COREALCREDIT BANK AG

usiness. The increase on the previous year was largely attributable to the fact that the SoFFin
guarantee costs no longer applied.
Administrative costs rose slightly to EUR 52.5 million (2010: EUR 49.8 million). Personnel costs
declined to EUR 18.3 million (2010: EUR 20.3 million) due to a reduced headcount. Due to the
costs associated with the sale of portfolios of non-performing loans and higher litigation costs,
operating costs rose to EUR 34.3 million (2010: EUR 29.4 million).
Net risk provisioning amounted to EUR -1.3 million in 2011 (2010: EUR -13.5 million). The net loss
from securities, mainly resulting from the write-down of a Greek bond recognised in current assets
in the amount of EUR 23.0 million, was largely offset by the positive credit risk provisions and a
partial release of the contingency reserves established in 2008 under section 340f HGB. The risk
provision of EUR 20.0 million for the indirect exposure to Greek risk arising from a credit-linked
note and disposal losses on securities allocated to fixed assets affected the net result from
financial investments, which amounted to EUR -36.6 million (2010: EUR 2.7 million).
The adjustments to pension provisions required as a result of the implementation of the German
Accounting Law Modernisation Act (BilMoG) were already recognised in the net extraordinary
result in the previous year. The Bank did not exercise the option of spreading this amount over a
maximum of 15 years. Thus, no additional allocation was required in the year 2011.
The tax result amounted to EUR -0.3 million (2010: EUR 1.6 million). Both years included special
effects from previous assessment periods. The same is true of the balance of other operating
income and expenses, which amounted to EUR 0.9 million (2010: EUR 1.2 million).
The net profit for the year 2011, combined with the loss brought forward from 2010, along with the
replenishment of some profit participation rights, resulted in a balance sheet loss of EUR 769.5
million.
Summary
On the whole, despite the continuing crisis in the financial markets, the Bank succeeded in further
consolidating its net assets, financial and profit situation.
Outlook
The German real estate market proved relatively robust during the financial market crisis. External
shocks from the debt crisis could still threaten the German economy, which is again growing
modestly following a period of strong recovery. Demand for real estate is likely to remain steady
overall. Nevertheless, there are differences between the individual quality categories; whereas
excess demand for modern city centre retail and residential space is likely to continue, economic
growth will probably be insufficient to make older office properties in peripheral locations attractive
again.
A similar trend can be seen in the investment market: as a result of the sovereign debt crisis, the
flight to real assets is set to continue for the time being, keeping yields on properties with stable
cash flows at a low level. At the same time, a large number of commercial mortgage backed
securities (CMBSs) are due to mature in 2012 and 2013. These were used in the middle of the last
decade to finance opportunistic real estate investments which have failed to achieve the
performance expected. Forced sales as a result of this cannot be ruled out, particularly as the
pressure on banks’ balance sheets is likely to increase somewhat overall. If this reaches a certain
level, it could also have a negative impact on general property price levels. To this extent, the
availability of funding is a significant risk factor for the German real estate market.
This market environment opens up lending business opportunities for well positioned banks like
COREALCREDIT, particularly where there is a (re)structuring requirement and a specialist bank
53