PDF format. - DG-Hyp

Transcription

ANNUAL REPORT 2015
OVERVIEW
€ mn
2015
2014
2013
5,722
5,637
85
4,941
4,709
232
5,378
5,328
50
378
359
438
4,114
3,628
3,293
Total assets
39,821
42,912
49,716
Mortgage loans*)
18,674
19,535
20,998
Originated loans to local authorities
6,525
6,996
7,636
Public-sector lending**)
8,442
9,671
11,144
Bank bonds***)
1,520
1,722
2,232
Development of new business
Commercial Real Estate Finance
Domestic
International
Treasury
Pfandbrief sales and other refinancing sources
Portfolio development
Mortgage-backed securities (MBS)
1,273
1,511
1,722
23,086
25,518
29,332
1,668
1,692
1,562
Total capital ratio (%)
12.7
11.2
12.6
Tier 1 ratio (%)
10.4
9.0
10.9
7.1
5.6
n/a
263
264
251
29
37
43
Pfandbriefe and other debt securities
Own funds****)
Common equity tier 1 ratio (%)
Profit and Loss Account
Net interest income
Net commission result
Administrative expenses
116
118
117
Net other operating income/expenses
-5
-6
3
Risk provision
64
-34
-41
Net financial result
-92
10
125
Operating result
143
153
264
0
68
29
Allocation to the fund for general banking risks
Partial profit transfer
18
20
20
Profit transfer
125
65
215
Cost/income ratio (%)
44.4
43.9
41.7
Return on equity (%)
13.9
14.8
28.8
454
449
438
Number of employees
Annual average
*)
**)
Since 2015, mortgage loans are disclosed including receivables collateralised by property liens, previous year‘s figures were adjusted accordingly.
Lending transactions with national governments and sub-sovereign entities as well as state-guaranteed corporate bonds, previous year‘s figures were
adjusted accordingly.
***) Securities issued by banks; disclosed within public-sector lending in previous years.
****) 2013 in accordance with the SolvV – limited comparability.
ANNUAL REPORT 2015
Deutsche Genossenschafts-Hypothekenbank AG
2
DG HYP | Annual Report 2015
CONTENTS
Letter from the Management Board
4
Report of the Supervisory Board
6
DG HYP
Management Report
Financial Statements
The commercial real estate bank in the Volksbanken
Raiffeisenbanken cooperative financial network
10
Sustainable Corporate Governance
12
Business Model
16
Economic Report
20
Economic environment
20
Development of the real estate markets
24
Business performance
30
Credit business
30
Refinancing
32
Net Assets, Financial Position and Financial Performance
36
Employees
44
Report on Expected Developments, Opportunities and Risks
48
Balance Sheet
68
70
Statement of Changes in Equity
71
Cash Flow Statement
72
Notes to the Financial Statements
73
General Notes
73
Notes to the Balance Sheet
75
Notes to the Profit and Loss Account
86
Coverage
87
Other Information on the Annual Financial Statements
95
Responsibility Statement
98
Audit Opinion
99
Service
Corporate Bodies and Committees, Executives
100
DG HYP Adresses
103
3
Letter from the Management Board
The Management Board of DG HYP: Manfred Salber and Dr Georg Reutter (Chairman)
Ladies and Gentlemen, dear business associates,
Amidst a challenging environment combining monetary policy with persistently low interest rates, intense competition and
tight regulatory requirements, DG HYP performed well in the 2015 financial year. We have successfully met the challenges
presented, conducted business with a sense of perspective and diligence, and continued to pursue a conservative approach.
Against this backdrop, we are pleased to present a set of good results and evidence of new business momentum, both of
which are noticeably above the previous year‘s level. For our clients, we proved to be a reliable financing partner during the
year under review, and our positioning in the market as a leading provider of commercial real estate finance was reaffirmed.
Joint market coverage with the cooperative banks, which we intensified, contributed significantly to this performance.
In the past year the capital markets continued to operate in the wake of moves by the central banks. The European Central
Bank (ECB) is persisting with its expansive monetary policy, in order to keep interest rates at the prevailing low level. This
contrasts with the signal sent from the US in December, when the US Federal Reserve moderately raised its target rate.
Investors took the recurring discussions about a possible exit of Greece from the euro area more or less in their stride. This
development attests to the fact that the euro area has become more stress-resistant, as a result of mechanisms established
in the recent past to deal with potential crises of this kind.
In addition, economic development in the euro area is on a broader footing: the marked decline in energy prices has reduced the burden on consumers in industrial countries over the past year. However, disparities between individual member
states remain significant. The German economy is on a growth path, thanks to an upswing in consumer demand. Although
Germany‘s strong export performance was the main driver of the economy in past recovery phases, this time it is domestic
demand – based on a sound labour market and rising real incomes that has provided the necessary impetus.
The German commercial real estate market continued to benefit over the past year from the high level of market liquidity
and strong macroeconomic data. This was accompanied by record activity levels on the German transaction market, with
4
€ 80 billion in residential and commercial real estate investments, whereby commercial properties accounted for about € 55
billion thereof. International investors contributed to growth, accounting for more than half of the total investment volume.
In this environment, we achieved a positive new business performance in Commercial Real Estate Finance: with a volume
of € 5.7 billion – of which € 5.6 billion in Germany – we exceeded the previous year‘s result. We were also successful in
regional locations, where we have particularly good access to the market by joining forces with local cooperative banks
as partners – as confirmed by the jointly transacted lending business. With our partner banks, we generated more new
business than in the previous year, with a volume of approx. € 2.8 billion. The current market environment offers good
prospects, yet presents us with challenges. High transaction volumes mean that we are increasingly confronted with a
preference for special repayment options.
DG HYP‘s financial position has remained favourable, as in the previous years. The bank‘s stable financial performance is
down to a rigorously pursued business and risk policy. Net interest income has stabilised at an adequate level. We were able
to slightly reduce administrative expenses; provisions for loan losses also developed positively. We took this as an opportunity to accelerate the scheduled reduction of non-strategic portfolios, under risk and equity considerations.
Our consistent efforts to achieve sustainable corporate governance were awarded a “C+” rating result by oekom research
during the year under review. In light of the positive result, oekom research awarded us the “Prime” status for the first
time – we thus rank among the top companies in the industry. This excellent rating has strengthened our resolve to move
the bank towards a sustainable future.
In an extensive empirical brand value study carried out by the Berlin-based European Real Estate Brand Institute in the
spring of 2015, we were awarded the title of “strongest bank brand in the real estate sector”. Out of a total of 22 criteria,
we scored points especially on “regional competence“ and “client service“. The award confirms the strong competitive
positioning of the Volksbanken Raiffeisenbanken cooperative financial network, which DG HYP represents in the market by
joining forces with the cooperative banks.
In November, the cooperative central banks DZ BANK and WGZ BANK declared the intention to combine their respective
strategic competence and operational strengths. We welcome this decision to merge both central institutions. This combination will enable the Volksbanken Raiffeisenbanken cooperative financial network to assume an even more forward-looking approach, and it provides us with a good opportunity to move our successful market presence forward.
The business environment will remain challenging in the current year, with the competitive situation unlikely to ease.
At the same time, the positive overall economic situation and historically low interest rates will ensure continued strong
demand for tangible assets. Real estate will therefore continue to be an attractive and sought-after asset class. Against this
backdrop, we will pursue our business with a sense of perspective, carefully weighing up risks and leveraging opportunities.
Our long-standing client relationships, the good cooperation in the Volksbanken Raiffeisenbanken cooperative financial
network, and the outstanding commitment of our employees: all of these factors also bode well for the current year.
Yours sincerely,
The Management Board
Hamburg, March 2016
5
Report of the Supervisory Board
REPORT OF THE SUPERVISORY BOARD
DG HYP‘s successful strategic focus was reflected in the bank‘s positive business performance in the 2015 financial year. Continued high demand for real
estate, accompanied by increasing property prices, falling yields, and persistently
low interest rate levels characterised the German real estate market during the
year under review. Furthermore, investors also began to focus increasingly on
regional locations amid a challenging competitive environment and increased
margin pressure. In this changed environment, DG HYP affirmed its position as a
leading provider of real estate financing in the core German market during the
2015 financial year. Together with the know-how and regional presence of the
Volksbanken Raiffeisenbanken cooperative financial network, DG HYP also positioned itself successfully and sustainably among its clients, within the framework of intense partnerships with cooperative banks, and thus performed successfully during the 2015 financial year. The high level of regulatory requirements
had to be taken into consideration in this context as well.
