ANNUAL REPORT 2006 - DG Hyp

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 2006 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 2006 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 2006. 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, DG HYP’s new commitments and loan extensions
for residential real estate finance totalled € 1,750
million in 2006, and is thus down from last year’s high level
(€ 1,973 million). Residential real estate loans totalled
€ 16.1 billion on 31 December 2006.
Future-oriented further development
of residential real estate finance – strategic
initiatives for the cooperative banking sector
In view of the difficult competitive situation, DG HYP
launched strategic initiatives in the 2006 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 – DG 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, DG 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 2006 with some cooperative
banks, and will be successively expanded at the start of
2007 to span more than 100 banks within the sector.
DG 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-Hypothekenbank AG | Annual Report 2006
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