annual report 2008 - DG-Hyp

Transcription

Deutsche Genossenschafts-Hypothekenbank AG
ANNUAL REPORT 2008
Member of the
Cooperative Financial
Services Network
OVERVIEW
€ mn
2008
2007
3,766
2,941
– German originated/cooperative sector
2,425
2,076
– International/secondary market
1,341
865
0
2,394
750
1,760
Development of originated new
business1)
Commercial Real Estate Finance
Portfolio investments2)
Treasury
– Originated loans to local authorities
– Public-sector
lending3)
2,066
5,392
7,865
8,862
10
405
Total assets
76,016
83,335
Real estate lending
21,774
22,499
– Pfandbrief sales and other sources of refinancing
Special portfolio4)
Portfolio development
Mortgage Backed Securities (MBS)
Public-sector3) and local authority loans
4,016
4,387
45,151
47,775
62,077
67,496
1,733
1,954
174
273
Covered bonds (Pfandbriefe)
and other debt securities
Own funds for solvency purposes
Profit and loss account
Gross profit
Administrative expenses
Revaluation results
Provisions for loan losses
Operating profit
Net extraordinary income/expenses
Profit transfer
130
169
– 111
– 121
– 62
– 68
– 129
– 86
187
148
–
–
Production
This Annual Report is climate-neutral and printed on PEFC-certified
paper. The greenhouse gas emissions caused by the production
and distribution of this publication have been offset by investments
in an additional climate protection project.
Number of employees
Annual average
(full-time equivalent)
Vocational trainees
1)
2)
3)
4)
Previous year’s figure included loan extensions
Completely suspended in response to the financial markets crisis
Securities and promissory note loans eligible as cover assets for public-sector covered bonds
Retail and non-strategic commercial loan portfolios
473
576
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17
CONTENTS
Letter from the Management Board
2
DG HYP: The commercial real estate bank
in the German Cooperative Financial Services Network
4
Management Report
Economic environment
6
8
Treasury
Loans to local authorities and public-sector lending
15
Refinancing
16
Special portfolio
18
Strategic realignment
20
Financial position and results of operations
22
Risk Report
27
Our staff
35
Report on material events after the balance sheet date
Financial Statements
and forecast
37
Balance sheet
41
47
Notes to the financial statements
53
General notes
53
Notes to the balance sheet
55
Notes to the profit and loss account
67
Cash flow statement
68
Coverage
69
Other information on the annual financial statements
75
Responsibility Statement
79
Audit Opinion
80
Report of the Supervisory Board
81
Corporate Bodies And Committees; Executives Supervisory Board
83
Management Board, Department Heads
84
Trustees, Advisory Council
85
DG HYP Offices
87
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Annual Report 2008
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Our Management Board from left to right: Dr. Georg Reutter, Hans-Theo Macke (Chairman), Manfred Salber
Ladies and Gentlemen, dear business associates,
The year 2008 will be remembered as the year of the worldwide financial markets crisis, a crisis that
has rapidly spread to the real economy and a crisis that we, like every other bank, have been unable to avoid entirely unscathed. However, from DG HYP’s perspective, 2008 was also a year
marked by the Bank’s successful strategic realignment as a commercial real estate bank within the
German Cooperative Financial Services Network.
The financial markets crisis is increasingly impeding worldwide money and capital movements and
has caused the interbank and Pfandbrief markets to grind to a halt. This can be attributed to the
huge loss in confidence among market participants, without which the money and capital markets
cannot function properly. To an ever greater extent, the crisis is having an impact beyond the financial sector itself, causing a worldwide drop in economic growth. The commercial real estate markets have also been hit by this development, with a significant reduction in transaction volumes being recorded during the second half of 2008.
Despite such difficult market conditions, we were able to increase new business in commercial real
estate finance at home and abroad during the past financial year and achieved our operational
goals. The fact that we are strongly anchored in the German Cooperative Financial Services Network, and thanks to our being integrated into DZ BANK’s group liquidity management, we remained able to fulfil our customers’ finance wishes during the second half of the year.
As a result of the crisis on the financial markets, traditional lending business is gaining in importance, whilst complex capital market transactions are being pushed into the background. One effect of the crisis will be that lending will once again be viewed as a demanding and complex product area, and as a product that must come with a price – with the recognition that loans that
cannot simply be produced in as high a quantity as possible, like a commodity. This requires a high
degree of individual attention and quality in the form of responsibility and trust.
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Annual Report 2008
We successfully implemented our strategic realignment process during 2008, completing the associated restructuring measures more quickly than anticipated. By the middle of 2008 the commercial
realignment, the new organisational structures in sales, the back office and in the services and support departments, as well as key personnel changes were all already in place. On the basis of solutions reached by mutual agreement with nearly all of the employees affected by redundancies, we
had reached our target size of approximately 400 full-time employees by the year-end. Additionally, over the course of the second half of the year, we analysed our processes, structures and IT so
that these could be optimised to generate further improvements in efficiency and to reduce their
complexity. We will continue to pursue this aim as one of our priorities for 2009.
Based on personnel changes and the rapid restructuring process, we were able to record a significant reduction in administrative expenses during the reporting period, thereby creating the necessary basic framework for a streamlined and commercially focused real estate bank.
In order to bolster our market position, we will be further expanding our real estate centres
and building up our team of employees with well-qualified staff who specialise in commercial real
estate lending. For the purposes of training young up-and-coming employees in-house, we have
developed a trainee programme that is geared specifically towards the Bank’s future requirements.
The past year has not only shown that even the most difficult economic phases can offer attractive
opportunities but has also demonstrated that DG HYP is a reliable partner during such periods in
particular. This is why we are working intensively to support our partners with competitive products
and a broad range of services, even during times of economic downturn in commercial real estate
finance. We are looking forward to continuing along this successful path during the current financial year, and to further expanding our market position.
The Management Board of DG HYP
Hamburg, March 2009
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Annual Report 2008
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DG HYP: THE COMMERCIAL REAL ESTATE BANK IN THE
GERMAN COOPERATIVE FINANCIAL SERVICES NETWORK
DZ BANK Group is part of the German Cooperative
Financial Services Network, which comprises approximately 1,230 individual cooperative banks. In terms of aggregate total assets, the cooperative banking sector ranks
among the largest financial services organisations in Germany. With 30 million customers, of whom around 16 million are members of their bank, no other group in the
world has such a broadly diversified ownership. Within the
Cooperative Financial Services Network, DZ BANK AG acts
as the central institution for around 1,000 cooperative
banks with a total of 12,000 outlets.
Combining banking services with insurance products
and asset management has a long tradition within the German Cooperative Financial Services Network. The specialist
institutions within the DZ BANK Group each offer highly
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competitive, first-rate products in their respective area of
competence. This allows Germany’s cooperative banks to
offer their customers an end-to-end range of excellent
financial services.
As a member of the DZ BANK Group, DG HYP is affiliated with Bausparkasse Schwäbisch Hall, DZ BANK International, DZ PRIVATBANK Switzerland, R+V Insurance, TeamBank, Union Investment Group, VR LEASING, and various
other specialist financial services providers. The various
DZ BANK Group entities are the cornerstones of a comprehensive range of financial services offered to (and through)
the German cooperative banking sector. Within this strong
network, DZ BANK Group entities work together to optimise the products and services delivered to cooperative
banks and their customers.
Annual Report 2008
Management Report
ECONOMIC ENVIRONMENT
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Annual Report 2008
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Management Report
ECONOMIC ENVIRONMENT
A financial markets crisis on a global scale
The international financial markets crisis has taken
everyone by surprise in terms of its sheer scale. The crisis
was triggered in mid-2007 when problems with sub/prime
loans arose in the USA against the background of rising
interest rate levels there. The intensity of international links
among banks meant that the crisis expanded across the
world in the course of the reporting year, impeding the
ability of the international financial markets to function
properly.
Europe was increasingly hard hit by the impact of the
financial crisis from the middle of 2008 onwards. In order
to stabilise the financial system, the international central
banks injected the markets with substantial quantities of
liquidity and reduced key interest rates over a series of rate
cuts.
In Germany, the Federal Government, in conjunction
with the other European governments, agreed on a rescue
package worth € 480 billion in the form of the German
Financial Market Stabilisation Fund („SoFFin“) in mid-October. This Fund can extend guarantees of up to € 400 billion and can provide banks with equity capital support of
up to € 80 billion. In taking this step, the German government is attempting to restore market participants’ confidence in each other. Banks will be able to receive guarantees for liabilities and equity capital allocations, and to have
their risk positions assumed by SoFFin in exchange for debt
instruments of the Federal Republic.
During the year under review, fifteen banks availed
themselves of this rescue package. It is our estimate that
stabilising the capital markets and enabling them to function properly again are tasks that will take until well into
2009.
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Economic downturn in the second half of 2008
During the second half of 2008 the financial markets
crisis picked up speed, spreading beyond the confines of
the banking sector and hitting the economy as a whole.
After two strong years, there was a clear dip in the state of
the economy during the reporting year. As a result, leading
economic researchers began, one after the other, to revise
their GDP forecasts for 2008 downwards. Whilst the
growth rate in 2007 was still 2.6%, the figure for 2008
was just a mere 1.3% despite getting off to a good start in
the first quarter due to the favourable weather conditions.
A further fall in overall economic output is expected for
2009.
Against this background, in early November 2008 the
Federal Government introduced a package of measures
worth up to € 12 billion designed to strengthen the economy and safeguard jobs, stimulating investment of € 50
billion over the next two years. This economic package is
limited to fifteen specific measures that can be implemented in the short term but that will have a sound long-term
impact. These include improved write-down conditions for
companies, tax benefits for craft professions and the limited waiver of motor vehicle tax. The EU heads of government also agreed on a comprehensive package of economic measures in December with a view to harmonising the
national programmes in the member states so as to avoid
unfair competition. The overriding aim is to prevent Europe
from sliding into a long and difficult recession as a result of
the crisis on the financial markets.
The highest level of employment since reunification
was recorded on the German labour market during the
year under review. It was only towards the year-end that
signs of a fall began to emerge, with the cooling of the
economy sparking a turnaround on the labour market too.
The unemployment rate is expected to rise in 2009.
Annual Report 2008
Management Report
COMMERCIAL
REAL ESTATE FINANCE
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Annual Report 2008
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Management Report
COMMERCIAL REAL ESTATE FINANCE
Mixed fortunes on the German real estate market
The volume of commercial real estate transactions fell
significantly during 2008 after what had been a very good
2007 in Germany. Whilst the level of market activity almost
remained as high during the first quarter of the year, it only
took until the spring for the visibly worsening financial crisis to impact on the number of deals being concluded.
Activity failed to pick up again for the rest of the year.
Instead, market activities almost collapsed completely. This
meant that transactions in Germany during the reporting
year only totalled some € 18 billion, compared with
€ 55 billion during the previous year. Compared with the
very strong 2007 in terms of sales, there was therefore a
clear collapse in activity, although the figure recorded was
only slightly below the long-term average.
At a European level, there was also a marked fall in
transaction volume. The trading volume amounted to only
around 40% of the previous year’s level, whilst in Germany
it was only about one third as high as in 2007. With the
German market still having benefited to a disproportionate
extent from the most recent upturn, the fall this time
round was all the more dramatic. In some cases foreign
investors withdrew from major projects due to a lack of
viable finance options. Elsewhere, large-scale projects were
simply cancelled due to the uncertain prospects for the
economy as a whole.
GROWTH OF OFFICE SPACE
%
2.5
2.0
1.5
1.0
0.5
Hamburg
Berlin
Frankfurt / Main
Munich
Dusseldorf
Stuttgart
2007
2008
2009
2007
0.6
2008
0.7
2009
1.0
2007
2008
2009 e
Berlin
Hamburg
Frankfurt / Main
Berlin
0.2
0.6
0.9
0.2
0.8
0.7
0.4
0.8
0.5
1.0
2.0
0.5
2007
2008
2009 e
Munich / Main
Frankfurt
Dusseldorf
Munich
0.6
0.9
0.5
0.6
2.2
0.4
1.0
2.2
1.9
2.0
1.4
1.9
Stuttgart
0.4
1.1
0.8
Hamburg
Source: DZ BANK Research
Please note that the charts and diagrams depicted do not constitute a part of the Management Report, for the purpose of the Financial Statements.
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Annual Report 2008
Management Report
Differing market developments across the segments
Up until the middle of the year it still looked as if retail
properties would outperform office real estate in terms of
transaction levels. However, retail properties once again
took up second place behind office premises. During the
reporting year, however, the difference in trading volumes
in these sectors was only small, whilst the office segment
had been nearly three times as big as the retail segment
during 2007. Just under € 7 billion was invested in German office real estate in 2008. The figure for retail properties was one billion less. It was only the logistics and industrial real estate market segment that experienced a
below-average decline, to € 1.6 billion, enabling it to
increase its market share from 5 to 9% as a result.
Still no rise in office property vacancy levels in 2008
During the reporting period comparatively few new
builds were completed in the major office locations, with
the exception of Munich. At the same time, however,
demand dipped towards the middle of the year as a result
of the economy as a whole slowing down. Office property
sales were therefore significantly down on 2007, which
was an exceptional year. Nevertheless, in Munich and
Frankfurt rents for office premises in prime locations rose
slightly, whilst they stagnated in Berlin, Dusseldorf and
Stuttgart. Despite the gloomy market situation, the vacancy rate for office premises in Hamburg and Munich
remained unchanged, with Frankfurt, Berlin and Stuttgart
actually recording a slight improvement. The prospects for
this year are less good. Given that numerous construction
projects will only be finished over the coming months in
many areas, contributing to a further rise in supply at a
time when demand is waning, we are expecting to see an
increase in vacancy rates.
Retail properties benefit from foreign demand
The rents in the top segment increased in 2008 across
all of the major German locations. The expansion in the
available surface area lagged behind demand, largely due
to the limited space available at prime locations. Despite
this rise, rents for retail premises in Germany remained
moderate by international standards, which again bolstered demand from abroad. Moreover, the share of rental
space in Germany taken up by international chain store
operators is still lower than on other markets. Given that
these foreign chain operators generally do not move away
to less favourable locations, the price difference between
ideal and less ideal locations for retail real estate widened.
Munich – still the most expensive location for retail
properties in Germany – was able to record the best result
of the major German locations with a rise of almost 7% in
the rents paid for prime locations in 2008. The rises in rent
levels recorded in Berlin, Dusseldorf and Frankfurt were
only slightly smaller. Even in Stuttgart, there was a slight
rise of 1% in rent levels, following a succession of falls over
previous years. Vacancy levels, however, also rose in
peripheral areas during the year under review. This is a
trend that can also be expected to continue over the coming months.
TRANSACTIONS INVOLVING
RETAIL PROPERTIES
€ bn
20
18.6
18
16
14
11.5
12
10
8
6.6
5.9
6
4
2
2005
2006
2007
2008
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Annual Report 2008
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Management Report
Logistics properties being pulled in the wake of the
industrial sector
The expansion in world trade lent momentum to the
market for logistics properties during the first few months
of the past financial year. As of the middle of the year,
however, the economic down-turn and financing difficulties in relation to large-scale projects stifled demand. The
sector’s strong dependence on the industrial sector, in
which the business climate deteriorated over the course of
the year, meant that investment in storage premises practically ground to a halt during the autumn. Consequently,
the transaction volume was down on the previous year as
in the other real estate sectors. The expansion in available
space outside the conurbations meant that there was a fall
in the average price payable in Germany for one square
metre of storage space.
The number of newly rented premises was in line with
the previous year. In terms of this financial year, the volume
of goods transportation can at best be expected to stagnate, with the result that prices and rent levels in the logistics sector will remain under pressure.
An end to portfolio acquisitions in
commercial housing
The wave of ‘bulk buying’ by foreign investors ended
once and for all in 2008. As a result, the number of residential units changing hands fell considerably compared
with earlier years. Whilst slight price increases were generally still achievable in the conurbations in the case of new
builds, prices stagnated in rural areas. Construction activity with regard to flats has been quite weak across Germany
over previous years and this is likely to remain the case for
the current year. Given that the number of households is
rising in Germany again, the prices for newly completed
homes look likely to remain stable.
TURNOVER OF STORAGE FACILITIES
(thousand sq.m.)
4,000
3,883
3,600
3,500
3,230
3,000
2,651
2,500
2,000
2,366
1,900
1,531
1,500
1,275
1,210
1,200
1,053
900
1,000
500
2003
2004
2005
2006
2007
2008
Nationwide
Conurbations
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Annual Report 2008
Management Report
With regard to residential rents, the market was once
again muted during the period under review. However, not
least due to the good start to the year in terms of the economy as a whole, residential rent levels did rise slightly. In
the main economic centres, this slightly positive development can be expected to continue due to the shortage of
residential properties in the most popular locations. In contrast, rent levels can be expected to dip slightly in rural
areas.
