- Net interest income increases substantially
- Cost-income ratio improves to 30.9 %
- Additional loan loss provision absorbed for Heta
Deutsche Hypothekenbank achieved a result from normal operations of € 31.3 million in the first half of 2015 (H1 2014: € 34.5 million). The decline is due to the creation of another loan loss provision for the Heta exposure, which was nearly compensated, however, by a significant rise in net interest income and a clear improvement in the risk result.
“In total we can be satisfied with our result in the first half of 2015. Without the special effect from Heta, we would have greatly exceeded our result from the first half of last year”, explained Andreas Pohl, Speaker of the Board of Managing Directors of Deutsche Hypo. “We have been particularly encouraged by our profitability in our core business area of commercial real estate finance and the significantly lower risk provisioning, which is a reflection of the improvement in our portfolio quality”.
Risk result improves by more than 38 %
The performance of net interest and commission income was very positive, rising cumulatively by 9.2 % to € 124.2 million in the first half of 2015 (2014: € 113.7 million). This performance is partially due to one-off effects from early repayments of loans. With a new business volume of € 1,402.9 million – not including prolongations – Deutsche Hypo did not quite achieve the level in the first half of the previous year (2014: € 1,513.5 million). The core market of Germany accounted for a share of 67 %, again representing the focal point of new business transactions (2014: 84.9 %). In almost all foreign target markets, the Bank was able to expand its volume of new business.
“As before, we are not making any compromises with regard to the quality requirements for financing”, Pohl stressed. The result of this quality-oriented awarding of loans is a significant 34.9 % improvement in Deutsche Hypo’s risk result to € -24.6 million (2014: € -37.8 million).
Administrative expenses continue to fall
Deutsche Hypo’s administrative expenses fell by 3.1 % to € 34.2 million (2014: € 35.3 million). Charges due to new regulatory requirements and higher allocations to pension provisions could be overcompensated by the ongoing successful implementation of the measures from the current cost and efficiency project. In this connection, Deutsche Hypo’s cost-income ratio improved to 30.9 %.
Due to significantly higher expenses on account of the bank levy, the other operating income decreased to € -13.8 million (2014: € -6.4 million). In turn, the income from securities and participatory interests fell to € -20.3 million, with positive effects from a reduction in the capital market portfolio being offset by the massive charges due to another loan loss provision for the securities of Heta Asset Resolution AG (Heta). The cause of this was the payment moratorium that the Austrian Financial Markets Authority (FMA) announced on Heta’s liabilities at the beginning of March of this year and extending until 31 May, 2016. Against this backdrop, Deutsche Hypo created significant loan loss provisions for the Heta exposure both in the 2014 annual financial statements and the half-year 2015 financial statements. “Our risk provisioning is absolutely sufficient in light of cautious assumptions”, commented Pohl.
The result from normal operations totalled € 31.3 million in the first half of 2015 (2014: € 34.5 million). The return on equity fell slightly to 6.4% relative to the first half of the previous year (2014: 7.0 %).
Deutsche Hypo’s issue volume rose in the first six months of this year to € 1,518.0 million (2014: € 1,144.2 million), of which € 615.0 million consisted of mortgage Pfandbriefe and € 903 million of unsecured bonds. A highlight was the successful issuance of a mortgage Pfandbrief in benchmark format, which was four times oversubscribed in a very short period of time. The successful funding activities supported the Bank’s competitive position in new business related to commercial real estate finance, as in the past.
“To greatly exceed result from 2014”
“Supported by the good performance in the first half of the year, we are sticking to our forecast that we will greatly exceed the result from 2014”, said Pohl. “Our target markets are all in very good shape. However, competition on both the investor and financing side has increased significantly – particularly for core real estate. It is all the more important for us to seamlessly continue our conservative risk policy”.