14.02.2008Berenberg Bank achieves record results

Assets under management: up 24% to EUR 19.1 billion Balance sheet total: up 33% to EUR 3.6 billion Retained earnings: up 14% to EUR 61.2 million New awards for Private Banking and Research

Hamburg. Hamburg's Berenberg Bank achieved the best
result in its 418-year history in 2007. Despite a difficult
year in the banking sector, Berenberg increased its net
profit for the year by 14% to EUR 61.2 million (previous
year: EUR 53.5 million) according to preliminary figures,
while the return on equity before taxes rose to 56.1%
(p.y. 52.5%).

"Our company is over 400 years old. We would not be in a
position to look back on so long a tradition if we had not kept
our sights on the avoidance and management of risk. Although
we are always very innovative in the development of
interesting investment models, when we are offered
"fashionable products" that we do not understand ourselves
we steer clear and advise our clients to do likewise. We have
fared well with this business policy especially in the present
market situation" says partner Claus-G. Budelmann. At no
time has the Bank made investments in subprime structures.

In 2007, Berenberg continued its organic growth. In the past
three years, the number of staff was boosted by more than
45%, and the Bank now employs 760 (p.y. 658) staff in eight
German and seven foreign locations and plans further
recruitments in 2008.

The commission surplus, that is dominated by the securities
business, was increased from the previous year’s high level by a
further 24% to stand at EUR 151.5 million (p.y. EUR 122.2
million). The interest surplus rose by 16% to EUR 36.8
million (p.y. EUR 31.8 million). The deposit business
contributed roughly twice as much to earnings as the credit
business. The ratio of commission to interest surplus was
unchanged at 80:20.

The balance sheet total increased mainly due to high liquidity
levels of the expanded securities and shipping business and the
associated deposits by 33.2% to EUR 3.6 billion (p.y. EUR 2.7
billion) while the enlarged business volume rose from EUR
2.9 billion to EUR 3.8 billion (up by 33.8%).

The subscribed capital of the Bank was increased by EUR 10
million to stand at EUR 155.1 million. Equity includes a core
capital of EUR 145 million and a supplementary capital of
EUR 10.1 million (EUR 5.1 million subordinated liabilities and
EUR 5 million participatory capital with a term longer than
two years).

Risk provision was again sufficient; write-backs of specific
adjustments led to a positive balance. As in recent years, in
2007, too, the taxed contingency reserve pursuant to § 340 f
HGB was again increased.

On account of the investments in the further growth of the
Bank (hiring of new staff, investments in IT, increased marketing,
expansion of branches), administrative costs rose from EUR 104.3
million to stand at EUR 133.5 million (a rise of 26%).

Due to investments in the further expansion of the business,
the cost/income ratio rose slightly, from 65% to 67%.

Berenberg Bank is one of the few private banks with a broad
base, with four fields of business:
- Private Banking
- Investment Banking
- Institutional Asset Management; and
- Corporate Banking.

All these divisions contribute substantially to the result. There
is no dependence on the success of any one division.
"Berenberg is perceived in the market and in the rankings as
being one of the quality leaders," reports partner Dr. Hans-
Walter Peters. Besides cultivating close client relationships,
Germany's oldest private bank is characterised by continuity in
its business policy. Here, one crucial factor is that all members
of staff embody and practise the corporate philosophy.
Berenberg Bank seeks consistently to measure up to its
principle of placing client interests and needs at the centre
stage of its activity. It is against this background that new staff
has been hired in line with growth. Notwithstanding a tight
market for good consultants, some outstanding new colleagues
have been recruited who are appreciative of a company’s stable
and long-term focus.

The year 2007 saw a large number of new clients.
Simultaneously, the business with existing clients expanded.
Together, these two factors led to an increase in assets under
management, with a rise of 24% to EUR 19.1 billion (p.y.
EUR 15.4 billion).

Private Banking
The private banking division is the most prominent area of a
private bank in terms of public perceptions. It is headed by
Dr. Hans-Walter Peters and his partner Andreas Brodtmann.

"Accompaniment of wealthy families over generations is a very
complex task and we devote a great deal of time to meeting
our responsibilities here," says Peters. This is indeed necessary,
since the tasks and issues in private banking are very wideranging,
and one-size solutions rarely lead to the hoped-for
results. The structured business model coupled with the
personal atmosphere in an evolved private bank enable knowhow
to be bundled to the advantage of clients.