International real estate markets
Transaction volumes in numerous European countries
shrank just as sharply as in Germany. In the UK, for example, a fall of almost one third was recorded. Yet the UK also
recorded the largest trading volume in Europe in the commercial properties segment. On the UK office market and
in the case of commercial properties, however, this was
only possible through a fall in purchase prices with rising
returns. France also recorded a rise in returns on the office
market, whilst commercial properties stagnated. The
Netherlands, meanwhile, was an exceptional case as far as
European office markets were concerned, with purchase
prices still tending slightly upwards in 2008.
In the USA, where the global financial market crisis was
triggered in mid-2007 by rising interest rates and the associated increase in the number of clients defaulting on subprime loans, it was not just the private residential markets
that cooled but also the commercial real estate markets.
Despite a weak level of construction activity, which scarcely increased the volume of office space available across the
country, vacancy rates in this segment increased. The market’s low absorption of surface area was to blame, only
reaching a quarter of the level recorded during the previous year. Despite the poor level of demand, rent increases
were still possible in the case of US office properties. In
terms of commercial properties, however, rents struggled
to rise above the previous year’s level and had begun to dip
before the end of the final quarter.
RENT DEVELOPMENTS FOR NEWLY-BUILT FLATS
Change (€/sq. m.)
8
6
4
2
0
-2
-4
-6
-8
2001
Berlin
2002
Dusseldorf
2003
2004
Frankfurt / Main
2005
2006
Hamburg
2007
2008
Munich
Stuttgart
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Annual Report 2008
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Management Report
BUSINESS DEVELOPMENT IN
COMMERCIAL REAL ESTATE FINANCE
Business activities at home and abroad
DG HYP’s commercial real estate finance activities
encompass domestic direct and syndicated business, as
well as activities as a partner to the cooperative banks
within the German Cooperative Financial Services Network. With regard to domestic direct business, DG HYP
focuses on the core segments of office, residential and
retail. The Bank is also involved in the specialist segments
of hotels and logistics as part of its credit risk strategy. In
terms of foreign business, DG HYP operates primarily as a
syndicate partner. DG HYP’s activities also include public
finance and originated lending to local authorities. The
Bank has developed a customised portfolio of commercial
real estate finance services for the cooperative banks,
which has been optimised as part of the Bank’s realignment process and will be further expanded in future.
NEW COMMERCIAL REAL ESTATE
FINANCE BUSINESS
€ mn
4,000
3,766
Good sales performance even under
difficult conditions
DG HYP continued its expansion course of recent years
and, despite the difficult general economic conditions during the year under review, was once again able to achieve
an increase both domestic and foreign business. Embedded within the German Cooperative Financial Services Network, the Bank’s strategy as a Pfandbrief bank and traditional provider of real estate finance proved its worth. At
the same time, DG HYP also benefited from the fact that
some of its competitors withdrew from the market.
With six real estate centres in the country’s major cities,
namely Hamburg, Berlin, Dusseldorf, Frankfurt, Stuttgart
and Munich, DG HYP has a good decentralised set-up
across Germany. Short decision-making channels, a high
level of market penetration, as well as good networks on
the market thanks to intensive contacts in the cooperative
banking sector and direct customer business, ensure that
DG HYP is a high-performance partner to direct customers
and the German cooperative banks alike.
Outside Germany, DG HYP has representative offices in
New York and London, whilst its business in France and
Scandinavia is dealt with through country desks. The
Bank’s focus during 2008 was on the USA, the UK and
France. During the second half of the year, DG HYP also
began moving in to the Eastern European markets and for
the first time wrote new business in Poland, working in
close cooperation with DZ BANK Polska. In light of the positive business environment there, Poland is an important
market within the Bank’s Eastern European strategy and
one in which it will be expanding its activities in the 2009
financial year.
2,941
3,000
1,974
2,000
1,722
1,000
2005
12
2006
2007
2008
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Annual Report 2008
Management Report
Products tailored to the cooperative banking sector’s
commercial real estate lending business
DG HYP supports the some 1,230 cooperative banks in
the Cooperative Financial Services Network in the area of
commercial real estate finance by providing a tailored
range of services that is expanded on an ongoing basis. It
offers the cooperative banks syndicate finance from
€ 3 million upwards in the form of its “Immo Meta” and
„Immo-Meta-Reverse” products. Whilst the partner bank
leading the syndicate is the customer’s first point of contact
in the case of the Immo Meta product, the Immo-MetaReverse product is offered by DG HYP to the cooperative
banks, through which they can participate in large-scale
commercial real estate finance projects local to them.
DG HYP has also developed the “Immo-Aval” standard
loan products for commercial real estate finance covering
amounts from € 0.5 to 3 million, and this will be offered
within the Cooperative Financial Services Network from
2009 onwards.
In addition to the specialist range of products, DG HYP
also offers the cooperative banks the opportunity of cooperation projects to exhaust the regional market potential
for a joint market presence in commercial real estate
finance. As the real estate bank within the Cooperative
Financial Services Network, DG HYP, working together with
the Federal Association of German Credit Unions and Rural
Banking Cooperatives (BVR) and the cooperative associations, has developed a group rating system for commercial
real estate finance. This is due to be introduced in 2009.
1)
Increase in volume of new business at home and
abroad
At € 3.8 billion, originated new business1) Previous
year’s figure included loan extensions in commercial real
estate finance in the 2008 financial year exceeded the previous year’s level by 28% (2007: € 2.9 billion). The share of
finance related to domestic direct and cooperative banking
sector business increased from € 2.1 billion in the previous
year to € 2.4 billion in the 2008 financial year. A gratifying
development was recorded with regard to foreign and secondary market business, where the volume of new business was up 55% on the previous year to reach € 1.3 billion (2007: € 865 million).
Despite the fact the market environment clouded over
during the second half of the year, DG HYP was still able to
notch up new business in its domestic and foreign markets
through to the year-end. New commitments at home and
abroad were entered into on the basis of a conservative risk
assessment of the individual transactions, taking due
account of the basic economic conditions on the respective
market. The fact that the financing options on the market
as a whole remain limited enabled DG HYP to enter into
selected transactions with an improved risk and reward
profile. This is clearly reflected in the rise in margins for
new business.
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Annual Report 2008
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Management Report
TREASURY
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Annual Report 2008
Management Report
LOANS TO LOCAL AUTHORITIES AND
PUBLIC-SECTOR LENDING
Originated loans to local authorities were initially
affected by a fall in demand from the public sector. In the
first half of the 2008 in particular, the improved financial
situation of local authorities meant that there was less
Through its involvement in originated lending to local
authorities, DG HYP supports the banks within the cooperative sector in terms of their market positioning. This
makes DG HYP a competent point of contact for these
banks with regard to the financing of local authority projects – provided, of course, that an adequate margin is generated for the Bank.
PORTFOLIO OF ORIGINATED LOANS
TO LOCAL AUTHORITIES
€ mn
424
In this environment the volume of new business, at
€ 750 million, was down, as expected (-57% year-onyear). With the change in market circumstances also affecting public financing tenders, DG HYP was able to impose
higher margins on the market, particularly during the second half of 2008.
Schleswig-Holstein
1.400
262
1,933
Mecklenburg-Western
Pomerania
Hamburg
77
82
Bremen
Brandenburg
Lower Saxony
Berlin
209
1,592
1,060
North RhineWestphalia
Saxony-Anhalt
271
137
Thuringia
Saxony
Hesse
RhinelandPalatinate
329
demand for finance. During the second six months, the
impact of the financial markets crisis changed the pricing
structure for the provision of liquidity for public financing
projects and, as a result, stifled business activity in this segment further.
A similar scenario emerged with regard to securitised
public financing business. The strategic direction of this
area of business was adapted in line with the volatile market environment and lower margins. Overall, this implies a
reduction of securities portfolios taking into account a profitability-oriented approach to new business. In line with this
strategy, the volume of new business in securitised public
finance fell by 62% year-on-year to € 2.1 billion.
1,776
1,542
Saarland
BadenWürttemberg
Bavaria
€ bn
Local authorities / municipalities / cities
Special public-sector administrative unions / administrative districts /
companies under a public-sector guarantee
Total originated loans to local authorities
8.46
2.64
11.10
31 Dec 2008
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Annual Report 2008
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Management Report
REFINANCING
The German Pfandbrief – a highly secure refinancing
tool
The German Pfandbrief continued to enjoy its reputation as a stable and particularly secure refinancing tool during the year under review. This is based first and foremost
on the statutory provisions of the German Pfandbrief Act,
which provides a high degree of investor protection. There
has not been a single case of a German Pfandbrief failing
during the product’s 200-year history. Against this background, the Federal Government also felt that it was not
necessary to explicitly include the Pfandbrief in the Financial Market Stabilisation Act (FMStG) adopted in October
2008.
Even if a Pfandbrief issuer should become insolvent, the
cover assets held by the Pfandbrief bank are exclusively
available to the Pfandbrief creditors for the purposes of
satisfying their claims. From the investors’ perspective, a
crucial aspect is, therefore, the intrinsic value of the cover
assets. To ensure that these assets are of the highest possible quality, in addition to the provisions of the Pfandbrief
Act, the Mortgage Lending Value Ordinance, for example,
also sets out further conditions for determining the value
of mortgage cover assets. These stringent statutory
requirements and the priority right of recourse to the cover
assets enjoyed by the Pfandbrief creditors provide investors
with a particularly high degree of protection.
The Pfandbrief market is expected to pick up again in
2009. Meanwhile, their experiences of the financial markets crisis have made investors more aware of potential
problems. As a result, in addition to considering the product itself, future investors will be increasingly scrutinising
the quality and structure of the cover assets and the risk
management approach of the Pfandbrief bank in question.
DG HYP is in a good position to deal with such scrutiny,
which means that there is a good basic framework in place
for ongoing refinancing.
Good placement opportunities create scope for
sound refinancing base
Despite the difficult market environment, DG HYP was
able to raise funding of € 7.9 billion. In line with the Bank’s
strategy, mortgage bonds in the covered segment totalled
€ 2.5 billion, with public-sector covered bonds totalling
€ 0.6 billion. Unsecured refinancing involved the sale of
bearer bonds and the taking up of promissory note loans
totalling € 4.8 billion. The good placement opportunities
open to DG HYP meant that the Bank enjoyed a solid refinancing base even when faced with a difficult year on the
capital market. The financial market crisis has only had a
minor impact on professional investors and private customers’ attitude to Pfandbrief products. The volume of
outstanding Pfandbriefe from both cover pools at the end
of the reporting year was € 51 billion.
Pfandbrief sales impaired by financial market crisis
Due to its high security standards, the German Pfandbrief was in demand among investors as a financing tool
during the first six months of the reporting year particularly as the financial market crisis spread to and took hold in
Europe. Pfandbrief sales rose by 25% during the first half
of 2008 compared with the same period of the previous
year. Yet as the financial market crisis intensified the Pfandbrief market was also hit by distortions, with its ability to
function properly still not being fully restored by the end of
2008.
16
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Annual Report 2008
Management Report
SPECIAL PORTFOLIO
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Annual Report 2008
17
Management Report
SPECIAL PORTFOLIO
Successive reduction of the special portfolio
In line with its new business strategy and the strategic
realignment, DG HYP ceased to take on new lending business in the area of private real estate finance – providing
finance for residential property to retail customers, effective 1 January 2008. As a result, new private construction
financing business is to be transferred within the DZ BANK
Group to Bausparkasse Schwäbisch Hall. The existing business will remain with DG HYP; exposures not exceeding
€ 500,000 will be serviced by VR Kreditwerk AG in accordance with section 25a of the German Banking Act. With
effect from 1 October 2008, VR Kreditwerk AG will provide
these processing services through its Mannheim-based
subsidiary Kreditwerk Hypotheken Management GmbH.
Loan portfolios to be kept within the
Cooperative Financial Services Network
Within the special portfolio, the loan portfolio that no
longer comprises DG HYP’s target business will be
processed and gradually reduced. The special portfolio primarily comprises retail business in the area of finance for
residential property. As at 31 December 2008, DG HYP’s
portfolio included some 159,000 retail customers accounting for a volume of approximately € 12.7 billion.
18
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The aim, within the process of prolongation of loans, is
to transfer as many loans as possible at interest maturity to
the cooperative banks that arranged the business, and to
Bausparkasse Schwäbisch Hall. Additionally, the business
shall be processed as lean and efficient as possible. At the
request of the cooperative banks concerned, DG HYP in
2008 began transferring back the retail portfolios that the
banks had arranged. A first portfolio transfer was successfully concluded at the end of 2008. Further cooperative
banks have expressed an interest in this move, with the
result that further transfers can be expected in the 2009
financial year.
In addition to retail business in the area of residential
real estate finance, within the special portfolio the NPL
portfolio and the non-strategic commercial real estate
lending business, representing a volume of € 2 billion, are
also being processed. The latter comprises small-scale commercial lending and the residual portfolios from agricultural lending business. DG HYP ceased actively pursuing agricultural lending business back in 2003.
Annual Report 2008
Management Report
STRATEGIC REALIGNMENT
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Annual Report 2008
19
Management Report
STRATEGIC REALIGNMENT
Realignment of DG HYP successfully concluded
DG HYP successfully implemented its strategic realignment in its capacity as a commercial real estate bank during the 2008 financial year. In terms of its business strategy, DGH HYP has placed the focus on commercial real
estate lending business in Germany and abroad. As
planned, residential real estate business in the retail banking sector was no longer pursued with effect from 1 January 2008. Existing loan portfolios relating to private real
estate finance will continue to be maintained by DG HYP.
Where loans are due to be extended, the customers will be
given the opportunity of having their loans extended by
the respective cooperative bank, or by Bausparkasse
Schwäbisch Hall. Where preferred by the cooperative
banks in question, DG HYP will transfer the loans that they
arranged back to them en bloc. The first portfolio transfer
took place during the reporting year with further transfers
scheduled for 2009.
geared towards the new business model. The Bank’s personnel capacity has also been reduced. In addition, the
Bank’s main sources of non-personnel costs – such as infrastructure and IT – have been optimised. This task also
extended to comprehensive outsourcing activities. Implementation of these measures had already led to a marked
reduction in personnel and non-personnel costs by the end
of 2008.
Optimisation of internal processes
and organisational structures
DG HYP had already begun with the rapid implementation of its reorganisation during the first half of 2008.
Processes and organisational structures in sales, the back
office and in the various staff departments have been
The realignment of the Bank and the measures that
have already been successfully put in place mean that
DG HYP has created the prerequisites for growth in its
capacity as a commercial real estate bank. DG HYP will
consistently continue to pursue the route embarked upon
during the year under review.
With regard to 2009, the further optimisation of the
way in which the Bank is aligned on its new business
model will be one of the main tasks facing DG HYP. With
regard to activities in the domestic direct and cooperative
banking sector markets, as well as in foreign and secondary market business, the expansion of sales capacity and
sales management, as well as ongoing process optimisation in relation to the front and back office activities, will
be the main priorities during the current financial year.
DG HYP‘S STRATEGIC POSITION
DG HYP
Commercial real estate bank
Originated
German
Business
20
International
and Secondary
Market Business
|
Cooperative
Sector Sales
Annual Report 2008
Local Authority
Lending,
Public Finance,
Treasury
Management Report
FINANCIAL SITUATION
AND RESULTS OF OPERATIONS
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Annual Report 2008
21
Management Report
FINANCIAL SITUATION AND RESULTS OF OPERATIONS
Financial situation
Following the changes to the Bank’s business model,
DG HYP’s total assets fell as planned during the 2008
financial year, down by 8.8% to € 76.0 billion.
The real estate loan portfolio developed in line with the
Bank’s strategy overall, down by 3.2% to € 21.8 billion.
The increase of € 1.7 billion in the commercial real estate
loan portfolio was more than offset by a planned reduction
of € 2.1 billion in the portfolio for private real estate lending business.
At the same time, the public finance and local authority lending portfolio was cut by € 2.6 billion due to a fall
in demand from the public sector and as a result of our
investment strategy being focused to a greater extent on
profitability. Reflecting a change in the intention to hold,
DG HYP reclassified a securities portfolio worth € 4.7 billion from the liquidity reserve to fixed assets.
We basically suspended any investments in mortgagebacked securities (MBS) from the middle of 2007 onwards
as the first problems with sub-prime loans in the USA
began to emerge. During the year under review, only the
cancellation of an MBS transaction with an opportunity
and risk lever led to a risk-neutral increase in the portfolio.
Taking into account scheduled repayments, the MBS portfolio, at € 4.0 billion, was approx. € 0.4 billion lower than
in the previous year.
Overall, our lending portfolio was therefore reduced
in line with our strategy by a total of € 3.7 billion to
€ 70.9 billion.
