BayernLB to boost property lending despite hefty Austrian write-offs

Bavarian Landesbank BayernLB is the German bank most heavily exposed to the moratorium on €11bn of debt issued by Heta in Austria, the ‘bad bank’ of erstwhile BayernLB subsidiary Hypo Alpe Adria.

While BayernLB doubled its real estate lending profits last year to €180m on new business of €3bn, the €1.2bn of loan receivables from Heta which it was forced to write off (along with the sale of an unprofitable Hungarian subsidiary MKB) saw it booking a €1.3bn net loss.

Last year’s new commercial real estate lending of €3bn included €1bn of loan extensions, with 84% going to domestic property. BayernLB said it expects to increase this to €3.7bn in 2015 at stable margins, and to raise its overall property lending by €5bn to €19bn over the next five years. The growth is expected to come from two markets – firstly, by more lending to German clients on their overseas investments, and secondly by winning new business from foreign investors coming into Germany, particularly from the Far East, the Middle East and North and South America.

BayernLB brought twice their usual contingent of bankers to the MIPIM, reflecting their strengthened domestic network of offices in Berlin, Frankfurt, Düsseldorf, Hamburg and Stuttgart, in addition to their Munich head office. Announcing the bank’s new plans for growth in financing, BayernLB CEO Edgar Zoller said the bank planned to reach its financing goals without incurring any more risk than it currently is, “by only lending on projects which would make sense if the interest rate was not 1% or 2% as it is at the moment, but 5%.”

In particular, said Zoller, the bank is looking to finance more hotels, managed-care homes and logistic properties, with project developments not to surpass more than 25% of new lending. Currently BayernLB’s lending profile is 70% domestic and 30% outside Germany.