16 Deutsche Genossenschafts-<strong>Hyp</strong>othekenbank AG | Annual Report <strong>2006</strong>
Management Report RESIDENTIAL REAL ESTATE FINANCE Despite favourable underlying conditions, such as unchanged low interest rates, there was no sustained revitalisation in demand for financing for private purchases of residential property during the <strong>2006</strong> financial year. The volume of new construction, and the market volume for the purchase and modernisation of private real estate, were both stable year-on-year. In contrast, there was pronounced momentum in loan extensions, where the impact of the strong real estate financing business at the end of the 1990s made itself felt. Challenges in retail business At the same time, competition for residential real estate financing once again got significantly hotter from the start of the <strong>2006</strong> financial year. Direct banks and internet-based providers in particular went on the offensive, with intensive marketing and attractive product offers in a bid to win retail customers in the German banking market. In particular, it can be seen that our sales partners, the cooperative banks, were increasingly geared to their own business rather than acting as agents for real estate loans during <strong>2006</strong>. However, we succeeded in increasing the proportion of loan extensions, which is highly attractive business, thanks to joint sales drives with our partner banks. In total, <strong>DG</strong> HYP’s new commitments and loan extensions for residential real estate finance totalled € 1,750 million in <strong>2006</strong>, and is thus down from last year’s high level (€ 1,973 million). Residential real estate loans totalled € 16.1 billion on 31 December <strong>2006</strong>. Future-oriented further development of residential real estate finance – strategic initiatives for the cooperative banking sector In view of the difficult competitive situation, <strong>DG</strong> HYP launched strategic initiatives in the <strong>2006</strong> financial year to further develop and future-proof residential real estate financing together with its partners in the German cooperative banking sector. A first key step was to re-orient our sales activities in the cooperative banking sector. Residential real estate finance is part of the cooperative banks’ core business, and is a key anchor business line for the long-term loyalty of retail customers. As an issuer of Pfandbriefe – German covered bonds – <strong>DG</strong> HYP is a major partner in this regard, allowing them to cover the entire bandwidth of residential real estate financing based on low-cost refinancing and active portfolio management via the capital market. Correspondingly, our sales activities place a particular focus on developing strategies for a successful presence on these markets in this area of business together with the cooperative banks. In line with this, <strong>DG</strong> HYP has developed strategic initiatives geared to sustainably reinforcing the German cooperative banking sector’s presence in the residential real estate financing market. Our lighthouse product immo express is an initial response to the heightened competition. This was piloted in Q4 <strong>2006</strong> with some cooperative banks, and will be successively expanded at the start of 2007 to span more than 100 banks within the sector. <strong>DG</strong> HYP offers cooperative banks a highly competitive, standardised product that is geared to customers with an excellent credit rating and loan-to-value ratios of up to 60 per cent, backed by regional advertising campaigns, attractive terms and service-oriented, simple execution via participating banks’ websites. Deutsche Genossenschafts-<strong>Hyp</strong>othekenbank AG | Annual Report <strong>2006</strong> 17
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