DEVELOPMENT OF LENDING VOLUME
€ mn
31 Dec 2007
Real estate lending
MBS
Public-sector and
local authority loans
21,774
4,016
22,499
4,387
– 725
– 371
– 3.2
– 8.5
45,151
47,775
– 2,624
– 5.5
Total portfolio
70,941
74,661
– 3,720
– 5.0
The volume of DG HYP Pfandbriefe outstanding during
the 2008 financial year was marked by the Bank’s new
strategic direction. In the same way as the loan portfolio, the
volume of outstanding mortgage Pfandbriefe was reduced
by € 2.0 billion overall to € 13.9 billion (with € 4.5 billion
falling due). In parallel to the low level of new business in the
public finance sector, the volume of public-sector covered
bonds outstanding fell by € 5.2 billion to € 39.1 billion.
Maturities totalling € 5.7 billion contrasted with only a low
level of new issues for the refinancing of local authority lending business. At the same time, there was a rise in the volume of uncovered other bonds in circulation, up by
€ 1.8 billion to € 9.0 billion, due to the reclassification of
securities which were transferred from the liquidity reserve
to fixed assets. Overall, the distorted movements on the
Pfandbrief market did not have a material impact on our refinancing opportunities, not least due to the Bank’s integration in the German Cooperative Financial Services Network.
22
Change from the previous year
€ mn
%
31 Dec 2008
|
Own funds and risk-weighted assets
DG HYP’s own funds for regulatory purposes are
reported in accordance with the requirements of the German Banking Act, as last amended with effect from 1 January 2007, and pursuant to the terms of the Solvency Ordinance which fleshes out the detail of the Banking Act. The
internal rating-based approach (IRBA) is applied to this
reporting.
In accordance with the Solvency Ordinance, aggregate
own funds for solvency purposes total € 1,733 million. The
fall of € 221 million compared with the previous year is
due to subordinated capital falling due, and to greater
account being taken of deductible items in accordance
with section 10 (6a) no. 3 of the German Banking Act.
Annual Report 2008
Management Report
OWN FUNDS FOR SOLVENCY PURPOSES
€ mn
Core capital
Supplementary capital
Total capital
During the 2008 financial year, the German Federal
Financial Supervisory Authority (BaFin) confirmed three further rating systems as suitable with regard to the internal
31 Dec 2008
31 Dec 2007
1,243
490
1,733
1,314
640
1,954
rating-based approach (IRBA). There was a further fall in
the risk-weighted items after these systems had been
applied:
RISK-WEIGHTED ASSETS ACCORDING TO THE SOLVABILITY ORDINANCE
(SOLVV – BASEL II) AS OF 31 DEC 2008
€ mn
31 Dec 2008
31 Dec 2007
Counterparty risk (total)
- Credit Risk Standard Approach
- Internal Rating-Based Approach (IRBA)
Total currency position
Operational risk
Transitory capital adequacy requirements
in accordance with section 339 of the SolvV
16,349
1,702
14,647
50
518
19,775
6,475
13,300
18
525
0
388
Total portfolio
16,917
20,706
The weighted amounts for the individual risk assets
according to the Solvency Ordinance totalling € 16.9 mil-
lion on the balance sheet date were € 3.8 million lower
than the previous year’s figure.
REGULATORY INDICATORS
€ mn
Total capital ratio
Core capital (Tier 1) ratio
31 Dec 2008
31 Dec 2007
10.2
7.3
9.4
6.3
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Annual Report 2008
23
Management Report
RESULTS OF OPERATIONS
The restructuring of DG HYP and the implementation
of the new business model progressed according to plan
during the 2008 financial year. The discernible successes
notched up in new business and in the key income and
expenditure items confirm that our decision to embark on
a process of strategic realignment was the right one. At the
same time, however, the Bank’s result for the year is still
affected by extraordinary factors from the ongoing crisis on
the financial markets and the knock-on effects of restructuring.
Gross profit
Against this background, gross profit, as expected, was
down from € 273.1 million to € 174.0 million. This fall can
be attributed in particular to the fact that DG HYP purposely avoided structural measures during the 2008 financial
year that were used the year before to stabilise interest
income levels. Adjusted to take account of these effects,
interest income was in line with the Bank’s expectations,
approximately 5 per cent down on the previous year.
At the same time, net commission income, at
€ 1.5 million, showed an improvement of € 37.7 million
on the previous year. This reflects the key effects of our
new business model. Whilst commission expenses for the
procurement of private real estate finance ceased to be
incurred with the abolition of the relevant division, there
was a rise in commission income generated by the issuing
of guarantees and service fees in the core area of commercial real estate finance. Furthermore, issue commissions
were down due to the lower funding requirement.
Costs development
Administrative expenses, at € 129.8 million during the
reporting period, were 23.3% down on the previous year’s
figure of € 169.0 million. This fall can be attributed to our
consistent restructuring and redimensioning of DG HYP.
The savings relate to all of the key expense items. In addition to the 17% reduction in personnel expenses to
€ 47 million and the drop of € 17.8 million (or 52.1%) in
processing costs for private real estate lending, particular
mention should be made of the fall in legal, auditing and
consultancy expenses, which were cut by € 6.7 million to
€ 6.4 million.
24
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Based on our cautious risk policy, provisions for loans
losses were cut further, from € 68.2 million in 2007 to
€ 61.5 million during the reporting period. This marks the
successful continuation of the downward trend of the past
few years.
Valuations/impact of the financial market crisis
In contrast, the ongoing liquidity squeeze and crisis of
confidence on the financial markets had a negative impact
on DG HYP’s earnings in 2008. The direct and indirect
consequences are reflected in our revaluation losses of
€ 111.3 million. These include valuation losses of
€ 25.8 million for securities held in the liquidity reserve.
These temporary valuation adjustments are mostly due to
the widening of credit spreads in response to the liquidity
situation. Additionally, long-term write-downs of
€ 47.1 million were also recorded with regard to some
mortgage-backed securities. Unsecured bank and government-issued papers also required a write-down of
€ 48.5 million.
Extraordinary restructuring expenses
As part of the restructuring of DG HYP, the Bank’s main
sources of non-personnel costs – such as infrastructure and
IT – were further optimised during the 2008 financial year.
The sale and lease-back transactions for the Bank’s headquarters in Rosenstrasse and a further rented property,
which have been in existence since 2003/04, were
unwound. The repurchase of this building at market prices
resulted in extraordinary expenses of € 24.8 million. Implementation of these measures also resulted in a significant
reduction in personnel and non-personnel costs. Moreover,
restructuring provisions in conjunction with personnel
measures and consultancy services totalling € 11.6 million
were included in the category of extraordinary expenses.
Extraordinary contribution to income
On the basis of the existing profit and loss transfer
agreement, the notable burdens on income during the current period were compensated for by DZ BANK, in the
form of an extraordinary contribution to income that was
unchanged on the previous year, at € 223 million.
DZ BANK has thus further underscored its readiness to
provide support for DG HYP’s consistent restructuring
program.
Annual Report 2008
Management Report
Net income
During the reporting year € 153.8 million of silent partnership contributions that had fallen due were repaid.
DG HYP – also as a result of the lower interest rate level –
transferred a partial profit of € 57.7 million, down
€ 17.8 million, to its silent partners, with the result that the
Bank reported a balanced result overall.
OVERVIEW OF THE PROFIT AND LOSS ACCOUNT
€ mn
Net interest income
Net commission result
Other operating income
Gross profit
Revaluation results
Operating profit
Taxes
Partial profit transfer
Net income
Change from the previous year
€ mn
%
2008
2007
163.0
1.5
9.5
174.0
129.8
– 61.5
– 111.3
– 128.6
186.6
0.3
57.7
297.9
– 36.2
11.4
273.1
169.0
– 68.2
– 121.4
– 85.5
147.8
– 13.2
75.5
– 134.9
37.7
– 1.9
– 99.1
– 39.2
6.7
10.1
– 43.1
38.8
13.5
– 17.8
– 45.3
104.1
– 16.7
– 36.3
– 23.2
9.8
8.3
– 50.4
26.3
102.3
– 23.6
0.0
0.0
0.0
0.0
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Annual Report 2008
25
Management Report
RISK REPORT
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Annual Report 2008
Management Report
RISK REPORT
I) Risk management – objectives and organisation
a) Objectives of risk management
DG HYP’s risk management process is geared towards
exploiting the business potential within the scope of the
bank’s capacity to carry and sustain risk, emphasising profitability. Within this context, we aim to optimise the
risk/return profile of the lending business, with respect to
individual transactions as well as within the framework of
active management of the entire portfolio. The individual
types of risk in the lending and securities business are standardised to permit comparison, in order to provide a basis
on which capital allocation throughout the entire bank is
managed, with an emphasis on risk and return.
Risks and Participations Committee of the Supervisory Board. This Committee is responsible for decisionmaking regarding those loan exposures, portfolio transactions and participating interests that – in line with the
Internal Rules of Procedure – do not fall within the remit of
the Management Board. In addition, the Lending and Participations Committee of the Supervisory Board deals with risk
management, and the overall bank strategy according to the
minimum requirements for risk management (MaRisk).
Audit Committee of the Supervisory Board. The
Audit Committee is responsible for supervisory issues in
relation to accounting, the internal monitoring system and
the requisite independence of the auditor of the financial
statements.
b) Responsibilities
The regulatory organisational requirements and the
allocation of risk management responsibilities are set out,
in particular, in the Minimum Requirements for Risk Management (Mindestanforderungen an das Risikomanagement - MaRisk). DG HYP meets these requirements, adapting its relevant processes to the specific needs of its
business model. DG HYP has also developed and implemented risk management and risk controlling systems that
take into account market and competitive requirements.
This forms the basis that ensures the proper operation and
efficiency of the risk management process.
Supervisory Board.The entire Supervisory Board
decides on the acquisition or disposal of participating interests in the event of changes exceeding € 500,000 in the
carrying amount of such interests, as well as on the establishment or disposal of business lines, establishing branches and representative offices, the internal rules of procedure of the Management Board, the business distribution
plan, and on material issues related to loans or participations that are not explicitly assigned to the Risk and Participations Committee of the Supervisory Board.
Management Board.All members of the Management Board are jointly responsible for risk management at
DG HYP. The Management Board determines the risk policy with regard to defining the business and risk strategies,
determining the types of business pursued and the scope
of the justifiable overall risk level, in line with the bank’s
capacity to carry and sustain risk.
c) Functions
Risk Planning. Planning, as a bank-wide exercise,
comprises the planning of income and costs, as well as the
risks associated with DG HYP’s individual business activities. Based on the strategic business orientation as part of
a five-year plan, the bank carries out operative planning on
an annual basis. Within this planning process, risk limits
and earnings projections are determined on the basis of
the Bank’s capacity to carry and sustain risk.
Risk/Return Management Committee. The
Risk/Return Management Committee is responsible for
managing the risks facing the entire bank at portfolio level
and for equity allocation. As well as including the members
of the Management Board, the Committee also comprises the heads of Finance and Treasury.
Credit Committee. The Credit Committee is responsible for managing and monitoring all of DG HYP’s credit
risks. It comprises the entire Management Board and the
heads of Front Office Credit, Back Office Credit and Controlling. The Credit Committee deals with strategic issues
regarding the bank’s lending business. These include, in
particular, the credit risk strategy, current risk events and
risk provisioning, credit portfolio management and income
optimisation as well as credit workflow optimisation.
Risk management. As part of the credit risk strategy
defined by the committees detailed above, the back office
together with Credit Risk Controlling is responsible for
managing the risk of counterparty default at an individual
exposure level and controlling risks at a portfolio level. This
involves both the implementation of rules as part of the
credit risk strategy as well as the active management and
monitoring of counterparty risks in the context of the issuing and processing of loans. The early identification of risk
potential in lending business and the intensive handling,
restructuring and settlement of loan commitments are governed by strictly defined processes and control systems.
The management of market and liquidity risks is the
responsibility of Treasury, within the scope of asset/liability
management.
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Annual Report 2008
27
Management Report
EXECUTIVE BODIES
OBJECTIVES
RISK MANAGEMENT – OBJECTIVES AND EXECUTIVE BODIES
To exploit the business potential within the scope of the Bank’s risk-bearing capacity, emphasising profitability
To optimise the Bank’s risk / return profile
To manage the allocation of (risk) capital with a focus on risks and profitability
Management
Board
Holds overall responsibility for risk management: determines the risk policy with regard to defining the business
and risk strategies, determining the types of business pursued, and defining the justifiable overall risk level,
in line with the Bank’s risk-bearing capacity.
Risk/Return
Management
Committee
Management Board, plus the Heads of Finance, Treasury, and ASM (International and Secondary Market Business)
> Managing the risks of the entire Bank at a portfolio level, as well as the allocation of capital.
Credit
Committee
Management Board, plus the heads of front office and back office units
> Managing the Bank’s overall credit risk exposure (including current risk exposures, risk provisioning,
credit portfolio management, optimising profitability and credit processes) at single-exposure and portfolio
level; allocating equity capital; defining the credit risk strategy.
Risks and
Participations
Committee
(a Supervisory Board committee)
> Decisions regarding loan exposures, portfolio transactions and participating interests that –
in line with the Internal Rules of Procedure – do not fall within the remit of the Management Board.
Supervisory
Board
> Decisions regarding the acquisition or disposal of participating interests in the event of changes exceeding ¤
€ 500,000 in the carrying amount of such interests, as well as on the establishment or disposal of business
lines, establishing branches and representative offices, the internal rules of procedure of the Management
Board, the business distribution plan, and on material issues related to loans or participations that are not
explicitly assigned to the Risk and Participations Committee.
Risk Controlling. The Controlling units are responsible
for current reporting and – together with the respective
risk management unit – for monitoring risk on a portfolio
level. This comprises quantifying the risk exposure, monitoring the quality and accuracy of data relevant to the risk
exposure, monitoring the limit utilisations, and risk reporting to the Management Board. For this purpose, Credit
Risk Controlling prepares a MaRisk-compliant credit risk
report on a quarterly basis outlining the key structural features of the lending business. The regular portfolio evaluations are used to recognise abnormalities in the portfolio at
an early state, and counter these in good time if required.
In addition, portfolio evaluations form the basis for the
annual review of the credit risk strategy.
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A risk report for the Bank as a whole is drafted monthly, illustrating credit risks as well as market, operational and
strategic risks. The measured risks are standardised for
each risk type on the basis of a confidence level of 99.95%
and a holding period of one year. The risk capital requirement calculated in this way for the Bank as a whole is then
contrasted against DG HYP’s capacity to carry and sustain
risk. The consideration of scenarios for all risk types and
their impact on the Bank as a whole, as required by
MaRisk, is regularly carried out, with the results being
reported to the management/Supervisory Board.
Annual Report 2008
Management Report
Furthermore, Risk Controlling also carries out daily risk
reporting on the market risks and existing liquidity risks to
which DG HYP is exposed, in accordance with MaRisk. The
key findings are regularly reported to the Supervisory
Board, or to the Risk and Participations Committee of the
Supervisory Board.
Risks arising from investments in other companies are
only of minor significance to DG HYP.
Internal Audit. The internal audit examines whether
the demands on the internal controlling systems, the risk
management and controlling systems, and the necessary
reporting, are adequately met.
d) Basel II
The new Basel Capital Accord (commonly referred to as
“Basel II”), which came into force as of 1 January 2007 in
the form of the Solvability Ordinance, is focused on securing the stability of the banking system and promoting
banking supervision with greater qualitative focus. The
core element of Basel II is greater risk-adjusted differentiation of the regulatory capital requirements for loans,
depending on the credit quality of the borrower.
DG HYP has implemented the Foundation Internal Rating Based Approach (FIRB) as part of Basel II. The acceptance audit for the first entry level of FIRB from 1 January
2007 by the Bundesbank and the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin – the German Financial
Supervisory Authority) took place in the autumn of 2006
and was successfully completed, with confirmation of
admission. Following a further audit in November 2007,
BaFin confirmed the suitability of further rating systems
and the supervisory reference point with effect from 1 July
2008. This means that the coverage rate for IRBA item values and risk-weighted IRBA item values with appropriate
risk systems is at least 80%. The exit threshold (92% coverage for IRBA positions and risk-weighted IRBA positions)
is almost achieved at the current time with a level of just
under 90%, although this is not actually required until
2012.
Developing our internal rating systems to implement
the requirements of the Basel II Accord remains on schedule. All of the Basel II projects have been implemented in
close coordination with the DZ BANK Group since 2003.
The bank-wide Basel II projects are also implemented with
the Federal Association of German Credit Unions and Rural
Banking Cooperatives (Bundesverband der Deutschen
Volksbanken und Raiffeisenbanken- (BVR) and the Association of German Pfandbrief Banks (Verband deutscher
Pfandbriefbanken - vdp).