As part of its activities, the Supervisory Board also had to address, in detail, the
bank‘s business performance, the continued positive development of risks, and
Frank Westhoff
the bank‘s regulatory environment in 2015. In particular, this concerned the status and progress made concerning the implementation of requirements under
Chairman of the Supervisory Board
BCBS 239 (the “Principles for effective risk data aggregation and risk reporting“
promulgated by the Bank for International Settlements). The activities of the Supervisory Board also focused on the result of
the evaluation of the Supervisory Board and Management Board, as well as the bank‘s business and risk strategy.
The Supervisory Board and its committees
During the 2015 financial year, the Supervisory Board of DG HYP and its committees monitored the Management Board‘s
management of the bank according to statutory regulations and those set out in the bank‘s Articles of Association, and
also took decisions on those transactions required to be presented to the Supervisory Board for approval. To fulfil its tasks,
the Supervisory Board engaged a Nomination Committee, a Remuneration Oversight Committee, an Audit Committee and
a Risk Committee during the year under review.
The self-evaluation of the Supervisory Board and evaluation of the Management Board performed between March and April
2015 concluded that the structure, size, composition and performance of the Supervisory Board and Management Board,
as well as the knowledge, abilities and experience of the individual members of both of the Supervisory Board and Management Board (as well as both boards as a whole) were wholly in accordance with the statutory requirements and those
requirements set out in the bank’s Articles of Association.
The Supervisory Board has adequate human and financial resources at its disposal to assist members of the Supervisory
Board in taking up their office and ensure they receive in-house training to help them maintain the required expertise. An
in-house training seminar for members of the Supervisory Board has been scheduled for the 2016 financial year.
Cooperation with the Management Board
The Management Board reported to the Supervisory Board on the bank’s situation and performance, general business
developments and the risk exposure, regularly, in good time and comprehensively, both in writing and in verbal reports.
Furthermore, the Supervisory Board was informed by the Management Board about the bank‘s operative and strategic planning, and about material lending exposures and investments. The Supervisory Board was kept informed about the bank‘s
profitability on an ongoing basis. The Supervisory Board discussed these issues as well as current developments with the
Management Board; it advised the Management Board and supervised the management of the Company. The Supervisory
Board was involved in all decisions that were of fundamental importance to the enterprise.
6
Meetings of the Supervisory Board
The Supervisory Board convened four times during the 2015 financial year. In addition, the committees engaged by the
Supervisory Board – the Nomination Committee, the Remuneration Oversight Committee, the Audit Committee and the
Risk Committee – convened on numerous occasions in 2015. The chairmen of the Supervisory Board committees regularly
gave account of the work in the respective committees to the plenary meeting.
Between meetings of the Supervisory Board, the Management Board informed it in writing of key events and transactions.
In regular discussions with the Chairman of the Management Board outside the meetings, the Chairman of the Supervisory
Board and the chairmen of the committees also discussed key decisions, particular transactions, and the development of the
bank‘s business and risk exposure. Overall, the members of the Supervisory Board and its committees participated regularly
in the meetings of the respective bodies and written resolutions during the 2015 financial year. There were no potential
conflicts of interest.
Cooperation with the external auditors
Ernst & Young AG Wirtschaftsprüfungsgesellschaft, Hamburg, presented a declaration of independence to the Supervisory
Board and audited the annual financial statements of DG HYP, including the accounting and management report of DG HYP
for the financial year 2015 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 report was submitted to members of the Supervisory Board, and
was discussed in detail during Supervisory Board meetings. The Supervisory Board agreed to the results of the audit by the
auditors in line with a recommendation by the Audit Committee.
Approval and confirmation of the financial statements
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 in their meetings. The Chairman of the Audit Committee
notified the Supervisory Board about the detailed discussions of the Committee regarding the financial statements and the
management report of DG HYP. The auditor‘s representatives participated in the Supervisory Board Meeting to adopt the
annual financial statements and in the preparatory meetings of the Audit Committee and the Risk Committee, and reported
on the key findings of their audit in detail. They were also available to answer questions by Supervisory Board members.
The Supervisory Board raised no objections against the accounts. The Supervisory Board approved the financial statements
of DG HYP as at 31 December 2015, prepared by the Management Board, in its meeting on 4 March 2016. The financial
statements are thus confirmed.
Personnel changes within the Supervisory Board and the Management Board
Mr Gert Wittkop resigned from his office as member of the Supervisory Board of DG HYP, effective 22 January 2015.
Mr Jürgen Handke’s mandate ended at the close of the Annual General Meeting of DG HYP held on 6 March 2015.
Ms Brigitte Baur and Ms Anja Iversen were both elected as new members to the Supervisory Board of DG HYP, effective as of
the close of the Annual General Meeting held on 6 March 2015. Otherwise, there were no changes made to the members
of the Supervisory Board and the Management Board during the 2015 financial year.
The Supervisory Board would like to thank the Management Board and all of DG HYP‘s employees for their successful work
during 2015.
Hamburg, 4 March 2016
Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft
The Supervisory Board
Frank Westhoff
Chairman of the Supervisory Board
7
AN EXCELLENT MARKET
POSITION
RECOGNISED AS THE STRONGEST REAL
ESTATE BRAND IN THE “BANKS“ CATEGORY
8
As a subsidiary of DZ BANK, DG HYP is part of the Volksbanken Raiffeisenbanken cooperative financial network, one
of the cornerstones of the German financial industry – with
trusted partners from all financial sectors. The network‘s high
level of solidity is built on a sustainable business model and
the good market positioning of the cooperative banking
sector, with high-performance specialist banks and other
group companies. DG HYP is one of Germany‘s leading real
estate banks. In 2015, our excellent market position was reaffirmed in an annual empirical brand value study, where
DG HYP was recognised as Germany‘s strongest real estate
brand in the category “banks“.
9
DG HYP
The commercial real estate bank in the Volksbanken Raiffeisenbanken cooperative financial network | Sustainable Corporate Governance
THE COMMERCIAL REAL ESTATE BANK IN THE
VOLKSBANKEN RAIFFEISENBANKEN COOPERATIVE
FINANCIAL NETWORK
The Commercial Real Estate Finance specialist
within the cooperative financial network
Real estate is a key economic factor in Germany, with major
significance for society as a whole. Commercial real estate
financing therefore remains an indispensable core business
segment of the Volksbanken Raiffeisenbanken cooperative
financial network, in which DG HYP, as a specialist, competence centre and the first point of contact for the German
cooperative banks, assumes the key role on all material
issues. DG HYP‘s central business policy role is to anchor the
business segment in the financial network, and to realise
financing solutions together.
Cooperation is a guarantee for successful market
presence
DG HYP offers the German cooperative banks a high-performance range of products and services tailored to meet
their specific needs. Cooperation is the guarantee for
successfully tapping potential in commercial real estate
finance. This allows cooperative banks to offer their medium-sized clients larger-sized financing deals with DG HYP
as a partner, or to diversify their risks. The German cooperative banks contribute their regional market knowledge, and
use the real estate and financing expertise of their partner
within the cooperative banking sector. In this context, both
sides benefit from joint market coverage – DG HYP from
the direct contact with regional clients, and the German
cooperative banks from the business relationships arising
from developing the market throughout Germany. Further
services in the financial network comprise the rating of
real estate clients and the valuation of properties through
VR-WERT, a wholly-owned subsidiary of DG HYP.
Good ratings confirmed
Standard & Poor‘s (S&P) reviewed and confirmed DG HYP‘s
good ratings in the 2015 financial year. S&P paid tribute to
DG HYP‘s successful business model as a real estate bank
deeply integrated within the strongly capitalised, highly
profitable Volksbanken Raiffeisenbanken cooperative financial network. DG HYP‘s Pfandbrief issues have retained their
top triple-A rating, thanks to the high quality of the bank’s
cover assets pools.
Rating overview (Standard & Poor‘s)
Long-/short-term liabilities/outlook
Public Pfandbriefe
Mortgage Pfandbriefe
Bearer bonds
10
A+/A-1/stable
AAA
AAA
A+
Issuer credit rating
Public Pfandbriefe (Senior Secured)
Mortgage Pfandbriefe (Senior Secured)
Senior Notes (Senior Unsecured)
DG HYP – PART OF A POWERFUL GROUP
DG HYP is a member of the DZ BANK Group, which also comprises home loan savings specialist Bausparkasse
Schwäbisch Hall, DZ PRIVATBANK, R+V Insurance, retail lender TeamBank, fund management specialists Union Investment Group, VR Leasing Group, as well as various other specialist financial services providers. The various DZ BANK
Group entities are the cornerstones of a comprehensive range of bancassurance products and services offered by the
Volksbanken Raiffeisenbanken cooperative financial network. Within this strong network, DZ BANK Group entities
work together to optimise the products and services delivered to cooperative banks and their roughly 30 million
customers.
