German mortgage bank Berlin Hyp wrote €2.9 billion of new lending during the first half of 2016, an increase from the €2.2 billion originated during the same period last year.
However, half-year profit before tax and transfer to shareholders was down 21.3 percent to €31.4 million compared with the same period last year, in line with the bank’s prediction that it would not match last year’s profits in 2016.
The uptick in lending, which includes extensions to existing loans, came despite a sharp decline in margins compared with the first six months of 2015. The bank added that it has not changed its risk conduct.
“In spite of fierce competition and a noticeable increase in pressure on margins, we still recorded an extremely satisfactory half-year result,” said Berlin Hyp’s chairman of the board, Jan Bettink.
Berlin Hyp has predicted that it will match 2015’s new lending during this year. The bank recorded €5.4 billion of new business volume in 2015, of which €1 billion was extensions to existing customers and €4.4 billion was new loans.
During the first half of 2016, new lending excluding extensions was 72 percent weighted towards properties in Germany, with 50 percent secured by property in the former West Germany and 22 percent in Berlin and the former East Germany. Foreign lending accounted for 28 percent of new loans.
By borrower type, 78 percent of new lending was to investors, 7 percent to developers and 15 percent to housing associations.
The bank’s half-year profit before tax and transfers of €31.4 million was down from €39.9 million in the first six months of 2015.
In its full-year results in March, the bank warned that profits are likely to be lower this year than last. In 2015, Berlin Hyp posted a rise in profits before tax and transfer to shareholders, from €65.8 million in 2014 to €93.0 million.
At the time, Bettink warned that for 2016, “due to low interest rates and the expected increase in risk costs, the result before profit transfer is likely to be well below that of 2015.”
Berlin Hyp also addressed the market uncertainty caused by the UK’s vote to leave the European Union in its half-year results. It said: “Given the associated decline in attractiveness of the British real estate market, Germany may become even more interesting for investors as a safe haven for their investments. The lack of alternative investment opportunities and the high level of liquidity on the market is likely to result in pressure on yields rising even further and competition on the real estate financing market remaining extremely fierce.”
The bank added that it will “keep an eye on these risks moving forward and, as it has always done, finance appropriately”.
Berlin Hyp also warned that the impact of the European Central Bank’s monetary policy and rising regulatory demands on the real estate financing business mean that challenging conditions will continue throughout the year.