* Landesbanks say they are well prepared for tests
* LBBW core capital 14.4 pct, NordLB at 10.7 pct
* ECB/EBA bank health check results due in Oct.
(Adds company quotes, context)
By Jonathan Gould and Andreas Kröner
FRANKFURT, Aug 28 German regional state-backed
landesbank lenders LBBW and NordLB said they
had thick cushions of loss-absorbing capital in place to
comfortably meet EU-wide health checks of the banking sector.
The two lenders said on Thursday their double-digit Common
Equity Tier 1 (CET1) ratios, a measure of capital strength, gave
them confidence they were ready for the examination, echoing
nearly identical statements from landesbanks BayernLB
and Helaba over the past week.
"We are well prepared for the upcoming stress tests," LBBW
Chief Executive Hans-Joerg Vetter said in a statement.
The review of asset quality and the stress tests by the
European Central Bank and the European Banking Authority are
aimed at giving regulators insight into the state of the banks'
books before the ECB takes over responsibility for banking
supervision in the euro area in November.
Germany's landesbanks, which provide wholesale banking
services to its around 400 local savings banks, have worked to
cut costs and rid themselves of wobbly assets acquired before
the financial crisis.
The Voeb banking association, which represents public-sector
lenders, has predicted that none of the landesbanks will
encounter problems in the stress tests, pointing out that in
addition to building up capital, the lenders have trimmed their
risk positions by nearly 60 percent since the financial crisis.
Exam results are due in October and could lead to
substantial capital raising by any bank that fails. That could
be a problem for the publicly owned landesbanks, because a
capital top-up by their owners could prompt state-aid
investigations from EU competition authorities in Brussels.
CAPITAL RATIOS RISE
LBBW reported a rise in its core capital ratio rose to 14.4
percent at the end of June from 13.1 percent at the end of
December, well above an ECB benchmark of 8 percent.
NordLB, which seen as facing a tougher time in the exercise
because of its heavy exposure to the troubled ship financing
business, was more guarded on Thursday.
"We will not participate in speculation about the outcome of
the stress tests, but we feel we are well prepared for them," a
NordLB spokesman said.
"We are relaxed about October," he added.
NordLB's CET1 ratio stood at 10.7 percent at the end of
June, up from 10.3 percent at the end of December.
Credit rating agency Fitch last month said NordLB had a more
diversified stream of income sources and strong performance in
its core business, which could help absorb further pressure from
its shipping loan book.
NordLB on Thursday said it had added to its risk buffers for
shipping loans in the first half of the year, bringing them to
1.7 billion euros ($2.2 billion) on a shipping loan book of 16
"We will stay alert and continue to build risk provisions,"
NordLB Chief Executive Gunter Dunkel said in a statement, adding
that the environment for shipping remained difficult and that
the bank would be dealing with it for some time to come.
HSH Nordbank, another major player in the ship
financing business, is due to report first-half results on
Friday. The landesbank has said repeatedly it is well prepared
for the stress tests.
Fitch in its review said HSH's business model still needed
to demonstrate its long-term viability.
"The viability rating reflects low legacy asset quality and
significantly higher exposure to the most risky parts of ship
financing compared with its peers," Fitch said.
(1 US dollar = 0.7596 euro)
(Editing by Maria Sheahan and Jane Baird)