Schrameier: We are on a good path. We closed the 2024 financial year with a positive result and further strengthened our reserves. Overall, we are satisfied with the business development.

Since 2022, Markus Bolder and Stephan Schrameier have formed the executive board of Warburg Bank. Bolder, who is responsible for the back-office operations of the Hamburg-based private bank, previously worked from mid-2017 to the end of 2021 for Bankhaus Lampe, which the Oetker Group sold in autumn 2021 and which was merged with Frankfurt-based Hauck & Aufhäuser. At the Bielefeld-based private bank, the 62-year-old was responsible, among other things, for production and risk management. Until June 2017, the trained banker and business graduate was a member of the executive board of Erste Abwicklungsanstalt (EAA) in Düsseldorf, where he worked on winding down the former WestLB portfolio.

Stephan Schrameier oversees the market-facing divisions on Warburg Bank’s executive board. Before moving to Hamburg, the 51-year-old served on the executive board of Standard Chartered Bank in Frankfurt. The economics and mathematics graduate previously spent nearly two decades working for Deutsche Bank in Frankfurt and London.

Schrameier: Our segments developed differently. In Private Banking – our most important business area – we exceeded our targets in 2024. In Corporate Banking, especially in lending, we performed reasonably. Due to the monetary policy easing, we no longer benefited from the interest rate environment as much as in 2023. The fact that we couldn't meet our targets in the lending business is mainly because we consciously acted more cautiously in the still-challenging real estate market. All in all, however, we achieved a solid result in lending. Although our net interest income declined by just over 30% to around 67 million euros due to the expected rate cuts, it remained on plan. But our capital markets business did not meet expectations.

Schrameier: The positive development of the stock market in 2024 was only partially reflected in the area we cover – small and mid-cap equities in Germany. This segment hardly benefited from last year’s stock market movements. There were few IPOs and capital increases. Because the issuance business in this area was weak, our net commission income also fell short of expectations.

Bolder: The fact that we are reporting a net profit of 1 million euros while also increasing reserves by 10 million euros is due in part to our cost control. Despite significant investments in renewing our IT infrastructure, other administrative costs declined. At the same time, personnel expenses remained almost unchanged in 2024. With the planned switch to the core banking system of the cooperative IT service provider Atruvia in May 2026, we are still on schedule. As for the budget, things are even looking better than initially estimated.

Bolder: Costs are around 40 million euros – about 10 million euros less than originally planned. But I want to emphasise that we’re not just switching the core banking system as a former in-house IT user. We’re overhauling the entire IT infrastructure. The number of applications will shrink from over 400 to about 90 by 2026. This streamlining and modernisation will not only reduce costs – it will also help us become more digital so we can meet customer needs faster and more flexibly.

Schrameier: There were some special items, but their impact on results mostly canceled each other out. For example, as part of our strategic focus on core business, we sold our stake in Hamburg-based property developer Quantum Immobilien. We also sold the last three ships still on our balance sheet. But we are continuing to serve our shipping clients.

Bolder: A nearly 15 million euros increase in other operating income and a nearly 8 million euros better result from financial investments had a positive effect in 2024. Also, the weakness in the real estate market did not lead to significantly higher loan loss provisions. Our risk strategy is conservative. We avoid special risks in both specific sectors and individual clients.

Bolder: That’s correct. Our risk policy has helped us get through the past years without major bumps. Our loan book is in good shape.

Schrameier: About two-thirds. But our overall loan portfolio is manageable at 500 million euros. We’re acting cautiously in this difficult environment after two years of recession in Germany – but we do intend to expand our lending business over time.

Schrameier: Medium-term, I see a loan volume of 1 billion euros as a good target for a house like Warburg Bank – one that wants to be a trusted bank for private and entrepreneurial clients.

Bolder: We will continue to monitor risk and quality closely. We won’t enter segments we don’t understand.

Schrameier: Things are going well in core private banking. We’re gaining more new clients than we’re losing.

Schrameier: Yes, that is correct. But we consistently receive confirmation of our strong expertise. We, for instance, win awards in competitions that we participate in. But rebuilding trust doesn’t happen overnight. That’s something we must work on continuously. I believe we’re on the right track. Our events attract very interesting guests, we’re being invited to more tenders again, and we’re winning appealing mandates. We also want to build trust through new initiatives.

Schrameier: We’re expanding our product range. Some products will be designed for the broader market. We also want to reconnect more strongly with foundations and smaller pension funds. To do that, we will strengthen our sales team. The message is clear: we want to grow in clients, business, and revenue.

Schrameier: No. After the disappointing performance in the capital markets business – due to both internal and external factors – that led our cost-income ratio to rise to 112% in 2024, we’ve decided to exit this area.

