DG HYP INVESTOR PRESENTATION Situation as at: 30 June 2017
AGENDA 1. Company profile and business strategy 2. Facts and figures 3. DG HYP funding 4. Analysis of the mortgage cover pool 5. Appendix DG HYP Investor Presentation 30 June 2017 2
1. DG HYP PART OF A STRONG GROUP DG HYP at a glance - One of Germany s leading mortgage banks - CRE specialist of the DZ BANK Group - 100% subsidiary of DZ BANK*, supported via a Letter of Comfort - Control and profit and loss transfer agreement with DZ BANK - Based in Hamburg - 476 employees in Germany * DZ BANK. Die Initiativbank a merger between DZ BANK and WGZ BANK started operations on 1 August 2016 DG HYP Investor Presentation 30 June 2017 3
1. OUTLOOK: MERGER OF DG HYP AND WL BANK Memorandum of Understanding agreed on 22 June 2017 Strategic targets: Bundling of existings competences, Avoiding of redundancies, One-shop customer advice and Improved benefits for cooperative banks Four customer segments remain: Business customers, mortgage customers, communes and retail customers New name for merged bank: DZ HYP Hamburg und Münster are to remain headquarters Merger of DG HYP and WL BANK by mid-2018, effective from 01/01/2018 Leading provider on all business fields / Germany s largest Pfandbrief issuer DG HYP Investor Presentation 30 June 2017 4
1. DG HYP PART OF A SOLID BANKING GROUP Cooperative Financial Network More than 30 million customers Key financial indicators Rating (S&P) (longterm) AA- Outlook stable 2016 2015 18.4 million shareholders 972 cooperative banks with 151,050 employees Profit before taxes (in m) 8,308 9,787 Cost/income ratio (in per cent) 67.0 63.6 Consolidated total assets (in m) 1,215,780 1,162,519 Consolidated equity (in m) 98,569 93,007 Common equity Tier 1 capital ratio (in per cent)1 Leverage Ratio (in per cent, fully loaded ) 15.2 14.6 7.3 6.9 Employees 181,740 187,616 1 incl. reserves in accordance with section 340f HGB DG HYP Investor Presentation 30 June 2017 5
1. COMMERCIAL REAL ESTATE BANK WITH LONG-STANDING EXPERIENCE History Foundation of DG HYP in Berlin Head office moved to Hamburg Take over of the commercial real estate finance business from DZ BANK Business model adjustment: commercial real estate finance business is now core business Focus on the German market Start of merger talks with WL Bank 1921 1949 2001 2008 2010 2017 Agricultural loans / Private housing finance Commercial real estate finance DG HYP Investor Presentation 30 June 2017 6
1. THE GERMAN REAL ESTATE MARKET Transaction volume Germany (EUR bln) vdp property price indices 2003 = 100 150 140 55,1 130 53,3 52,9 50,0 43,7 30,5 39,9 25,0 23,0 21,1 19,1 23,0 10,1 9,5 12,0 11,0 4,8 3,3 3,8 6,0 13,7 12,8 13,7 14,0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e Residential Real Estate Commercial Real estate 120 110 100 90 2003 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Residential Commercial composite index 2017-H1 Quelle: EY Research, JLL, Prognose DZ BANK Research, vdp DG HYP Investor Presentation 30 June 2017 7
1. CORE COMPETENCE: COMMERCIAL REAL ESTATE FINANCE Real estate bank of the cooperative banking network Joint market coverage with German Cooperative Banks Commercial real estate finance Commercial real estate customers Local cooperative banks Public customers: Local authority lending/ PPP IMMO Meta products underpinning cooperation with German cooperative banks IMMO VR Rating a web-based, convinient rating procedure for cooperative financial network VR WERT real estate valuation DG HYP Investor Presentation 30 June 2017 8
1. PERVASIVE DECENTRALISED PRESENCE IN GERMAN CORE MARKET CROSS BORDER Debt solutions for German clients in F, NL, UK Dusseldorf Hamburg Frankfurt Stuttgart Leipzig Munich Berlin DG HYP has a decentralised Leipzig structurewith 6 real estate offices across Germany Success factors for real estate offices: Customer serrvice by local front office and back office units Flat hierarchies, with local decision-making process Strong market penetration in mid-volume segment Close relastionship with local cooperative banks Five regional offices in Hanover, Kassel, Leipzig, Nuremberg and Mannheim Servicing international investors directly from Hamburg for CRE investments throughout Germany DG HYP Investor Presentation 30 June 2017 9
