Notes to the Consolidated Financial Statements
Notes to the Consolidated Income Statement
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Basis of segment preparation
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1
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The segment information has been prepared in accordance with IFRS 8, Operating segments, which defines requirements for the disclosure of financial information of an entity’s operating segments as NIBC decided to early adopt IFRS 8. IFRS 8 replaces IAS 14, Segment Reporting.
Identification of segments
IFRS 8 requires operating segments to be identified on the basis of internal reports on components of the entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess segment performance.
As of 1 July 2008, the early adoption date of IFRS 8 Operating segments, NIBC is comprised of the following operating segments:
- Merchant Banking; and
- Specialised Finance.
Segment information for these two operating segments is presented in these Financial Statements on the same basis as used for internal reporting within NIBC.
Through the Merchant Banking business NIBC advises, finances, and co-invests with its mid-cap clients in the Benelux and Germany. The following services are provided by Merchant Banking:
- Coverage bankers maintain long-term relationships and provide strategic advice to NIBC’s mid-cap clients in the Benelux and Germany. Together with product specialists operating in multidisciplinary teams, client teams deliver a wide range of customised products and solutions, including merger and acquisition advisory, financing, derivative products, mezzanine and equity investments;
- M&A provides advisory services in close cooperation with the coverage bankers. It executes M&A-related transactions, including mergers, acquisitions, disposals and buyouts; and
- Investment Management creates and manages funds that are open to third-party investors. Funds have been developed in the fields of private equity and mezzanine (for our corporate clients), infrastructure and real estate. Investment Management also manages and services NIBC’s direct investments (including private equity investments in
non-financial companies included in the consolidation) and investments in third-party funds.
Specialised Finance provides asset financing in a select number of clearly-defined asset classes: corporate lending, leveraged finance, oil & gas services, infrastructure and renewables, shipping and real estate. It also includes NIBC’s retail activities in the residential mortgage market and in online retail savings via NIBC Direct. Specialised Finance performs the following functions:
- Origination structures, arranges and underwrites debt financing for its clients and is organised around the six asset classes;
- Structuring is the liaison between the origination and distribution teams and is responsible for structuring transactions for clients as well as fund and tax structuring;
- Distribution is the integrated distribution platform of NIBC and matches investor appetite with NIBC’s origination network and structuring capabilities;
- Portfolio Management pro-actively monitors credit quality and covenant compliance of borrowers and reviews the status of assets provided as collateral; and
- Retail Markets activities include residential mortgage origination in the Netherlands and Germany on the basis of white labelling through a number of distribution partners and NIBC’s online retail savings programme, NIBC Direct.
IFRS 8 requires the disclosure of the information used by the chief operating decision maker to allocate resources and to assess performance. Management reporting within NIBC is based on IFRS. Segment reporting under IFRS 8 requires a presentation of the segment results based on management reporting methods and a reconciliation between the results of the operating segments and the Consolidated Financial Statements.
Segment reporting
The following table presents the results of the operating segments, including a reconciliation to the consolidated results under IFRS for the year 2008 and 2007.
NIBC’s operating segments were implemented during 2008. This segment report reflects this organisational change, including comparative figures for 2007.
The measurement of segment assets and liabilities and segment revenues and results is based on the accounting policies. Transactions between segments are conducted on normal commercial terms and conditions. The funding requirements of each segment reflect funding at market interest rates. Segment revenues, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
The items displayed under ‘consolidation effects’ refer to entities over which Merchant Banking has control. IFRS requires NIBC to consolidate these entities. The internal management report differs from this, as the investments in these entities are non-strategic and the activities of these entities are non-financial. Therefore, in the income statement of Merchant Banking only NIBC’s share in the net profit of these entities is included in the line-item Share in result of associates. Subsequently, under ‘consolidation effects’ this is eliminated and replaced by the figures of these entities used in the Consolidated Financial Statements of NIBC.
