Interim Report as of 30 September 2016

EAA’s business performed well

The EAA’s business performed well in the period from January to the end of September 2016. We have already succeeded in implementing most of our plans for the current fiscal year. In fact, they have been exceeded in some cases. Both the banking book and the trading portfo- lio have been reduced by around 15% since the start of the year. At EUR 5.8 million as at 30 September, the result after taxes is once again better than planned. This is largely attributable to the significantly better-than-expected performance of financial assets and participations. We were likewise successful at cost management, which enabled us to decrease administra- tive expenses more than originally forecast.

The EAA will continue to focus on particularly complex components of the portfolio, with the objective of reducing the associated risks as quickly as possible in the interests of its stakeholders. From today’s perspective, the portfolios with project financing, American life insurance policies and municipal interest swap transactions will need particularly close attention. The performance of the Phoenix Light SF Ltd. special purpose vehicle, whose financing instruments are held entirely with the EAA, must be scrutinised carefully, too.

Even though the EAA does not underestimate the risks remaining in the overall portfolio, it is clear that the existing risk buffer has improved further relative to the volume of the banking book. In absolute figures, the EAA’s equity, equity draw-down facility and risk provisions add up to EUR 2.3 billion and therefore correspond to the level of the beginning of the year, even though the portfolio volume has decreased further.

As in the prior periods, the development of the EAA’s total assets (30 September 2016: EUR 68.6 billion) does not reflect the success in winding-up the portfolio (31 December 2015: EUR 68.7 billion). This is mainly due to the rising market values of trading assets and liabilities, which are primarily influenced by the development of interest rates. The notional wind-up and the related reduction in risks are thus offset. The temporary increase in cash and cash equivalents, for instance, reinforces the effect. The EAA’s total assets are also higher because it could now legally assume assets that it had previously guaranteed. While this measure does not change the risk situation, it facilitates the wind-up of the corresponding positions in the future.

In view of the progress the EAA has made in the first nine months, we are confident that fiscal year 2016 as a whole will conclude with a satisfactory result.