1. STRATEGIC FOCUS ON COMMERCIAL REAL ESTATE FINANCING Segments Core segments: Offices Multifamiliy Retail Speciality segments: Hotel Logistics Nursing/ retirement homes Customers Private / institutional investors Residential real estate companies Project developers Developers Financing principles Individual transactions up to 120 mn Senior loans secured by first ranking mortgage Equity commitment generally min. 20% LTV: up to 75%, depending on the property segment Properties suitable for use by third parties Property appraised and valued by VR WERT DG HYP Investor Presentation 30 June 2017 10
1. SUSTAINABILITY WITHIN THE DG HYP Economic growth can only be long-term where it is sustainable, and where it respects social and environmental needs. (Dr. Georg Reutter, Chairman of the Management Board) Economic Responsibility In our business activities, we therefore aim to balance entrepreneurial success with social and ecological considerations. (Dr. Georg Reutter, Chairman of the Management Board) Ecological Responsibility Social Responsibility DG HYP Investor Presentation 30 June 2017 11
1. SUSTAINABILITY RATINGS* imug results 2014 rating 2015 rating 2016 rating Public Sector Covered Bonds very positive (A) very positive (AA) very positive (AA) Mortgage Covered Bonds neutral (CC) positive (BB) positive (BB) Uncovered Bonds positive (B) positive (BB) positive (BBB) * The status report on sustainability is available: www.dghyp.de/en/sustainability.html DG HYP Investor Presentation 30 June 2017 12
1. SUSTAINABILITY IS A PERMANENT PROCESS DG HYP Investor Presentation 30 June 2017 13
AGENDA 1. Corporate profile and business strategy 2. Facts and figures 3. DG HYP funding 4. Analysis of the mortgage cover pool 5. Appendix DG HYP Investor Presentation 30 June 2017 14
2. TREND IN BUSINESS New business ( mn) 2015 30 June 2016 30 June 2017 Commercial real estate financing 5,722 3,420 2,703 of which domestic 5,637 3,299 2,573 of which foreign 85 121 130 Local authority lending business 378 99 71 Issues 4,114 2,799 2,038 covered 1,707 1,130 1,119 uncovered 2,353 1,669 921 Portfolio ( mn) 2015 2016 30 June 2017 Total assets 39,821 36,696 36,363 Real estate loans 18,674 19,742 19,003 Public-sector lending / originated local authority loans 14,967 12,873 12,270 Bank bonds 1,520 904 883 MBS 1,273 963 831 DG HYP Investor Presentation 30 June 2017 15
2. FINANCIAL RATIOS Income statement ( mn) 30. June 2016 30. June 2017 Net interest income 134.1 138.6 Net commission result 17.4 16.7 Gross profit 151.5 155.3 Administrative expenses 71.7 71.9 Net other operating income/expenses 9.5-3.0 Risk provision -13.4-11.9 Net financial result -6.3 1.8 Operating result 69.6 70.3 Allocation to the fund for general banking risks 30.0 20.0 Tax expenses 1.1 22.6 Partial profit transfer 8.5 7.7 Profit transfer 30.0 20.0 DG HYP Investor Presentation 30 June 2017 16
2. FAVOURABLE TREND CONTINUES* Net interest income Net commission result Profit transfer 263 270 41 125 29 80 139 16,7 20 2015 2016 06/2017 2015 2016 06/2017 2015 2016 06/2017 * Declarations in EUR mn DG HYP Investor Presentation 30 June 2017 17
2. FINANCIAL RATIOS Regulatory capital* 2016 30. June 2017 Own funds (EUR mn) 1,607 1,737 Total capital ratio (%) 12.4 14.1 Tier 1 ratio (%) 9.8 10.7 Common equity tier 1 ratio (%) 6.9 8.2 * DG HYP has used the so-called waiver option provided under section 2a of the German Banking Act (KWG, old version). Ratios 2015 2016 Cost Income Ratio (%) 44.4 38.6 Return on Equity (%) 13.9 25.0 Liquidity coverage requirements 2016 30. Jun 2017 LCR (%) 360 736 DG HYP Investor Presentation 30 June 2017 18
AGENDA 1. Company profile and business strategy 2. Facts and figures 3. DG HYP funding 4. Analysis of the mortgage cover pool 5. Appendix DG HYP Investor Presentation 30 June 2017 19