Using the Berenberg Sigma asset concept, the assets can be
divided into ten investment categories. This enables the
inclusion of alternative investments (the often reviled hedge
funds are currently providing for a certain calm in the
portfolios) as well as illiquid assets (such as ships and
buildings). "We see ourselves as occupying a unique position in
the German market in this respect," comments Peters. The
optimisation of returns and risk management enjoy here equal
priority. This approach has proven its strength in the present
difficult market phase and is also one of the reasons for the
many awards, such as the overall pre-eminence and top
ranking in Fuchs Report’s "Hall of Fame" or four years of
winning the highest distinction "summa cum laude" in the
report "The elite of asset managers".

Berenberg identifies the best products in the market in the
different investment categories. The Bank deploys solutions of
its own only very selectively and, indeed, they are developed
only when there are otherwise no convincing products to be
had. "We did this, for instance, in the case of Eastern
European funds, umbrella funds and in the area of small and
mid caps. Here, we were quickly able to obtain market
leadership in the different segments with interesting niche
products," reports Peters. Moreover, our private clients profit
from the development of innovative special solutions that are
otherwise reserved for institutional investors. One example are
asymmetrical risk corridors in which the risk is capped below
whereas participation in growth is almost 1:1.

Berenberg meanwhile offers its private banking services at
eight locations in Germany (Hamburg, Bielefeld, Bremen,
Düsseldorf, Frankfurt, Munich, Stuttgart, and Wiesbaden), one
of the biggest networks of branches of a private bank in
Germany. Special attention is given to maintaining a uniformly
high level of quality at all locations. Our success here has been
impressively confirmed, for example, in the latest Fuchs
Report.

Clear growth in portfolios has been recorded in the family
assets area. These are mostly awarded through beauty contests.
In its global "Private Banking Survey" in January, British
financial magazine "Euromoney" proclaimed Berenberg the
best German bank for assets between USD 10 and 30 million.

The business has been extended with cooperation partners
(such as savings banks and independent asset managers) for
whom Berenberg assumes asset management functions or
provides individual solutions.

There was strong growth in international Private Banking, run
by Berenberg Bank (Schweiz) AG in Zurich. The assets
managed in Switzerland were increased by 7% in the reporting
year, to CHF 3.2 billion (p.y. CHF 3 billion). Berenberg
employs 53 staff in Zurich.

Investment Banking
The Investment Banking division is headed by the partners
Graeme Davies and Hendrik Riehmer. It consists of two areas:
Capital Markets and Corporate Finance.

In 2007, the division achieved record growth in commission of
47%, representing more than half of the Bank's commission
earnings. With this growth, Berenberg Investment Banking has
impressively reinforced its leading position in the area of
European small and mid caps.

Capital Markets
In 2007, more than EUR 25 billion was handled for more than
300 institutional clients. Here, Berenberg significantly
increased its market share for the trade in small and mid caps
and is currently the most active German investment bank in
this sector.

Our research function observes 314 listed companies in
Germany, Austria, Switzerland, France, and Italy. More than
60% of the companies covered are domiciled abroad. At 540
roadshows (p.y. 430) and three investor conferences for
German, Swiss and French small and mid caps, all of which
were staged close to London, some 43 listed companies had
the opportunity of presenting themselves to our institutional
clients.

In 2007, Berenberg was honoured by rating agency AQ for the
best MDAX recommendations and by the Börsen-Zeitung, for
the best recommendations in the area of German small and
mid caps. "We are especially pleased about the vote of 1,000
fund management firms in the Thomson Extel Pan-European
Survey. There, our research into stocks achieved, for a fourth
time in a row, first place for German small and mid caps, and
our sales team, too, was awarded first place," said Peters.

Corporate Finance
The corporate finance area, too, developed very successfully in
2007 and in the coming years, it will constitute the growth
motor of our investment banking. In the first place, the Bank’s
wish is to give strategic advice to clients and share its expertise
with them.

