German landesbank Helaba wrote €4.9 billion of new business through its real estate segment during the first half of 2016, a drop of 6 percent from the same period last year.
Helaba’s real estate unit made the largest contribution to the bank’s pre-tax profit during the first half of the year. The segment made €180 million, albeit down on €227 million in the previous period. In total, the Helaba Group generated a pre-tax profit of €279 million, around 23 percent lower than last year’s €362 million during the same period.
Helaba said that, due to a high level of repayments, the size of its real estate portfolio was slightly smaller. Net interest income was below last year’s level as a result of falling margins on new business, it added. However, provisions for losses on loans and advances were higher than in the same period in the previous year.
The bank’s real estate segment includes the corporate divisions of its real estate finance and real estate management divisions. Equity holdings in real estate companies are also allocated to the segment.
“Volume of new business has remained stable on the good level of previous years. Net fee and commission income showed a welcome rise. Low and even negative interest rates are leading to a fall in the net interest income, although it is not as significant as we had projected,” said the bank’s chief executive, Herbert Hans Grüntker.
“Uncertainty surrounding Brexit had a negative effect on the trading result in the second quarter. Earnings are slightly above our target after six months. In view of the challenging business environment in which we find ourselves, we are satisfied with this result,” Grüntker added.
The group’s net interest income amounted to €611 million, down €57 million on the same period last year. The bank cited the historically low level of interest rates leading to lower earnings due to the higher cost of creating liquidity reserves and to negative margins on deposits.
Helaba’s consolidated balance sheet total rose from €172.3 billion at the end of 2015 to €175.6 billion. Of this, €32.3 billion related to commercial real estate loans.
Grüntker added that the bank will stick to its forecast of a decline in profits for 2016.
“We live in a time of uncertainty and crises. The current geopolitical and economic developments are unsettling the markets and leading to greater volatility. Furthermore, the on-going phase of low and negative interest rates is leaving its mark on our figures,” he said.
“It will become increasingly difficult, if not impossible, to compensate for this negative impact on the earnings side. Therefore, we see little room for optimism and continue to adhere to our original forecast for the year as a whole, which anticipates a noticeable decline in the consolidated net profit.”