In the income statement of Merchant Banking and Specialised Finance the following allocations are made:
- All expenses relating to Risk Management, Corporate Center and the Managing Board are allocated to the two segments based on the number of direct FTEs in each segment. Total operating expenses relating to support and overhead amounted to EUR 74 million in 2008 (2007: EUR 99 million);
- Certain client-related portfolios are managed by Merchant Banking and Specialised Finance together; all related income and expenses of these portfolios (interest, fee and trading income, impairments and also related operating expenses) are therefore allocated on a 50/50 base to the two operating segments. Total operating income from these portfolios amounted to EUR 70 million in 2008 (2007: EUR 121 million), total operating expenses to EUR 7 million (2007: EUR 6 million) and impairments to EUR 44 million (2007: nil);
- All income and expenses related to Treasury activities are included in Specialised Finance, with the exception of income from NIBC’s strategic mismatch position, which is allocated equally to the two operating segments. Income from NIBC’s strategic mismatch position amounted to EUR 23 million in 2008 (2007: EUR 17 million); and
- During 2008, an average of EUR 365 million of economic capital was allocated to Merchant Banking (2007: EUR 382 million), the remainder was allocated to Specialised Finance. The average before tax return on average economic capital for Merchant Banking was 4% in 2008 (2007: 2.75%).
Besides the allocations mentioned above, there are no further inter-segment revenues and expenses in 2008 and 2007.
NIBC generated 102% of its revenues in the Netherlands (2007: 84%) and -2% abroad (2007: 16%). Due to negative trading income in the international branches in 2008, total operating income in these branches was negative.
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In EUR millions
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2008
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2007
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Interest and similar income
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Interest income from assets designated at Fair Value through Profit or Loss
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784
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849
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Interest income from other assets
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690
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795
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1,474
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1,644
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Interest expense and similar charges
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Interest expense from liabilities designated at Fair Value
through Profit or Loss
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544
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572
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Interest expense from other liabilities
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723
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834
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1,267
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1,406
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207
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238
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For the year ended 31 December 2008, Net interest income includes interest on impaired financial assets of EUR 4 million (2007: EUR 5 million).
For the year ended 31 December 2008, net interest expense related to Deposits from customers amounts to EUR 121 million (2007: EUR 121 million).
Interest income from debt and other fixed income instruments Held for Trading or designated as Fair Value through Profit or Loss is recognised in Interest and similar income at the effective interest rate.
Interest income of reclassified assets in 2008 (following from the application of amendments to IAS 39), both after reclassification (as reported in the Consolidated Income Statement 2008) and before reclassification (assuming the reclassification had not been made) is displayed in the following table. The difference between the figure before and the figure after reclassification reflects amortisation of discounts and premiums of assets reclassified out of trading.
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in EUR millions
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For the period ended 31 December
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2008
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2007
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After reclassification
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Before reclassification
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|
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Interest income
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331
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323
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505
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Net fee and commission income
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3
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In EUR millions
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2008
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2007
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|
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Fee and commission income
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|
|
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Agency and underwriting fees
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14
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35
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Investment management fees
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15
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13
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Other
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16
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17
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45
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65
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Fee and commission expense
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Other non-interest related
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2
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3
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| |
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2
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3
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|
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43
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62
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In EUR millions
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2008
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2007
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|
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Equity investments (Available for Sale)
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8
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33
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Equity investments (investments in associates at Fair Value
through Profit or Loss)
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2
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6
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Structured investments (Fair Value through Profit or Loss)
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40
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45
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50
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84
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In EUR millions
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2008
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2007
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|
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Assets and liabilities designated as Fair Value through Profit or Loss (including related derivatives)
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36
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2
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Assets and liabilities designated as Held for Trading
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(93)
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(26)
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Other net trading income
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138
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-
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81
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(24)
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Net trading income includes a foreign exchange loss of EUR 9 million (2007: gain of EUR 13 million).
Revaluation of certain assets and liabilities are sometimes interrelated due to hedges and are larger than normal, mainly resulting from the special market circumstances especially during the second half of 2008.
