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Berlin Hyp warns profits this year will be “well below” 2015

Berlin Hyp became the second German pfandbrief bank to say that profits are likely to be lower this year than last when it unveiled results on 16 March. The bank posted a rise in 2015 profits before tax and transfer to shareholders, from €65.8 million to €93 million, after recording €5.4 billion of new business volume.

Berlin Hyp became the second German pfandbrief bank to say that profits are likely to be lower this year than last when it unveiled results on 16 March.

Jan Bettink Berlin Hyp
Jan Bettink: warned profits will be lower

The bank posted a rise in 2015 profits before tax and transfer to shareholders, from €65.8 million to €93 million, after recording €5.4 billion of new business volume. But chairman of the board Jan 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.”

His comments follow those of pbb Deutsche Pfandbriefbank. On 2 March, in its first results since privatisation, pbb said it expected 2016 pre-tax profit to be “slightly below” 2015’s result. Last year the bank lent €10.4 billion on real estate and increased profits by 12 percent to €195 million.

One of the reasons cited by pbb was tougher banking regulations, with the banking levy impacting profits in Q1 2016. The bank has also seen average margins continue to decline, particularly in its domestic market, falling from 200 basis points in 2014 to 170bps in 2015 and putting further pressure on profitability.

Berlin Hyp is now an independent real estate finance bank within the Savings Bank Finance Group (Sparkassen Finanzgruppe) after being spun off from Landesbank Berlin in a restructuring started last year.

“We are pleased to have increased our new business once again following the repositioning. The bank has exceeded its forecast of generating slightly better profit transfer compared to the previous year”. Bettink said.

Of the €5.4 billion of new business written, €1 billion was extensions to existing customers and €4.4 billion was new loans. Net interest and commission income rose slightly to €254 million (€248 million).

Another office is to be opened in Germany, Berlin Hyp’s results said, in Stuttgart in the Spring, adding to the five in Berlin, Dusseldorf, Frankfurt, Hamburg and Munich.

Real Estate Capital recently reported that the bank will also open a branch office in London in the UK as soon as possible, perhaps by June. According to Fitch Ratings, the UK is being targeted because the mortgage bank expects margins to improve there.

Berlin Hyp currently has three offices outside Germany, in Amsterdam, Paris and Warsaw, and about 25 percent of business is outside its domestic market.

Director of real estate finance Kevin O’Connell will move to be based full-time in London when the branch opens.

About €1 billion of lending was syndicated to savings banks (€719 million) or structured as schuldschein bonds (€284 million), a form of debtenture. In total, Berlin Hyp arranged and placed three schuldschein last year including the first secured by a hotel.

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