COREALCREDIT BANK AG

can beat the competition through its expertise – as is the case with maturing securitisations. In this
situation lending conditions that meet the Bank’s high profitability requirements and stringent risk
standards can continue to be achieved. The impending market consolidation could also create
strategic opportunities.
A return to the former equilibrium is still some way off for the financial market. A “new normality”
characterised by high risk aversion with the ECB making up for the interbank market is already
being discussed widely. Liquidity will therefore remain a scarce resource to be managed with
foresight. Based on conservative planning assumptions, the Bank will have adequate liquidity to
cover the refinancing requirements of the existing business and new business at the same level as
recent years until at least the end of 2013. To the extent that additional liquidity can be generated
at favourable terms by issuing covered and uncovered bonds and further placements under the
commercial paper programme, it will also be possible to expand new lending business.
Mortgage Pfandbriefe will continue to be the Bank’s main refinancing instrument. The Bank
believes that it will continue to have sufficient access to this refinancing channel for new business.
In the unsecured segment, the Bank’s rating at the lower end of investment grade means that at
least long-term borrowing is more difficult, although demand for short-term secured commercial
paper is likely to continue. Refinancing through customer deposits covered by the Deposit
Protection Fund is set to remain more significant, with the possibility of approaching other
customer groups, such as retail investors, in addition to the existing institutional investors.
The outlook has changed for the syndication and securitisation refinancing channels planned in
the Bank’s business model. The focus of the remaining market participants on direct business with
real estate customers means that traditional syndication will not be as readily possible as in the
past, and will most likely involve local banks or insurance companies as the buyers. Club deals for
higher financing volumes are likely to make up the bulk of the syndication business. However, the
outlook for securitisation is brightening, as new, transparent and risk-appropriate structures make it
the perfect response to many investors’ scepticism on banks. However, the residential mortgage
backed securities (RMBS) market will probably open up before the commercial mortgage backed
securities (CMBS) market does. The Bank is continuing to structure its loan agreements in such a
way that it will be able, in principle, to utilise these two refinancing channels in addition to the
collateral pool approach.
COREALCREDIT expects the annual net profit to increase in 2012 and 2013 due in part to a
further improvement in the portfolio’s risk/return profile. This assumes that the German economy
and real estate market will grow modestly, the financial markets will stabilise at the current level
and the sovereign debt crisis will not spread. These expectations are based on uncertainties,
relating mainly to developments in the money and capital markets and their effects – both direct
and indirect – on the Bank’s economic environment, as well as the risks that may arise in
connection with the legal action over participation certificates. The limiting factor for the Bank’s
business prospects in medium term will remain the liquidity situation. The decisive factor affecting
future profit performance will be whether the sovereign debt crisis can be resolved.
Thanks to its strong capital base, the Bank meets the key condition for overcoming this difficult
environment. COREALCREDIT's business model has proved effective over the past five years,
even in this difficult environment. Its market position, gained through expertise and flexibility, gives
the Bank the foundation and confidence it needs to tackle any challenges the future may hold.
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