Net trading income of reclassified assets in 2008 (following from the application of amendments to IAS 39), both after reclassification (as reported in the Consolidated Income Statement 2008) and before reclassification (assuming the reclassification had not been made) is displayed in the following table:
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in EUR millions
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For the period ended 31 December
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2008
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2007
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After reclassification
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Before reclassification
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Net trading income
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(45)
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(201)
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(22)
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Gains less losses from financial assets
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6
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In EUR millions
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2008
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2007
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|
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Equity investments
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|
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Gains less losses from equity investments (available for sale):
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Net gain/(losses) on disposal
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9
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10
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Net revaluation gain/(losses) transferred from equity on disposal
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26
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20
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Gains less losses from associates (Fair Value through Profit or Loss)
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(24)
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78
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Impairment losses equity investments
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(65)
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(1)
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(54)
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107
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Debt investments
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Gains less losses from debt investments (Available for Sale)
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(3)
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-
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(57)
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107
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Impairment losses relating to debt investments (available for sale) are presented under Impairment of other interest bearing assets.
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In EUR millions
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2008
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2007
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|
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Real estate rental income
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1
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1
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Net revenue of non-financial companies included in the consolidation
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38
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-
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Other
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1
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5
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40
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6
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In EUR millions
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2008
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2007
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|
|
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Net revenue of non-financial companies included in the consolidation can be categorised as follows:
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Net sales
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50
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-
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Cost of sales
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(12)
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-
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38
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-
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In EUR millions
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2008
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2007
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|
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Salaries
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65
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67
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Variable compensation
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25
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48
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Pension and other post retirement charges:
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Defined benefit plan
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7
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8
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Defined contribution plan
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3
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2
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Other post retirement charges/(releases)
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(1)
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2
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Other social security charges
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7
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6
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Other staff expenses
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2
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2
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Staff cost of non-financial companies included in the consolidation
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17
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-
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125
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135
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The decrease in salaries and the lower pension and other post retirement charges in 2008 are mainly explained by lower average FTEs in 2008 (661) compared to 2007 (700).
The decrease in variable compensation mainly relates to lower expenses related to share-based payment plans (partly related to forfeited rights due to employees leaving NIBC) and lower performance related reward arrangements (carried interest).
The number of FTEs (excluding the non-financial companies included in the consolidation) decreased from 703 at 31 December 2007 to 625 at 31 December 2008. The number of FTEs employed outside of the Netherlands decreased from 111 at 31 December 2007 to 106 at 31 December 2008.
516 FTEs are employed at the non-financial companies included in the consolidation at 31 December 2008. 483 of these FTEs work outside of the Netherlands (2007: not applicable).
Information on the pension charge is included in Employee benefit obligations (note 43).
Information on NIBC’s share-based payment plans as well as on the remuneration of the Statutory and Supervisory Board can be found in note 55.
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Other operating expenses
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9
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In EUR millions
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2008
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2007
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|
|
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Fees of the external auditor
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3
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4
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Other operating expenses of non-financial companies included in the consolidation
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7
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-
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Other operating expenses
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63
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55
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|
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73
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59
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In EUR millions
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2008
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2007
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| |
|
|
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Fees of the external auditor can be categorised as follows:
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|
|
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Audit Financial Statements
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2
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2
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Other audit related activities
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1
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2
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Other non-audit related activities
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-
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-
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Fiscal services
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-
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-
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|
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3
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4
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The fees listed above relate to the procedures applied to NIBC and its consolidated group entities by accounting firms and external auditors as referred to in Section 1(1) of the Dutch Accounting Firms Oversight Act (Dutch acronym: Wta), as well as by Dutch and foreign-based accounting firms, including their tax services and advisory groups.
