ANNUAL REPORT 2006 - DG Hyp

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CREDIT TREASURY In the Credit Treasury division, active management of DG HYP’s real estate financing portfolio was consistently developed further during the 2006 financial year. To manage the portfolio, the bank's risk management team constantly monitors exposure, with the objective of optimising the risk/return profile of our assets and thus achieving a more efficient use of our capital. In addition to buying, selling and hedging real estate financing portfolios, DG HYP is increasingly leveraging its competence in this field to offer portfolio management consulting services for third parties. We are thus also expanding, in particular, our range of services as a centre of competence for real estate financing in the German cooperative banking sector. Loan securitisations and portfolio transfers continue to grow Securitisation markets continued to grow in the 2006 financial year, particularly for real estate assets under RMBS and CMBS. This shows that the importance of actively transferring risk in real estate lending is continuing to grow. At the same time, direct purchases and sales of real estate financing portfolios are growing dynamically. In the past few years, vibrant trading in non-performing loans has developed. This is primarily driven by international investors, and mostly comprises large-volume deals. This market already reached a high degree of maturity in Germany in a relatively short period, with record transaction volumes seen in 2005 and 2006. In the meantime, average transaction sizes are starting to decrease, with an increasing number of smaller banks joining the fray to reduce their stocks of non-performing loans. This sector continues to offer substantial business potential – in particular with regard to the German cooperative banking sector – which 24 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2006 Management Report means that annual transaction volumes will decrease over the coming years, alongside an increasing number of transactions. We also believe that buying and selling problem-free real estate financing portfolios (performing loans) offers interesting potential for business. Equity management, which is enjoying additional impetus at present thanks to Basel II, and strategic considerations (such as reducing nonstrategic portfolios, focusing on target customers and core business) means that the real estate lending sector is increasingly focusing on this option. Lending and capital markets are merging, which is creating the latitude needed to further expand active portfolio management. Further growth for active portfolio management In view of these developments, DG HYP further increased its transaction volumes on the credit and capital markets during the 2006 financial year. DG HYP also further increased investment in structured credit products during the year: in this area, our exposure to MBS purchases on the secondary market is with a selective investment strategy. In addition, DG HYP further expanded its involvement in real estate lending portfolios by buying retail portfolios in the rest of Europe, based on synthetic structures, with an initial true buy transaction in October 2006. In so doing, DG HYP took 1,590 private mortgage loans in Germany onto its own books from Antwerp-based Argenta Spaarbank N.V., with a total volume of € 162 million.
Management Report Overall, new portfolio investments of € 2,753 million were up 55.8 per cent on the previous year’s figure (€ 1,767 million). Our MBS portfolio totalled € 4.9 billion on the reporting date. We took a further key step in placing credit risks to optimise our own portfolio structure with the successful sale (true sale) of non-strategic commercial real estate loans (€ 422 million) in March 2006. We already sold a retail portfolio comprising 3,000 non-performing real estate loans, with a volume of € 300 million, to an international investor in December 2005. DG HYP provides the expertise it has accumulated to the cooperative banking sector, and also supports placements of NPL portfolios for cooperative banks. There was also dynamic growth in services related to the servicing and placement of non-performing loans. In this context, DG HYP’s wholly-owned subsidiary IMMOFORI Gesellschaft für Immobilien Forderungsinkasso mbH has successfully positioned itself not only with third parties, but also in the German cooperative banking sector, as a servicer and advisor for the realisation and sale of non-performing real estate loans. NEW PORTFOLIO INVESTMENTS € mn 3,000 2,500 2,000 1,500 1,000 500 780 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2006 932 965 1,767 2002 2003 2004 2005 2006 2,753 25
Page 1 and 2: Deutsche Genossenschafts-Hypotheken
Page 3 and 4: CONTENTS Letter from the Management
Page 5 and 6: In the past few years, DG HYP has s
Page 7 and 8: PROPORTION OF RESIDENTIAL REAL ESTA
Page 9 and 10: DEVELOPMENT IN DEMAND FOR RESIDENTI
Page 11 and 12: From DG HYP’s perspective, immo e
Page 13 and 14: Active portfolio management as a ke
Page 15 and 16: Deutsche Genossenschafts-Hypotheken
Page 17 and 18: Management Report The sales drive f
Page 19 and 20: Management Report RESIDENTIAL REAL
Page 21 and 22: 1 2 3 1 2 3 Office Building “Kant
Page 23 and 24: Management Report Commercial buildi
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Page 31 and 32: Management Report REFINANCING STRUC
Page 33 and 34: Management Report FINANCIAL SITUATI
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Page 39 and 40: Management Report c) Credit scoring
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Page 45 and 46: Management Report NUMBER OF EMPLOYE
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Page 49: FINANCIAL STATEMENTS Financial Stat
Page 52 and 53: ASSETS BALANCE SHEET 31 Dec 2005
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Notes to the Financial Statements C
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Notes to the Financial Statements A
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Notes to the Financial Statements O
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Notes to the Financial Statements (
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The following is an English transla
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In regular discussions with the Cha
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Corporate Bodies and Committees; Ex
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Corporate Bodies and Committees; Ex
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