Big rise in lending from Berlin Hyp as bank restructures
Property financier Berlin Hyp raised new lending last year by 55% to €4.5bn, although this didn’t prevent bottom-line pre-tax earnings slipping to €120m from €128m in 2012. It expects 2014 revenues to fall short of last year mainly due to the reorganisation with the Landesbank Berlin group.
“Given the demanding environment in which Berlin Hyp operates, and the temporary costs incurred as a result, Berlin Hyp anticipates solid revenues for 2014 that will, however, fall noticeably short of 2013 figures,” the bank said in a statement. It is satisfied with earnings before tax and profit transfer in the challenging environment, under rising regulatory requirements and the negative impact from the restructuring of the Landesbank Berlin group – all of which will have an impact on earnings this year as well.
Berlin Hyp granted €3.2bn in new lending last year, up from €1.7bn in 2012, and extended a further €1.3bn. Return on equity fell to 13.8% from 15.4%. But bank chairman Jan Bettink said the substantial increase in new lending offset the negative effects of the low interest rates and group restructuring costs.
The bank is in the process of repositioning, which will see its corporate status changing into that of a unit of Landesbank Berlin Holding, alongside the Berliner Savings Bank (Sparkasse) separating hitherto combined operations. Berlin Hyp will then focus on commercial real estate lending in the German savings bank network. It has expanded its range of products and services, including the placement of a first property loan certificate (ImmoSchuldschein), exclusively tailored to saving banks’ investment requirements. It has also set up new service portals and expanded syndication activity with new partners.
“We achieved the milestones we set ourselves for 2013,” said Bettink. “However, 2014 will see Berlin Hyp come face to face with another major challenge, namely the re-allocation of the real estate portfolio of the real estate financing division formerly shared with Landesbank Berlin, which is necessary as a result of the strategic re-alignment of Berliner Sparkasse and Berlin Hyp.”
The common real estate financing division was discontinued at the end of 2013, and the portfolio separation began in December. The project will be completed this year. “By 2015 at the latest, the disentanglement of Berlin Hyp from Landesbank Berlin will be completed,” he added. “Berlin Hyp will then become a subsidiary of Landesbank Berlin Holding on equal footing with Berliner Sparkasse.”
Bettink added a cautionary note about this year’s prospects: “We believe that the current phase of low interest rates will remain in place throughout 2014, and therefore we cannot assume that there will be any positive interest-induced effects for our net interest income this year. In addition, this year’s asset quality review by the ECB will be a major focal point for all relevant financial institutions this year, including Berlin Hyp. We will have to devote a great deal of resources to this task.”
Meanwhile, the association of the 417 German Sparkassen, or savings banks, issued figures showing that the Sparkassen lent €40.2bn in private mortgages in 2013, a rise of 5% on the previous year. This represents one in every three housing loans in the country. The average equity provided by borrowers was 40%, which Sparkassen association president Georg Fahrenschon said was a good measure of the stability of the German residential market. Overall the Sparkassen raised their profits on mortgage lending by €100m to €2.1bn, even after €3.5bn of extra provision for future bad or doubtful lending, and a €1.2bn write-down on bad debts at, among others, Landesbank Berlin.