All told, the regulations of the Basel Committee confirm our approach to a risk/return-oriented business and
portfolio management. The FIRB admission and the ongoing further developments confirm the high performance of
our risk management system.
II) Counterparty risk
Risk management in the real estate lending sector
focuses on the risk of counterparty default. Counterparty
risk denotes the risk that a business partner has defaulted
on a major liability for more than 90 days, or can only repay
liabilities by way of recourse to pledged collateral. Valuing
the collateral is of particular importance due to the fact
that real estate is involved. The management of counterparty default risk is conducted largely as follows:
• rating and portfolio-oriented management of new business and loan extensions;
• risk-oriented credit pricing;
• active portfolio management (constant portfolio monitoring and management);
• active management of problem loans (early warning
process, intensified handling, restructuring and settlement).
• annual review of credit risk strategy.
a) Lending process
The front and back offices for commercial real estate
finance in Germany are located in DG HYP’s Real Estate
Centres. Key workflow stages include the credit rating,
which is identified using rating systems that comply with
Basel II, and also property and project assessments. In the
latter case, DG HYP benefits from the proximity of its Real
Estate Centres and surveyors – who are also decentralised
– to its clients. Each lending decision requires a separate
vote by the market unit as well as by the back-office unit.
The loan application is authorised on the basis of lending
volume and risk classification. The corresponding parameters are laid down in the credit and portfolio strategies.
Credit analysis and the processing of foreign commitments, domestic secondary market transactions in the
banking market and small-scale commercial commitments
are dealt with centrally in Hamburg by specialist backoffice departments.
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Annual Report 2008
29
Management Report
With regard to capital market products, the existing
portfolio of mortgage backed securities (MBS) is also
looked after centrally in Hamburg by a specialist backoffice department. New business is not currently being pursued in this product area in the wake of the global financial markets crisis.
b) Limit system
DG HYP has a limit system in place to manage and
monitor counterparty and country risks. This system calculates the utilisation of external limits (country risk limits in
the DZ BANK Group, and default risks in accordance with
section 13 of the KWG), setting internal limits for country
and default risks simultaneously and independently of one
another. The respective limits must be upheld and can be
viewed at any time via an online system.
During the back-office monitoring processes, the utilisation of the individual limits is monitored daily. If the limits
are exceeded a process of escalation is induced, during
which support is provided to ensure that the limit is
returned to, and that suitable measures are implemented.
Internal individual risk limits are identified depending
on the individual counterparty risk of the business partner.
Essentially, this is carried out in cooperation with the parent company DZ BANK, which calculates an individual VR
rating per counterparty risk and makes this available to
DG HYP. Additionally, as part of Group risk management,
limits and ceilings on counterparty risks are taken into
account, whilst an agreed traffic light system for the early
detection of risks is also in place.
c) Credit rating
In order to take the particular demands on the commercial real estate lending business into account, DG HYP
has developed (in cooperation with the central institutions
of the German cooperative banking sector and BVR) and
implemented a special Basel-II compliant rating system for
specialised lending (SLRE – Specialised Lending Real
Estate). These rating procedures apply to the following customer groups: real estate developers, residential property
developers, development companies, closed-end funds,
project developers and commercial real estate investors.
The procedures underwent end-to-end validation, updates
and optimisation during the period under review. An independent consultancy company has described the procedures as ‘state of the art’. Given this particularly high level
of quality, the procedures will therefore also be rolled out
in the cooperative banks in 2009 in the context of a rating
desk solution.
30
|
The calculated data forms the basis for the lending
decision and pricing. The borrower’s rating in conjunction
with the property’s ability to cover interest and principal
repayments, is at the forefront of DG HYP’s forward-looking credit analysis. Also taken into account is the security
situation and, where applicable, any existed intertwining of
risks.
For local authority lending, credit ratings are also estimated based on a rating method that complies with
Basel II. DG HYP played a major role in developing the
municipal rating system, particularly within the scope of a
cooperative project where vdp joined forces with S&P Risk
Solutions. We use the VR rating procedures implemented
in DZ BANK within the framework of a ‘rating desk’ solution for the rating of sovereigns, banks and key accounts.
As part of the implementation of Basel II, the review of
loan exposure – including a rating update required under
section 18 of the KWG – has been expanded for all customer categories registered for IRBA. In addition, monitoring documents are prepared regularly for exposures
exceeding EUR 2.5 million per primary obligor group. The
monitoring comprises the rating analysis and other customer records, an assessment of the current rental situation, and the tenant rating(s). The property or other collateral is revalued if deemed necessary.
d) Management of problem loans
DG HYP uses what is known as an individual risk management system for the purposes of early warning and the
management of problem loans, this being used in a similar
way at the parent company DZ BANK. Cases with early
warning signs of a possible long-term negative development are assigned to a yellow list. Loans with regard to
which a subsequent loss cannot be excluded are kept on a
watch list. The loans included on this watch list are not
subject to individual write-downs. Where there is clear
negative trend, coupled with an existing requirement for
risk provisioning in the form of individual value adjustments, the cases are included on the list of individual writedowns. The processing rules and requirements on the
transfer from one ERM list to another are subject to
defined criteria.
Those problem credit exposures whose economic perspective can be assessed as positive are processed in the
restructuring department, which forms part of the back
office. Submitting a concept that must comprise a differentiated analysis and assessment of the overall situation of
the exposure and a cost-benefit analysis, as well as a com-
Annual Report 2008
Management Report
prehensive restructuring plan, forms the basis for a restructuring decision. Loan exposures are transferred to workout
if restructuring has failed or if this is deemed to be fruitless
from the outset.
Detailed reporting on ailing exposures is carried out
quarterly.
III) Market risks
For us, the concept of ‘market risks’ comprises the risks
associated with fluctuations in market prices (market risks
in the narrower sense), and liquidity risk. Market price risk
is the impact of interest rate fluctuations on the money and
capital markets, and changes in exchange rates. Liquidity
risk comprises the threat that DG HYP is unable to borrow
the funds required to maintain payments, or the risk of
only being able to do so at considerably less favourable
terms.
a) Risks associated with market price fluctuations
DG HYP uses various hedging tools in its dynamic management of interest rate risk and currency risk for the bank
as a whole. This consists mainly of macro hedge transactions employing interest-rate swaps and caps; options on
interest-rate swaps (known as “swaptions”) are also concluded occasionally, albeit to a limited extent. In addition,
a number of large-sized transactions, such as granting
promissory note loans to institutional clients, are hedged
regularly through micro hedges against the interest rate
risk. Interest-rate swaps and swaptions are also used for
this purpose.
In order to quantify the bank’s market price risk exposure, DG HYP calculates VaR figures daily using a
variance/co-variance procedure for all positions in each of
the portfolios. This is done with due account being taken
of the provisions of section 315 of the Solvency Ordinance
with regard to internal risk models.
The forecasting quality of our internal VaR model is
checked daily. We apply the requirements of section 318 of
the SolvV for this back-testing.
Market Risk Controlling compares the projected
changes in present value that are calculated according to
these parameters, with the negative changes in present
value that actually occur the following day. On this basis,
we determine how often the actual negative changes in
the present value exceeded the VaR figures in the risk
model. The results from back-testing in 2008 confirm the
quality of our calculations.
Market Risk Controlling informs the Management
Board (as well as the Treasury) on the day-to-day Treasury
performance and utilisation of the VaR limit. The Management Board decides on the management of the risk structure for the entire bank at the regular meetings of the
Risk/Return Management Committee.
The impact of the sub-prime crisis also made itself felt
in the development of the entire bank’s VaR during 2008.
The overall positioning was relatively constant, and low in
terms of the basis point value. However, the volatility
surges during September 2008 in particular led to a substantial increase in VaR.
In parallel, DG HYP reviewed and adapted its concept
for managing market price risks during the year under
review, adapting it to the new business model. In parallel,
Treasury management was more strongly focused on managing profit and loss, taking into account the intent to hold
investment securities permanently. The associated changes
to the value-at-risk model led to a VaR reduction towards
the year-end.
RISK CAPITAL REQUIREMENTS
€ mn
Risk capital requirement, VaR, 1 year
holding period, 99.95% confidence level
Maximum
in 2008
Minimum
in 2008
Mean value
in 2008
Year-end value
2008
497.6
165.7
390.1
285.5
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Annual Report 2008
31
Management Report
b) Liquidity risks
The bank’s liquidity situation is determined daily in line
with the regulatory and daily business requirements. For
this purpose, Market Risk Controlling provides Treasury
with a differentiated overview on a daily basis, indicating
future liquidity flows resulting from the individual positions
in the portfolio. Additionally, at its meetings the
Risk/Return Management Committee is provided with an
overview of the short- and long-term liquidity projection.
Liquidity is managed on the basis of this overview, with the
A suitable liquidity controlling system is already in place
in line with the requirements of Basel II for measuring and
reporting on liquidity risk. On the basis of the short- and
long-term liquidity projection, a limit system is implemented on a daily basis and integrated into the risk monitoring
process. The results from the scenarios are fed into the risk
analysis process.
IV) Operational risks
The Basel Committee defines operational risk as “the
risk of direct or indirect losses resulting from inadequate or
failed internal processes, people and systems, or from
external events”. DG HYP has adopted this definition,
albeit with marginal changes to detail in order to adjust it
to the bank’s own special interests. According to the Basel
II regulations, DG HYP has been subject to capital requirements for operational risks since 1 January 2007. DG HYP
has adopted the standardised approach for quantification,
and has notified BaFin accordingly.
RISK CAPITAL REQUIREMENTS
BY TYPE OF RISK
Operational risks
dual objectives of securing the Bank’s long-term liquidity
and achieving compliance with the Liquidity Ordinance.
Business risks and
strategic risks
A system for collecting and recording loss data has
already been in place since 2002. Incoming loss reports are
collected systematically in a database arranged according
to predefined categories: they are subsequently used as
indicators for further improving the operating processes,
and hence for reducing operational risks.
Credit risk
Market risk
%
Credit risk
Market risk
Operational risks
Business risks and strategic risks
52
38
5
5
Total
100
30 Dec 2008
32
|
In addition, all of DG HYP’s organisational units have
regularly conducted self-assessments since 2004. Current
risks are estimated using a standardised electronic questionnaire. In addition, Risk Controlling carries out continuous plausibility and consistency checks.
In order to also be able to identify operational risks in
good time, an early warning system regularly records various risk indicators (such as system failures, fraud, staff fluctuation). The agreed risk indicators and the collated reports
are submitted anonymously within the scope of groupwide reporting to DZ BANK.
Annual Report 2008
Management Report
From an organisational perspective, DG HYP’s Controlling unit is responsible for measuring operational risks. It
reports regularly on operational risk issues to DG HYP’s
Management Board, and on the activities for further developing the quantification approach, within the scope of the
Risk/Return Management Committee meetings.
V) Strategic risks
Strategic risks include the threat of losses arising from
management decisions regarding DG HYP’s business policy.
Strategic risks can also include long-term success factors in
DG HYP’s environment. These include, for example,
changes to the legal or corporate environment, changes to
the market and competitive conditions, customers or refinancing partners. We also include planning and reputation risks in this risk category.
In order to reduce planning risks, variance analyses are
prepared as a basis for continuously reviewing planning
data and assumptions.
DG HYP generally uses, amongst other things, investment calculations and projections, business plans including
scenario-based simulations, cost/benefit analyses, and risk
analyses as the basis for strategic decisions, in order to
identify and minimise strategic risks. In addition, all decision proposals submitted that may involve or induce strategic risks include a statement by the responsible organisational unit on the risk content, which is taken into account
in the resolution passed.
Given that, as a rule, strategic risks are subject to very
complex and irregular factual connections, they cannot be
included in an integrated system as special risks. They are
therefore specially monitored by the Management Board;
they are also monitored and continuously analysed by the
respective individual organisational units responsible. The
regular review of business unit strategies is also a core element of the continuous process of business unit planning
and control.
Reputation risk concerns direct or indirect losses
incurred by the erosion of DG HYP’s reputation among
shareholders, staff, customers, business partners and the
general public. All activities and events that can affect the
Bank’s reputation are identified in both the Corporate
Development, Organisation and IT units, and in the market
units concerned. They are evaluated in close cooperation
with the Management Board, in order to mitigate their
impact as early as possible.
|
Annual Report 2008
33
Management Report
OUR STAFF
34
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Annual Report 2008
Management Report
OUR STAFF
Job and personnel planning reworked
As part of the strategic realignment of DG HYP, the
Bank’s personnel planning has also been overhauled in line
with the changed requirements. A settlement of conflicting
interests and a social plan have been agreed. The planning
horizon for the medium-term job and personnel plans has
been set as 31 December 2012. Measures will be gradually implemented by then, and the social plan will also
remain in force until this date. The jobs plan involved a
reduction in personnel to 445.6 full-time equivalents by
31 December 2008. This reduction in numbers has been
implemented in the Retail division and in the staff departments in particular.
On 31 March 2008 – immediately before the conclusion of the settlement of conflicting interests and the introduction of the personnel measures – DG HYP employed
518 active members of staff (equating to 493.7 FTEs). By
31 December 2008, this figure had been reduced to
419 employees (404.4 FTEs) through termination agreements and the use of a small number of redundancies for
operational reasons. This meant that the target of
445.6 FTEs by the year-end was not just achieved but actually exceeded as a result of the rapid and successful restructuring process.
Over the final few weeks of the reporting year DG HYP
further stepped up its efforts to acquire skilled employees
for its core business and for credit risk analysis activities
with regard to foreign markets.
Internal communication concept successfully
implemented
Implementation of the new jobs and personnel plan
was accompanied by intensive communications work and
change management measures. DG HYP kept its staff up
to date on progress made in relation to the “Aufbruch
2008” (Re-positioning 2008) project and with regard to
the next stages in the process. This created transparency
with regard to the process itself and the need for the
changes being introduced. Workshops were also staged at
which managers were prepared for the change processes
and given appropriate training. In this way, DG HYP succeeded in presenting the arguments for the changes to its
middle management and employees.
The fact that the labour market was very absorbent
through until the third quarter of the reporting year meant
that those employees who left the Bank were able to enter
new employment relatively quickly. The outplacement
advice provided within the context of the social plan was
also helpful in this regard.
Following the complete separation from VR Kreditwerk
AG, the workforce elected a new works council in December 2008, now only composed of eleven members. The
Management Board has taken the new election as an
opportunity to thank all of the members of the Works
Council for their constructive contribution to the Bank’s
reorganisation during the past financial year.
Thanks must also go to the employees of DG HYP who
were forced to take on many changes during the restructuring phase and who, thanks to their ongoing dedication
and commitment, guaranteed a smooth transition. In this
way our employees have helped to ensure that DG HYP
could successfully move forwards and capture new business.
|
Annual Report 2008
35
Management Report
REPORT ON EVENTS AFTER THE
BALANCE SHEET DATE AND FORECAST
36
|
Annual Report 2008
Management Report
REPORT ON EVENTS AFTER THE BALANCE SHEET DATE
AND FORECAST
Report on material events after the reporting date
Events after 31 December 2008
No events occurred between 1 January and 10 February 2009 that would have had a material impact on our
2008 results.
Report on expected developments
Cautionary forward-looking statement
The forecast and other parts of the Annual Report
include expectations and forecasts that relate to the future.
These forward-looking statements, in particular regarding
DG HYP’s business and earnings growth, are based on
forecasts and assumptions, and are subject to risks and
uncertainties. As a result, the actual results may differ
materially from those currently forecast. There are a large
number of factors that impact on our business, and which
are beyond our control. These factors primarily include
changes to the general economic situation, the competitive situation and developments on the national and international real estate and capital markets. In addition, results
can be impacted by possible defaults by borrowers or other
risks, some of which are discussed in detail in the risk
report.
In this regard, it must be pointed out that, at the time
of writing, there is major uncertainty surrounding the
development of the capital and real estate markets over
the rest of 2009. What does appear to be certain is that it
will take until well into 2009 for the Pfandbrief and interbank markets to become fully functional again. The extent
of the economic downturn and the related negative impact
on the real estate markets are all the subject of very different assessments.
Anticipated business development
In implementing its restructuring, DG HYP has ensured
that its business strategy and organisational approach are
geared towards the future developments and needs of the
market. DG HYP’s strategy, with its focus on traditional balance-sheet real estate lending business and based on a
strong anchoring in the cooperative banking sector, has
proven its worth. Despite the increasingly difficult liquidity
situation as a result of the crisis of confidence on the market, we were able to position ourselves at the year-end as
a strong, well-functioning provider of commercial real
estate finance. Whilst DG HYP was still able to enter into
new business during the fourth quarter thanks to the allocation of liquidity via the DZ BANK Group, some of its competitors were forced to withdraw from the market. In this
way, the Bank has proved itself to be a reliable provider of
commercial real estate finance for its new and existing customers alike in Germany and abroad even in difficult times.
