Siemens Financial Services Shows Stability in Times of the Financial Crisis

Siemens Financial Services (SFS) has avoided the general trend in the banking industry and strengthened its position as a reliable partner to companies in the financial market crisis, thanks to the financial strength of Siemens and an anti-cyclical investment strategy. As a cross-sector business, SFS is firmly anchored within Siemens and substantially supports the Group's operating business activities with financial solutions. SFS has displayed a high level of stability in the financial market crisis, generating a high level of profitability similar to previous years. Total assets rose by 27 percent to EUR 11.3 bn year-on-year (09/30/2008). Compared with the previous year, SFS recorded particularly strong growth in new bookings in the global commercial finance business (e.g., lease and loan financing). Income before income taxes (IBIT) amounted to EUR 286 mn in fiscal year 2008. Profitability remained above the target margin corridor (20-23 percent): The return on equity reached 31 percent.

SFS continues to rigorously implement the three pillars of its strategy: professional management of financial risks and opportunities on behalf of Siemens, strengthen Siemens sales through sales financing and profitable growth in third-party business areas with Siemens expertise. "SFS is the center of expertise for the Group's treasury, credit risk management, asset management of pension provisions, project and export finance and insurance solutions. We use this expertise in particular for our business activities in the sectors of energy, industry and healthcare. As a result, we can offer our customers integrated total solutions that many, less financially strong competitors cannot offer. In a turbulent business environment, this ability is becoming increasingly important," said Joe Kaeser, CFO of Siemens AG. "SFS puts Siemens in a position to offer innovative solutions and financing from a single source so that our customers can efficiently invest in new technology, exploit growth opportunities and improve their competitiveness."

This combination of financial expertise and industrial know-how creates value for Siemens customers on all continents, in particular in the core sectors of energy, industry and healthcare. "The range of SFS solutions extends from advisory services to equity and debt financing," Dominik Asam, CEO of Siemens Financial Services, said with regards to the business model of SFS. "With our global reach, we can offer customized financial solutions for infrastructure, equipment, technology and working capital even in crisis times. The expertise and network of the Siemens Group in the sectors of industry, energy and healthcare offer us specific competitive advantages in risk management and sales in turbulent markets. Our closeness to business also helps us understand customer requirements in this environment and rely on long-term, sustainable business success rather than short-term sales and profit growth. After six quarters of reducing our total assets, we started to increase our investments in the second half of the past fiscal year. By providing liquidity in times of a general credit crunch, we not only offer added value to our customers, but also enhance the potential of SFS for profitable growth thanks to the significantly higher margins in the lending business," Asam said.

SFS observes the strict principles of a fundamentally stable financing and investment policy for Siemens. For example, SFS' assets are principally financed without maturity mismatches, which harbor substantial risks. The financing of the Siemens Sectors is also secured over the long term so that the Group is prepared for a long and deep credit crisis. During the past fiscal year, SFS has rigorously exploited favorable time windows in the bond markets to secure long-term financing. In fiscal year 2008, the company raised nearly EUR 6 bn in medium- to long-term debt capital at comparatively favorable conditions. This liquidity alone allows SFS to redeem all issues maturing this year and in the next two fiscal years. In addition, the Group already secured long-term credit lines in still more liquid financial markets. Aside from its own liquidity, the company can draw on EUR 8 bn worth of credit lines at very favorable financing conditions. These credit lines have not yet been used and will expire in 2012 and 2013.

The diversification of default risks is another top priority. SFS observes strict limits with respect to counterparty risks, which have been progressively reduced as the crisis has spread. Siemens' Group treasury, which is integrated into SFS, places this liquidity in very short-term and broadly diversified investments at top-rated banks. Siemens has obtained banking licenses, e.g. in the UK, and has the option of making deposits at central banks. The same cautionary approach is applied with respect to investment policies. SFS invests only in assets that it fully understands. For example, SFS has not invested in credit portfolios with a non-transparent risk profile, but focuses on loans to the real economy in segments where Siemens has particular expertise.

"Building on our stable business model, which, as an integral part of Siemens, can exploit significant synergies, we want to remain a reliable and efficient partner for our customers in these turbulent times, in particular. We rely on real growth rather than grand visions," Asam said. "There can be no doubt that the business environment will become even more challenging in the new fiscal year. This is why, despite our growth, we continue to work on improving our cost position and our productivity. In new business, we place particular value on adequate compensation for continually rising credit risks, broad diversification and the highest risk management standards."

Siemens Financial Services (SFS) is an international provider of financial solutions in the business-to-business area. With about 1,900 employees and an international network of financial companies coordinated by Siemens Financial Services GmbH, Munich, we support Siemens as well as non-affiliated companies, focusing on the three sectors of energy, industry and healthcare. We finance infrastructure, equipment and working capital and act as a competent manager of financial risks within Siemens. By leveraging our financing expertise and our industrial know-how we create value for our customers and help them strengthen their competitiveness.

SOURCE Siemens Financial Services GmbH