3. FUNDING STRATEGY liquidity supply at any time DG HYP Pfandbrief issuer in the structurally congruent refinancing cooperative financial network optimisation of the liquidity costs goals products Unsecured funding mainly within the DZ BANK group well-balanced funding mix Strategy broad investor base institute rating from S&P and long-term business relationships investors rating Fitch regular publication of institute and cover pool rated by S&P cover-specific data professional cover fund management DG HYP Investor Presentation 30 June 2017 20
3. STRONG FUNDING BASE THROUGH STABLE RATING Mortgage Pfandbrief AAA - Public Pfandbrief AAA - Senior Unsecured Debt Senior subordinated* AA- A+ - Issuer rating Long-term/ outlook/ short-term AA- / stable / A-1+ AA- / stable / F1+ Last Rating Action 03/10/2017 Upgrade from A+ to AA- 03/24/2015 Upgrade from A+ to AA- Cooperative Banking Sector Germany AA- outlook stable AA- outlook stable * Previously rated as senior unsecured, Situation as: March 10, 2017 DG HYP Investor Presentation 30 June 2017 21
3. LONG-TERM FUNDING Portfolio development (notional, mn) registered bonds 2,405 11,539 13,270 12,797 Benchmark 4,500 bearer bonds 1,242 11,879 8,124 7,335 registered bonds 6,093 10,533 10,283 10,976 bearer bonds 4,071 2015 2016 30 June 2017 Mortgage Pfandbrief Public Pfandbrief Unsecured Bonds DG HYP Investor Presentation 30 June 2017 22
3. LONG-TERM FUNDING New issues ( mn) New Mortgage Pfandbriefe ( mn) 2,407 3,577 138 4,1 7,8 921 1,500 5,3 619 1,707 1,638 1,119 2015 2016 1st HY 2017 3,5 35,1500 27,8 21,8 12,9 2016 1st HY 2017 Mortgage Pfandbriefe Unsecured bonds Benchmark Issues Private Placements DG HYP Investor Presentation 30 June 2017 23
3. DG HYP MORTGAGE COVERED BONDS Outstanding Benchmark Issues (mln EUR) 600 500 400 300 200 100 0 DGHYP 0,025% 09/10/18 DGHYP 1,375% 01/29/20 DGHYP 0,25% 01/21/21 DGHYP 0,875% 07/21/21 DGHYP 0,125% 09/30/22 DGHYP 0,625% 06/05/24 DGHYP 0,05% 12/06/24 DGHYP 0,375% 03/31/26 DGHYP 0,50% 09/30/26 DG HYP Investor Presentation 30 June 2017 24
AGENDA 1. Company profile and business strategy 2. Facts and figures 3. DG HYP funding 4. Analysis of the mortgage cover pool 5. Appendix DG HYP Investor Presentation 30 June 2017 25
4. MORTGAGE POOL* SHARE OF COMMERCIAL LENDING GROWS FURTHER 9.237 +13.8% 10.516 4.427-64.6% 1.569 2013 2014 2015 2016 06/2017 x 1 EURmn x > 1 EURmn * According to section 28 Pfandbrief Act DG HYP Investor Presentation 30 June 2017 26
4. MORTGAGE POOL* SHARE OF COMMERCIAL LENDING GROWS FURTHER Differentiation by type of use by geographical breakdown 0,9 39,8% 34,6% 31,1% 29,9% 60,2% 65,4% 68,9% 70,1% 11,2 2014 2015 2016 06/2017 Commercial 06/2017 Domestic Foreign * EUR bn * According to section 28 Pfandbrief Act DG HYP Investor Presentation 30 June 2017 27
4. MORTGAGE POOL*: DOMESTIC EXPOSURE Differentiation by property location ( mn) Differentiation by type of use ( mn) 1.400 1.200 1.000 800 600 400 200 0 3.500 3.000 2.500 2.000 1.500 1.000 500 0 Commercial Residential * According to section 28 Pfandbrief Act DG HYP Investor Presentation 30 June 2017 28
4. MORTGAGE POOL*: DEVELOPMENT OF THE COVER POOL 14,0 2,5 12,0 10,0 8,0 2,0 1,5 6,0 1,0 4,0 2,0 0,5 0,0 Jun 17 2018 2020 2022 2024 2026 2028 2030 Asset pool Pfandbriefe outstanding overcollateralisation 0,0 * bn DG HYP Investor Presentation 30 June 2017 29
AGENDA 1. Company profile and business strategy 2. Facts and figures 3. DG HYP funding 4. Analysis of the mortgage cover pool 5. Appendix DG HYP Investor Presentation 30 June 2017 30
5. APPENDIX: PUBLIC SECTOR POOL: HIGH DOMESTIC SHARE Differentiation by debtor category ( mn) Local authorities Foreign public debtors 2,638 Regional authorities 358 621 5,016 Other debtors Domestic exposure: 6.4 EUR bn * According to section 28 Pfandbrief Act DG HYP Investor Presentation 30 June 2017 31
5. APPENDIX: PUBLIC SECTOR POOL: FOREIGN Differentiation by country and debtor category debt and guarantees ( mn) 800 700 600 500 400 300 200 100 0 ES IT CA CH PT AT LUX BE State Regional authorities Local authorities Other * According to section 28 Pfandbrief Act DG HYP Investor Presentation 30 June 2017 32
