Ein Unternehmen Member der of Interim Report 30 June 2005 Member of the Cooperative Financial Services Network DG HYP. The innovative real estate bank.
Overview Business development 1.1. to 6/12 6/12 30.6.2005 of 2004 of 2003 million million million Real estate lending 1,933 1,667 1,909 (incl. loan extensions) Public-sector lending 5,898 5,532 3,478 (incl. loan extensions) MBS-purchases 680 483 466 Pfandbrief sales and other 8,098 6,542 4,940 refinancing resources Balance sheet 30.6.2005 31.12.2004 31.12.2003 million million million Balance sheet total 77,196 73,813 69,097 Mortgage loans 24,628 24,809 24,779 Loans to municipalities 41,430 39,379 37,584 Bonds and other 65,263 60,477 55,071 fixed-income securities Profit and loss account 1.1. to 6/12 6/12 30.6.2005 of 2004 of 2003 million million million Gross profit 130.7 166.9 147.6 Administrative expenses 85.5 91.3 94.2 Risk provisions/revaluation results 18.3 36.2 45.4 Operating result 26.9 39.4 8.0 Profit transfer 5.4 8.8 8.8 2
Ladies and Gentlemen, dear business associates, Notwithstanding the difficult economic conditions that have persisted during this year, in the first half of 2005 DG HYP saw a significant increase in its new business in residential and commercial real estate financing, as well as in local authority lending. These notable achievements were due to intensified marketing efforts, both via the distribution network within the cooperative banking sector, and in direct business. This was all the more encouraging in the absence of a sustained recovery to date of the domestic real estate financing market. Operating profit during the period under review amounted to 26.9 million (6/12 of 2004: 39.4 million) which, taking into consideration the weak economic environment, was in line with our expectations. We placed two very successful jumbo Pfandbrief issues totalling 4.5 billion on the capital market. Additionally, we joined forces with DZ BANK and KfW Banking Group to market an innovative multi-seller securitisation transaction that was issued under the name PROSCORE-VR 2005-1. This was the first time that risks related to smaller-sized commercial real estate loans (totalling 735 million) from the portfolios of various cooperative banks were aggregated and offered to domestic and international investors. Thanks to the favourable development across all areas of business, DG HYP is well positioned to progress further as an innovative real estate bank. Deutsche Genossenschafts-Hypothekenbank AG The Management Board Hamburg, August 2005 3
Further progress made in Residential Real Estate Finance New business and loan extensions in Residential Real Estate Finance amounted to 875 million during the period under review; this corresponds to a 24.5% increase over the pro-rata figure for the previous year ( 703 million). DG HYP offers attractive products in this market, thus securing its successful position. Transactions intermediated by cooperative banks, as well as by Bausparkasse Schwäbisch Hall, also show a positive trend. This highlights the fact that DG HYP is firmly enshrined within the cooperative banking sector: it also demonstrates the successful development of VR-Immobilien AG s business model. Commercial Real Estate Finance continues to expand DG HYP s Commercial Real Estate Finance business continued to develop positively, leveraging its decentralised market presence in its core German market as well as in selected international locations. New business and loan extensions totalled 1,057 million during the first half of 2005, which equates to a 9.7% increase over the pro-rata figure for the previous year ( 964 million). Particularly high growth in new business was recorded by the domestic direct business originated by our Real Estate Centres, increasing roughly by 35% over the previous year. Our international business, which is in the start-up phase in Paris, London and Amsterdam, is becoming increasingly important. It accounted for 13.3% of originated new business, compared with 3.2% the year before. 4
