ANNUAL REPORT 2006 - DG Hyp
ANNUAL REPORT 2006 - DG Hyp
ANNUAL REPORT 2006 - DG Hyp
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<strong>DG</strong> HYP as a centre of competence for residential<br />
real estate finance within the cooperative banking<br />
sector<br />
With around 1,250 member banks, the cooperative<br />
banking sector is a core element of the German financial<br />
industry. Thanks to its proximity to approximately<br />
30 million customers, the cooperative banking sector is a<br />
key player in the German retail business. Cooperative<br />
banks enjoy important competitive advantages thanks to<br />
their extensive advisory skills, customer proximity and<br />
strong regional presence. The market share of the cooperative<br />
banking sector in its core business of residential real<br />
estate finance stands at around 20 per cent. Due to fierce<br />
competition, however, it has come under massive pressure.<br />
As the centre of competence for real estate finance<br />
within the German cooperative banking sector, and in its<br />
capacity of an international covered bond issuer, <strong>DG</strong> HYP is<br />
a key product supplier to cooperative banks in real estate<br />
finance. <strong>DG</strong> HYP has the ability to offer them highly<br />
flexible financing solutions, even for longer terms, with<br />
customised interest or redemption terms, or hedging features.<br />
Given their restricted funding resources, and the lack<br />
of asset/liability management geared to the capital<br />
markets, regional banks are generally unable to provide<br />
such products themselves. Moreover, given the large volume<br />
and broad diversification of its real estate financing<br />
portfolio, <strong>DG</strong> HYP is in a position to optimise the risk/return<br />
profile in real estate lending, actively deploying hedging<br />
techniques, and using portfolio purchases and sales. In this<br />
way, <strong>DG</strong> HYP is acting as a bridge to the capital markets,<br />
thus significantly broadening the product range and business<br />
potential that the cooperative banking sector has to<br />
offer in real estate finance.<br />
As a key strategic element of the cooperative banking<br />
sector – combining decentralised market coverage of<br />
cooperative banks with innovative product development by<br />
specialist providers – customer proximity and capital<br />
market orientation are important success factors for a<br />
product and service offer tailored to market requirements.<br />
<strong>DG</strong> HYP is facing the challenge of developing innovative<br />
products to stay abreast with dynamic changes in the competitive<br />
real estate finance market. The bank’s objective is<br />
to stabilise the overall market share held by the cooperative<br />
banking sector in this fiercely competitive segment –<br />
and to further boost it, in order to explore additional crossselling<br />
opportunities.<br />
8 Deutsche Genossenschafts-<strong>Hyp</strong>othekenbank AG | Annual Report <strong>2006</strong><br />
Such innovative products not only need to match everchanging<br />
customer needs – it is just as important to make<br />
sure they fulfil the requirements of credit risk management<br />
by deploying a risk-adjusted product and pricing policy.<br />
Given the focus on high-quality, expert advice (which cooperative<br />
banks have pursued for many years), predatory,<br />
purely price-oriented competition is not an option either.<br />
Instead, the objective must be to capitalise on, and further<br />
enhance the strengths of the cooperative banking sector,<br />
with a view to establishing a unique offer that is distinguished<br />
from the competition. Against this backdrop,<br />
<strong>DG</strong> HYP has developed a two-pronged strategy for the<br />
cooperative banking sector, comprising a standardised<br />
‘lighthouse’ product and special products linked to the<br />
capital markets.<br />
Innovative solutions for residential real estate<br />
finance: the standardised ‘lighthouse’ product for<br />
the prime customer segment<br />
There is intense competition for customers with strong<br />
creditworthiness who are looking for financings with low<br />
loan-to-value ratios – <strong>DG</strong> HYP’s immo express was developed<br />
specifically for this target group. This ‘lighthouse’<br />
product is designed to provide cooperative banks with a<br />
high-profile solution helping them attract new customers,<br />
and enhance customer loyalty in the highly competitive<br />
refinancing business – with the objective of building<br />
market share. The key immo express success factors<br />
include<br />
• a strong product brand with a high-profile advertising<br />
concept;<br />
• straightforward, web-based handling with high service<br />
quality, delivered through an ‘express check’ with the<br />
option of contracting online, directly on the website of<br />
the relevant cooperative banks (with the additional<br />
option of advice provided by that bank’s account executives);<br />
• a focus on customers with strong creditworthiness and<br />
low loan-to-value ratios not exceeding 60 per cent,<br />
allowing the pricing of financings in line with the most<br />
aggressive competitors; and<br />
• fast approval and execution within 48 hours.<br />
Combined with the customer proximity and high-quality<br />
expert advisory skills of cooperative banks, this concept<br />
has set new standards for the home loan financing business<br />
offered by the German cooperative banking sector.