- Increase of almost 20% in result
- Precautionary reserves again bolstered
- Successes on the funding side
In financial year 2018, Deutsche Hypothekenbank generated a result from normal operations of EUR 74.7 million, representing a 19.1% increase on the previous year’s result of EUR 62.7 million. This positive development was due both to special effects and in particular also to the high quality of the financing provided, producing a risk result enabling net releases in the real estate finance business area.
“We are satisfied with the financial year 2018 and are delighted that the current result seamlessly continues our strong results from the previous year. Our lending activity, which is always focused on quality, is clearly paying off, and also forms the foundation for a strong future position for Deutsche Hypo in terms of its financing portfolio. The fact that last year we were able to further boost our precautionary reserves is important and positive in equal measure,” explained Sabine Barthauer, Member of Board of Managing Directors of Deutsche Hypo, on the publication of the financial figures.
Volume of new business impacted by strong competition
The new business volume in 2018 was down compared with the level of credit commitments in the previous year, largely due to the intensive competition within the market environment. Additionally, the Bank’s quality-focused business policy means that it has been deliberately very selective in terms of new business. At the end of the year, the volume of new business transactions stood at EUR 2,869.8 million (prior year: EUR 3,798.3 million).
Standing at EUR 1,698.4 million (prior year: EUR 2,180.9), almost three fifths of the new business volume was attributable to the core market of Germany. Similarly, new business volumes in the largest in foreign markets of Benelux, UK and France totalling EUR 368.9 million (prior year: EUR 488.6 million), EUR 347.4 million (prior year: EUR 466.1 million) and EUR 274.6 million (prior year: EUR 399.7 million) were also down. Turning to the asset classes, new business was dominated by office properties with a total volume of EUR 1,289.8 million (prior year: EUR 1,198.8 million). Conversely, last year financing of retail real estate fell significantly to EUR 616.5 million (prior year: EUR 1,338.5 million). This was followed by residential finance with a volume of EUR 487.5 million (prior year: EUR 554.2 million). Despite the lower volume of new business, in 2018 Deutsche Hypo expanded its portfolio of commercial real estate finance to EUR 12,264.0 million (prior year: EUR 12,077.1 million) as fewer early repayments were recorded year-on-year.
Positive risk result in the commercial real estate finance segment
The Bank’s risk-conscious lending policy produced a positive risk result in the commercial real estate finance area – also seeing releases of loan loss provisions in net terms. For the Bank as a whole, the risk result came to EUR -20.3 million (prior year: EUR -41.3 million), an improvement of more than 50%. As in previous years, this also includes a significant increase of the precautionary reserves pursuant to section 340 f German Commercial Code (HGB). While the other operating income was down at EUR -7.4 million (prior year: EUR -4.2 million), the income from securities and participatory interest rose to EUR 9.1 million (prior year: EUR -10.2), which was primarily due to a special effect: Earnings from the sale of a debtor warrant of Heta Asset Resolution AG totalling EUR 12.1 million were posted.
As a result of the development of new business and intensification of competition which increased pressure on margins, the Bank’s net interest income of EUR 177.4 million (prior year: EUR 193.4 million) was down year-on-year. Additionally, the reduction of the capital market portfolio, which is still proceeding to plan, had a detrimental impact on interest income. At EUR 84.0 million (prior year: EUR 83.8 million), the administrative expenses of Deutsche Hypo remained more or less stable. Additional investments in the technical and organisational infrastructure and lower expenditure for variable remuneration components largely balanced out. At EUR 11.1 million, the bank levy again represented a significant cost element. The cost-income-ratio rose to 49.5% (prior year: 42.3%).
First sterling mortgage Pfandbrief and second Green Pfandbrief successfully placed
In 2018 Deutsche Hypo was again able to fund its new business on competitive terms. It issued securities of its own totalling EUR 2,327.1 million (prior year: EUR 3,526.3), including mortgage Pfandbriefe in the amount of EUR 1,722.8 million (prior year: EUR 1,328.0 million) and unsecured bonds in the amount of EUR 604.3 million (prior year: EUR 2,198.3 million). In terms of issues, highlights included the first mortgage Pfandbrief issued by the Bank in sterling for a total of GBP 355.0 million and the second Green Pfandbrief totalling EUR 500 million – this seeing Deutsche Hypo expanding its green value creation chain for awarding energy-efficient commercial real estate finance.
“Strong new business transactions expected for 2019”
“Our sector continues to express a healthy optimism, which was apparent at the Mipim real estate trade fair in March. I assume that the real estate cycle will remain at this strong level for some time to come,” explained Barthauer. “We are looking confidently to financial year 2019 and expect that again we will enter into high-quality new business transactions both at our domestic and foreign markets. Given the unrelenting competition and our risk-averse business policy, we do not assume, however, that the level of the previous year’s result will be achieved in 2019.”