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Depreciation and amortisation
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10
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In EUR millions
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2008
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2007
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|
|
|
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Property, plant and equipment
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6
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17
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Property, plant and equipment non-financial companies included in the consolidation
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8
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-
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Intangible assets
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3
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-
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|
|
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17
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17
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In EUR millions
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2008
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2007
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| |
|
|
|
|
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Amortisation of intangible assets can be categorised as follows:
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|
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Goodwill
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-
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-
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Trademarks and licenses
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-
|
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-
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Customer relationships
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1
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|
-
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Order backlog
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2
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-
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Other intangible fixed assets
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-
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-
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|
|
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3
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-
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In 2008, all intangible assets are related to non-financial companies included in the consolidation.
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Impairments of corporate loans and of other interest bearing assets
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11
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In EUR millions
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2008
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2007
|
| |
|
|
|
|
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Impairments
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|
|
|
|
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Loans classified as Amortised Cost
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48
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|
-
|
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Loans classified as Available for Sale
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34
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|
15
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|
Debt investments classified as Amortised Cost
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-
|
|
-
|
|
Debt investments classified as Available for Sale
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7
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|
-
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|
89
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|
15
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Reversals of impairments
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|
|
|
|
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Loans classified as Amortised Cost
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(14)
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-
|
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Loans classified as Available for Sale
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(11)
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(14)
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Debt investments classified as Amortised Cost
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|
-
|
|
-
|
|
Debt investments classified as Available for Sale
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|
-
|
|
-
|
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|
|
|
|
| |
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(25)
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(14)
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| |
|
|
|
|
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Other
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(2)
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-
|
| |
|
|
|
|
| |
|
62
|
|
1
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Further details on interest on impaired financial assets can be found in note 2.
Impairments of interest bearing assets reclassified in 2008 (following from the application of amendments to IAS 39), both after reclassification (as reported in the Consolidated Income Statement 2008) and before reclassification (assuming the reclassification had not been made) is displayed in the following table:
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in EUR millions
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For the period ended 31 December
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|
2008
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|
2007
|
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After reclassification
|
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Before reclassification
|
|
|
| |
|
|
|
|
|
|
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Impairments of interest bearing assets
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(35)
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(27)
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(7)
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In EUR millions
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2008
|
|
2007
|
| |
|
|
|
|
|
Current tax
|
|
1
|
|
18
|
|
Deferred tax
|
|
-
|
|
2
|
| |
|
|
|
|
| |
|
1
|
|
20
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Further information on deferred income tax is presented in note 34. The Tax on NIBC’s profit before tax differs from the theoretical amount that would arise using the basic tax rate.
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In EUR millions
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2008
|
|
2007
|
|
These differences can be analysed as follows:
|
|
|
|
|
|
Profit before tax from continuing operations
|
|
94
|
|
262
|
|
Tax calculated at the nominal Dutch corporate tax rate of 25.5% (2007: 25.5%)
|
|
24
|
|
67
|
|
Effect of different tax rates in other countries
|
|
-
|
|
1
|
|
Impact of income not subject to tax
|
|
(23)
|
|
(53)
|
|
Impact of expenses not deductible for tax purposes
|
|
2
|
|
7
|
|
Utilisation of previously unrecognised tax losses
|
|
(2)
|
|
(2)
|
| |
|
|
|
|
| |
|
1
|
|
20
|
| |
|
|
|
|
|
Effective tax rate
|
|
1.1%
|
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7.6%
|
The impact of income not subject to tax mainly relates to income from equity investments and associates, in which NIBC has a stake of more than 5%, being income that is tax exempt under Dutch tax law.
NIBC Holding N.V. is the parent company of a number of subsidiaries such as NIBC Bank N.V., NIBC Investments N.V. and NIBC Investment Management N.V., which all are part of the same fiscal entity.
| |
Result attributable to minority interest
|
|
13
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|
In EUR millions
|
|
2008
|
|
2007
|
| |
|
|
|
|
|
Result attributable to minority interest
|
|
1
|
|
3
|
| |
|
|
|
|
| |
|
1
|
|
3
|
The minority interest reflects third-party participations in investment funds controlled by NIBC and in non-financial companies included in the consolidation held by investment funds controlled by NIBC.
