased their income and, by mid-year, each achieved a profit in a three-digit million range and reached a pre-tax result at or above the previous year’s level.

Income underlines growth path – expenses impacted by integration effects of Berlin Hyp

Group income rose by 3 percent to €2.12 billion, reflecting the successful operating performance. Particularly notable was the 9 percent increase in net fee and commission income, driven by strong securities and custody business as well as higher earnings from structuring larger financings in the business segments Corporate Customers and Project Finance.

Expenses amounted to €1.31 billion. This figure includes €54 million in integration effects from Berlin Hyp. Excluding these, expenses rose by 4 percent to €1.26 billion (previous year: €1.20 billion). The increase was mainly due to investments in IT development (including cyber resilience), collective bargaining and salary effects, and capacity expansion in growth areas. Contributions to the protection schemes of the S-Finanzgruppe also increased.

Berlin Hyp, acquired in summer 2022, was legally integrated into LBBW with effect from 1^st of August 2025, and combined with LBBW’s own commercial real estate business. This new structure further simplifies processes and the management of business activities. As part of this reorganization, the above-mentioned effects also arose in the first half of the year, including for IT and restructuring provisions.

The operating cost-income ratio stood at 59.2 percent, and including integration effects at 61.8 percent. The operating return on equity was 9.3 percent, or 8.6 percent including integration effects.

Stable risk position – high portfolio quality

The bank’s risk position remained stable despite the weak economy and the challenging situation in real estate markets. Allowances for losses on loans and securities totaled €107 million, slightly below the previous year (€118 million), and continued to be at a moderate level in long-term comparison. These provisions mainly resulted from individual cases in the real estate business, with some additional cases in corporate customers. The consistently high quality of the portfolio was reflected in the non-performing exposure (NPE) ratio of 0.6 percent, which remains low compared to the industry. The bank also continues to maintain a strong buffer of additional allowances in the form of model adjustments totaling EUR 880 million, unchanged from the previous year.

The Common Equity Tier 1 ratio under CRR III stood at a very comfortable 16.6 percent. The increase from 14.6 percent in the previous year was largely due to a reduction in risk-weighted assets following methodological changes from the transition from CRR II to CRR III.

Successful operating segments

LBBW’s customer business is broken down into four operating segments. All four segments achieved a pre-tax profit in a three-digit million range at mid-year, once again highlighting the balance of LBBW ’s universal banking model.

The Corporate Customers segment increased its pre-tax profit to €352 million, up from €305 million in the previous year. Income rose significantly across a broad range of product areas despite subdued investment demand from companies, with strong contributions from corporate finance, hedging products and cash management. Allowances for losses on loans and securities remained very moderate despite the weak economy, while portfolio quality continued to be solid overall.

The Real Estate/Project Finance segment improved its profit to €205 million (2024: €197 million), despite the ongoing challenges in real estate markets. Income was slightly above the previous year, supported by improved margins in real estate financing and a positive performance in new project finance business, the latter with a focus on renewable energy and the expansion of digital infrastructure.

Allowances for losses on loans and securities decreased to €95 million (previous year: €106 million).

The Capital Markets business delivered a result in line with the previous year at €142 million (previous year: €143 million). Income rose across a broad spectrum of customers and products, including certificates, credit markets and issuance business. Higher expenses were attributable to investments in IT, amongst others.

The Private Customers/Savings Banks segment, with €103 million, reported a result on prior-year level (previous year: €105 million). While interest income, particularly from deposits, declined due to the lower interest rate environment, revenues increased in securities business and asset management. Revenue from the brokerage of pension products also grew, as did deposit volumes.

Outlook

Looking ahead to the coming months, CEO Rainer Neske said: “The economic environment remains volatile, creating uncertainty for both the real economy and the financial markets. This makes reliability and structural reforms in Germany more important than ever for companies. LBBW is prepared to work alongside them to restore Germany as a business location to its former strength. Thanks to our balanced business model, our robust balance sheet, and our long-term partnerships, we are ideally positioned to achieve this. We are therefore reaffirming our pre-tax earnings target of over €1 billion.”

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