Investor Presentation April 2018 · Investor Presentation – April 2018 Page 8. BayernLabo...

Investor PresentationApril 2018

Agenda

Investor Presentation – April 2018

Summary

2 The Free State of Bavaria, guarantor of BayernLabo

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Portrait of BayernLabo

BayernLabo in figures

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� BayernLabo has a legal mandate to promote social housing and municipal construction in Bavaria. In addition, BayernLabo makes loans to state and local authorities in Bavaria.

� BayernLabo is a legally dependent part of BayernLB but independent in organizational and commercial terms.

� The Free State of Bavaria is liable for all liabilities that BayernLabo enters into on an "unconditional, unlimited in time, and irrevocable" basis. The refinancing guarantee by the Free State of Bavaria is payable on demand, thereby ruling out any delay in payment.

� With Aaa/AAA, the Free State of Bavaria has the highest ratings from Moody’s and Standard & Poor’s. Moody’s rating of BayernLabo: Aaa.

� Solva-0 status: no regulatory capital charges [art. 116 par. 4 CRR].

� LCR status: level 1 assets

� No risk of any bail-in [liability of the Free State of Bavaria is not affected from BRRD Implementation Act].

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Free State of Bavaria compares well to its European neighboursBavaria aims to be completely debt free by 2030 - th e first state in Germany

Sources: BayernLB Research, Eurostat, German federal and state statistics offices, Datastream

2016 gross domestic product by country (EUR bn)

AAABest credit ratings

The Free State of Bavaria has the highest

ratings from Standard & Poor's and Moody's –

AAA/Aaa – and is one of only three German

states rated AAA by S&P

EUR 568 bn

Gross domestic product

Bavaria accounted for 18.1 % of Germany's

nominal gross domestic product in 2016

DAX 30Bavaria – German state with a strong economy

Around 25 % of all DAX 30 corporations are in

Bavaria. Bavaria is one of Germany’s most

economically powerful states and is typically

home to a large number of Mittelstand companies

174185216276276335353423426465

568604703

1.119

1.681

2.229

2.396

3.144

Bavaria


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� 1884 On 21 June 1884, King Ludwig II signed a law establishing the Königlich-Bayerische Landeskulturrentenanstalt. This put an end to years of discussion on how the state could help finance the modernisation of agriculture. In 1908, the Landeskulturrentenanstalt also began financing the construction of small flats for people with lower incomes.

� 1949 Under the law of 19 June 1949, the Landeskulturrentenanstalt was transformed into Bayerische Landesbodenkreditanstalt with a mandate to promote social residential construction.

� 1972 Bayerische Landesbodenkreditanstalt merges with Bayerische Gemeindebank Girozentrale to form Bayerische Landesbank Girozentrale, nevertheless remaining a legally-independent institution whose chief mandate is to subsidise residential housing and urban development.

� 2005 Implementation of Understanding II between the European Commission and the Federal Republic into national (Bavarian) law to maintain public sector liability and public guarantee for state-owned promotional banks.

History


In accordance with Article 19 of the Bayerische Landesbank Act (BayLaBG), BayernLabo is a state promotional bank that is a legally dependent part of BayernLB but independent in organizational and commercial terms. BayernLabo's annual financial statements are fully consolidated into BayernLB’s annual financial statements. BayernLabo is owned by the Free State of Bavaria and the Association of Bavarian Savings Banks via their respective shareholdings in BayernLB (through BayernLB Holding AG).

¹ Standard & Poor‘s, Moody‘s2 24.99999994%

Freestate of Bavaria

AAA/Aaa¹

BayernLB Holding AG

~ 25% 2 ~ 75%

100%100% State-guarantee

Sparkassenverband Bayern

Institution established under public law

BayernLabo in the BayernLB Group


BayernLabo residential housing subsidy programmes

Bavarian residential construc. programme (private h ousing, rental properties)

Subsidised loans for student housing

Subsidised loans for facilities for the disabled

Fiduciary business

Bavarian programme of low-interest loans for privat e housing

Bavarian modernisation programme (rental properties , care facilities)

Proprietary business

Own-liability transactions

Replacement buildings (care facilities)

Under Bavarian state law (Article 20 Paragraph 1BayLaBG), BayernLabo is responsible for providing financial assistance to individuals and private or public-sector entities forprojects in the residential and infrastructure sectors as well as other measures to improve and strengthen Bavaria's housing and settlement structure as part of the state’shousing policy and in line with the aid provisions of the European Community.