DZ BANK Group is a part of the Volksbanken Raiffeisenbanken cooperative financial network, which comprises more
than 1,000 individual German cooperative banks and ranks among the largest financial services organisations in Germany. Within the cooperative financial network, DZ BANK AG acts as the central institution for more than 850 cooperative banks with a total of 10,000 branches, and as a commercial bank.
Combining banking services with insurance products and services, as well as real estate financing and a range of services for securities investments, has a long-standing tradition within the Volksbanken Raiffeisenbanken cooperative
financial network. The specialist institutions within the DZ BANK Group each offer highly competitive and reasonably-priced products in their respective area of expertise. This allows Germany’s cooperative banks to offer their customers an end-to-end range of first-rate financial services.
11
DG HYP
The commercial real estate bank in the Volksbanken Raiffeisenbanken cooperative financial network | Sustainable Corporate Governance
SUSTAINABLE CORPORATE GOVERNANCE
Third sustainability report published
As part of the DZ BANK Group, DG HYP is committed to
the fundamental cooperative concept of sustainable and
responsible business practices. This means that the bank‘s
entrepreneurial spirit has a long-term horizon; it uses natural resources in a careful and efficient manner, and takes
risks and opportunities into consideration as part of its decision-making processes. Within the scope of its sustainability
reporting, DG HYP informs its stakeholders in a transparent
and detailed manner about key developments and progress
in this area. Against this background, DG HYP published its
third sustainability report in the 2015 financial year, which
was prepared according to the international standards of
the Global Reporting Initiative (GRI). At the same time,
the report provides information on the progress made by
DG HYP in integrating the UN Global Compact into business practice.
Economic responsibility
Corporate governance founded on economic responsibility is a material basis for sustaining performance and for
securing long-term success. DG HYP aims to apply this responsibility in its day-to-day business. As part of its business
model, the bank applies a conservative risk strategy, forges
long-term business relationships and treats clients with
honesty, trust and a sense of partnership. The bank takes
its economic responsibility seriously, in conjunction with
financing decisions. As a result, in the 2015 financial year
DG HYP received the REAL ESTATE BRAND AWARD for
the first time, as Germany’s strongest real estate brand in
2014 in the category “Banks”. The award was based on an
annual empirical brand value study conducted by the Berlin-based European Real Estate Brand Institute (EUREB Institute). According to the EUREB Institute, the performance
criteria “regional competence” and “customer service” –
categories in which DG HYP increased its performance –
were decisive factors in determining the strongest bank
brand. The award is a reflection on the bank‘s successful
positioning in the German real estate market, and its significance for the Volksbanken Raiffeisenbanken cooperative
financial network.
In the 2015 financial year DG HYP provided financing for an
additional property, on the EUREF Campus in Berlin located
beside the famous gasometer. The “intelligent city of the
12
future“ contains only buildings that produce a CO2-neutral
form of energy that already meets the Federal Government‘s
climate protection targets for 2050.
Responsibility for its employees
The entrepreneurial success of DG HYP depends largely on
the dedication and performance of its employees. The bank
therefore pursues a human resources policy that aims to
fulfil its employees‘ needs while meeting economic requirements. Important human resources components include the
emphasis on the professional and personal competence of
the staff over the long term, targeted personnel development as a consequence of demographic change, and the
recruitment of qualified trainees. Given this background,
DG HYP intensified the advancement of women in the 2015
financial year and established its training programmes. Within the framework of the dual-track programme launched in
2014, the “Bachelor of Arts in Banking & Finance”, two
new jobs were created for students at DG HYP during
the year under review. In addition, the bank launched the
fourth cycle of its trainee programme and hired a total of
five qualified trainees in Commercial Real Estate Finance
and in the Treasury department.
Corporate responsibility
The cooperative basic values of help for self-help, solidarity,
partnership and social responsibility are cornerstones of
DG HYP‘s social commitment. The bank and its staff pursue an active programme of social and community duties.
Against this background, and besides its own activities,
DG HYP supports a large number of social projects and
organisations, professionally-oriented non-profit organisations, as well as a commitment to society in conjunction
with the Volksbanken Raiffeisenbanken cooperative financial network. For the third year in a row, DG HYP was the
host and financial backer of the annual meeting of the
CLUB OF ROME schools. As a company which shares the
values and goals of the CLUB OF ROME school network,
the bank received an award from the network in November, in recognition of its role as an education partner of the
CLUB OF ROME schools. Through its commitment, DG HYP
contributes to the implementation and expansion of the
CLUB OF ROME school network’s activities at national level.
Together with 15 other companies, DG HYP has been
a member of the Real Estate and Leadership Foundation
since 2015. The joint goal of the association is to promote
science, research and education relating to interdisciplinary
and cross-interface leadership issues of the real estate business. Moreover, in 2015 DG HYP supported two students
at the HafenCity University Hamburg (HCU) by granting
German scholarships for the first time. In terms of social
responsibility, the bank subsidised the Hamburg Donor’s
Parliament and a relief project for refugees. In addition,
DG HYP made a donation to the staff annual Christmas
collection for the “Midnight bus”, which is run by the
community care centre for homeless people, and to the
project “SeniorPartner community care centre” organised
by Diakonisches Werk in Hamburg. DG HYP usually doubles
what staff has collected. As in the previous year, DG HYP
decided not to send Christmas cards during the year under
review. DG HYP has used the resulting savings to support
three projects of „SOS Children‘s Villages“, designed to aid
children, young people and families in need.
Ecological responsibility
The responsible handling of natural resources and environmental protection are of the utmost importance to
DG HYP. The bank is therefore continuously deepening its
contribution to climate and resources protection. DG HYP
further developed its environmental management system
during the period under review. In order to continue to
make allowance for the conscious and interdisciplinary
discussion about the ecological, social and social effects of
the bank’s operations, the sponsorship of issues assumed by
various functions will be continued. Furthermore, DG HYP
optimised the food concept in its company staff restaurant
during the year under review. The bank has been increasingly reliant on high-quality regional products, whose origin
and production are known to the bank. That DG HYP ranks
among the top companies in its sector in terms of social and
ecological services was acknowledged by the sustainability
rating agency oekom research. The bank was awarded a
“C+” rating in the “oekom Corporate Rating” in the spring
of 2015. It was therefore awarded “Prime” status for the
first time.
Sustainability market initiative
With a view to integrating sustainability to an even greater
extent in business processes, DG HYP has been playing an
active role in DZ BANK Group‘s sustainability market initiative
since 2012. This initiative aims to bundle sustainability-related activities, take advantage of market opportunities,
avoid risks and foster the active exchange of knowledge
and experience between the members of the Group. The results of this collaboration are, for example, the introduction
of a Group-wide database structure, common supply standards and a coordinated environmental and climate strategy.
SUSTAINABILITY RATING: DG HYP UPGRADED TO ‘PRIME’ STATUS
12/2012
12/2013
01/2015
13
EXCITING TASKS
CHALLENGING DOMAIN WITH A HIGH DEGREE OF RESPONSIBILITY
Project managers (left to right)
Heiko Drevs, Credit Risk Management, Hamburg Real Estate Centre, DG HYP
Tobias Mewes, Regional Director, Hamburg Real Estate Centre, DG HYP
Christina Uhkötter, Department Manager Real Estate Office, BERENBERG
Michael Montebaur, Department Manager Real Estate Office, BERENBERG
Dr Thomas Brakensiek, Board Member, Hamburger Volksbank eG
Herbert Hagen, Corporate Client Service, Hamburger Volksbank eG
Height 1, Hamburg
14
© Z | U | G Galileo GmbH
Galileo, Munich
© WE-AG
Motel One am Alex, Berlin
© HHVISION
Wohnen am Schloss, Bad Homburg
Jointly financed with Raiffeisenbank Oberursel eG
© Hans-Jürgen Fuchs for ECE
Breuningerland, Sindelfingen
Jointly financed with 66 German cooperative banks
We offer attractive jobs for our employees in the
as the Finance or IT functions. All employees assume
Commercial Real Estate Finance segment involving
responsibility as part of the team. DG HYP has lean
challenging and diverse tasks. The working environ-
management structures and flat hierarchies. Each
ment at the bank is multifaceted and ranges from
individual is visible and, through his/her actions,
client service in sales to risk management and
helps ensure that the bank operates successfully on
Treasury – right through to central control units such
the market.
