Deutsche Hypo generates record result in 2013

  • Result from normal operations rises to EUR 64.3 million
  • Net interest income maintains high level of the previous year
  • Cost-income ratio continues to improve

In the 2013 financial year Deutsche Hypo increased its result from normal operations by 27.6% year-on-year to € 64.3 million (2012: 50.4). This represents Deutsche Hypo’s best operating result in its history going back more than 140 years. The main contributing factors were the high net interest income, lower risk provisions, improved income from securities and participatory interests and lower administrative expenses.

“Deutsche Hypo has never performed better than in 2013. This is a remarkable success from all of the Bank’s employees. Over the previous year we have been able to substantially reduce our cost base and at the same time stabilise our operating income at a high level,” Andreas Pohl, speaker of the Board of Managing Directors of Deutsche Hypo, highlighted positively at today’s presentation of the financial statements in Frankfurt.

New business volume rises by 6 percent

After net interest income broke through the € 200 million barrier in 2012, last year it again rose slightly by € 0.6 million or 0.3% to € 210.4 million (2012: 209.8). The lion’s share of the earnings was attributable to the core business area of commercial real estate finance, which in itself generated net interest income of € 174.8 million (2012: 168.6). Conversely, at € 6.0 million net commission income was lower than the previous year as expected (2012: 7.3).

Alongside the rise in margins, the increased volume of new business in 2013 contributed to the increase in net interest income: new commitments amounted to €2,662 million, a good 6 percent above the previous year’s volume of € 2,513 million. Just under 79% of the new business (€ 2,099 million) was concluded in Germany (2012: 1,702). In terms of property classes, office and retail properties were again the focus of the new commitments.

Risk situation has relaxed further

The trend for falling net expense from the credit business reported in 2012 continued in financial year 2013. The portfolio of loan loss provisions fell year-on-year, meaning that the risk result in the commercial real estate finance business area improved considerably from € -71.0 to € -64.9 million. Conversely, the capital market business was subject to negative effects – including from the repurchase of the Bank’s treasury securities. Additionally, the risk result reflects the changes in the provision reserves. In sum the risk result of Deutsche Hypo – including allocations to reserves – amounted to € -83.2 million (2012: € -72.0), which does not reflect the real improvement in the commercial real estate finance business.

As a result of the optimisation of the securities portfolio, the income from securities and participatory interests in 2013 rose to € 6.5 million (2012: -17.1). Other operating result was € -5.5 million (2012: -4.4).

Administrative expenses fell by almost 5 percent

The Bank’s active cost management and the implementation of the measures from the cost improvement programme launched in 2012 yielded substantial successes: in 2013 the administrative expenses fell by 4.5 percent year-on-year to € 69.9 million (2012: 73.2). Both personnel as well as material expenses lay substantially below the previous year’s values. This positive development on the cost side resulted in a further improvement of the cost-income ratio to 33.1 percent (2012: 34.4).

The bottom line is that Deutsche Hypo’s result from normal operations was € 64.3 million (2012: 50.4), equivalent to an increase of 27.6 percent.

The funding of Deutsche Hypo continues to be successful thanks to its established issuing business: in the financial year 2013 the Bank issued a securities volume of € 3.266 million (2012: 4,254), including mortgage Pfandbriefe of € 2,725 million. Deutsche Hypo again issued two benchmark bonds – each at a volume of € 500 million – and encountered lively demand among both national and international investors. In future too, Pfandbriefe and uncovered debt securities will form funding sources for the Bank.

Pohl optimistic for financial year 2014

The current year has started on a positive note for Deutsche Hypo: “Once again we can be extremely satisfied with the first quarter of 2014,” explained Pohl. “At present, there is much to suggest that we will be able to maintain the excellent result from 2013 this year, too. Of course, a precondition for that is that the upward trend on the commercial real estate markets in general and our strategic target markets in particular continues. A further decisive factor will be the impact that the increasing regulatory requirements have on business. All in all we are optimistic for 2014 – especially given that we assume that our net interest income can maintain its high level and our risk result will improve.”