In the Equity Capital Markets area, Berenberg was Sole Lead
Manager for the first time when the Bank conducted a stock
flotation in the prime standard for Kromi Logistik AG in
2007. In addition, the Bank was Sole Lead Manager in selling
the 66% stake held by Carlyle Group in P&I Personal und
Informatik AG under a private placement to 50 fund managers
with long-term investment horizons in Europe and the US;
Berenberg was a member of the syndicate issuing the HHLA
shares on behalf of the Free and Hanseatic City of Hamburg,
and the Bank was also involved in the placement of the EUR
1.2 billion stake in Beiersdorf AG.

Mergers and Acquisitions: With twelve transactions concluded,
Berenberg was among the top ten M&A consultancy institutes
in 2007 (in volumes up to EUR 200 million). Of special note
here is the healthy structure of the clientele – listed companies
and well-known financial investors and private firms.

In the Structured Finance area, Berenberg develops complex
finance for listed companies and owner-managed mid-sized
firms. The Bank supplements the house banks with financial
structures for credit over EUR 10 million. If greater financial
volumes are required, the Bank arranges syndicates.

Institutional Asset Management
Our institutional asset management handles investments for
insurance companies and pension funds. The aim is to offer
institutional clients yield-optimised and risk-adjusted strategies
in line with the individual risk capability and the market
environment. In the light of the difficult situation in the
international financial markets, in 2007 the focus was on risk
management and constancy of earnings. Here, Berenberg
develops diversification possibilities and investment strategies
equipped with absolute-return objectives.

Simultaneously, the requirement rose for risk-adjusted
strategies, fund designs and overlay management strategies for
pension and share funds that are also implemented within
master fund designs for the pertinent segments. In this area,
first of all existing market price risks of our clients are analysed
and systematically collated. Subsequently, clearly defined risks,
such as currency, duration and share risks are controlled by
quantitative models in a separate overlay portfolio. This
enables the investments to be directed and controlled in terms
of the individual risk capability and risk budgeting.

"We expect two trends in 2008," says Peters: "There will be
demand for highly efficient investment instruments such as
ETFs, certificates and benchmark-oriented strategies. But we
will also be faced with trends to individualisation and
specialisation against the background of greatly differing
specifications from investor to investor (yield expectation, risk
capability, or balance sheet restrictions).

In 2007, Berenberg managed EUR 2.5 billion in low-risk
derivative structures; this led to a traded volume of OTC
derivatives amounting to EUR 10 billion.

Corporate Banking
"Besides the financing of commercial transactions for
domestic and foreign clients, the shipping area contributed
significantly to earnings and will gain even more in importance
with increasing globalisation," says Budelmann, who is
responsible for this area together with his partner Guido M.
Sollors (Credit Risk Control). Berenberg is active in both the
operational area (in particular, payments transactions) and in
financing used tonnage, albeit on a very conservative risk basis.

Flexibility and short lines of decision form the basis for the
Bank’s collaboration with its clients. "For this reason, we are
often contacted for special deals and cross-sector
transactions." Special value is placed on a risk and earningsoriented
direction of the loan portfolio. The loans business is
here, as a rule, connected with further services, such as
individual fall-back and optimisation strategies with respect to
interest rates and currencies. Comprehensive advice for large,
mostly owner-managed firms with the financial
implementation of long-term strategies is enjoying increasing
importance.

Since as a private bank, Berenberg knows the needs of its
clients very exactly, since the middle of last year the Bank has
been offering a new service, Berenberg Unternehmer
Office. "Attending to companies represents a particular
challenge for banks. The assets tied up in the firm often
constitute a major portion of the assets of the entrepreneurial
family, but are barely taken into consideration in the asset
allocation," explains Budelmann. Moreover, very few banks
can properly account for the connections between financial
issues of the firm and the assets of the entrepreneur. "We have
bundled our long-standing consultancy competences for
owners of family enterprises and now within the framework of
the Berenberg Unternehmer Office offer bespoke financial and
investment concepts for the enterprise, the entrepreneur and
his family," says Budelmann. "This is the classical approach
that private bankers had in former times and that we are now
reviving."

Outlook for 2008
Berenberg Bank had an extraordinarily successful financial year
in 2007. It is well positioned in the market. "We wish to grow
further and to this end we are relying, as in the past, on organic
growth," says Peters. The staff is highly motivated and will
continue to ensure a high standard of client assistance in the
different business fields. "We look to the future very positively.

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