15
Management Report
Business Model | Economic Report | Net Assets, Financial Position and Financial Performance | Employees | Report on Expected Developments, Opportunities and Risks
BUSINESS MODEL
The commercial real estate bank for the Volksbanken
Raiffeisenbanken cooperative financial network
DG HYP is the commercial real estate bank of the Volksbanken Raiffeisenbanken cooperative financial network
and one of the leading real estate banks in Germany. Its
core business segment is Commercial Real Estate Finance,
where the bank operates as a partner to more than 1,000
cooperative banks in Germany. The focus of the business
activities is on financing properties in the German market.
In addition, DG HYP supports its German clients‘ investment
projects in selected international markets.
Focus on the traditional lending business
As a real estate bank, DG HYP focuses on the traditional
lending business, whereby the loans it grants lay the foundation for long-term partnerships. The bank‘s Commercial
Real Estate Finance activities are focused on the core segments of office, residential and retail properties. DG HYP is
also involved in the specialist segments of hotels, logistics
and real estate for social purposes, within the scope of its
credit risk strategy. Target clients are private and institutional investors, housing companies, as well as commercial and
residential real estate developers. When selecting exposures, the priorities are the quality of the client relationship,
the third-party usability of the financed property, and collateralisation through first-ranking liens.
Joint market coverage with the German cooperative
banks
The bank‘s new business activities are being developed successfully with the German cooperative banks. Thanks to its
size and stability, the German real estate market provides
particular potential for successful business. DG HYP offers
its clients an extensive range of tailor-made financing solutions, which are adapted to client needs and current market
16
developments. The resulting opportunities are consistently
exploited together with the German cooperative banks.
IMMO META products underpinning cooperation
With the IMMO META product family, DG HYP offers the
German cooperative banks a high-performance and comprehensive range of products for a successful cooperation.
The core product is IMMO META REVERSE+, introduced in
2010, through which many cooperative banks can acquire
individual tranches of a financing concluded by DG HYP, as
partners in the syndicate, with equal priority and in a standardised manner. Portions of a loan against charges on real
property are placed in this way. The German cooperative
banks can access an online platform, to simplify the process
and ensure efficient distribution. A framework agreement
must be concluded prior to utilisation. Origination and provision of information to participating German cooperative
banks – also about existing exposures – is carried out solely
via this platform. IMMO META REVERSE+ has met with a
good response within the Volksbanken Raiffeisenbanken
cooperative financial network. Overall, DG HYP has concluded approximately 490 framework agreements to date.
The largest transaction of the year under review related to
the “Breuningerland” property in Sindelfingen, which was
awarded the title of Germany‘s currently most successful
shopping centre, and which was financed by 66 cooperative banks.
Joint lending in the regions
Further products of a cooperation based on partnerships are
IMMO META REVERSE and IMMO META. Via IMMO META,
DG HYP participates on a pari-passu basis in commercial
real estate finance exposures originated by cooperative
banks with medium-sized real estate clients in their region.
The cooperative banks retain their leadership role with such
financings. This product is particularly suited to banks with
regional potential in commercial real estate financing. Using IMMO META REVERSE, the cooperative banks can get
involved in selected large-volume projects in their regions
from as early as the origination phase. The cooperative
banks themselves decide on the level of their involvement,
participating on a pari-passu basis.
Successfully managing real estate risks
In the form of IMMO VR RATING, DG HYP has developed
a web-based, convenient rating procedure that is uniform
across the cooperative network to complement its product
range. This enables the German cooperative banks to determine the customer-specific default risk associated with their
real estate customers. The banks can use the process to
implement a modern risk management process that takes
account of all of the relevant factors. IMMO VR RATING is
aimed at cooperative banks that focus on commercial real
estate finance, and at those for whom commercial real
estate accounts for a significant proportion in their credit
portfolio. The rating application provides a key foundation
for joint lending business within the Volksbanken Raiffeisenbanken cooperative financial network, and is encountering continuous demand growth. At present, 254 German
cooperative banks use IMMO VR RATING.
Close to our clients, flexible and effective
With six Real Estate Centres in Germany’s major cities,
namely Hamburg, Berlin, Dusseldorf, Frankfurt, Stuttgart
and Munich, as well as regional offices in Hanover, Kassel,
Leipzig, Mannheim and Nuremberg, DG HYP has a good
presence throughout the country, which it leverages to
finance suitable properties for its commercial real estate
clients. The Real Estate Centres provide local client coverage through front office and back office units, whereby the
lending process can be managed flexibly and effectively.
The success factors of market positioning are client proximity, professionalism and expertise, funding power and a
high degree of market penetration with good networking.
Real estate valuation by VR WERT
The valuation of real estate properties is an important step
in order to conduct credit pricing commensurate with risk
and guarantee the portfolio quality of the loans. Within the
Volksbanken Raiffeisenbanken cooperative financial network, this task is performed by VR WERT, a wholly-owned
subsidiary of DG HYP. The focus is on the valuation of
commercial real estate, which requires a differentiated, individual assessment of each exposure and therefore requires
a corresponding high level of competence by the valuer.
VR WERT provides all of DG HYP‘s valuations.
VR WERT creates lending and market valuations for the
Volksbanken Raiffeisenbanken cooperative financial network on the basis of the legal framework and the Regulation on the Determination of the Mortgage Lending Value
(Beleihungswertermittlungsverordnung). Added to this is
the preparation of valuations of agricultural holdings and
companies operating in the food and beverage industry, as
well as for special types of real estate. The expert opinion
on construction plans, construction projects and methods,
production costs, viability and property developments, are
complemented by construction rate reports and resource
control. The range of services comprises the valuation of
real estate portfolios for investors, banks and institutional
investors.
17
NATIONWIDE PRESENCE
IN CENTRAL METROPOLITAN AREAS
We are where our clients are. Our Real Estate
office and back office functions: hence, from the
Centres are conveniently located in Germany‘s
initiation of business to the securing of financing,
inner-city metropolitan areas of Hamburg, Berlin,
our clients are supported directly from the individ-
Dusseldorf, Frankfurt, Stuttgart and Munich. Our
ual real estate centres.
teams at the individual locations cover both front
RE
RE
CH
CB
AM
ER
BU
RG
LIN
RE
CD
US
SE
LD
OR
F
RE
CF
NK
RT
RE
H
NIC
U
CM
18
T
UT
T
CS
FU
DG HYP Real Estate Centre (REC) Locations
RT
GA
RA
RE
Ralf Streckfuss
Head of Credit Risk Management in the
Real Estate Centre Dusseldorf
“DG HYP helped me in my professional and personal
development with a transfer from Frankfurt to
Dusseldorf, where I was able to take on a management position. My new job, with a new team in a
new town, has opened up exciting new perspectives
for me.”
Heidi Schürmann
Credit Analyst at the
Real Estate Centre Stuttgart
“Having worked for DG HYP in Hamburg
for several years, I wanted to move to
Stuttgart for personal reasons. Following
my parental leave, DG HYP offered me a
new position at the Real Estate Centre
Stuttgart, where I have been able to grow
professionally.”
19
Management Report
ECONOMIC ENVIRONMENT
German economy on a solid growth path
Germany’s gross domestic product grew in real terms by
1.7 percent in the 2015 financial year and, as such, was
slightly higher than the previous year‘s figure (2014: 1.6
percent). GDP development during the course of the year
did not experience any significant quarterly fluctuations,
exhibiting a more constant picture than in previous years.
The upswing in consumer demand contributed significantly
to macro-economic growth during the year under review.
Growth was driven by the continued upturn in employment
and standard wage development. The unemployment rate,
averaging 6.4 percent, has fallen to its lowest level since
reunification, with just under 2 million people registered
as unemployed. In 2015, an average of approximately
43 million people resident in Germany were in employment.
The rise in employment – which has been ongoing for more
than ten years – thus continued into 2015. In addition, the
introduction of the minimum wage at the beginning of
the year resulted in a one-off increase in gross wages and
salaries, and thus underpinned private consumption. Moreover, the sharp decline in energy prices since the second
half of 2014 had a positive impact, relieving the burden on
German households and companies alike, and improving
private purchasing power.
