Lower Saxony's Prime Minister Stephan Weil has threatened the Savings Banks Finance Group with unusually clear words with an end to ownership in the struggle over the future direction of Nord LB. The owners of the Landesbank would have to come to a common understanding that Nord LB should be allowed to "develop further through profitable new business", said Weil on Wednesday in his speech at the "Sparkassentag" event, which is taking place this week in Hanover with 2700 participants. However, if this agreement via Nord LB was not possible, Lower Saxony would have to "end the partnership amicably if necessary". However, Weil also said that he actually wanted to continue the cooperation and thanked the Savings Banks Finance Group for supporting Nord LB in 2019.

Hanno Mußler

Editor in business.

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In the years leading up to 2019, Nord LB was in dire straits, mainly due to non-performing ship loans that cost it €7 billion. In 2019, Nord LB was no longer able to cover its losses on its own and needed EUR 3.4 billion. The majority, 2.4 billion euros, came from the state of Lower Saxony, Saxony-Anhalt gave 200 million euros. As a result, these two federal states now hold 57.5 and 6.3 percent of the shares. However, the nationwide savings bank organization, which contributed 1.1 billion euros to the rescue of Nord LB, was also new to the circle of sponsors. Since then, two special purpose vehicles, one for the savings banks and one for the state banks, have each held 12 percent of the shares.

Complicated owners

The problem is that the other Landesbanks, such as LBBW, Bayern LB and Helaba, increasingly perceive the now stable Nord LB as a competitor. In 2022, Nord LB generated a good 23 billion euros in new business, 81 percent more than in the previous year, including many projects for the expansion of renewable energies, to the delight of the participating federal states. However, the other Landesbanks would also like to finance such projects. At the end of 2022, Nord LB's total assets amounted to around €110 billion, significantly more than the €90 billion agreed at the bailout for 2024.

With this "violation" of the original agreement to rescue the institution, the Landesbanks involved now have a lever in their hands to prevent business policy decisions in Nord LB. At the moment, there is a struggle for a new bank management software, which is required by the banking supervisory authority for Nord LB, but which is considered by other Landesbanks to be too expensive and oversized for Nord LB.

Because it doesn't get concrete

Prime Minister Weil left open how exactly he intends to resolve this conflict, which has what it takes to become a permanent conflict because it can always be ignited by other Nord LB projects. The ownership structure de facto allows only two Landesbanks to block important decisions by Nord LB. Weil left no doubt about his determination to support Nord LB.

One way to change the ownership structure would be for the state of Lower Saxony to buy the shares of 12 percent each from the two special purpose vehicles of the savings bank group for at least the amount of 2019.1 billion euros contributed in 1. Another way to simplify the ownership structure would be to separate Landessparkasse Braunschweig from Nord LB and take it over by local authorities. Helmut Schleweis, President of the German Savings Banks and Giro Association, spoke out in favour of this at the Savings Banks Day. However, Nord LB should not be endangered by the separation of the Landessparkasse, Schleweis warned. He spoke about good talks and announced a quick solution for Nord LB.

Nord LB appears to have been restructured, as it achieved a pre-tax profit of EUR 2022 million in 104 according to IFRS. According to HGB accounting, however, Nord LB reported an annual loss of EUR 2022 million for 33. On Wednesday, Nord LB now reported that it had made a loss of around €2023 million in the first quarter of 8, compared to a loss of €99 million a year earlier.

In contrast to most banks, Nord LB's net interest income declined slightly in the first quarter. On the other hand, there was a jump of around a quarter in net commission income. Otherwise, as usual, the payments for the bank levy and the deposit guarantee fund amounted to EUR 68 million in the first quarter. The bank is sticking to its "growth course without losing sight of the issue of risk," said CEO Jörg Frischholz at the presentation of the figures.