- Positive development in new business within commercial real estate financing
- Significant increase in net interest income
- Very successful issuing activity
- Risk provisioning lower than planned despite difficult market environment
- Development of result within framework of expectations
In the first six months of the current 2010 financial year, Deutsche Hypo succeeded in maintaining its market position and achieved a significant increase in net interest income. In particular, the commercial real estate finance segment saw a pleasing trend following on from 2009, which was a particularly difficult year. “This development confirms that the Bank is well-equipped to successfully expand its business activities, despite the renewed market turbulences seen in recent months and the fact that the environment remains fragile”, explained Dr. Jürgen Allerkamp, Chairman of the Management Board at Deutsche Hypo.
With continued careful management of foreign business, domestic business in the commercial real estate finance segment showed pleasing development. Overall, Deutsche Hypo attracted new business amounting to €679 million in this segment during the reporting period (same period in the previous year: €432 million). Furthermore, the desired progress was made in the extremely complex process of transferring the real estate finance portfolio from NORD/LB to Deutsche Hypo. Consequently, in the first six months of the current financial year alone, more than one billion euros were successfully transferred to Deutsche Hypo. Until such time as the transfer is complete, Deutsche Hypo will be operating as the service-provider for the Group’s commercial real estate portfolio, the total value of which is in the region of €22 billion.
Business within the capital market segment developed as planned during the first six months of the financial year. The volume of new business amounted to €1.3 billion (€1.7 billion). Key areas were business with target countries having a solid national budget and traditional local authority loans within Germany. On the refinancing side, Deutsche Hypo issues met with lively demand from investors. The issue of a benchmark Pfandbrief in the amount of €600 million in May was particularly positive. This was the first issue of a covered bond following the launch of the rescue package for Greece, and therefore constituted a re-launch of this issue format in Europe. Overall, Deutsche Hypo issued debt instruments totalling €3.8 billion in the first six months of 2010, of which approximately €2.1 billion were mortgage Pfandbriefe and public Pfandbriefe.
As at 30 June 2010, the income situation was as follows:
• Net interest income rose significantly to €88.7 million (€22.3 million). Here, the positive contribution to income made by the commercial real estate finance segment was just as noticeable as the loss of exceptional expenses in the period used for comparison.
• Commission income continued to show positive development and reached €8.4 million, an increase compared with the same period in the prior year (€6.8 million).
• During the reporting period, the result from financial instruments at fair value, including hedge accounting, fell by €66.1 million to -€24.8 million (€41.1 million). This development was considerably influenced by an expansion of the credit spread within the credit derivatives portfolio.
• New employee appointments, the transfer of the NORD/LB employees to the London site and a rise in material expenses due to higher project outlay led to an increase in administrative expenses, which climbed to €32.6 million. As a consequence, the cost-income ratio increased from 35 percent to 44 percent.
• Loan loss provisions displayed stable development. At €29.9 million (€25.7 million), this result was below plan, despite the strained situation on certain real estate markets.
• This resulted in a pre-tax consolidated result of €11.7 million (prior year: €25.3 million). The net group income for the year amounted to €6.0 million (prior year: €15.8 million).
Deutsche Hypo stands by the prediction it made at the start of the year regarding the overall trend for the 2010 financial year. The Bank still believes that there are risks posed by some of its foreign real estate target markets and due to the continuing volatility on the financial markets. “We will therefore continue to focus on sustainable, income-oriented growth, retain our conservative risk profile and remain a reliable partner for our customers”, stressed Dr. Allerkamp. “We expect a positive consolidated result for the 2010 financial year as a whole.”