From this position, we are confident that we can
achieve our goals. Looking to 2009, we expect to see
greater growth in new business in our domestic and foreign markets. As a centre of excellence within the German
Cooperative Financial Services Network, we will be further
developing customised commercial real estate finance
products and services for the cooperative banks and supporting them as they present themselves on the market
and tap into regional potential.
Our commercial real estate financing expertise, our network in the German cooperative banking sector and the
expansion of our international activities form solid foundations for a high-performance real estate bank focused on
the commercial real estate sector.
|
Annual Report 2008
37
Management Report
Earnings forecast
DG HYP recognised at an early stage the need for a
new strategic direction in a market environment that has
grown increasingly difficult for all credit institutions and
implemented a viable business model during the 2008
financial year. As part of this process we have looked intensively at the changing market conditions in the wake of the
financial market crisis and, on this basis, geared our
growth targets to the expected level of market potential.
The improvement in the net commission result already
recorded during 2008 will be maintained on the basis of
the new business model.
The successful implementation of the new business
model will be reflected in a clear improvement in our operating result before the end of 2009, resulting in a tangible
reduction in the required contribution from income from
DZ BANK. We anticipate sustained positive results from
2010 following the conclusion of the reorientation process.
We also expect the fall-out from the current financial crisis
to have been largely dealt with by the end of the 2009
financial year.
With the focus on commercial real estate finance, foreign business with professional clients, alongside domestic
business, will have a long-term role to play. The risk measurement system in place is appropriate for the risks associated with our business model and will be developed further on an ongoing basis. Against this background, despite
our cautious business policy, our risk position will also
increase over the years to come as our business volumes
rise. We have taken due account of this with regard to provisioning for loan losses.
The predicted level of interest income for 2009 is some
13 per cent above that of the 2008 financial year, due to
the less marked impact of earlier structural measures and
the rising margins from new business from 2007 and
2008. The successive increase in the volume of commercial
real estate financing will be reflected in a constant increase
in net interest income in the following financial years. This
forecast is based on the margins that can currently be
realised on the market.
38
|
The organisational restructuring and redimensioning of
DG HYP was successfully concluded in 2008. We have
therefore laid the foundation for a greatly improved cost
structure, which we will further optimise as we continue
our efforts to reduce our non-strategic lending portfolio.
Overall, it is our view that our decision to embark on a
new strategy has been proved correct: we firmly believe in
the long-term profitability of our business model with the
turnaround in 2010. These strategic objectives are based
on the first signs of a calming on the financial markets
emerging during the second half of 2009, accompanied by
a renewed upturn on the Pfandbrief market.
Annual Report 2008
FINANCIAL STATEMENTS
Page
Financial Statements
Balance as at 31 December 2008
41
Profit and Loss Account
for the period from 1 January to 31 December 2008
47
Notes to the Financial Statements
General Notes
Notes to the Balance Sheet
Notes to the Profit and Loss Account
Cash flow statement
Coverage
Other information
on the annual financial statements
53
55
67
68
69
75
|
Annual Report 2008
39
BALANCE SHEET
AS AT 31 DECEMBER 2008
|
Annual Report 2008
41
BALANCE SHEET
ASSETS
€ 000’s
Cash funds
a) Cash on hand
b) Balances with central banks
of which: with Deutsche Bundesbank
Loans and advances to banks
a) Loans secured by property mortgages
b) Loans to local authorities
c) Other loans and advances
of which: Payable on demand
Note #
€ 000’s
€ 000’s
54,795
33,309
16
33,293
(33,293)
4,327,010
7,174,567
159,096
4,319,910
2,695,561
(156,880)
39,089,815
40,763,277
22,339,652
17,817,321
606,304
31,290,214
(30,162,724)
12,606,762
34,202,704
(33,835,301)
16,322,450
17,555,962
(15,222,425)
17,512,851
9
54,786
54,786
(4)
133,221
2,647,235
1,546,554
140,819
Loans and advances to customers
a) Loans secured by property mortgages
b) Loans to local authorities
c) Other loans and advances
(4)
Debt securities and other fixed-income securities
a) Bonds and debt securities
aa) Public-sector issuers
of which: Securities eligible as collateral
with Deutsche Bundesbank
ab) Other issuers
of which: Securities eligible as collateral
with Deutsche Bundesbank
b) Own bonds issued
Nominal amount
(7)
31 Dec 2007
€ 000’s
21,641,134
16,573,506
875,175
11,810,615
14,208,211
(13,419,322)
367,403
(365,294)
1,127,490
1,125,943
Equities and other non-fixed income securities
(7)
1,316
2,042
Participations
(7)
167
726
Investments in affiliated companies
(7)
2,569
2,044
(6)
696,499
685,666
(652,956)
Intangible fixed assets
(7)
543
10,188
Tangible fixed assets
(7)
153,589
2,997
(22)
241,757
268,148
157,601
189,626
188,719
907
76,015,875
83,335,294
Trust assets
of which: Trustee loans
Other assets
Prepaid expenses
a) From new issues and lending
b) Other
Total assets
663,789
(9)
156,685
916
AS AT 31 DECEMBER 2008
LIABILITIES AND EQUITY
€ 000’s
Liabilities to banks
a) Outstanding registered mortgage bonds
(Hypotheken-Namenspfandbriefe)
b) Outstanding registered public sector covered bonds
(öffentliche Namenspfandbriefe)
c) Other liabilities
Registered mortgage bonds
and registered public-sector covered bonds
surrendered to lenders as collateral for borrowings
Liabilities to customers
a) Outstanding registered mortgage bonds
(Hypotheken-Namenspfandbriefe)
b) Outstanding registered public sector covered bonds
(öffentliche Namenspfandbriefe)
c) Other liabilities
surrendered to lenders as collateral for borrowings
11,930,167
784,936
2,099,194
7,134,189
2,550,288
8,594,943
(1,408,867)
(3)
(9,833)
17,000,069
17,127,557
2,606,015
2,685,224
11,207,081
3,186,973
11,126,050
3,316,283
(345,984)
(5,113)
(9,669)
(12)
45,392,241
10,535,048
25,819,136
9,038,057
50,349,525
12,430,851
30,686,292
7,232,382
(6)
696,499
685,666
(652,956)
(23)
110,927
119,802
121,817
129,797
129,704
93
111,142
114,218
69,702
767
43,749
(13)
619,926
731,899
(14)
109,928
145,718
(89,476)
1,847,174
2,000,945
(1,318,687)
90,000
1,228,687
589,113
(93,145)
945
92,200
76,015,875
83,335,294
470,357
1,575,437
1,946,311
2,067,839
663,789
(9)
121,740
77
71,086
734
39,322
Subordinated liabilities
53,686
(15)
(16)
(16)
Total equity and liabilities
Other commitments
Irrevocable loan commitments
10,006,152
391,505
5,113
7,113
Provisions
a) Provisions for pensions and similar obligations
b) Provisions for taxes
c) Other provisions
Contingent liabilities
Liabilities from guarantees and indemnity agreements
31 Dec 2007
€ 000’s
772,769
(12)
Deferred income
a) From new issues and lending
b) Other
Shareholders’ equity
a) Subscribed capital
aa) Share capital
ab) Silent partnership contributions
b) Capital reserves
c) Retained earnings
ca) Legal reserves
cb) Other retained earnings
€ 000’s
306,427
2
3,281
Other liabilities
Profit-participation certificates
of which: Due within two years
€ 000’s
(12)
Securitised liabilities
Bonds issued
a) Mortgage bonds (Hypothekenpfandbriefe)
b) Public-sector covered bonds (öffentliche Pfandbriefe)
c) Other debt securities
Trust liabilities
of which: Trustee loans
Note #
(1,164,916)
90,000
1,074,916
589,113
(93,145)
945
92,200
(17)
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2008
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Annual Report 2008
47
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2008
€ 000’s
Note #
Interest income from
a) Lending and money market transactions
b) Fixed-income securities and debt register claims
€ 000’s
€ 000’s
2007
€ 000’s
3,747,127
3,584,187
162,940
2,437,958
1,587,143
4,025,101
3,728,335
296,766
62
79
2,227,730
1,519,397
Interest expense
Current income from
equities and other non-fixed-income securities
Income from profit-pooling, profit transfer,
and partial profit transfer agreements
0
Commission income
28,356
Commission expenses
26,844
Net commission result
Other operating income
(26)
General administrative expenses
a) Personnel expenses
aa) Wages and salaries
ab) Compulsory social security contributions and
expenses for pensions and other employee benefits
1,087
20,242
56,425
1,512
– 36,183
9,458
11,415
35,936
44,096
10,769
46,705
116,625
11,822
55,918
(6,074)
104,193
160,111
10,579
7,410
2,607
1,547
Amortisation and write-downs of loans
and advances and specific securities,
as well as additions to loan loss provisions
87,318
131,113
Amortisation and write-downs on participations,
interests in affiliated companies,
and investment securities
85,463
58,475
– 128,620
– 85,492
of which: Pension expenses
b) Other administrative expenses
6,122
69,920
Amortisation/depreciation and write-downs of
intangible and tangible fixed assets
Other operating expenses
(27)
Result from ordinary activities
Extraordinary income
(28)
223,000
237,000
Extraordinary expenses
(29)
36,424
89,146
(30)
267
Taxes on income
Other taxes not disclosed under
“Other operating expenses”
Profits transferred under
partial profit transfer agreements
Net income
186,576
147,854
– 13,172
0
267
–1
– 13,173
57,689
75,535
0
0
NOTES TO THE FINANCIAL STATEMENTS
General notes
(1) General information on the preparation of financial statements
The financial statements of DG HYP for the financial
year 2008 have been prepared in accordance with the provisions of the German Commercial Code (Handelsgesetzbuch – “HGB”) and the provisions of the German
Accounting Directive for Banks (Verordnung über die Rechnungslegung der Kreditinstitute – “RechKredV”). At the
same time, the financial statements fulfil the requirements
of the German Public Limited Companies Act (Aktiengesetz – “AktG”) and the German Pfandbrief Act (Pfandbriefgesetz – “PfandBG”).
Given the non-materiality of all subsidiaries, in accordance with section 296 (2) of the HGB, the company has
not prepared consolidated financial statements.
All amounts have been quoted in euros, in accordance
with section 244 of the HGB.
(2) Accounting policies
Loans and advances to banks/to customers
Loans and advances to banks and customers are recognised at nominal value, in accordance with section 340e (2)
of the HGB. Where their stated value of the loans differs
from the amount disbursed, or cost, the amount of the difference is reported under prepaid expenses/deferred
income and amortised in interest income over the term of
the transaction.
Loans and advances which are fully classified as current
assets are valued strictly at the lower of cost or market. All
existing individual lending risks are covered by specific loan
loss provisions. Existing risks of default in the retail lending
business are covered by recognising specific provisions at a
flat rate. We have formed a tax-deductible general loan
loss provision to cover expected loan losses which have
been incurred but not identified as such at the balance
sheet date.
Early repayment penalties charged for loan repayments
or extensions during the fixed-interest term of a loan are
fully recognised in interest income. With regard to interest
claims, we no longer recognise interest income where it
becomes obvious during execution proceedings that the
realisable proceeds will fall short of the carrying amount.
Debt securities and other fixed-income securities
At the balance sheet date, all debt securities and other
fixed-income securities are carried as fixed assets (invest-
ment securities), at amortised cost, except repurchased
own issues which are valued strictly at the lower of cost or
market. Premiums and discounts are amortised in net interest income over the term of the securities.
At the balance sheet date, the fair value of investment
securities was € 85 million higher than their book value.
The fixed-income securities of the investment portfolio are
grouped with interest rate hedges (swaps), to establish
hedging relationships. The accounting of hedging relationships and the effectiveness test are both performed on
portfolio level. Taking these hedges into account, we did
not recognise an extraordinary write-down in the amount
of € 997 million for investment securities due to the
expected temporary nature of the impairment, pursuant to
section 253 (2) sentence 3 of the HGB. Based on our current assessment, no impairment of interest and principal
payments is expected to occur with respect to these securities.
In contrast, extraordinary write-downs pursuant to section 253 (2) sentence 3 of the HGB were required due to
an expected permanent impairment of government and
bank bonds (write-down of € 49 million) and mortgagebacked securities (MBS; write-down of € 47 million).
To ensure a uniform measurement within the DZ BANK
Group, price data used to determine the fair value of debt
securities and other fixed-income securities as at the 2008
balance sheet date was taken from a DZ BANK price feed
for the first time. As a result of the lacking validity of market values in view of increasingly illiquid markets and
applying a valuation model complying with generally
accepted accounting principles, future cash flows from
interest and principal were projected and discounted to
their present value, using market interest rates in line with
the risks and maturities concerned, and applying adequate
liquidity yield add-ons (discounted cash flow method).
Yield add-ons to reflect risk and liquidity were determined
on the basis of most recent values observed on an active
market, taking into account current market developments.
Given the illiquid market for mortgage-backed securities,
the liquidity yield add-ons for a portfolio in the amount of
€ 4.0 billion were derived from still liquid bond markets.
Valuation parameters for all other securities were derived
from market prices and rates prevailing on the 2008 balance sheet date.
Participations and interests in affiliated companies
Participations and interests in affiliated companies are
carried at amortised cost.
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Annual Report 2008
53
Intangible and tangible fixed assets
Tangible fixed assets are carried at cost less regular
depreciation, where applicable. In the year under review, a
write-down to the lower going concern value under German tax laws (Teilwert) was recognised for the building in
Rosenstrasse 2, Hamburg. Movable tangible fixed assets
are predominantly depreciated on a straight-line basis,
using the maximum rates permissible under tax laws, or
based on the declining-balance method with a subsequent
transfer to straight-line depreciation. Low-value assets are
written off in full during their year of purchase. Standard
software is reported under intangible assets, as prescribed
by accounting standard HFA 11 issued by the Main Committee of the IDW (IDW RS HFA 11). As a result of the
change of the business model, write-downs in the amount
of € 6.5 million had to be recognised for a securitisation
software and a capitalised expected economic benefit due
to the resulting impairment.
Liabilities
Liabilities are shown on the balance sheet at the
amount due for repayment. The difference between the
nominal value and the initial carrying amount of liabilities is
recognised under deferred items and amortised over the
term of the transaction.
Liabilities classified as structured products (as defined in
Accounting Practice Statement BFA 1.003 issued by the
Banking Committee of the IdW) are accounted for as uniform liabilities as they only contain embedded interest rate
derivatives. Such liabilities are grouped with corresponding
hedge transactions, to establish hedging relationships.
The partial profits to be paid for silent partnership contributions are carried in their full amount.
Provisions
Contingent liabilities are covered by provisions
equalling the anticipated amount of the liability, on the
basis of prudent business judgement. Provisions for pensions are determined using the cost (“Teilwert”) method in
accordance with actuarial principles, using the actuarial
tables 2005 G by Dr. Klaus Heubeck. The imputed rate used
for discounting was 4.5 per cent.
54
|
Derivative financial instruments
Financial derivatives are accounted for separately in
auxiliary ledgers. These instruments are generally used to
hedge the interest rate and currency risk exposure of onbalance sheet transactions. Current interest payments are
amortised and recorded in net interest income.
Income from the disposal (close-out) of interest ratebased derivative financial instruments is generally recognised in interest income. Where interest rate swaps are
grouped with securities, to establish hedging relationships
(asset swaps), income realised upon closing out swaps are
recognised in line with the recognition of income of the
underlying transaction, in the net result on financial assets,
or in the net risk provisioning balance, respectively.
Premiums paid or received for credit default swaps are
amortised in commission income over the terms of the
transactions.
Premium payments for swaptions entered into as a
hedge against the impact of statutory loan termination
rights pursuant to section 489 of the German Civil Code
(Bürgerliches Gesetzbuch - „BGB“) are allocated to the
investment portfolio and carried at cost.
(3) Currency translation
Assets and liabilities from foreign exchange transactions
are translated in line with section 340h of the HGB and
Statement BFA 3/1995 issued by the IdW. Book receivables,
securities, liabilities and unsettled spot transactions are
generally translated using the ECB reference rate prevailing
on the balance sheet date. Income and expenses from currency translation are recognised in the income statement in
accordance with section 340h of the HGB. Income and
expenses from foreign exchange forwards, which were
entered into exclusively for the purpose of hedging interestbearing balance sheet items, are recognised in interest
income.
