New-look Berlin Hyp sees strong demand for €500m Pfandbrief

Commercial property financier Berlin Hyp, which is currently undergoing a major restructuring and a new logo and company colours emphasising its integration into Germany’s Sparkassen-Finanzgruppe, will have been well pleased at the market reception for its first benchmark mortgage Pfandbrief of the year earlier this month.

The seven year bond with a volume of €500m and a coupon rate of 1.25%, was rated Aaa and AA+ by ratings agencies Moody’s and Fitch, and was placed on the market by a consortium consisting of Commerzbank, Credit Suisse, DZ Bank, J.P. Morgan and Landesbank Baden-Württemberg.

The order book opened in the mid-swap +7 region and closed at mid-swap +5 basis points only 1.5 hours later. At this level, it received orders worth over €800 mln, representing an oversubscription of more than 60%. At closing Berlin Hyp collected 50 individual orders, of which 89% came from Germany, with banks and German savings banks making up 67% of all investors in the issue.

Meanwhile, news from other Hypothenkenbanks in Germany point to a resurgence of confidence in the sector for new real estate lending, and a further easing of pressure for borrowers this year.

Hamburg-headquartered DG Hyp, the commercial real estate bank in the Volksbanken Raiffeisenbank cooperative financial network and a subsidiary of DZ Bank, has increased its emphasis on local lending. For 2013, new business at €5.4bn was slightly up on the previous year, of which €5.3bn was in Germany – or almost the entire amount. Joint lending with its German co-operative banks came to €2.9bn, up from €2.2bn in 2012. Besides offices in Hamburg, Berlin, Dusseldorf, Frankfurt, Stuttgart and Munich, DG Hyp opened regional offices in Kassel, Leipzig and Hannover (in Kassel and Leipzig sharing premises with the local cooperative banks).

Down in Munich, Münchener Hypothekenbank, which is also a partner bank for the co-operative Volksbanken and Raiffeisenbanken, also booked full-year operating results double the previous year’s, with net income rising to €6.7m. Despite what it said was “intensive competition in the property financing market, Münchener Hyp made €3.6bn in mortgage loans, although the volume of new residential property financing business declined slightly to €2.9bn. According to board chairman Dr. Louis Hagen, “Currently we are seeing that competition in the residential property financing market is being increasingly driven by lending conditions. We are not, however, interested in growth at any price. Margins also have to be adequate.” He added, “The business environment is right for us. Demand for property financing – both for residential and commercial property – is very likely to remain high. For this reason we are confident that we will be able to further expand our position in the market,"

The bank’s new business in commercial property financing rose by 12% to € 740 million over the year. Overall the bank’s portfolio of mortgage loans rose by €0.5bn to €21.5bn, of which about three-quarters is lending within Germany.