Construction investment also provided momentum, benefiting from the persistent low interest rate environment and
energy costs. The pace of export expansion slowed down
throughout the rest of the year after a strong first half, due
to the lack of impetus, most notably from emerging markets. Against this background, the German export economy
generally held its own: although exports were down slightly
compared to imports, foreign trade made a moderate contribution, on balance, to macro-economic growth. The German and the European economies face challenges in light
of weak economic data from some key emerging countries,
the tensions with Russia over the Ukraine crisis, political
crises in Southern Europe, migration to Europe due to the
refugee crisis, and the increasing threat posed by terrorism.
Euro area economic output further on the upturn
Economic recovery in the euro area gradually stabilised
further during the year under review. This positive development was largely due to domestic demand, with private
GROSS DOMESTIC PRODUCT 2015 – EURO AREA AND SELECTED COUNTRIES
GDP change vs. 2014 (%)
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0
-1.0
Euro area
DE
FR
GR
PT
ES
NL
BE
AT
FI
Euro area
1.5
Greece
Portugal
1.5
Belgium
1.4
1.7
Italy
0.6
Spain
3.2
Austria
0.8
France
1.1
Ireland
6.8 *
The Netherlands
1.9
Finland
0.4
The graphs do not form part of the Management Report.
-0.7
IE
Germany
* Forecast
20
IT
Source: DZ BANK Research
consumption providing the greatest impetus for growth.
This has been underpinned by real disposable income,
which benefits from declining oil prices and higher personal
incomes due to the ongoing recovery in the labour markets of the euro area. More favourable funding terms and
easier access to loans also encourage additional corporate
spending. Moreover, despite the downward trend in global
trade, exports rose – to the marked benefit of trade within
the euro area.
Greece continues reform process
The crisis in Greece eased during the second half of the
year under review. After the change in government at the
beginning of the year, EU finance ministers and government representatives of the 19 euro member states spent
considerable time in the months that followed wrestling
with the new Greek government about suitable proposals
for reform. At the end of June, however, Greece broke off
negotiations for the time being and organised a referendum. Following subsequent, renewed negotiations with the
Greek government, the Heads of State and Government of
the euro area agreed upon a third aid programme – worth
€ 86 billion – during the summer. Approximately € 25 billion
of this had been disbursed to the Greek government by end
of the year. By channelling these funds, the ECB aims to
support the reform process in Greece.
European Commission proposes European deposit
insurance scheme
In June 2015, the European Commission submitted a renewed proposal – in the form of a European policy paper –
for the Europe-wide communitisation of national deposit insurance schemes. The aim of the statutory deposit
insurance scheme is to protect bank deposits of up to
€ 100,000 per customer. To date, this task has been performed by a national deposit-protection scheme. In its policy paper, the European Commission proposed that the national deposit insurance schemes should be merged to form
a European Deposit Insurance Scheme (EDIS), as the third
pillar of a full banking union. A multi-level transition phase
lasting until 2024 was proposed for the establishment of
a common deposit insurance scheme. The cooperative
organisation has objected to such a communitisation, as
this would lead to cross-border liabilities without adequate
scope to monitor risk, and represent a further step towards
an uncontrolled transfer union.
The ECB continues to pursue an expansive monetary
policy
The European Central Bank (ECB) continued its expansive
monetary policy throughout the 2015 financial year. The
ECB‘s programme to purchase government bonds and other
securities, which was resolved at the beginning of the year
and originally provided for monthly securities purchases
of € 60 billion until September 2016, was extended until
March 2017 by the ECB at its final meeting for the year.
Proceeds from the securities purchase programme are to
be reinvested, in order to inject liquidity into the market.
Substantiating its decision, the ECB‘s Governing Council
cited exceptionally low inflation in the euro area. At the
same meeting, the Governing Council resolved to increase
the negative interest for commercial bank deposits held
with the ECB: the interest rate for overnight deposits was
lowered from -0.1 % to -0.3 %. The Governing Council left
the rate for its main refinancing facility at a record low of
0.05 %.
Sources: DZ BANK Research, Federal Statistical Office, National Association of German Cooperative Banks (BVR), Deutsche Bundesbank.
21
RESPONSIBLE HUMAN
RESOURCES ACTIVITIES
OUR STAFF ARE AT THE
HEART OF WHAT WE DO
Our Human Resources
department
Discussions between
Human Resources department
and works council
22
Satisfied and motivated employees are crucial to
acting responsibly. We offer our staff perfor-
the Company‘s long-term success. We therefore
mance-based remuneration, flexible working hours
provide our employees with a working environ-
without a set schedule, and a family-conscious
ment in which everyone is treated with respect,
corporate culture. Our attractive employment
openness and fairness – and which promotes
offer is complemented by extensive continuous
dedication and sustained commitment. Our Hu-
professional development offers, social benefits,
man Resources work aims to fulfil our employees‘
plus comprehensive occupational health mana-
needs whilst meeting economic requirements and
gement.
PERFORMANCE-BASED
COMPENSATION
FLEXIBLE WORKING
HOURS WITHOUT A
SET SCHEDULE
PROMOTING TRAINEES
VARIOUS FLEXITIME
MODELS
EXTENDED OCCUPATIONAL
SOCIAL BENEFITS
EXTENSIVE TRAINING
PROGRAMMES
POSITIVE, FAMILYFRIENDLY WORK
ENVIRONMENT
HOLISTIC COMPANY
HEALTH MANAGEMENT
Key benefits at a glance
23
Management Report
DEVELOPMENT OF THE REAL ESTATE MARKETS
Commercial real estate market: markedly increased
transaction volumes
Developments on the German real estate markets in the
2015 financial year were characterised by the strongest
growth in the past six years. Given the European Central
Bank‘s persistent low interest rate policy, stable political
and economic conditions in Germany, as well as positive
labour market developments, there is renewed demand for
commercial property. With transaction volumes of € 55.1
billion (excluding residential real estate) on the German
commercial real estate market, this represented a significant
increase (of almost 40 %) compared to the previous year
(source: Jones Lang LaSalle; the survey includes the offices,
retail, storage and logistics, hotels, and other commercial
real estate segments, but excludes residential real estate).
Transaction volumes thus exceeded the previous record
level of 2007. One of the reasons was the above-average
increase in portfolio transactions, which markedly exceeded
the previous year‘s figure with a volume of € 19.2 billion in
the year under review.
The positive development for the year as a whole was also
attributable to the significant interest shown by international investors in German commercial real estate, accounting
for more than half of the capital invested. International
investors therefore represented the largest investor group
in the German commercial real estate market. Investors,
especially those from the US, were anxious to increase their
exposure to commercial real estate in Germany and other
European countries, given the opportunity presented by
weakness of the euro against the dollar over the past year.
Regional locations with above-average growth
In light of the significant interest shown by investors, investment levels in the commercial real estate market in the prime
German locations of Hamburg, Berlin, Cologne, Düsseldorf,
Frankfurt, Stuttgart and Munich remained high during the
year under review. The market saw transaction volumes of
€ 31 billion achieved in the seven metropolitan areas, representing an increase of 35 % compared with the previous
year. Compared to 2014, investments outside the prime
locations even increased disproportionately by 43 %, to
€ 24 billion during the year under review. At just under
€ 23 billion, the office properties asset class accounted for
approximately 41 %, which once again saw the highest demand, followed by retail at 31 % (€ 17 billion). Mixed-use
properties accounted for a share of just under 10 %, hotel
properties for 8 %, and storage/logistics properties for
about 7 %.
COMMERCIAL REAL ESTATE FINANCE VOLUMES IN GERMANY
€ bn
2010
2011
2012
2013
2014
2015
19.3
23.5
25.3
30.7
39.8
55.1
Source: Jones Lang LaSalle
24
Residential investment market: transaction volumes
nearly doubled
The German market for commercial housing property and
portfolios also experienced dynamic, above-average investment activity during the year under review. Transaction
volumes of € 25 billion nearly doubled compared to the previous year‘s figure of € 12.9 billion, and thus reached their
highest level based on a ten-year average (source: Jones
Lang LaSalle). This positive development was mainly driven
by a series of mergers between listed housing companies,
including four transactions involving more than 15,000
apartments. Record results were also recorded for transactions involving less than 4,000 apartments, with almost 450
sales and a transfer volume of approximately € 9.8 billion.