Annual Report 2008
Notes to the balance sheet
(4) Lending business
Principal
€ mn
Carrying amount
€ mn
to banks
to customers
132
21,331
133
21,641
Total
21,463
21,774
€ mn
€ mn
Mortgage loans
Portfolio development (principal)
Balance at 31 Dec 2007
22,297
Additions during the financial year 2008
Disbursements
Transfers
Other additions
2,807
9
1
2,817
Disposals during the financial year 2008
Scheduled repayments
Unscheduled repayments
Transfers
Other disposals
2,054
1,563
9
25
3,651
21,463
Principal
€ mn
Carrying amount
€ mn
to banks
to customers
2,597
16,313
2,647
16,574
Total
18,910
19,221
€ mn
€ mn
Loans to local authorities
Portfolio development (principal)
21,801
Additions during the financial year 2008
Disbursements
Transfers
Other additions
1,220
–
25
1,245
Disposals during the financial year 2008
Scheduled repayments
Unscheduled repayments
Transfers
Other disposals
3,349
787
–
–
4,136
18,910
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Annual Report 2008
55
(5) Negotiable securities
Balance sheet item
Listed
Unlisted
Amount of negotiable
securities not valued at
the lower of cost or market
31 Dec 2008
€ 000’s
31 Dec 2007
€ 000’s
31 Dec 2008
€ 000’s
31 Dec 2007
€ 000’s
31 Dec 2008
€ 000’s
31 Dec 2007
€ 000’s
Debt securities
and other fixedincome securities
29,150,767
32,446,678
2,139,447
1,756,026
9,746,437
17,571,028
Equities and
other non-fixed
income securities
–
–
1,316
2,042
–
–
31 Dec 2008
€ 000’s
31 Dec 2007
€ 000’s
663,789
32,710
652,956
32,710
696,499
685,666
602,434
94,065
577,044
108,622
696,499
685,666
(6) Trust business
Assets held in trust comprise:
– Loans and advances to customers
– Participations
Trust liabilities are carried vis-á-vis:
– Banks
– Customers
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Annual Report 2008
(7) Breakdown of, and statement of changes in fixed assets
Purchase or production cost
1 Jan 2008
Additions
Reclassi-
Depreciation and amortisation
Disposals
fications
Financial
Reclassi-
year
fications
Carrying amounts
Disposals
Total
31 Dec 2008 1 Jan 2008
€ 000’s
€ 000’s
€ 000’s
€ 000’s
€ 000’s
€ 000’s
€ 000’s
€ 000’s
€ 000’s
€ 000’s
48,362
354
0
6,948
9,930
0
6,879
41,225
543
10,188
881
174,366
0
303
22,3851)
0
0
22,436
152,5082)
830
23,442
134
0
3,984
649
0
3,413
18,511
1,081
2,167
24,323
174,500
0
4,287
23,034
0
3,413
40,947
153,589
2,997
I. Intangible
assets
II. Tangible
fixed assets
1. Land and
buildings
2. Office furniture
and
equipment 3)
Net change
III. Financial assets
1. Participations
2,853
– 2,686
167
726
2,044
525
2,569
2,044
2,042
-726
1,316
2,042
29,416,007
746,717
2. Investments in
affiliated
companies
3. Equities and
other non-fixed
income
securities
4. Investment
securities
30,162,724 29,823,585
1)
The extraordinary write-down on the building in Rosenstrasse, amounting to € 22.4 million, is reported in extraordinary expenses.
2)
Owner-occupied properties: € 62 million; used by third parties: € 90.5 million.
3)
Fully used for the bank’s own operations.
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Annual Report 2008
57
(8) List of investments pursuant to sections 285 no. 11 and 340a of the HGB
Minimum stake of 20 %
Name/Sitz
Equity interest
%
Shareholders’ equity
€ 000’s
Result 2007
€ 000’s
Landschaftliche
Grundstücksgesellschaft mbH, Kiel
100.0
800
750 *)
VR WERT Gesellschaft für
Immobilienbewertungen mbH, Hamburg
100.0
100
221 *)
IMMOFORI Gesellschaft für Immobilien
Forderungsinkasso mbH, Hamburg
100.0
1,000
15 *)
VR HYP GmbH, Hamburg
100.0
25
0
VR REAL ESTATE GmbH, Hamburg
100.0
25
–1
26.0
100
199
TXS Financial Products GmbH, Ellerau
*) Profit and loss transfer agreement with DG HYP
(9) Prepaid expenses and deferred income
31 Dec 2008
€ 000’s
31 Dec 2007
€ 000’s
– Difference between the nominal amount
and the higher disbursement amount
of receivables
16,212
21,815
and the lower issuing amount
of liabilities
94,585
124,073
47,836
48,972
Prepaid expenses
Sub-item a) From new issues
and lending comprises:
Deferred income
Sub-item a) From new issues
and lending comprises:
and the lower disbursement amount
of loans and advances
58
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Annual Report 2008
(10) Open-market transactions
31 Dec 2008
€ 000’s
31 Dec 2007
€ 000’s
3,609,689
3,445,302
Principal
€ mn
Carrying
amount
€ mn
753
2,554
10,294
773
2,606
10,535
13,601
13,914
2,060
10,948
25,316
2,099
11,207
25,819
38,324
39,125
Other debt securities
8,898
9,038
Borrowed funds
from banks
from customers
1,438
2,701
1,460
2,777
4,139
4,237
64,962
66,314
Open-market transactions entered into with
Deutschen Bundesbank
(11) Securities repurchase agreements
There were no securities repurchase agreements on the balance sheet date.
(12) Breakdown of, and statement of changes
in debt securities and borrowed funds
to banks
to customers
Mortgage bonds
Registered public-sector covered bonds
to banks
to customers
Public-sector covered bonds
Total
Development (principal)
Balance on
31 Dec 2007
€ mn
Additions
Disposals
€ mn
€ mn
Balance on
31 Dec 2008
€ mn
Mortgage bonds and
registered mortgage bonds
15,537
2,518
4,454
13,601
43,449
603
5,728
38,324
Other debt securities
7,124
4,151
2,377
8,898
Borrowed funds
4,350
706
917
4,139
70,460
7,978
13,476
64,962
Total
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Annual Report 2008
59
(13) Subordinated liabilities
Subordinated
other debt securities
borrowed funds
Expenses incurred
31 Dec 2008
€ 000’s
31 Dec 2007
€ 000’s
160,000
459,926
160,000
571,899
619,926
731,899
38,778
42,547
On the basis of the requirements of section 10 (5a) of the German Banking Act (Kreditwesengesetz or „KWG“), an amount of
€ 436,305 thousand is included as modified available capital for solvency purposes. Early repayment obligations are not provided
for in all cases. There are no provisions or plans for a conversion of such funds to capital, or into another form of debt.
Subordinated liabilities carry an average interest of 5.4 per cent, and have original maturities of between 9 and 20 years.
Disclosures on subordinated liabilities amounting to 10.0 per cent or more of the aggregate amount of subordinated liabilities:
Amount
Currency
Coupon
€ mn
Maturity
%
100.0
EUR
4.27
7 Dec 2015
100.0
EUR
4.63
23 Nov 2016
90.0
EUR
5.52
23 Jan 2017
(14) Profit-participation certificates
Issuer
DG
DG
DG
DG
HYP
HYP
HYP
HYP
Year of issue
Amount
€ mn
Coupon
%
1993
1993
1999
1999
51.1
51.1
5.1
2.6
7.25
7.00
6.79
6.63
Repayment*
11
1
11
11
Jun
Jun
Jun
Jun
2009
2014
2011
2009
109.9
* The term of profit-participation certificates ends on 31 December of the preceding year.
An amount of € 56.2 million of the profit-participation certificates represent supplementary capital pursuant to section 10 (5) of
the KWG. The holders of profit-participation certificates receive an annual distribution in the amount of the respective coupon,
which takes precedence over the profit entitlements of shareholders.
60
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Annual Report 2008
(15) Subscribed capital
31 Dec 2008
€ 000’s
31 Dec 2007
€ 000’s
90,000
90,000
Silent partnership contributions
1,074,916
1,228,687
Total
1,164,916
1,318,687
Issued share capital
The issued share capital amounts to € 90,000,000 and is divided into 3,500,000 notional no-par value shares (“unit shares”).
DZ PB-Beteiligungsgesellschaft mbH, Frankfurt/Main holds 3,321,500 shares (94.9 per cent), of which 1,131,320 shares are held in
trust on behalf of DZ PB-Beteiligungsgesellschaft mbH by other entities. The remaining 178,500 shares (5.1 per cent) are held by
DZ BANK Deutsche Zentral-Genossenschaftsbank AG, Frankfurt/Main.
The silent partnership contributions are partial profit transfer agreements within the meaning of section 292 (1) no. 2 of the AktG.
Of the silent partnership contributions, € 635.0 million are unlimited, and € 635.0 million comply with the provisions of section 10 (4) of the KWG on the balance sheet date.
(16) Breakdown of, and statement of changes in reserves
Balance on
31 Dec 2007
€ 000’s
Additions
Disposals
€ 000’s
€ 000’s
Balance on
31 Dec 2008
€ 000’s
Capital reserve
589,113
–
–
589,113
Retained earnings
– Legal reserves
– Other retained earnings
(93,145)
945
92,200
–
–
–
–
–
–
(93,145)
945
92,200
Total
682,258
–
–
682,258
(17) Contingent liabilities
This item mainly includes guarantees extended to other banks for commercial real estate loans.
(18) Revaluation reserves
No revaluation reserves pursuant to section 10 (2b) sentence 1 no. 6 of the KWG were included in liable capital.
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Annual Report 2008
61
(19) Relationships with affiliated enterprises and subsidiaries
Affiliated enterprises
Loans and advances to
– banks
– customers
Debt securities and other
fixed-income securities
Liabilities to
– banks
– customers
Subordinated liabilities
Subsidiaries
There were no loans and advances, or liabilities, to subsidiaries at the reporting date.
62
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Annual Report 2008
31 Dec 2008
€ 000’s
31 Dec 2007
€ 000’s
358,657
25,263
1,894,356
26,705
1,107,437
–
3,546,299
1,066,530
10,772,339
308,271
5,332,527
1,093,785
9,827,240
315,940
(20) Breakdown of maturities for receivables and liabilities
31 Dec 2008
€ 000’s
31 Dec 2007
€ 000’s
140,819
1,710,814
579,085
993,448
902,844
156,880
3,082,615
1,205,302
1,224,482
1,505,288
4,327,010
7,174,567
239,301
1,474,815
2,139,258
10,908,450
24,327,991
212,671
1,744,833
1,937,588
9,962,649
26,905,536
39,089,815
40,763,277
3,747,569
2,698,058
306,427
5,545,544
340,504
1,842,783
1,970,894
1,408,867
4,535,618
1,837,746
1,669,844
2,478,092
10,006,152
11,930,167
391,505
577,443
921,643
4,178,374
10,931,104
345,984
744,077
545,268
3,588,421
11,903,807
17,000,069
17,127,557
9,936,095
12,700,569
Assets
Remaining term – payable on demand
– up to three months
– between three months and one year
– between one year and five years
– more than five years
Bonds and other fixed-income
securities maturing
in the following year
Liabilities
Liabilities to banks
Liabilities to customers
Certificated liabilities maturing
in the following year
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Annual Report 2008
63
(21) Assets and liabilities in foreign currencies
31 Dec 2008
€ 000’s
31 Dec 2007
€ 000’s
Assets include foreign-currency receivables
in the total amount of
1,086,768
1,959,083
Liabilities and equity include foreign-currency liabilities
in the total amount of
1,151,696
2,116,297
(22) Other assets
Other assets include loans and advances to fiscal entity subsidiaries in the amount of € 224.6 million as well as interest
rate options with a carrying amount of € 10.2 million.
(23) Other liabilities
This item includes mainly € 58.4 million in profits to be transferred under partial profit transfer agreements.
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Annual Report 2008
(24) Forward contracts not reflected in the balance sheet
The following types of forward transactions based on foreign currencies, interest rates or other underlying instruments
were outstanding as at the balance sheet date:
€ mn
Interest rate instruments
OTC products
Interest rate swaps*)
including: Forward swaps
including: With embedded
caps/floors
including: With embedded
puts/calls
Interest rate options
including: Swaptions bought
including: Swaptions sold
Exchange-traded products
Nominal amounts by
residual term
Total
<
_ 1 year > 1–5 yrs
> 5 yrs
2008
2007
Fair value
2008
2007
positive negative positive negative
24,453
56,758
73,975
155,186 174,478
2,909
4,496
1,991
3,229
23,859
–
56,609
179
73,975
229
154,443 173,122
408
404
2,831
6
4,490
28
1,928
2
3,225
15
143
70
51
264
264
3
18
2
12
10
594
594
–
–
100
149
139
10
–
510
–
–
–
–
620
743
733
10
–
498
1,356
1,312
44
–
14
78
78
–
–
20
6
–
6
–
12
63
63
–
–
7
4
–
4
–
86
86
–
–
2,827
2,827
–
–
614
614
–
–
3,527
3,527
–
–
2,283
2,283
–
–
496
496
–
–
102
102
–
–
179
179
–
–
7
7
–
–
Credit-related transactions
Credit default swaps
including: Protection seller
including: Protection buyer
Total Return Swaps
including: Protection seller
including: Protection buyer
–
–
–
–
–
–
–
1,150
1,150
172
978
–
–
–
928
568
8
560
360
360
–
2,078
1,718
180
1,538
360
360
–
2,414
2,075
198
1,877
340
340
–
30
10
–
10
20
20
–
125
2
–
2
123
123
–
64
14
–
14
50
50
–
4
4
–
4
0
0
–
Forward transactions exposed
to other price risks
–
–
–
–
–
–
–
–
–
24,539
60,735
75,517
160,791 179,176
3,435
4,723
2,234
3,240
14
1,096
510
332
Currency-related instruments
Cross-currency swaps
Foreign exchange forwards
Foreign exchange swaps
Total
Of which part of hedging relationships with investment securities**).
*) Including interest rate swaps with identical foreign currency.
**) The negative market value of € 1,082 million is included in the write-downs which were not recognized in accordance with section 253 (2) sentence 3 of
the HGB (as mentioned in Note (2)).
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Annual Report 2008
65
The breakdown of the carrying amounts of forward contracts not reflected on the balance sheet by balance sheet items pursuant to
section 285 sentence 1 no. 18 b) of the HGB is as follows:
Carrying
amount
2008
€ mn
Carrying
amount
2007
€ mn
Interest rate swaps
130
108
Interest rate options
10
18
Cross-currency swaps
460
168
1
2
26
26
Credit default swaps
Total Return Swaps
Balance sheet item
Assets
Carrying
amount
2008
€ mn
Carrying
amount
2007
€ mn
274
283
0
0
17
7
Liabilities to banks,
deferred income
2
2
Other liabilities
Loans and advances to banks,
loans and advances to customers,
prepaid expenses
Other assets
Other assets
prepaid expenses
Balance sheet item
Liabilities and equity
Liabilities to banks,
Liabilities to customers,
deferred income
Loans and advances to banks,
prepaid expenses
The forward transactions identified above are used to manage interest rate, currency and counterparty risk exposure. As a rule, counterparties are OECD banks, OECD financial services institutions or OECD central governments. In addition, borrowers also appear as counterparties (market value € 12.3 million) in connection with loan agreements. Interest rate swaps are valued using present values, determined by discounting cash flows using market interest rates in line with the credit risk and maturities concerned, as indicated by the yield
curve prevailing on the balance sheet date.
Options are valued using option pricing models. These are applied on the basis of generally recognised assumptions regarding valuation
parameters, in particular the value and volatility of the underlying instrument, the agreed exercise price (interest rate), the remaining lifetime of the contract, as well as the risk-free interest rate for that lifetime.
Credit derivatives are valued on an individual basis, predominantly on the basis of the default probability of the reference obligations concerned.
Market values are determined without consideration of netting agreements. No add-ons or credit quality weightings – as defined pursuant to methodology of the German Solvability Ordinance (Solvabilitätsverordnung) – are taken into account. Negative market values of
derivatives are offset by positive market values of the related hedged balance sheet items.
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Annual Report 2008
Notes to the profit and loss account
(25) Breakdown of income by geographic markets within the meaning of section 34 (2) no. 1 of the RechKredV
The breakdown of interest income, current income from equities and other non-fixed-income securities, commission income
and other operating income is as follows:
in %
2008
2007
Germany
68.1
69.8
International
31.9
30.2
(26) Other operating income
Other operating income totalling € 9.5 million is mostly due to rental income totalling € 4.7 million and income on services totalling € 2.4 million.
(27) Other operating expenses
Other operating expenses totalling € 2.6 million includes purchases of goods in the amount of € 0.9 million.
(28) Extraordinary income
The restructuring expense and the impact of the crisis on the international capital markets have weighed on DG HYP’s earnings in the year under review. In order to compensate for these extraordinary factors, and to support a future realignment
of DG HYP, the DZ BANK made a contribution to income of € 223 million, which was derived from the existing profit and
loss transfer agreement and was recognised as extraordinary income in financial year 2008.
