ANNUAL REPORT 2006 - DG Hyp

ECONOMIC ENVIRONMENT
AND STRATEGIC DEVELOPMENT
Positive economy – real estate markets brightening
Germany’s economy improved substantially in 2006,
with GDP growing by more than 2 per cent. This growth
was primarily driven by dynamic corporate investments. As
a result, the construction sector also grew again for the
first time in many years. There are clear signs that the
protracted structural problems seen in recent years have
mostly been overcome. However, this does not change the
fact that it is the big cities that benefit most from this
development – for both residential and commercial properties.
The trend towards increasing regional differentiation
between prosperous and structurally weak locations
continued unchanged.
There is stronger demand for both residential and commercial
property, in particular from foreign investors. In
contrast, demand for private properties has tended to
stabilise. Depending on the specific region, growth is very
varied in this sector.
The foreign real estate markets served by DG HYP
recorded very positive growth. This applies to both London
and the US market, which benefited from the strong
economic growth – defying many forecasts.
Significant increase in competition for real estate
financing
Growth on the real estate markets has, on the whole,
been positive – accompanied by a substantial increase in
competition for real estate financing. In the retail sector,
direct banks and internet-based providers are forcing their
way onto the market with fervent marketing, and offering
attractive terms and conditions. In the commercial real
estate financing sector, all of the competitors who had
focused on foreign markets in recent years have now
returned to the German market. This has placed margins in
the real estate lending sector under pressure. Growth in
new commitments and loan extensions demands increased
efforts from product development and sales.
There is also increased competition for international
real estate financing. However, the margins that can be
obtained in this sector are still more attractive than for
German business.
14 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2006
Management Report
Key strategic development milestones reached
The tasks that DG HYP set itself in the 2006 financial
year for the strategic further development of the bank
called for drilling down the market orientation coupled
with decisions on direction, further steps to optimise
credit workflows, and reworking credit risk strategies.
Reorientation of sales in the cooperative banking
sector. One of the key tasks included in the decision to
reorganise VR-Immobilien AG was to anchor responsibility
for retail sector sales and marketing with DG HYP. A key
objective in this regard was to sustainably bolster DG HYP’s
image as a centre of competence for real estate and
public sector financing.
As a result, we have thus fundamentally remodelled
our sales structure in the cooperative banking sector. Our
strong sales team offers cooperative banks and Bausparkasse
Schwäbisch Hall end-to-end advice and support
from a single source. This includes support for fundamental
issues regarding the strategic orientation of cooperative
banks in the real estate financing business, and – in addition
– the entire range of products and services that
DG HYP offers via all of its divisions for real estate and
public sector financing as well as portfolio management.
This means that DG HYP has taken a key step towards
further expanding its position as the largest real estate
bank in the German cooperative banking sector.
Residential real estate finance – strategic initiatives,
process optimisation and adjustment of credit
risk strategy. DG HYP has developed strategic initiatives
to sustainably reinforce the cooperative banking sector’s
position on the residential real estate finance market compared
to direct banks and internet-based providers. This
includes immo express, a standardised lighthouse product
successfully launched in the autumn of 2006 in an initial
pilot stage; and innovative special products – for example
financing solutions to accommodate higher loan-to-value
ratios – that have been launched on the market at the start
of 2007.