Retail: high level of demand for floor-space in prime
locations
Thanks to positive consumer sentiment, retail sales volumes
remained strong at Germany’s top seven locations, mainly
due to positive personal income developments. Inner-city
retail also benefited from an increase in the number of
inhabitants and visitors. Hence, demand for first-class
retail space on the main shopping thoroughfares and in
city-centre arcades remained very high. In addition, due to
its exceedingly good economic situation compared to its
European neighbours, Germany is a market that is highly
popular with international retail chains, and thus almost
always explored via prime locations. At the same time, new
concepts are being tested, primarily in metropolitan areas.
The German residential property investment market continues to be largely determined by domestic buyers. Accordingly, direct investments by foreign investors in the
German residential property market only accounted for 15 %
(2014: 24 %). However, international investors provide capital to – and therefore act as indirect buyers for – German
listed housing companies, as well as various fund conduits.
During the year under review, there was a marked trend
towards residential products such as new construction
projects, micro-apartments or student apartments, where
higher interest is ensured than is normally the case for commercial residential construction. Buyers included, in particular, special funds, pension funds or insurance companies
seeking higher returns than those available on traditional
rental apartment investments.
The high level of demand for floor space has ensured that
the uptrend of maximum rents per square metre of sales
floor-space in the prime locations continued by an average
2 % during the year under review. Munich continued to lead
the market at € 340 per square metre, followed by Berlin
and Frankfurt with € 300 per square metre. In Hamburg, the
maximum rent for retail space of € 285 was slightly below
the average for the prime locations. Dusseldorf, Cologne
and Stuttgart represented the lower half of the table at
€ 270, € 250 and € 245 per square metre, respectively.
Uptrend of maximum rents continued
Despite a significant decline in rental yields, demand among
investors for core properties in the prime locations continued
during the year under review. The decision to invest in the
metropolitan areas is primarily based on the good prospects
they offer, which to a large extent benefit from Germany‘s
economic strength and the trend towards urbanisation. The
resulting increase in inhabitants and the workforce supports
a high level of demand for retail and office premises as well
as residential properties. Against this backdrop, the uptrend
in maximum rents which has persisted for years in the economic hubs is set to continue, even though it has lost some
of its pace. Markedly increased rental levels and the rise in
commercial and residential construction are curbing the
rate of increase.
Office properties experiencing sluggish rental
growth
The generally positive economic development was also reflected in the office market during the year under review.
Office space turnover at the seven prime locations increased
by 8 % year-on-year, to almost 3 million square metres, in
2015. This was also the third-best figure of the past decade,
and significantly more than in the previous two years, in
which approximately 2.75 million square metres was turned
over each year.
As a result of the pick-up in construction activity and
commensurate increase in supply, the increase in maximum office rents slowed during the year under review. In
addition, the already high rental levels, averaging € 26.70
per square metre at the top locations in 2015, were some
20 % higher than ten years ago. Against this background,
maximum rents only rose by 1 % on average during the
year under review. In the Frankfurt/Main metropolitan area,
an unchanged € 35 had to be paid in 2015 for a square
25
Management Report
metre of office space in a very good location – followed by
Munich, where the price per square metre increased slightly
to € 34.10. The maximum rent in Hamburg remained stable
at € 24.50 per square metre, as well as in Dusseldorf (€ 24)
and Cologne (€ 21). In Berlin it increased to € 24 per square
metre. At € 19.10, rents in very good locations in Stuttgart
were marginally higher during the year under review than
in the previous year.
Housing demand at top locations continues to be
high
In recent years, major German city housing markets have
been characterised by considerable rent increases, due to
strong population growth, but also sluggish levels of residential construction activity. The number of inhabitants at
the seven prime locations has increased by almost 10 %
on average since the millennium. However, construction
of new housing projects only picked up after 2012. Nevertheless, the number of completions is still too low to cover
housing demand in prime locations.
Still, the momentum of average first-occupancy rents
slowed during the year under review. On the one hand, this
was due to the high rental levels, with newly built apartments becoming increasingly less affordable. On the other
hand, increased residential construction activity has resulted
in broader supply. In addition, the persistently low interest
rate environment still makes buying a flat a comparatively
attractive alternative to renting, despite the sharp increase
in price levels. The average first-occupancy rent increased
by about 2 % during the year under review, and amounted
to € 12.60 on average per square metre at the seven prime
RETAIL: MAXIMUM RENTS AT TOP LOCATIONS 2015
€/sqm
350
300
250
200
150
100
50
0
Berlin
Dusseldorf
Frankfurt
Hamburg
Cologne
Munich
Berlin
300.0
Cologne
Dusseldorf
270.0
Munich
340.0
Frankfurt
300.0
Stuttgart
245.0
Hamburg
285.0
Top 7
292.4
Stuttgart
Top 7
250.0
Source: BulwienGesa
26
locations. It ranged from € 11.50 in Berlin and Cologne to
over € 15 in Munich. Rental growth in the prime segment
was comparatively strong in 2015, with average levels of €
17.60 per square metre. Specifically, rent levels during the
year under review were approximately € 15.50 in Cologne
and Stuttgart, € 15.60 in Berlin, € 16 in Dusseldorf, and just
over € 19 in Hamburg and € 20 in Frankfurt. Munich led
the market at € 22 per square metre in very good residential
locations.
favourable general economic climate. In addition to home
buyers benefiting from the favourable financing conditions
and rising personal incomes, domestic and foreign investors
are actively searching for secure investments. The upsurge
in prices developed heterogeneously throughout Germany
during the year under review. Although prices in Germany’s
large cities and conurbations showed a marked increase,
much more moderate rates of increase were seen in rural
districts and structurally weaker regions.
Accelerated price development in the residential
property market
Price increases for condominium ownership accelerated in
the 2015 financial year. With prices increasing by 4.5 %,
this was the strongest growth recorded in Germany in about
20 years. The upsurge in prices was accelerated by the still
OFFICES: MAXIMUM RENTS AT TOP LOCATIONS 2015
€/sqm
35
30
25
20
15
10
5
0
Berlin
Dusseldorf
Frankfurt
Hamburg
Cologne
Munich
Berlin
24.0
Cologne
Dusseldorf
24.0
Munich
34.1
Frankfurt
35.0
Stuttgart
19.1
Hamburg
24.5
Top 7
26.7
Stuttgart
Top 7
21.0
Source: BulwienGesa
27
TARGETED PROFESSIONAL
DEVELOPMENT MEASURES
PROMOTING SKILLS AND KNOW-HOW
We find ourselves in a challenging competitive
and competence. DG HYP‘s Real Estate Academy,
environment. Our mission is to provide top-class
which we run in cooperation with the IRE|BS
services. That is why we offer our employees a
Real Estate Business School at the University of
comprehensive range of training courses. With a
Regensburg, is an integral part of our training
variety of internal and external seminars, depart-
efforts. This offers participants a way to obtain an
mental training, team development measures and
additional broad-based professional qualification,
workshops, employees can continue to build up
and to complement their practical work with tail-
professional – as well as personal – know-how
ored theoretical units.
9%
3%
35 %
SPECIALISED
TOPICS
IT
TARGET-GROUP-SPECIFIC
Key issues of our training programmes
28
11 %
4%
7%
TEAM SPIRIT AND
COOPERATION
LEADERSHIP
PERSONALITY
2%
28 %
HEALTH
LANGUAGE TRAINING/
LANGUAGE COURSES
Participants of the current course at DG HYP Real Estate Business School
OPINIONS FROM PAST YEARS
»Working on the project case study ‘Revitalisation of an office building’ in a small team was a great experience. We took on the role of
a consulting company, putting theory into practice; that was a busy
time, and I really enjoyed it.«
Stephanie Horn, Regional Manager,
Syndication Cooperative Banks
»By cooperating closely with colleagues from other locations and the
head office, I made new contacts that have proven very helpful to me in
my day-to-day work. Integrating DG HYP Real Estate Business School into
my workload at the bank was easy, as the dates of the block seminars
were published well in advance.«
Jens Stapelfeld, Senior Credit Analyst
29
Management Report
CREDIT BUSINESS
New business volume above the previous
year‘s level
DG HYP‘s new Commercial Real Estate Finance business
developed favourably during the year under review. The
high degree of market liquidity – thanks to the monetary
policy measures by the European Central Bank (ECB) – and
the persistently low interest rate environment supported intense investor demand for commercial property financings.