Schrameier: Specifically, we will discontinue our equity research focused on small and mid-caps, as well as the related capital markets business with institutional clients. This includes our equity value chain: sales, trading, and capital markets activities. This segment contributed around 10% of the bank’s total revenue in 2024.

Schrameier: That will become clearer as the year progresses. We had to make the decision now because the planned core banking system change in May 2026 would have required substantial investments in the capital markets business. We carefully examined whether a small bank like ours could sustainably earn enough returns from this business to justify such investment – and concluded it couldn’t. So, we will exit the capital markets business by the time we switch systems at the latest. We’re currently exploring external solutions and holding talks.

Schrameier: Yes. We want to find the right solution.

Schrameier: There are many firms active in the market – including ones that might want to enter the German market.

Schrameier: Yes. As part of our planning, we anticipate operating the bank successfully from 2027 on with a headcount equivalent of around 400 full-time positions. We currently have about 550. Warburg Bank intends to reduce complexity and operate in only two business areas instead of the current three. One will be Private Banking, the other Corporate Banking with the target customers being entrepreneurs, the shipping and real estate segments, and the advisory business. We will also retain the custodian business for illiquid assets. Without investment banking and trading systems, we will be leaner and simpler, with a lower cost base.

Bolder: No, discussions with employee representatives are still in the early stages. A proposal with a personnel concept has been presented. It’s unclear when an agreement will be reached, but we want to provide clarity for employees as quickly as possible.

Schrameier: As a focused private bank with a long tradition and a strong name, we occupy an attractive niche. We serve a wealthy clientele. That niche will continue to exist. We’re confident that our strategy project „Mercator“ will enable a good future. The project isn’t just about focusing on two business areas, streamlining, and cost-cutting – it’s also about growing in those areas and attracting clients with more and better offerings.

Schrameier: We will enter the market with new products. For example, we will soon launch an actively managed equity fund focused on the European defence industry. Equity funds with this focus are currently very rare. Approval from the financial supervisory authority has been granted. We will build personnel in our core business areas and strengthen sales, increase our visibility, and also our presence. We will maintain our focus on the German market and our eight locations.

Bolder: The 2021 fiscal year ended with a very good result in the capital markets business for Warburg Bank. It became clear in the following years, amid geopolitical upheavals and an economic slowdown, that the administrative effort was disproportionate to the revenues. Companies are holding back on investment decisions. Since 2022, we have seen an unprecedented drying up of the small and mid-cap market. For a small institution like Warburg Bank without a large loan portfolio, strategic questions arose again.

Bolder: We will focus on two still very lucrative business fields and growing markets with a lower cost base. We are adjusting Warburg Bank’s profile with the prospect of achieving not only cost-income ratios below 70% in the medium term but also a return on equity above 10%. We need a double-digit return on equity to compete for capital and remain attractive to our shareholders. For growth and in view of increasing regulatory requirements, we must strengthen our capital base.

Bolder: If the restructuring and the core banking system change proceed as planned, we could approach the 10% mark as early as 2027. Last year, we were close to zero, and the year before that around 3%.

Bolder: The restructuring will involve additional costs that will likely result in an annual loss in the 2025 fiscal year. At present, this is expected to be in the low double-digit million euro range. More precise forecasts are not possible because negotiations with employee representatives about the restructuring are still pending and there are external uncertainties.

Schrameier: The course of the investor process so far has no influence on our decision to adjust the business model and give up the capital markets business. The decision has been coordinated with our committees and is supported by the shareholder circle.

Bolder: Companies always have to keep strategic changes in mind. Markets and customer needs are constantly changing. You have to be able to adjust strategies if you want a secure future. We are focusing on two business areas with good growth prospects. The path we want to take is independent of the investor process.

Schrameier: The investor process so far has shown that the two business areas we want to focus on are attractive from the perspective of potential investors. Conversations have indicated that our considerations are heading in the right direction. We as the board are convinced that the focus of the business model will support the investor process if it is resumed.

Schrameier: As board members who are not directly involved in the process, we cannot comment on this. We would be pleased with one or more anchor investors. The strategy we now want to pursue works on a stand-alone basis. We have a solid plan.

Bolder: That is possible. Many things are conceivable, including a complete takeover by one investor. It is also possible that there will be more than two main shareholders in the future. We on the board have no preferences. It just has to be ensured that the bank’s capital planning requirements are stably and permanently supported. There are regulatory requirements that must be met.

Schrameier: With the support of our shareholders, a good, viable solution was found that now allows more time for the investor process. One-third of the outstanding loan was repaid, the rest extended.

Schrameier: The term was extended by two years.

Bolder: Within this period, we also want to complete the core banking system change and focus on the two business areas. So, the solution for the loan on the one hand and our plans for the IT restructuring and business model adjustment on the other fit well together.