ANNUAL REPORT 2006 - DG Hyp

Management Report
The sales drive for residential real estate finance is
accompanied by systematic optimisation of credit workflows
and an adjustment to the credit risk strategy. Credit
workflows in the retail business have been fundamentally
reworked in cooperation with our processing partner,
VR Kreditwerk, in order to reduce processing time and
substantially improve quality and service.
Finally, based on a systematic analysis of the retail portfolio
for credit scorings, loan-to-value ratios and property
credit ratings, the credit risk strategy in the retail sector has
been optimised. DG HYP has thus put additional measures
in place to actively manage the risk structure of its retail
portfolio.
Foreign strategy for commercial real estate
finance up and running. DG HYP has enjoyed dynamic
growth for commercial real estate finance in Germany over
the past few years, and we have now gained a foothold in
foreign business with a substantial increase in new
commitments. We believe that commercial real estate
finance outside of Germany is an attractive supplement
to our business, allowing us to benefit from different
economic cycles in different markets, thus specifically
diversifying risks and spreading our earnings base.
Portfolio management product range expanded.
Further developments in portfolio management were
primarily characterised by the growing importance of true
sale and true buy transactions. The market for real estate
credit portfolio purchases and sales is currently enjoying
dynamic growth, and we believe that this will continue in
the coming years. DG HYP has systematically further
expanded its activities in this area – both for its own
business as well as consulting for third parties – with a
range of transactions in the 2006 financial year. With its
first ‘true buy’ portfolio purchase, DG HYP has positioned
itself as an active player on this market.
Basel II successfully implemented. DG HYP successfully
implemented Basel II in the 2006 financial year – thus
reaching a further key milestone. We believe that fulfilling
the requirements of Basel II is primarily a strategic investment
to future-proof the bank. The associated systematic
expansion of risk management provides key impulses when
it comes to aligning business strategies, structures and
workflows. The acceptance audit for the first entry level in
the Foundation Internal Rating Based Approach (FIRB) by
the supervisory authorities was conducted in the autumn
of 2006, and successfully completed with confirmation of
admission.
DG HYP rating again upgraded
DG HYP’s ratings also developed positively in the 2006
financial year, allowing us to further bolster our positioning
as a real estate bank geared to the capital markets. Standard
& Poor’s upgraded the long-term rating for DZ BANK,
and thus also DG HYP, in December 2006 from A/positive
to A+/stable. The rating awarded by Fitch Ratings for the
entire cooperative banking sector, and thus also DG HYP,
was confirmed at A+/stable. The two rating agencies
upheld their AAA ratings for DG HYP public-sector covered
bonds and mortgage bonds (Hypothekenpfandbriefe).
Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2006
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