DG HYP bases its financing decisions on the quality of the
client relationship as well as on its assessment of the property from a risk and return perspective. Despite the continued
challenging competitive environment, DG HYP managed to
increase its new business volume of commercial real estate
financings in the 2015 financial year. New business grew
by 15.8 % as at 31 December 2015, to € 5,722 million
(2014: € 4,941 million). The German core market accounted for € 5,637 million thereof (2014: € 4,709 million),
in line with DG HYP’s strategic focus. New business of
€ 85 million was generated on the international markets
(2014: € 232 million).
Joint lending operations increased slightly
DG HYP successfully maintained cooperation within the
Volksbanken Raiffeisenbanken cooperative financial network during the year under review. Joint lending business
with the cooperative banks totalled € 2,825 million as at
31 December 2015 (2014: € 2,617 million). This development shows that Commercial Real Estate Finance – as part
of the corporate customer business – is attracting great
interest and a persistently strong response amongst cooperative banks. At present, DG HYP cooperates with more than
400 cooperative banks in this business.
Local authority lending to support the cooperative
banks
In the interests of the Volksbanken Raiffeisenbanken cooperative financial network, DG HYP supports the cooperative banks as they respond to financing enquiries from the
public sector. In this way, the cooperative banks are able to
reinforce their presence on the market and build up further
business relationships with local authorities. This is a field in
COMMERCIAL REAL ESTATE FINANCE – NEW BUSINESS
€ mn
6,000
5,000
4,000
3,000
2,000
1,000
0
30
2010
2011
2012
2013
2014
2015
4,613
4,014
5,256
5,378
4,941
5,722
which DG HYP is a competent point of contact within the
network. Taking into account the borrowers‘ credit ratings,
finance offers are prepared and submitted to the local authorities via the cooperative banks. During the 2015 financial year, DG HYP generated new business with a volume
of € 378 million (2014: € 359 million) in the area of local
authority lending.
Run-down portfolios reduced further
There have been no new investments in mortgage-backed
securities (MBS) since mid-2007. Moreover, within the
framework of its strategic realignment, DG HYP suspended
its public finance and interbank lending activities in 2008.
Both decisions were taken well in advance of the sovereign
debt crisis affecting euro zone peripheral states. The related
portfolio of sovereign and bank loans has been reduced as
planned, from € 38.5 billion at the end of 2007 to € 9.9
billion as at 31 December 2015. The MBS portfolio was cut
from € 4.5 billion to € 1.3 billion during the same period.
DG HYP will continue to adhere to this strategy – implementing the scheduled portfolio reduction – in the years
to come.
Also in the context of the bank‘s strategic realignment,
DG HYP has continuously wound down its private home
loan financing portfolio since 1 January 2008. As at
31 December 2015, DG HYP’s portfolio included some
41 TSD retail customers accounting for lending volume of
approximately € 2.3 billion. Outside of its core business, the
bank is also continuing to work through non-strategic commercial real estate lending exposures (amounting to € 0.5
billion). This section of the portfolio comprises small-scale
commercial lending and subordinated finance approaching
its maturity date, as well as residual portfolios from the agricultural lending business, an area which DG HYP has not
been actively pursuing since 2003.
VR WERT
VR WERT, a wholly-owned subsidiary of DG HYP, performed
well during the 2015 financial year: it issued 2,370 expert
valuations during the 2015 financial year, slightly below the
previous year‘s figure of 2,588. Revenues of € 8.8 million
were in line with the previous year (2014: € 8.9 million).
31
Management Report
REFINANCING
Markets in the wake of moves by the central banks
Throughout the 2015 financial year, developments on the
capital markets were once again dominated by the monetary decisions taken by central banks. For instance, at the
beginning of the year the Swiss National Bank took the
markets by surprise by decoupling its national currency from
the euro. A few days later, the ECB‘s Governing Council
passed a resolution to purchase government bonds, from
March 2015 onwards: with monthly purchase volumes – including already existing asset-purchase programmes – set
to increase to € 60 billion. The yields that had already declined in expectation of quantitative easing (QE) measures
continued their trend following that announcement, and
only stabilised in mid-April, at a level of 0.049 % for 10-year
German Government bonds.
This was followed by a sudden turnaround on bond markets at the end of April. Within two months, the 10-year
Bund yield jumped about 100 basis points and, at a level of
1.057 % in mid-June, marked a high for 2015.
The Greek sovereign debt crisis came to a head during this
period. Due to uncertainty about whether Greece would
remain in the European Monetary Union, the volume of
Pfandbrief issuance remained sluggish. Following an agreement between the creditors and the Greek government in
mid-July, a variety of issues helped the market catch up with
the delayed issuance within three weeks.
During the summer months, the attention of market participants was also drawn to the slowdown in growth in some
emerging countries, notably in China. In addition, various
expectations with regard to future monetary policy pursued
in the industrial countries played a leading role.
Whilst the US Federal Reserve faced the challenges presented by a reversal in interest rates, the ECB fuelled hopes of
a yet even more expansive monetary policy. In that connection, the ECB Governing Council noted that the expanded
purchase programme was indeed running smoothly, but
stressed at the same time that the economic cycle – which was
somewhat weaker than expected – and inflation forecasts
10-YEAR GOVERNMENT BOND YIELD
in %
4.0
3.0
2.0
1.0
0
12|2010
12|2011
12|2012
12|2013
12|2014
12|2015
Source: Reuters
32
for the euro area afforded scope for further increases. In
addition, comments from the ranks of the ECB reinforced
market expectations that the central bank would also significantly reduce the deposit rate once more at its meeting
in December.
Although the ECB may have invariably surprised the markets in recent years with its highly expansive monetary policies, the decisions it made at its last meeting in December
clearly fell short of expectations. In addition to reducing the
deposit rate by ‘just‘ 10 basis points, to minus 0.30 %, the
central bank decided to continue its bond purchase programme until at least the end of March 2017 – and to also
include the issues of Federal states and of regional and local
authorities in euro area countries.
Pfandbrief issues as a low-cost, reliable source of
funding
DG HYP used the historically low interest rate environment,
the ongoing decline in credit spreads, and increased investor
appetite for large-sized issues to place a total of three bench-
mark bonds with a total volume of € 1.5 billion in the 2015
financial year (2014: € 0.5 billion). The maturities of these
much sought-after Mortgage Pfandbrief issues covered
terms of three, six and nine years. The declining volume of
private placements over recent years, due to the preferential
regulatory treatment of benchmark bonds, became further
entrenched in the 2015 financial year. Despite this trend,
DG HYP managed to sell smaller-sized Mortgage Pfandbrief
issues totalling € 207.0 million (2014: € 1.0 billion). At the
year-end, DG HYP‘s outstanding Pfandbrief issues totalled
€ 22.4 billion (31 December 2014: € 24.8 billion).
In the area of unsecured refinancing, DG HYP exploited the
outstanding refinancing options within the Volksbanken
Raiffeisenbanken cooperative financial network and thereby generated liquidity of € 2.4 billion (2014: € 2.1 billion).
The total volume of unsecured funding amounted to
€ 11.8 billion as at the year-end (31 December 2014: € 10.9
billion).
DEVELOPMENT OF ECB‘S COVERED BOND PURCHASE PROGRAMME 3 (CBPP 3)
6,000
160,000
140,000
5,000
120,000
4,000
100,000
3,000
80,000
60,000
2,000
40,000
1,000
20,000
0
0
10|2014
12|2014
02|2015
04|2015
06|2015
08|2015
10|2015
12|2015
Weekly purchases (€ mn, LHS)
Total purchases (€ mn, RHS)
Source: DZ BANK
33
AWARD-WINNING
PROMOTION OF YOUNG
PROFESSIONALS
SPECIFIC TRAINING PROGRAMMES
FOR YOUNG TALENT
Students from the
dual study programme 2015
Trainees 2015
34
DG HYP at the
Graduate Congress 2015
Young professionals have a partner in DG
and young professionals. To us, the award
HYP, a company which places great value on
confirms that this is the correct way to train
individual, targeted promotion. That is why we
young talent. We also offer school-leavers a
have developed a trainee programme for uni-
link between science and practical applica-
versity graduates: currently in its fourth year,
tion with our three-year, dual-track Bachelor
the programme has once again been award-
of Arts Programme in Banking and Finance.
ed the “career-advancing trainee programme“
With alternating theoretical and practical
seal of quality by Absolventa, the leading
modules, they can put the theory that they
recruitment website for students, graduates
have learned directly into practice.
