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Group financial report Q1 2019

Detailed financial performance report for Q1 2019, with strong capital base, sound capital adequacy, and operational income on target. Key highlights include profits, capital ratios, risk provisions, and operational earnings by segment.

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Group financial report Q1 2019

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  1. Group financial reportQ1 2019 Munich, 14 May 2019

  2. Contents • Financial performance • Detailed charts

  3. Solid capital base:CET1 ratio at 14.6% • Net interest and commissionincome, at approx. EUR 500 m, within our expectations • Operating income on target – previous-year figure benefited from one-off income and positive net risk provisions • Profit before taxes of EUR 51 mafter EUR 93 m charge for bank levyand deposit guarantee scheme • Good portfolio quality again leading to positive risk provisions; NPL ratio at a new best of 0.7% Q1 2019

  4. Q1 2018 benefited from one-off income and exceptionally positive net risk provisions Profit before taxes EUR million Consolidated profit EUR million Q1 2018 Q1 2019 Q1 2018 Q1 2019 CIR % RoE % 72.7 10.9 60.1 2.1 Q1 2018 Q1 2019 Q1 2018 Q1 2019

  5. Sound capital adequacy enabled moderate growth Total assets EUR billion RWAs EUR billion 235.3 66.9 65.5 220.2 Dec 2018 Mar 2019 Dec 2018 Mar 2019 CET1 capital (fully loaded) EUR billion CET1 capital ratio (fully loaded) In % 10.0 15.2 9.7 14.6 Dec 2018 Mar 2019 Dec 2018 Mar 2019

  6. Net interest and net commission income, at approx. EUR 500 m, within our expectations Net interest income EUR million Net commission income EUR million Q1 2018 Q1 2019 Q1 2018 Q1 2019 • ~15% rise due especially to enhanced securities business and increased income from fund transactions • Expected decline at DKB due e.g. to lower early repayment penalties

  7. Gains or losses on fair value measurement, hedge accounting and financial investments, and other income and expenses Aggregated gains or losses on FV measurement, hedge accounting and financial investments EUR million Other income and expenses EUR million Q1 2018 Q1 2019 Q1 2018 Q1 2019 • Previous year benefited from one-off income from interest on tax reimbursements and equity investments • Loss on fair value measurement due to measurement effects from unfavourable market developments was offset by earnings from sales of securities

  8. Administrative expenses higher due to investments; NPL ratio hits a new best Administrative expenses EUR million Risk provisions EUR million Q1 2018 Q1 2019 Q1 2018 Q1 2019 • Higher expenses for major regulatory projects and investments in sales, digitalisation and Group-wide strategic initiatives • Positive net risk provisions again; previous-year result boosted by high releases and recoveries on written down receivables • NPL ratio at 0.7% – a new best

  9. Operating earnings in the customer business at previous-year level Profit before taxes by segment EUR million • Financial Markets affected by measurement losses. Operating earnings roughly at previous-year level. • DKB earnings slightly down as expected due to the low interest rate environment. • Central Areas & Others strongly affected by high bank levy and deposit guarantee scheme. Previous year reaped benefits brought about by tax-related one-off income. • Corporates & Mittelstand results in previous year boosted by high releases of risk provisions. Current year seeing moderate increase in operating earnings amid a challenging market environment. • Real Estate & SB/Association improving resultsthrough good new real estate business and releasesof risk provisions. Q1 2018 Q1 2019 Corporates & Mittelstand Real Estate & Savings Banks/ Association Financial Markets DKB Central Areas & Others

  10. Corporates & Mittelstand • Profit before taxes slipped to EUR 18 m (Q1 18: EUR 143 m) due to high reversals of risk provisions and recoveries on written down receivables in the previous year • Net interest and net commission income climbed collectively to EUR 94 m (Q1 18: EUR 86 m) despite the tough market environment • Earnings from Financial Markets products for customer segments stood at previous-year level despite persistently low demand and a competitive market environment • Administrative expenses were higher, driven by Bank-wide investments in sales and projects • RWAs increased through new business CIR In % RoE In % 79.0 23.3 78.8 2.5 Q1 2018 Q1 2019 Q1 2018 Q1 2019

  11. Real Estate & Savings Banks/Association • Profit before taxes surged to EUR 55 m (Q1 18: EUR 25 m) thanks to more good new business in the Real Estate Division and to releases of risk provisions • Earnings from net interest and net commission income was up year-on-year at EUR 95 m (Q1 18: EUR 91 m) • Other earnings components (EUR +12 m) were strongly affected by valuation changes from interest-hedging transactions (BayernLabo) • The increase in administrative expenses is the result of Bank-wide investments in sales and projects • Profit before taxes at BayernLabo stood at EUR 14 m (Q1 18: EUR 9 m) • Earnings at Real I.S. doubled to EUR 4 m (Q1 18: EUR 2 m) due to increased business activity CIR In % RoE In % 68.1 17.3 66.1 9.9 Q1 2018 Q1 2019 Q1 2018 Q1 2019

  12. Financial Markets • Profit before taxes plunged to EUR -18 m (Q1 18: EUR 19 m) as a result of measurement losses • Rise in net commission income due to increasing business activities with financial institutions, which essentially also account for the RWA increase • Other earnings components impacted mostly by market-induced measurement losses for derivatives. The previous year included measurement gains • Earnings from Financial Markets products for customer segments were roughly on par with the previous year; as usual these earnings were reported under the segments that directly sold them • Administrative expenses were higher, driven by Bank-wide investments in sales and projects • Profit before taxes at BayernInvest remained unchanged at EUR 2 m CIR In % RoE In % 140.2 7.4 74.5 -5.3 Q1 2018 Q1 2019 Q1 2018 Q1 2019

  13. DKB • Profit before taxes fell from the exceptionally strong year-before period to EUR 96 m (Q1 18: EUR 114 m) due to a decrease in net interest income and higher administrative expenses • The decline in net interest income was the result of a market-related, narrowing interest margin • Other earnings components were impacted by the expenses for the bank levy and deposit guarantee scheme (EUR -28 m (Q1 18: EUR -23 m)) as well as by measurement gains from e.g. the fund portfolio • Administrative expenses rose to EUR -141 m (Q1 18: EUR -121 m), mainly as a result of new staffing measures and strategic projects in connection with the continued digitalisation of the business model • Bayern Card-Services posted stable profit before taxes of EUR 1 m CIR In % RoE In % 52.0 14.9 47.0 Q1 2018 Q1 2019 Q1 2018 Q1 2019

  14. Central Areas & Others • Profit before taxes were affected mostly by high expenses for the bank levy and deposit guarantee scheme (EUR -65 m (Q1 18: EUR -77 m)) • At EUR -99 m (Q1 18: EUR -64 m), profit before taxes plunged mostly as a result of one-off tax-related income in the previous year

  15. Outlook • Performance in 2019 – forecast confirmed • We expect profit before taxes for the financial year to remain within the mid-triple-digit million range. • Strategy process • BayernLB is working from a position of strength on the Bank’s future strategic direction. The goal of the strategy process is to optimally position the Group for the future in the interests of our customers and owners.

  16. Contents • Financial performance • Detailed charts

  17. Year-on-year earnings comparison

  18. Segment overview

  19. Segment overview Q1 2018

  20. Balance sheet overview

  21. Key capital figures

  22. Thank youfor your attention. Thank youfor your attention.

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