(29) Extraordinary expense
As part of the restructuring of DG HYP, the Bank’s main sources of non-personnel costs – such as infrastructure and IT –
were further optimised during the 2008 financial year. The sale and lease-back transactions for the Bank’s headquarters in
Rosenstrasse and a further rented property, which have been in existence since 2003/04, were unwound. The repurchase of
this building at market prices resulted in extraordinary expenses of € 24.8 million. Moreover, restructuring provisions in conjunction with personnel measures and consultancy services totalling € 11.6 million were included in the category of extraordinary expenses.
(30) Taxes on income
The tax income of € 0.3 million recorded in the year under review results from the adjustment of the negative tax overhead
credit that was recognised in 2007. This credit related to partial profit transfers, covered by section 8a of the KStG.
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Annual Report 2008
67
Cash flow statement
(31) Cash flow statement
€ mn
1.
2.
+/–
3.
4.
5.
6.
7.
+/–
+/–
–/+
–/+
=
8.
8a.
8b.
9.
10.
11.
11a.
11b.
12.
13.
14.
15.
16.
17.
18.
19.
20.
20a.
20b.
21.
21a.
21b.
22.
68
+/–
+/–
+/–
+/–
+/–
+/–
+/–
+/–
+
–
+
–
+/–
=
+
+
–
–
+
23.
–
24.
25.
26.
27.
27a.
27b.
28.
29.
+/–
=
+
–
–
+/–
=
30.
31.
32.
33.
34.
+/–
+/–
+/–
+/–
35.
=
Net income for the period
(including minority interests)
excluding extraordinary items and taxes
Non-cash items included in net income and
reconciliation to cash flow from operating activities
Depreciation, write-downs and write-ups on loans and advances,
tangible fixed assets and financial assets
Increase / decrease in provisions
Other non-cash expenses/income
Profits/losses from the disposal of tangible fixed assets and financial assets
Other adjustments (net balance)
Subtotal
Net changes in assets and liabilities
from operating activities
Loans and advances
– to banks
– to customers
Securities (excluding financial assets)
Other assets from operating activities
Liabilities
– to banks
– to customers
Other liabilities from operating activities
Interest and dividends received
Interest paid
Extraordinary cash receipts
Extraordinary cash payments
Income tax payments
Cash flow from operating activities
Receipts from the disposal of
– financial assets
– tangible fixed assets
Payments for investments in
– financial assets
– tangible fixed assets
Cash receipts from the disposal of consolidated companies
and other business units
Cash payments for the acquisition of consolidated companies
and other business units
Changes in cash funds due to other investing activities (net balance)
Cash flow from investing activities
Cash receipts from issue of capital
Cash payments to owners and minority shareholders
– Dividends paid
– Other distributions/cash payments
Changes in cash funds due to other capital movements (net balance)
Cash flow from financing activities
Cash funds at the beginning of the period
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Effect on cash funds of exchange rate movements,
changes in reporting entity structure and revaluation
Cash funds at the end of the period
|
Annual Report 2008
2008
2007
– 129
– 85
177
–3
28
– 11
– 176
– 114
142
18
99
–2
– 298
– 126
2,798
1,599
– 1,015
48
– 756
556
3,073
– 75
– 1,934
– 126
– 4,840
– 59
3,885
– 3,698
223
–1
–
– 3,234
– 1,563
2,723
– 3,619
– 124
4,053
– 3,905
237
– 71
13
416
5,438
1
2,637
–
– 1,708
– 174
– 3,372
–1
–
–
–
–
3,557
–
–
–1
– 737
35
–
– 58
– 243
– 301
–
– 76
371
330
33
– 3,234
3,557
– 301
24
416
– 737
330
–
55
–
33
Coverage
(32) Coverage by balance sheet item
Mortgage
bonds
31 Dec 2008
€ mn
Mortgage
bonds
31 Dec 2007
€ mn
Public-sector
covered bonds
31 Dec 2008
€ mn
Public-sector
covered bonds
31 Dec 2007
€ mn
15,346
16,982
35,657
42,856
15,346
15,346
–
16,982
16,982
–
16,760
1,580 *)
15,180
18,027
1,640 *)
16,387
Loans secured by property mortgages to banks
Loans to local authorities, to banks
–
–
–
–
–
–
2,429
8 *)
2,421
4,013
10 *)
4,003
Own bonds issued
–
–
16,468
20,816
342
1,201
3,999
3,325
–
–
–
–
2,973
2,973
2,299
2,299
342
1,201
1,026
978
–
–
–
48
15,688
18,183
39,656
46,181
–
–
–
–6
Ordinary cover
Loans secured by property mortgages to customers
Loans to local authorities, to customers
Extended cover
Balances held with banks
Own bonds issued
Derivatives
Total
Market value of hedging derivatives**)
*) under a municipal guarantee
**) negative market value of a cross currency swap employed to hedge the outstanding Pfandbriefe
(33) Details pursuant to section 28 of the German Pfandbrief Act
Outstanding Pfandbriefe and related cover assets
a) Total amount
of outstanding
Nominal amount
31 Dec 2008
31 Dec 2007
€ mn
€ mn
Present value
31 Dec 2008
31 Dec 2007
€ mn
€ mn
Risk-adjusted present value*)
31 Dec 2008
31 Dec 2007
€ mn
€ mn
Mortgage bonds
13,606
15,542
14,273
15,867
13,931
15,532
Cover assets pool
of which: Derivatives
15,688
0
18,183
0
16,825
0
18,597
0
16,025
0
17,892
0
2,082
2,641
2,552
2,730
2,094
2,360
15.3
17.0
17.9
17.2
15.0
15.2
Excess cover
Excess cover (%)
*) When calculating stress scenarios, the static method is used for currencies and the dynamic method for interest rates.
ad a) Maturity structure
up to 1 year
> year – 5 years
> 5 years – 10 years
> 10 years
Total
Mortgage bonds
31 Dec 2008
31 Dec 2007
€ mn
€ mn
Cover assets pool
31 Dec 2008
31 Dec 2007
€ mn
€ mn
1,482
8,858
3,228
38
4,439
7,554
3,485
64
1,963
7,259
5,429
1,037
2,485
6,440
7,988
1,270
13,606
15,542
15,688
18 ,183
|
Annual Report 2008
69
b) Total amount
of outstanding
Nominal amount
31 Dec 2008
31 Dec 2007
€ mn
€ mn
Present value
31 Dec 2008
31 Dec 2007
€ mn
€ mn
Risk-adjusted present value*)
31 Dec 2008
31 Dec 2007
€ mn
€ mn
37,419
43,326
39,375
43,296
37,056
41,458
Cover assets pool
of which: Derivatives
39,656
0
46,181
48
42,333
0
46,783
48
39,895
0
44,911
41
2,237
2,855
2,958
3,487
2,839
3,453
6.0
6.6
7.5
8.1
7.7
8.3
Excess cover
Excess cover (%)
*) When calculating stress scenarios, the static method is used for currencies and the dynamic method for interest rates.
ad b) Maturity structure
31 Dec 2008
31 Dec 2007
€ mn
€ mn
Cover assets pool
31 Dec 2008
31 Dec 2007
€ mn
€ mn
up to 1 year
> 1 year – 5 years
> 5 years – 10 years
> 10 years
6,165
13,029
11,723
6,502
5,752
16,188
14,221
7,165
5,585
16,651
10,337
7,083
6,635
18,431
13,635
7,480
Total
37,419
43,326
39,656
46,181
Assets included in cover for mortgage bonds, by loan amount
Mortgages serving as cover
31 Dec 2008
31 Dec 2007
€ mn
€ mn
up to € 300,000
11,337
13,241
> € 300,000 to € 5 million
2,042
2,197
> € 5 million
2,309
2,745
15,688
18,183
Total
70
|
Annual Report 2008
Financial year
Belgium
Federal Republic of Germany
Denmark
France
Greece
UK
Netherlands
Austria
Portugal
Sweden
USA
Total
Assets included in cover for mortgage bonds,
by country where real property collateral is located, and by type of property
Commercial
properties
2008
2007
–
–
3.2
3.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.2
3.8
Commercial
housing properties
2008
2007
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Residential properties
2008
2007
–
0.1
1,917.2
2,265.3
–
–
0.9
1.1
–
–
0.4
0.4
–
0.1
0.1
0.1
–
–
–
–
–
–
1,918.6
2,267.1
Single-family homes
2008
2007
0.3
0.3
6,739.1
7,770.2
0.1
0.1
14.8
17.6
–
–
0.2
0.2
0.7
0.8
0.2
0.2
–
0.1
–
–
–
–
6,755.4
7,789.5
Multi-family homes
2008
2007
–
–
2,434.6
2,756.3
–
–
0.2
0.2
–
–
–
–
–
–
0.1
0.1
–
–
–
–
–
–
2,434.9
2,756.6
Office buildings
2008
2007
–
–
1,306.0
1,252.9
14.4
0.1
291.4
251.1
–
–
99.8
39.9
8.0
31.0
12.4
12.4
–
–
3.0
3.4
21.4
–
1,756.4
1,590.8
Commercial buildings
2008
2007
–
–
659.1
645.7
0.5
–
41.4
–
–
–
2.5
4.9
–
–
77.0
–
–
–
28.2
24.2
–
–
808.7
674.8
Industrial buildings
2008
2007
–
–
93.7
94.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
93.7
94.9
2008
Other commercial properties 2007
–
–
1,432.4
1,644.8
1.4
–
36.4
31.0
–
–
–
–
–
–
–
–
–
–
–
–
–
1,470.2
1,675.8
Unfinished new buildings
not yet yielding returns
2008
2007
–
–
104.3
127.9
–
–
0.3
0.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
104.6
128.2
Securities
2008
2007
–
–
342.3
681.1
–
–
–
–
–
351.5
–
–
–
–
–
–
–
168.5
–
–
–
–
342.3
1,201.1
Total
2008
2007
0.3 15,031.9
0.4 17,242.9
16.4
0.2
385.4
301.3
–
351.5
102.9
45.4
8.7
31.9
89.8
12.8
–
168.6
31.2
27.6
€ mn
|
21.4 15,688.0
– 18,182.6
Annual Report 2008
71
Aggregate payments in arrears by at least 90 days
on cover assets for mortgage bonds
Germany
France
Netherlands
Total
31 Dec 2008
€ mn
31 Dec 2007
€ mn
50.52
42.42
0.25
0.35
–
–
50.77
42.77
Assets included in cover for mortgage bonds
Forced sales/forced administration
Commercial properties
2008
2007
Number
Number
Housing properties
2008
2007
Number
Number
No. 3a
Forced sales pending
144
207
1,247
1,195
60
96
444
479
52
86
429
447
132
195
715
590
Number
Number
Number
Number
–
–
–
1
–
–
–
–
€ mn
€ mn
€ mn
€ mn
13.6
11.5
85.1
54.4
2.8
2.7
9.2
16.2
€ mn
€ mn
€ mn
€ mn
through redemption
249.0
185.5
1,603.9
490.2
through other forms of repayment
591.3
674.5
978.5
1,550.5
Forced administrations pending
of which: Included in forced sales pending
Forced sales executed
No. 3b
Purchases of properties to prevent losses
(foreclosed assets)
of which: Still part of cover assets
No. 3c
Total arrears
of which: on interest due
No. 3d
Repayments of mortgage loans
72
|
Annual Report 2008
Assets included in cover for public-sector covered bonds,
by country of domicile of the borrower and, in the case of full guarantee, of the guarantor
€ mn
Belgium
Sovereign
borrowers
2008
2007
Regional
public-sector
entities
2008
2007
Local
public-sector
entities
2008
2007
Other
borrowers
2008
2007
2008
Total
2007
70
340
94
96
–
–
–
–
164
436
Federal Republic of Germany
2
98
8,395
10,757
10,559
11,416
6,870
9,242
25,826
31,513
Denmark
–
–
–
–
–
–
20
20
20
20
Finland
–
150
–
–
–
–
–
–
–
150
France
–
–
225
225
–
–
210
410
435
635
Greece
436
990
235
235
–
–
240
–
911
1,225
–
–
–
–
–
–
304
204
304
204
Ireland
50
100
–
–
–
–
95
95
145
195
Iceland
30
30
–
–
–
–
–
–
30
30
822
965
851
875
175
175
–
–
1,848
2,015
–
–
511
449
–
–
–
–
511
449
25
25
–
–
–
–
–
–
25
25
Lithuania
–
–
23
23
–
–
–
–
23
23
Luxembourg
–
–
–
–
–
–
180
200
180
200
Netherlands
–
150
–
–
–
–
230
330
230
480
Austria
180
205
315
315
–
–
648
640
1,143
1,160
Poland
133
83
–
–
–
–
–
–
133
83
Portugal
727
637
75
75
–
–
270
196
1,072
908
–
–
191
172
–
–
200
195
391
367
Slowakia
35
35
–
–
–
–
–
–
35
35
Slovenia
65
65
–
–
–
–
10
10
75
75
–
–
4,520
4,513
31
31
1,259
1,085
5,810
5,629
Czech Republic
50
50
–
–
–
–
–
–
50
50
Hungary
81
81
–
–
–
–
–
–
81
81
USA
–
–
114
92
48
49
45
45
207
186
Cyprus
7
7
–
–
–
–
–
–
7
7
2,713
4,011
15,549
17,827
10,813
11,671
10,581
12,672
39,656
46,181
UK
Italy
Canada
Latvia
Switzerland
Spain
Total
|
Annual Report 2008
73
Aggregate payments in arrears by at least 90 days
on cover assets for public-sector covered bonds
31 Dec 2008
€ mn
31 Dec 2007
€ mn
Sovereign states
–
–
Regional public-sector entities
–
6.4
Local public-sector entities
–
0.3
11.4
–
11.4
6.7
Germany
Other
Total
74
|
Annual Report 2008
Other information on the annual financial statements
(34) Audit and consulting fees within the meaning of section 285 no. 17 of the HGB
In the 2008 financial year, € 1,267,000 was recorded as fee expenses for the auditor within the meaning of section 319 (1)
sentences 1 and 2 of the HGB. The breakdown pursuant to Accounting Practice Statement HFA 1006 of the IDW is as follows.
Audit of financial statements
875,000 €
Other audit
or valuation services
Tax advisory services
Other services
249,000 €
5,000 €
138,000 €
|
Annual Report 2008
75
(35) Executive bodies of DG HYP
Supervisory Board
Dr. Thomas Duhnkrack
Member of the Management Board
DZ BANK Deutsche ZentralGenossenschaftsbank AG,
Frankfurt/Main
– Chairman –
Dr. Christopher Pleister
President of the Federal
Association of German
Credit Unions and Rural
Banking Cooperatives (BVR)
– Deputy Chairman –
(until 15 Jul 2008)
Dagmar Mines
Bank employee
Deutsche GenossenschaftsHypothekenbank AG
– Deputy Chairman –
Peter Bade
Member of the Management
Board
Volksbank Lüneburger Heide eG
Maik Brammer
Bank employee
Hans-Jürgen Buhlert
Bank employee
Carl-Christian Ehlers
Chairman of the Management Board
Kieler Volksbank eG
Ralph Gruber
Bank employee
Jürgen Handke
VR Bank Hof eG
Rainer Kattinger
Stuttgarter Volksbank AG
Klaus Kohlmorgen
Bank employee
Dietmar Küsters
Volksbank Straubing eG
(until 31 Dec 2008)
Dr. Reinhard Kutscher
Union Investment
Real Estate AG
(since 17 Jun 2008)
Jens Meyer
Bank employee
(until 9 Jun 2008)
Thomas Müller
Dresdner Volksbank
Raiffeisenbank eG
Manfred Nüssel
President of the German Raiffeisen
Federation
Herbert Schindler
Director
Badischer Genossenschaftsverband
e.V. (Association of Cooperative Banks
in Baden)
Martin Schmitt
Kasseler Bank eG Volksbank
Raiffeisenbank
Diedrich Taaken
Volksbank Esens eG
Dietrich Voigtländer
DZ BANK Deutsche ZentralGenossenschaftsbank AG
(until 26 May 2008)
Thorsten Wenck
Bank employee
(since 22 Sep 2008)
Frank Westhoff
DZ BANK Deutsche ZentralGenossenschaftsbank AG
Winfried Willer
Employee
VR Kreditwerk Hamburg –
Schwäbisch Hall AG
Management Board
Hans-Theo Macke
CEO
76
Dr. Georg Reutter
(since 1 Aug 2008)
|
Annual Report 2008
Manfred Salber
(36) Remuneration of the executive bodies
2008
€ 000’s
2007
€ 000’s
259
275
Management Board
1,385
1,708
Former members of the Management Board
or their surviving dependants
1,647
2,654
20,114
20,124
31 Dec 2008
€ 000’s
31 Dec 2007
€ 000’s
Supervisory Board
1,654
1,710
Advisory Council
1,881
2,794
–
–
Supervisory Board
Provisions for current pensions
and pension commitments
for former members of the Management Board
or their surviving dependants
(37) Loans to members of executive bodies
Management Board
(38) Offices held by members of the Management Board or members of staff in supervisory bodies
of large limited companies
As at 31 December 2008, members of the Management Board held the following offices in supervisory bodies of large
limited companies:
Hans-Theo Macke
Bausparkasse Schwäbisch Hall AG, Schwäbisch-Hall: member of the Supervisory Board
VR Kreditwerk Hamburg – Schwäbisch Hall AG, Hamburg/Schwäbisch Hall: member of the Supervisory Board
|
Annual Report 2008
77
(39) Average number of employees
Male
Female
2008
Total
Male
Female
2007
Total
Total number of employees *)
280
193
473
353
223
576
of which: Full-time employees
Part-time employees
Number
weighted
277
165
442
349
188
537
(10)
3
(47)
28
(57)
31
(8)
4
(63)
35
(71)
39
3
3
6
10
7
17
Vocational trainees
(not included in total)
*) Weighted in line with the hours worked.
