Half-yearly result at € 33.9 million
Precautionary reserves strengthened once again
Successful issue of the first benchmark mortgage Pfandbrief in GBP
In the first half of 2018, Deutsche Hypothekenbank generated a result from normal operations of € 33.9 million (2017: € 35.2 million), thereby continuing the bank’s positive income performance into 2018.
“Our start into 2018 has been successful. We have been able to repeat last year’s excellent result and are looking ahead to the rest of the year with optimism,” stressed Sabine Barthauer, Member of the Board of Managing Directors of Deutsche Hypo. “What is especially remarkable is that we have been able to once again strengthen our precautionary reserves and continue improving the quality of our portfolio – both in our real estate financing business and in our capital market business.”
Real estate financing portfolio kept stable
In Deutsche Hypo’s core business area of commercial real estate financing, the volume of new business generated by the bank in the first six months of the year came to € 1,402.9 million (2017: € 2,116.2 million). This development can be attributed to a market environment that continues to be characterised by strong competition and to the bank’s retention of its quality-oriented lending policy. The majority of new business, € 1,049.4 million (2017: € 1,313.4 million), was concluded in Germany. In its international target markets, the volume of new business totalled € 353.5 million (2017: € 802.8 million). The dominant class of assets was once again office real estate, accounting for a share of 40.3% (2017: 33.7%) of the total new business volume, followed by retail and residential real estate with shares of 24.3% (2017: 33.1) and 19.6% (2017: 18.3%) respectively. Deutsche Hypo was able to keep its portfolio of commercial real estate financing stable at € 12,116.3 million (2017: € 12,077.1 million).
Improved result in core business area
The core business area of commercial real estate financing contributed € 68.1 million to the bank’s overall result, a year-on-year improvement of 6.6% (2017: 63.9%). The main factor driving this pleasing development, which was once again utilised to set aside precautionary reserves pursuant to Section 340 f of the German Commercial Code (HGB), was the positive risk result in the bank’s core business area. The bank as a whole recorded a much improved risk result of € -3.0 million (2017: € -19.5 million).
Increases in return-on-equity and cost-income-ratio
Due to the intense competitive situation and the accompanying pressure on margins, the bank’s net interest income in the first six months of this year amounted to € 89.0 million (2017: € 98.6 million). Administrative expenses rose to € 50.3 million (2017: € 46.0 million) due to factors such as the bank levy increasing to € 11.1 million (2017: € 10.0 million) and necessary investments being made in IT infrastructure. As a result, the cost-income-ratio rose to 57.8% (2017: 46.0%). By contrast, the return-on-equity improved to 8.0% (2017: 7.6%).
High demand from investors for issues
In the first half of 2018, Deutsche Hypo issued a benchmark mortgage Pfandbrief in British pounds (GBP) for the first time. The issue with a volume of GBP 355 million was just as positively received as two other Pfandbriefe issued in the benchmark format and denominated in euros. The total value of the mortgage Pfandbriefe issued came to € 1,203.0 million (2017: € 628.0 million), while unsecured bonds amounted to € 423.8 million (2017: € 1,619.9 million). Consequently, the total volume of securities issued, which were used to fund new real estate financing business as needed, reached a value of € 1,626.8 million (2017: € 2,247.9 million).
Outlook characterised by optimism
“Thanks to its good market position and the high quality of its real estate financing portfolio, Deutsche Hypo is well-equipped to continue asserting itself in the competitive market environment going forward. We will keep pursuing our conservative risk strategy and will only conclude new business if we are convinced that it is of high quality,” announces Barthauer. She is optimistic about 2018 as a whole: “Our target markets are currently still in robust shape. For this reason, we are anticipating an ongoing positive business development and expect to be roughly on par with the previous year’s result of € 62.7 million at the end of the year.”