ProgrammsBusiness

Municipal programme for the creation of rental prop erties in Bavaria


Under Bavarian state law (Article 20 Paragraph 2BayLaBG), BayernLabo may also carry out financing for regional authorities and public-law special-purpose associations.

State and local authority lending

As the municipal promotional bank of the Free State of Bavari a with a financing

volume of around 5.9 billion EUR and a market share of around o ne third,

BayernLabo is the market leader in Bavarian municipal lendi ng. BayernLabo’s

municipal lending is limited exclusively to Bavarian borro wers. The volume of

loans extended directly to the Free State of Bavaria is aroun d 3.9 billion euros .

Capital market business

"Investkredit Kommunal Bayern" to finance investments inlocal infrastructure.

"Energiekredit Kommunal Bayern" to finance the upgr ading of the energy efficiency as well as the building or acquisition o f all non-residentialmunicipal buildings.

Developmentbusiness

“Inklusionskredit Kommunal Bayern” to finance the removal o f barriers inpublic buildings and public spaces.

ProgrammsBusiness

In addition to conventional municipal lending, BayernLabo, in its role as a promotional bank ofthe Free State of Bavaria, currently offers the following subsidised loan programs to municipalborrowers in cooperation with KfW:


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Stand: 31.12.2017

Total assets (HGB) 23,068 EUR m

Equity (HGB) 1,963 EUR m

Cost Income Ratio 62,7%

Headcount 189

Loan commitments in 2016 1,514 EUR m

Selected key figures


4.758

6.077

5.030

Local authority loans

Loans to the Free State of Bavaria Business at own liability

Guaranteed loans (state or municipal)

Fiduciary Lending

Lending portfolio structureAs at 31 Dec 2017 EUR m

BayernLabo’s lending portfolio

Loans to banks

120

4.878344

5.574

3.791

5.770

2.763

Loan to the Free State of ThuringiaLending volume of approximately EUR 23.2bn

� EUR 4.9bn in fiduciary business

� EUR 18.3bn in BayernLabo's proprietary business

Counterparty risks apply only to EUR 344m in loans granted under BayernLabo's own liability, i.e. which are not secured by a state guarantee if the borrower defaults.


5.053

5.030

Own funds

Other bank liabilities

Liabilities to BayernLB

Securitized liabilities

Borrowing from customers

Liabilities to LR

Liabilities to KfW

Fiduciary liabilities

Funding structureAs at 31 Dec 2017 EUR m

BayernLabo's funding structure

3.927

4.878

4.136

852

569

5.522

1.221

1.963

Funds for BayernLabo's fiduciary operations are provided by the Free State of Bavaria .

BayernLabo obtains much of its funding from KfW Förderbank , mainly through its subsidised loan programmes.

In addition, BayernLabo funds itself on the capital markets.

BayernLabo's own funds (total equity) amount to approximately EUR 2.0bn.


On the capital markets BayernLabo issues:

Schuldschein notes (promissory notes)

Registered bonds

Bearer bonds

BayernLabo’s Funding:

2017: EUR 1.0bn

2018: EUR 1.5bn (projected), thereof capitalmarket funding 1.0bn

Benchmark bonds (Social Bond)

Bearer bonds

Schuldschein notes / registered notes

Funding 2017EUR m

BayernLabo’s Funding

355

631

500

413

promotional Banks

35 50


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BayernLabo Sustainability rating

imug rating oekom research

As at October 2017

Rating C+

Ranking number 3 in industry ranking

Rating range D- to A+

Benchmark 52 banks, Sector: Financials/mortgage &

public sector finance

oekom prime status

Rating 34%

Ranking Top 25

Rating range -100% to +100%

Benchmark 150 banks, Sector: promotional bank

CCC (unsecured bonds): neutral

As at January 2016

Investment status Investment status

Independent sustainability rating agencies rate Bay ernLabo as a leader among sector peers in achieving sustainability targets.