(40) Information about the parent company pursuant to section 285 no. 14 of the HGB
DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt/Main, prepares consolidated financial statements
which incorporate the financial statements of DG HYP. The consolidated financial statements of DZ BANK are published in the electronic German Federal Gazette (elektronischer Bundesanzeiger).
Hamburg, 10 February 2009
Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft
Hans-Theo Macke
78
Dr. Georg Reutter
Manfred Salber
|
Annual Report 2008
RESPONSIBILITY STATEMENT
To the best of our knowledge, and in accordance
with the applicable reporting principles, the annual financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the company,
and the management report of the company includes a fair
review of the development and performance of the business and the position of the company, together with a
description of the principal opportunities and risks associated with the expected development of the company.
Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft
Hans-Theo Macke
Dr. Georg Reutter
Manfred Salber
|
Annual Report 2008
79
The following is an English translation of the Audit Opinion, which has been prepared on the basis of the German language version of
the Financial Statements and the Management Report. The translation of the Financial Statements, the Management Report, and the
Audit Opinion are provided for convenience; the respective German versions shall be exclusively valid for all purposes.
AUDIT OPINION
We have issued the following opinion on the financial statements and management report:
We have audited the annual financial statements,
comprising the balance sheet, the income statement and
the notes to the financial statements, together with the
bookkeeping system, and the management report of Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft,
Hamburg, for the fiscal year from 1 January 2008 to
31 December 2008. The maintenance of the books and
records and the preparation of the annual financial statements and management report in accordance with German
commercial law are the responsibility of the Company’s
management. Our responsibility is to express an opinion on
the annual financial statements, together with the bookkeeping system, and the management report based on our
audit.
We conducted our audit of the annual financial statements in accordance with Sec. 317 HGB („Handelsgesetzbuch“: „German Commercial Code“] and German
generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer
(Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the audit such that
misstatements materially affecting the presentation of the
net assets, financial position and results of operations in the
annual financial statements in accordance with (German)
principles of proper accounting and in the management
report are detected with reasonable assurance. Knowledge
of the business activities and the economic and legal environment of the Company and expectations as to possible
misstatements are taken into account in the determination
of audit procedures. The effectiveness of the accountingrelated internal control system and the evidence supporting
the disclosures in the books and records, the annual financial statements and the management report are examined
primarily on a test basis within the framework of the audit.
The audit includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall presentation of the annual financial
statements and management report. We believe that our
audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit,
the annual financial statements comply with the legal
requirements and give a true and fair view of the net assets,
financial position and results of operations of the Company in accordance with German principles of proper accounting. The management report is consistent with the annual
financial statements and as a whole provides a suitable
view of the Company’s position and suitably presents the
opportunities and risks of future development.“
Ernst & Young AG
Wirtschaftsprüfungsgesellschaft
Steuerberatungsgesellschaft
Bühring
Wirtschaftsprüfer
(German Public Auditor)
80
Kaltschmidt
Wirtschaftsprüfer
(German Public Auditor)
|
Annual Report 2008
REPORT OF THE SUPERVISORY BOARD
In the 2008 financial year, the Supervisory Board and its committees monitored
the Management Board’s management of the Bank according to statutory regulations and those regulations set out in the Bank’s articles of association, and
also took decisions on those transactions required to be presented to the
Supervisory Board.
In fulfilling its tasks, and in accordance with statutory requirements, the Supervisory Board formed a Human Resources Committee, an Audit Committee and
a Risk and Participations Committee. These Committees convened several
times during the 2008 financial year.
Dr. Thomas Duhnkrack,
Chairman of the Supervisory Board
The Management Board reported to the Supervisory Board on the bank’s situation and growth and on general business regularly, in good time and comprehensively, both in writing and in verbal reports. In addition, the Management
Board reported regularly to the Supervisory Board on ongoing business as well
as future business policy including the bank’s strategic and organisational orientation. The Supervisory Board also dealt with the bank’s risk situation, and
particularly the development of credit, market price, liquidity and operating
risks as well as additional key typical banking risks.
The Supervisory Board convened four times during the 2008 financial year. At these meetings, the
Supervisory Board received detailed reports on the current situation and the future strategic positioning of DG HYP, with updates on the work of the Committees being provided in rotation at two
of these meetings.
At its meeting on 5 March 2008, the Supervisory Board dealt with the 2007 financial statements
and the Bank’s realignment. At the meeting of 21 April 2008, Dr. Georg Reutter was appointed to
the Bank’s Management Board as an ordinary member. Following the implementation of the Bank’s
new organisational structure with effect from 1 June 2008, the Supervisory Board, at its meeting
on 18 June 2008, dealt with the future business development and direction of the Bank. At its
meeting on 19 November 2008, discussion focused in particular on the developments on the financial and capital markets and the resulting impact on the Bank.
Between meetings of the Supervisory Board, the Management Board informed it in writing of key
transactions. In urgent cases, the Supervisory Board approved key transactions outside of its meetings by passing written resolutions.
In regular discussions with the Chairman of the Management Board outside the meetings, the
Chairman of the Supervisory Board and the Chairman of the Audit Committee and the Risk and
Participations Committee also discussed key decisions, particular transactions, the bank’s business
growth, and, in particular, the future strategic realignment of the bank.
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Annual Report 2008
81
Ernst & Young AG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, Hamburg, presented a declaration of independence to the Supervisory Board and audited the annual financial
statements as at 31 December 2008, including the accounting and management report of DG HYP
for the financial year from 1 January 2008 to 31 December 2008 presented to it by the Management Board, and found these to be in line with statutory requirements. It issued an unqualified
audit opinion. The audit reports were submitted to members of the Supervisory Board, and were
discussed in detail. The Supervisory Board approved the results of the audit by the auditors.
The auditor participated in the Supervisory Board meeting to adopt the annual financial statements
according to section 171 (1) sentence 2 of the Aktiengesetz (AktG – German Public Limited Companies Act), and in the preparatory meetings of the Audit Committee and the Risk and Participations Committee, and reported on the key audit findings. The auditor was available to answer the
Supervisory Board’s questions.
The Supervisory Board, and the Audit Committee formed from amongst its number, reviewed in
detail the annual financial statements of DG HYP and the management report of DG HYP at their
meetings, and acknowledged and approved the findings of the auditor’s audit. There were no
objections to the annual financial statements and the annual report, which includes the management report.
At its meeting on 6 March 2009, the Supervisory Board approved the financial statements of
DG HYP as at 31 December 2008 prepared by the Management Board. The financial statements
are thus confirmed.
The Supervisory Board would like to thank the Management Board and all of the Bank’s employees
for their work during 2008, a year marked by the Bank’s realignment and the impact of the developments on the financial and capital markets.
Hamburg, 6 March 2009
Deutsche Genossenschafts-Hypothekenbank
Aktiengesellschaft
The Supervisory Board
Chairman of the Supervisory Board
82
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Annual Report 2008
Corporate Bodies And Committees; Executives
CORPORATE BODIES AND COMMITTEES; EXECUTIVES
Supervisory Board
Jürgen Handke
Herbert Schindler
DZ BANK AG Deutsche
Zentral-Genossenschaftsbank,
Frankfurt/Main,
Chairman
Chairman of the Management Board,
VR Bank Hof eG,
Hof
Director
Badischer Genossenschaftsverband
e.V. (Association of Cooperative
Banks in Baden), Karlsruhe
Dagmar Mines
Deutsche GenossenschaftsHypothekenbank AG,
Hamburg,
Deputy Chairman
Peter Bade
Member of the Management Board,
Volksbank Lüneburger Heide eG,
Soltau
Maik Brammer
Hamburg
Hans-Jürgen Buhlert
Hamburg
Carl-Christian Ehlers
Kieler Volksbank eG,
Kiel
Ralph Gruber
Hamburg
Peter Heinrich
Münchner Bank eG,
Munich
Rainer Kattinger
Stuttgarter Volksbank AG,
Stuttgart
Klaus Kohlmorgen
Hamburg
Dr. Reinhard Kutscher
Union Investment Real Estate AG,
Hamburg
Thomas Müller
Dresdner Volksbank Raiffeisenbank
eG,
Dresden
Manfred Nüssel
Martin Schmitt
Kasseler Bank eG
Volksbank Raiffeisenbank,
Kassel
Diedrich Taaken
Volksbank Esens eG,
Esens
Thorsten Wenck
Hamburg
Frank Westhoff,
DZ BANK Deutsche ZentralGenossenschaftsbank AG,
Frankfurt/Main
Winfried Willer
VR Kreditwerk Hamburg –
Schwäbisch Hall AG,
Hamburg
President of the German Raiffeisen
Federation,
Berlin
Updated: 1 March 2009
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Annual Report 2008
83
Management Board, Department Heads
Management Board
(and distribution of responsibilities)
Hans-Theo Macke
Dr. Georg Reutter
Manfred Salber
– German Originated and
Cooperative Sector Business
– International and
Secondary Market Business
– Treasury
–
–
–
–
Sibylle von Brunn
Patrick Ernst
Detlef Gäßler
Human Resources
Treasury
Back Office II / Special Portfolio
Steffen Günther
Jörg Hermes
Axel Jordan
International and
Secondary Market Business
Finance
German Originated and
Cooperative Sector Business
Dr. Cornelius Riese
Siegfried Schneider
Corporate Development,
Organisation and IT
Treasury Settlements
Peter Vögelein
Eckhard Wulff
Internal Audit
Management Board Office /
Legal / Communications
Chairman
– Management Board Office /
Legal / Communication
– Human Resources
– Internal Audit
– Corporate Development,
Organisation and IT
Back Office I
Back Office II / Special Portfolio
Treasury Settlements
Finance
Department Heads
84
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Annual Report 2008
Frank Stöfer
Back Office I
Trustees, Advisory Council
Trustees
Dr. Michael Labe
Volker Thilo
Dr. Peter Lassen
Judge at the Hamburg Higher
Regional Court (Hanseatisches Oberlandesgericht Hamburg),
Hamburg
Deputy Trustee,
Certified public accountant
and tax adviser (retired),
Hamburg
Deputy Trustee,
Judge (retired),
Hamburg
Rolf Witezek
Wolfgang Eckert
Dietmar Herderich
Volksbank Mittelhessen eG,
Gießen,
Chairman
VR-Bank eG,
Regen
Raiffeisenbank Mutlangen eG,
Mutlangen
Enno Emmerinck
Ulrich Jakobi
Hamburger Volksbank eG,
Hamburg
Volksbank Wetzlar-Weilburg eG,
Wetzlar
Alfred Foistner
Michael Joop
Raiffeisenbank Oberschleißheim eG,
Oberschleißheim
Volksbank Hameln-Stadthagen eG,
Hameln
Klaus Geurden
Andreas Mann
Volksbank Krefeld eG,
Krefeld
Volksbank Regensburg eG,
Regensburg
Manfred Geyer
Rudolf Müller
Raiffeisen Volksbank eG
Gewerbebank,
Ansbach
Volksbank Bonn Rhein-Sieg eG,
Bonn
Advisory Council
Dr. Dr. Claus Becker
Volksbank Darmstadt eG,
Darmstadt,
Deputy Chairman
Dr. Rolf Flechsig
Berliner Volksbank eG,
Berlin,
Deputy Chairman
Willi Braun
Aachener Bank eG,
Aachen
Bernhard Carl
H + G Bank Heidelberg Kurpfalz eG,
Heidelberg
Lothar Peters
Willi Göttsche
Raiffeisenbank eG,
Bad Bramstedt
Raiffeisenbank Ratzeburg eG,
Ratzeburg
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Annual Report 2008
85
Advisory Council
Hans-Werner Reuter
Alfred Salz
Günther Wainowski
Dithmarscher Volksund Raiffeisenbank eG,
Heide
Volksbank Rhein-Wupper eG,
Leverkusen
Vereinigte Volksbank AG
Böblingen/Sindelfingen – Schönbuch
– Calw/Weil der Stadt,
Sindelfingen
Elmar Stender
Wilhelm Rippen
Raiffeisenbank Wesermarsch-Süd eG,
Brake
Volksbank Marl-Recklinghausen eG,
Marl
Gerd Streuber
Tilman Römpp
Volksbank Bautzen eG,
Bautzen
Volksbank Hildesheimer Börde eG,
Söhlde-Hoheneggelsen
86
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Annual Report 2008
Horst Weyand
Volksbank Nahetal eG,
Bad Kreuznach
DG HYP ADDRESSES
20095 Hamburg, Germany
Rosenstrasse 2
Postfach 10 14 46
20009 Hamburg
Phone +49 40 33 34-0
Fax
+49 40 33 34-11 11
Internet:www.dghyp.de
Real Estate Centres for commercial investors
DG HYP
Real Estate Centre Berlin
Pariser Platz 3
10117 Berlin
Phone +49 30 3 19 93-51 01
Fax
+49 30 3 19 93-50 36
DG HYP
Real Estate Centre Düsseldorf
Ludwig-Erhard-Allee 9
40227 Dusseldorf
Phone +49 2 11 22 04 99-10
Fax
+49 2 11 22 04 99-40
DG HYP
Real Estate Centre Frankfurt
CITY HAUS 1, Platz der Republik 6
60325 Frankfurt / Main
Phone +49 69 75 06 76-21
Fax
+49 69 75 06 76-99
DG HYP
Real Estate Centre Hamburg
Rosenstrasse 2
20095 Hamburg
Phone +49 40 33 34-37 78
Fax
+49 40 33 34-11 02
DG HYP
Real Estate Centre Munich
Türkenstrasse 16
80333 Munich
Phone +49 89 51 26 76-10
Fax
+49 89 51 26 76-30
DG HYP
Real Estate Centre Stuttgart
Heilbronner Strasse 41
70191 Stuttgart
Phone +49 7 11 12 09 38-0
Fax
+49 7 11 12 09 38-30
Representative offices
DG HYP
London Representative Office
DG HYP
New York Representative Office
10, Aldersgate Street
London EC1A 4HJ
United Kingdom
Phone +44 20 777 676-13
Fax
+44 20 777 676-19
609 Fifth Avenue, 6th Floor
New York NY 10017
USA
Phone +1 212 796 43-00
Fax
+1 212 796 43-13
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Annual Report 2008
87
OVERVIEW
€ mn
2008
2007
3,766
2,941
– German originated/cooperative sector
2,425
2,076
– International/secondary market
1,341
865
0
2,394
750
1,760
Development of originated new
business1)
Portfolio investments2)
Treasury
– Originated loans to local authorities
– Public-sector
lending3)
2,066
5,392
7,865
8,862
10
405
Total assets
76,016
83,335
Real estate lending
21,774
22,499
– Pfandbrief sales and other sources of refinancing
Special portfolio4)
Portfolio development
Mortgage Backed Securities (MBS)
Public-sector3) and local authority loans
4,016
4,387
45,151
47,775
62,077
67,496
1,733
1,954
174
273
Covered bonds (Pfandbriefe)
and other debt securities
Own funds for solvency purposes
Gross profit
Revaluation results
Operating profit
Profit transfer
130
169
-111
-121
-62
-68
-129
-86
187
148
-
Production
This Annual Report is climate-neutral and printed on PEFC-certified
paper. The greenhouse gas emissions caused by the production
and distribution of this publication have been offset by investments
in an additional climate protection project.
Number of employees
Annual average
(full-time equivalent)
Vocational trainees
1)
2)
3)
4)
Completely suspended in response to the financial markets crisis
Securities and promissory note loans eligible as cover assets for public-sector covered bonds
Retail and non-strategic commercial loan portfolios
473
576
6
17

annual report 2008 - DG-Hyp

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