5. APPENDIX: PUBLIC SECTOR POOL: DEVELOPMENT OF THE COVER POOL* 10,0 2,0 9,0 8,0 7,0 6,0 1,0 5,0 4,0 3,0 0,0 2,0 1,0 0,0 June 2017 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036-1,0 Asset Pool Pfandbriefe outstanding overcollateralisation * in bn DG HYP Investor Presentation 30 June 2017 33
5. APPENDIX: DG HYP PART OF A STRONG NETWORK Interaction within the German Cooperative Financial Network * Source: DZ BANK DG HYP Investor Presentation 30 June 2017 34
5. APPENDIX: DG HYP PART OF A STRONG SECTOR The three pillars of the German banking sector * Source: DZ BANK DG HYP Investor Presentation 30 June 2017 35
CONTACTS Deutsche Genossenschafts-Hypothekenbank AG Rosenstraße 2 20095 Hamburg E-Mail: treasury@dghyp.de Patrick Ernst Head of Treasury Tel.: +49 40 3334-2600 patrick.ernst@dghyp.de Nicole John Deputy Head of Treasury Tel.: +49 40 3334-2779 nicole.john@dghyp.de DG HYP Investor Presentation 30 June 2017 36
DISCLAIMER This document has been prepared by Deutsche Genossenschafts-Hypothekenbank AG (DG HYP) solely for information purposes and is intended only for distribution in the Federal Republic of Germany. This document is not intended for persons having their domicile and/or registered office and/or branches outside Germany, particularly in the United States of America, Canada, the United Kingdom or Japan. This document may only be distributed outside Germany in compliance with the laws and regulations applicable in the relevant country. Anyone gaining possession of this information or material must inform themselves of the applicable laws and regulations and observe said laws and regulations. Nothing contained in this document constitutes either a public offer or an invitation to make an offer to buy securities or financial instruments. It cannot replace an independent examination of the opportunities and risks relating to the product presented taking the respective investment objectives into consideration. DG HYP shall not act in particular as an investment advisor or on the basis of an asset management duty or obligation. This document does not constitute financial analysis. All assessments, expressions of opinion and statements contained herein are those of the writer and are not necessarily shared by third parties. DG HYP has obtained the information on which this document is based from sources that are considered reliable, but has not, however, verified all of these documents. Accordingly, no representation or warranty as to the accuracy or completeness of the information or expressions of opinion contained herein is made by DG HYP. DG HYP shall not be liable for direct of indirect losses caused by the distribution and/or use of this document or any losses in connection with the distribution and/or use of this document. Investors shall not base their investment decision regarding securities or other financial instruments on this document, but on the relevant sales prospectus or information memorandum. Depending on the specific investment objectives, investment horizon and financial situation, our recommendations may not suitable, in whole or in part, for individual investors. As trading recommendations are largely based on short-term market conditions, they may also conflict with other recommendations made by DG HYP. The recommendations and expressions of opinion contained herein are as at the date of this document. They can change at any time or may become obsolete as a result of future developments. DG HYP is under no obligation to update or keep the information current or to inform about this. This document includes expectations and forecasts that relate to the future. These forward-looking statements, in particular those regarding DG HYP s business and earnings growth, are based on forecasts and assumptions, and are subject to risks and uncertainties. As a result, the actual results may differ materially from those currently forecast. DG HYP Investor Presentation 30 June 2017 37