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Manfred PongratzDeputy Member of Executive [email protected]

Contact

Internet:http://www.bayernlabo.de


The information in this presentation constitutes neither an offer nor an invitation

to subscribe to or purchase securities or a recommendation to buy. It is solely

intended for informational purposes and does not serve as a basis for any kind

of obligation, contractual or otherwise.

Disclaimer


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Annexes

� Free State Bavaria Refinancing Guarantee

� BaFin and Bundesbank Confirmation (Solva 0%)

� BaFin Confirmation (meets the standards in article 116 paragraph 4 CRR for zero weighting)


100% liability by the Free State of Bavaria

� Under a ruling by the EU Commission, legally dependent promotional banks which are part of public-sector banks, such as BayernLabo, are permitted to enjoy the protection of state guarantees after October 18, 2005 (Article 22 Paragraph 2 BayLaBG).

� Under this law, the Free State of Bavaria guarantees in full all of BayernLabo’s liabilities, including loans, mortgage bonds, land mortgage bonds, debentures, forward transactions, options, and guarantees.

� This legal guarantee is unconditional, unlimited in time and irrevocable and can be cancelled, limited, or modified only by a corresponding state law.

� The guarantee is furthermore payable upon first demand, thereby eliminating the possibility of a delay – however short-term – in payment.

� The Free State of Bavaria is one of only three states in the Federal Republic of Germany that is rated Aaa/AAA by the major rating agencies (Moody’s, S&P). Bavaria's excellent creditworthiness supports and underscores its outstanding character as a guarantor of BayernLabo.


Solva-0 status

� The German Federal Financial Supervisory Authority (BaFin) and the German Bundesbank (central bank) have also recognized the Free State of Bavaria’s liability under Article 22 Paragraph 2 of the Bayerische Landesbank Act (BayLaBG).

� This means the Free State of Bavaria’s liability represents an explicit guarantee as defined in § 31 Number 1 in conjunction with § 27 Number 1a in conjunction with § 26 Number 2a of the Solvency Regulation (Solvabilitätsverordnung) or § 20 Subsection 2 Clause 1 Number 1d in conjunction with Number 1c of the German Banking Act (Gesetz über das Kreditwesen); these privileges also apply under article 116 paragraph 4 of the CRR.

� This guarantee means that the Solva-0 regulation applies to BayernLabo, meaning that financial institutions that purchase BayernLabo's debt issues are not required to allocate regulatory capital against them and they do not count against (German) large loan limits.


Level 1 assets

� On 10 November 2014, the EU Commission adopted a Delegated Regulation to provide specific guidance on implementing the Liquidity Coverage Ratio (DR-LCR) requirements.

� The Detailed Regulation describes, among other things, which bonds can be classified as liquid assets. In accordance with the Delegated Regulation, BayernLabo's issues are classified as level 1 assets due to its status as both a public-sector entity (Article 10, para 1, c (v)) and a "credit institution" (Article 10, para 1, e (i)).

� This means that BayernLabo's bonds can be used to cover net liquidity flows without any restriction on the amount or discounts from market value.


Refinanzierungsgarantie des Freistaat Bayern (1)Free State Bavaria Refinancing Guarantee

Investor Presentation – April 2018 Page 27

Bestätigung BaFinBaFin and Bundesbank Confirmation (Solva 0%)


Bestätigung BaFinBaFin Confirmation(meets the standards in article 116 paragraph 4 CRR for zero weighting)


BayernLaboPhone:+49-89-2171-28016

Internet:http://www.bayernlabo.de

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