Berlin Hyp writes €4.1bn despite “challenging” conditions

German mortgage bank Berlin Hyp wrote €4.1 billion of new business during the first three quarters of the year, a slight year-on-year increase, despite what it described as “challenging” underlying conditions.

“In addition to the continuing adverse factors, such as historically low interest rates, rising regulatory requirements, and increased pressure on margins, the implications of Brexit on the political and economic future of the EU are still unclear,” the bank said in its interim results to 30 September 2016, which it published this morning (7 November).

The bank said that new real estate financing business totalled €3.639 billion in the first three quarters, up from €3.265 billion in the previous year. Including loan extensions, the total was €4.142 billion, a slight increase on €4.012 billion in the previous period.

Commercial real estate accounted for 81 percent of financing, with the remainder to residential real estate. Of the total, 11 percent financed developers, builders and housing associations.

“There has been no change in the business environment, which remains challenging due to the prolonged phase of low interest rates, stiff competition and the associated pressure on margins. Nonetheless, the bank maintained its new business volume at the same high level from the previous year without deviating from its conservative risk policy,” said Sascha Klaus, chairman of the board of management at Berlin Hyp.

The bank’s operating income after risk provisioning increased to €85.3 million, up from €77.7 million in the previous year. Berlin Hyp said that it increased its provision reserves by €30 million during the period. The fund now stands at €133 million. Before risk provisioning, the bank’s profit was €125.5 million, almost unchanged.

Speaking about the remainder of 2016, Klaus added that Berlin Hyp will aim to “take advantage of the bank’s positive business performance to further strengthen our equity capital and take adequate precautions today for the ever-increasing regulatory requirements”.

The bank therefore expects that operating results before profit transfer in 2016 will be below 2015’s results.

Net interest income rose by €14.7 million to €199.3 million, which the bank attributed to the increase in the average mortgage portfolio and a fall in refinancing expenses. Net commission income increased by €7 million to €28.6 million.

The total volume of the joint loan business provided in partnership with Germany’s Savings Banks Finance Group rose to around €1.181 billion, up from €703 million in the previous year.

In terms of funding, Berlin Hyp placed two mortgage pfandbreife issues, each with a volume of €500 million during the first half of the year, followed in Q3 by its first green senior unsecured bond with a volume of €500 million.