Significant increase in local authority lending New business and loan extensions in originated local authority lending reached 1,615 million during the period under review, which corresponds to a 56.4% increase over the pro-rata figure for the previous year ( 1,033 million). This progress is defined on the one hand by the continuing rise in the local authority finance requirements. On the other hand, DG HYP has successfully expanded its position in the market for local authority finance, in cooperation with local cooperative banks. Real Estate Credit Treasury expands with product innovations The Real Estate Credit Treasury division continues to expand, supported by product innovations such as investments in structured high-margin credit products. New business in MBS purchases totalling 680 million was up significantly on the amount of 483 million (6/12 of 2004). Furthermore, DG HYP and DZ BANK once again positioned themselves as pioneers in multi-seller securitisations, with the first small-size commercial MBS transaction PROSCORE-VR 2005-1. The transaction comprises 3,072 small commercial real estate loans with a total volume of 735 million, 94% of which originate from DG HYP s portfolio and 6% from the portfolios of six cooperative banks. 5
A positive trend was also reported in Structured Finance activities. During the period under review, DG HYP successfully arranged the placement of a large commercial non-performing loan portfolio on behalf of DZ BANK. Once again, DG HYP demonstrated its leading role within the cooperative banking sector, as an active manager of real estate loan portfolios. Successful international jumbo issues DG HYP kick-started the market in January 2005 with the first jumbo Pfandbrief of the year, a seven-year, 2 billion issue. Another jumbo issue followed in June 2005 accompanied by a major international roadshow. This 2.5 billion issue, which included an innovative 5-year/ 10-year split-maturity feature, commanded considerable interest. Both issues were oversubscribed, with over 50% being placed with international investors. This allowed DG HYP to proceed successfully with its strategy of internationalisation in its refinancing activities. During the period under review, DG HYP s new issues totalled 8.1 billion, of which public-sector covered securities (öffentliche Pfandbriefe) accounted for 6.3 billion, mortgage bonds (Hypothekenpfandbriefe) for 1.1 billion and unsecured refinancing for 0.7 billion. 6
Income statement DG HYP s operating profit was 26.9 million in the first half of 2005 (6/12 of 2004: 39.4 million), which is in line with our expectations. Within this context, the development in net interest income showed the impact of maturities of existing highmargin exposures. Naturally, the positive effects of new business development will not be felt in full for some years yet. The decline in the net commission result, to 27.2 million in expenditure (6/12 of 2004: expenditure of 20,0 million) was due to the increase in new business intermediated by the cooperative banking sector, and to considerably higher new Jumbo Pfandbrief issuance. Other operating income was down to 4.8 million; the previous year s level of 20.3 million had been due primarily to capital gains on the sale of the bank's office buildings in Hamburg and Berlin. The consistent restructuring of the IT systems, and further cost reductions, have allowed DG HYP to reduce administrative expenses further, to 85.5 million (6/12 of 2004: 91.3 million). Risk provisioning/revaluation results amounted to 18.3 million (6/12 of 2004: 36.2 million). 7
Balance sheet development DG HYP s total assets rose by 3.4 billion during the period under review, to 77.2 billion. This development is marked by the expansion of the securities portfolio, by 2.9 billion to 28.2 billion. At 24.4 billion, the volume of mortgage loans has remained virtually constant compared with the figure as at 31 December 2004. Loans to local authorities increased by 2.4% to 17.2 billion. Developments on the liabilities side of the balance sheet were driven by the large supply of new issues during the period under review. Accordingly, the volume of securitised liabilities rose by 4.6 billion compared with the figure as at 31 December 2004, to 52.1 billion. 8
