- New real estate finance business grew by 55.2 percent in 2011,
- Cost/income ratio drops to 35.8 percent,
- Result from ordinary business activity of EUR 32.7 million
Deutsche Hypothekenbank has registered a result from ordinary business activity of EUR 32.7 million for the financial year 2011 as against the previous year’s EUR 45 million. The reason for this contraction lay in, among other things, negative impacts generated by the European government debt crisis. However, new real estate finance business, and as consequence, the Bank’s operating income, developed along particularly positive lines.
“The financial year 2011 followed an ambivalent course from Deutsche Hypo’s point of view: on the one hand we saw a remarkable upward trend in our new real estate finance business, thus underlining our standing as one of the leading providers of financing for commercial real estate. On the other hand we were not quite able to repeat the previous year’s excellent operating result. Given the ongoingly difficult market conditions and the fact that the bank levy alone consumed twelve percent of our previous year’s result, we can nevertheless be satisfied with the figure for 2011”, emphasizes Dr. Jürgen Allerkamp, Chairman of the Board of Managing Directors of Deutsche Hypo.
An excellent year from the operational standpoint
The new commitments in real estate finance business generated a total of EUR 2,769.2 million in 2011. This was 55.2 percent up on the previous year’s figure of EUR 1,784.0 million, with new business in Germany climbing by 38.5 percent to EUR 1,567.5 (previous year: EUR 1,131.6) million and abroad likewise significantly by 84.2 percent to EUR 1,201.8 (previous year: 652.5) million. The real estate finance business portfolio grew by 5.9 percent to EUR 12,125.9 million as against the previous year’s figure of EUR 11,447.7 million.
Above all the considerable expansion of new real estate finance business enabled Deutsche Hypo to increase its net interest income in 2011 by 11.1 percent to EUR 191.9 (previous year: 172.7) million. Net commission income dropped from EUR 13.4 to 10.8 million. In the aggregate, net interest and commission income grew by 8.9 percent.
Improved cost/income and capital ratios
In spite of having considerably increased its workforce, the Bank succeeded in keeping its administrative expenses at a virtually stable level of EUR 70.6 (previous year: 69.4) million. This positive trend is attributable to initial successes with the efficiency-improving programme commenced last year. The enhanced trend in terms of costs is also reflected in the cost/income ratio which improved in 2011 from 37.2 to 35.8 percent. Besides this, Deutsche Hypo’s capital ratios rose significantly – due in particular to the enhanced quality of the real estate finance business portfolio and the retainment of profits in the previous year. The core capital ratio, for example, stood at 8.4 (previous year: 7.7) percent as at year-end.
Sovereign debt crisis and bank levy weigh on the operating result
As anticipated, the risk result of EUR -82.7 million was not far off the previous year’s level (EUR -78.8 million). Other operating income stood at EUR -5.4 million, primarily due to the contribution to be paid for the first time to the restructuring fund, known as the bank levy, which in Deutsche Hypo’s case amounted to EUR 6.5 million.
The Bank’s net income from financial assets of EUR -11.3 (previous year: 6.6) million reflected the turbulences and distortions in the international capital markets in 2011. The only Greek government bond in Deutsche Hypo’s portfolio at year-end was appropriately written down from its nominal value of EUR 12 million to 4.2 million. The Bank disposed of that bond in early 2012, and now has no exposure to Greece anymore.
The Bank was able to generate the necessary refinancing volumes at all times during 2011 in spite of the turbulences in the capital market due to the European government debt crisis. In this context its cost-effective issuance platform for Pfandbriefe once again proved its worth as competitive advantage in retail business. All told, Deutsche Hypo issued a volume of EUR 4.9 (previous year: 6.5) billion, broken down into mortgage Pfandbriefe (EUR 1.5 billion), public Pfandbriefe (EUR 1.4 billion) and uncovered bonds (EUR 2.0 billion). March 2011 saw the Bank make use of one of the few available opportunities to place a mortgage Pfandbrief benchmark issue to an amount of EUR 1.0 billion, for which the demand was strong among German and international investors alike.
Outlook for 2012
The Bank sees the current year in a positive light: “Provided the European government debt crisis does not escalate in 2012 and continues to leave the commercial real estate market unscathed, Deutsche Hypo will achieve a result from ordinary business activity which is likely to at least slightly exceed that of last year”, says Dr. Allerkamp.