Business progress figures New business 1.1. to 6/12 Change 30.6.2005 of 2004 Real estate lending million million % incl. loan extensions 1,933 1,667 15.9 Division of real estate lending between areas of business Private customers 875 703 24.5 Investors 1,057 964 9.7 MBS-purchases 680 483 40.9 Public-sector lending incl. loan extensions 5,898 5,532 6.6 thereof loans to municipalities 1,615 1,033 56.4 promissory note loans 1,377 352 291.4 public-issue securities 2,907 4,148 29.9 Pfandbrief sales and others 8,098 6,542 23.8 9
Balance sheet as at 30 June 2005 Assets 30.6.2005 31.12.2004 Change million million % Receivables from banks 5,772 5,628 2.6 thereof mortgage loans 248 224 10.7 loans to municipalities 4,710 4,843 2.7 Receivables from non-bank customers 42,317 42,006 0.7 thereof mortgage loans 24,380 24,585 0.8 loans to municipalities 17,211 16,800 2.4 Bonds and other fixed-income securities 28,222 25,294 11.6 Other assets 885 885 0.0 Balance sheet total 77,196 73,813 4.6 10
Balance sheet as at 30 June 2005 Liabilities and equity 30.6.2005 31.12.2004 Change million million % Liabilities to banks 10,360 11,567 10.4 thereof registered bonds (Pfandbriefe) 4,008 3,965 1.1 Liabilities to non-bank customers 11,912 11,924 0.1 thereof registered bonds (Pfandbriefe) 9,155 8,989 1.8 Certificated liabilities 52,100 47,523 9.6 thereof mortgage bonds (Pfandbriefe) 14,334 14,502 1.2 public bonds (Pfandbriefe) 33,174 28,151 17.8 Subordinated liabilities 593 620 4.4 Capital with participation rights 154 154 0.0 Fund for general banking risks 13 13 0.0 Equity 1,306 1,271 2.8 Other liabilities 758 741 2.3 Balance sheet total 77,196 73,813 4.6 11
Profit and loss account 1.1. to 6/12 Change 30.6.2005 of 2004 million million % Net interest income 153.1 166.6 8.1 Net commission income 27.2 20.0 36.0 Other operating income 4.8 20.3 76.4 Gross profit 130.7 166.9 21.7 Administrative expenses 85.5 91.3 6.4 Operating result before provisions for risks 45.2 75.6 40.2 Provisions for risks/revaluation results 18.3 36.2 49.4 Operating result 26.9 39.4 31.7 Extraordinary profit 1.0 2.2 54.5 Taxes 0.2 9.2 97.8 Partial profit transfer 20.3 19.2 5.7 Profit transfer 5.4 8.8 38.6 12
Employee figures* 1.1. to 1.1. to 30.6.2005 30.6.2004 Average number of staff 631 629 thereof (600) (598) part-time 66 64 trainees 21 18 * Numbers in brackets are weighted according to hours worked 13
Board of Management Friedrich Piaskowski Harald Pohl Christian Sewing Chairman of the Supervisory Board Dr Alexander Erdland Deutsche Genossenschafts-Hypothekenbank AG 20095 Hamburg 10117 Berlin Rosenstrasse 2 Pariser Platz 3 PO Box 10 14 46 PO Box 08 01 62 20009 Hamburg 10001 Berlin Tel. +49 (0)40 3334-0 Tel. +49 (0)30 31993-0 Fax +49 (0)40 3334-1111 Fax +49 (0)30 31993-5010 Internet: www.dghyp.de If you have questions, please contact our Investor-Relations-Team: Tel. +49 (0)40 3334-2944 Fax +49 (0)40 3334-7822944 email: ir@dghyp.de 14
Addresses of DG HYP Real Estate Centres for commercial investors DG HYP Real Estate Centre North Germany 20095 Hamburg Rosenstrasse 2 Tel. +49 (0)40 3334-3778 Fax +49 (0)40 3334-1102 DG HYP Real Estate Centre Central Germany 60325 Frankfurt am Main Friedr.-Ebert-Anlage 2 14 (City-Haus) Tel. +49 (0)69 750676-21 Fax +49 (0)69 750676-99 DG HYP Real Estate Centre East Germany Berlin Main Branch 10117 Berlin Pariser Platz 3 Tel. +49 (0)30 31993-5101 Fax +49 (0)30 31993-5060 DG HYP Real Estate Centre West Germany 40227 Dusseldorf Ludwig-Erhard-Allee 9 Tel. +49 (0)211 220499-10 Fax +49 (0)211 220499-40 DG HYP Real Estate Centre South Germany 80333 Munich Türkenstrasse 16 Tel. +49 (0)89 512676-10 Fax +49 (0)89 512676-30 DG HYP Real Estate Centre Southwest Germany 70191 Stuttgart Vordernbergstrasse 16 Tel. +49 (0)711 26376-39 Fax +49 (0)711 26376-47 Representative Offices Bureau de Représentation Paris 75008 Paris, France 120, avenue des Champs-Elysées Tel. +33 (0)156 8812-90 Fax +33 (0)156 8812-91 London Representative Office London EC1A 4HJ, UK 10, Aldersgate Street Tel. +44 (0)20 777676-12 Fax +44 (0)20 777676-19 Amsterdam Representative Office 1075 AB Amsterdam, The Netherlands Koningslaan 35 Tel. +31 (0)20 57115-55 Fax +31 (0)20 57115-50 15
Member of the Cooperative Financial Services Network DG HYP. The innovative real estate bank.