35
Management Report
NET ASSETS
DG HYP‘s total assets in the 2015 financial year were cut
by a further € 3.1 billion (-7.2%), to € 39.8 billion, in line
with the bank‘s strategy. The portfolio of real estate loans
(including short-term receivables collateralised by property
liens) fell by € 0.8 billion to € 18.7 billion, mainly due to the
reduction in the non-strategic real estate lending portfolio,
and private home loan financing in particular. Despite higher levels of unscheduled loan repayments, the portfolio of
commercial real estate financings was in line with the previous year, thanks to successful new business origination.
In originated local authority lending, the bank‘s investment
strategy continues to focus on supporting the cooperative
Nominal values
€ mn
Sovereigns*)
banks in this line of business whilst ensuring a balanced
risk/return profile. New business originated during 2015 fell
short of ongoing repayments as planned, thus reducing the
portfolio by € 0.5 billion to € 6.5 billion.
At the same time, the public finance portfolio was cut by
a further € 1.3 billion, to € 8.4 billion during 2015, as a
result of run-offs, repayments and sales. The portfolio of
bank bonds was reduced by € 0.2 billion, to € 1.5 billion, in
line with plans. Exposures to countries and banks that are
particularly affected by the debt crisis have developed as
follows (details excluding MBS):
Banks
Total
31 Dec 2015
31 Dec 2014
31 Dec 2015
31 Dec 2014
31 Dec 2015
31 Dec 2014
Spain
Italy
Portugal
1,494
1,060
595
1,979
1,511
645
1,010
-
1,010
-
2,504
1,060
595
2,989
1,511
645
Total
3,149
4,135
1,010
1,010
4,159
5,145
*) including state-guaranteed corporate bonds and sub-sovereign entities
As in the previous year, DG HYP did not hold any publicfinance exposures vis-à-vis Ireland and Greece, or bonds
issued by banks in these countries. Loans and advances
to banks exclusively consisted of covered bonds. Securities
issued by Italian regional authorities with an aggregate
nominal amount of € 299.3 million were sold during the
year under review.
Yields for bonds from the countries listed fell slightly during
the year under review, reflecting continued market stabilisation. Likewise, renewed discussion about a possible Greek
exit from the euro did not significantly unsettle the capital
markets – a remarkable development which attests to the
36
fact that the euro area has become more stress-resistant
due to the crisis mechanisms established in the recent past.
The policy of reform has enhanced the competitiveness
of the euro area countries: stabilisation action is working.
The large-volume bond purchases by the European Central
Bank, commenced in 2015, provided a material contribution in this context: the ECB thus reiterated its commitment
to do “all it takes“ to protect the European Monetary
Union‘s (EMU) continued existence.
Driven by this development, the hidden burdens for
DG HYP‘s securities (excluding MBS) that are treated as
fixed assets (excluding hedges taken out within the scope
of overall bank management) totalled € 41.4 million as at
31 December 2015 (31 December 2014: € 117.6 million).
This contrasts with undisclosed reserves in the amount of
€ 848.8 million (31 December 2014: € 900.3 million).
Taking into account the net effects from hedges within the
context of the overall management of the bank, hidden
burdens from this securities portfolio amounted to € 784.1
million (31 December 2014: € 1,119.6 million); Following a
comprehensive credit quality assessment of these securities,
DG HYP has concluded that only one of the securities is
permanently impaired. Specifically, this concerns a bond
issued by Austrian HETA Asset Resolution AG. However, in
view of ongoing litigation, there is a chance for a complete
repayment of this bond, which is guaranteed by the Austrian state of Carinthia.
There have been no new investments in Mortgage Backed
Securities (MBS) since mid-2007. The portfolio in this
business area, which is being phased out, was reduced by
€ 0.2 billion, to € 1.3 billion during the 2015 financial year,
as a result of ongoing repayments, sales, necessary writedowns and exchange rate fluctuations. MBS holdings are
intensively monitored by means of a detailed risk management system, regular analyses of individual exposures, and
comprehensive stress testing. The development of material
risk factors has confirmed the stabilisation of this non-strategic portfolio, which has been ongoing for several years
now. Undisclosed reserves on the MBS portfolio totalled
€ 0.2 million on the reporting date (31 December 2014:
€ 1.3 million). Hidden burdens on this exposure in the
amount of € 145.2 million (31 December 2014: € 162.3
million) reflect to a lesser extent the default risk of the securities. Illiquidity of the markets and stricter regulatory capital
requirements are more significant factors.
In this respect, DG HYP anticipates a write-back over the
remaining term of the MBS portfolio held as fixed assets.
Overall, therefore, there was a 7.6 % reduction in DG HYP‘s
credit portfolio during 2015.
DEVELOPMENT OF LENDING VOLUME
Change from the previous year
€ mn
31 Dec 2015
31 Dec 2014
€ mn
%
Mortgage loans*)
Public-sector lending**)
Bank bonds***)
MBS
18,674
6,525
8,442
1,520
1,273
19,535
6,996
9,671
1,722
1,511
-861
-471
-1,229
-202
-238
-4.4
-6.7
-12.7
-11.7
-15.8
Total
36,434
39,435
-3,001
-7.6
*)
Since 2015, mortgage loans are disclosed including short-term receivables collateralised by property liens, previous year‘s figures were adjusted
accordingly.
**) Lending transactions with national governments and sub-sovereign entities as well as state-guaranteed corporate bonds, previous year‘s figures were
adjusted accordingly.
***) Securities issued by banks; disclosed within public-sector lending in previous years.
DG HYP‘s financial position is sound.
37
Management Report
Regulatory capital
DG HYP has used the so-called waiver option provided
under section 2a of the German Banking Act (KWG; old
version) with effect from the reporting date of 31 December 2012. According to section 2a (1), (2) and (5) of the
KWG (as amended) and section 6 (1) and (5) as well as
section 7 of the EU Capital Requirements Regulation (CRR),
the provisions of sections 2-5 and 8 of the CRR no longer
Own funds (€ mn)
Total capital ratio (%)
Tier 1 ratio (%)
Common equity tier 1 ratio (%)
need to be applied by DG HYP on an individual basis, but
will be covered at DZ BANK Group level instead. However,
DG HYP will continue to make use of the regulatory capital
requirements for internal management purposes. Equity
ratios developed favourably during 2015, mainly reflecting
repayments and sales from the MBS portfolio. These effects
were offset by the reduced inclusion of interest-bearing
capital components.
31 Dec 2015
31 Dec 2014
1,668
12.7
10.4
7.1
1,692
11.2
9.0
5.6
FINANCIAL POSITION
Within the scope of liquidity management, DG HYP differentiates between ongoing, short-term liquidity management (covering liquidity flows of up to one year) and
structural, long-term funding (covering liquidity in maturity
bands of more than one year). Appropriate management
systems are in place for both types of liquidity.
– To mitigate short-term liquidity risk, short-term liquidity management is designed in a way that ensures the
reliable and permanent liquidity supply at any time.
Given DG HYP‘s integration in the Volksbanken Raiffeisenbanken cooperative financial network and its affiliation with DZ BANK, DG HYP consciously refrains from
maintaining an independent market presence for the
purposes of short-term liquidity management, which is
carried out in close coordination with DZ BANK. Due to
its central bank function within the Volksbanken Raiffeisenbanken cooperative financial network, DZ BANK
raises cash and cash equivalents of various maturities,
and applies the funds raised within its Group. Within
this Group liquidity management framework, subsidiaries such as DG HYP may call upon funding from
DZ BANK. This is based on a closely-monitored, regular
reporting system concerning future liquidity shifts, as
well as the application of DZ BANK‘s liquidity risk model,
including compliance with all limits.
38
– Structural, long-term funding is exposed to the risk that,
due to various influencing factors, the bank might be
unable to maintain the required funding levels, and that
in certain circumstances, debt may not be sufficiently
available in the desired maturities. As a Pfandbrief issuer, DG HYP is licensed to issue Pfandbriefe (German
covered bonds) pursuant to the German Pfandbrief
Act. This licence is the foundation for covered funding,
and thus provides a safe and cost-efficient way to raise
liquidity. DG HYP maintains its own market presence
as a Pfandbrief issuer, placing Pfandbriefe with investors within as well as outside the Volksbanken Raiffeisenbanken cooperative financial network. DG HYP
uses the Group-internal funding available within the
DZ BANK Group for portions of loans or excess cover
exposures which must be refinanced outside Pfandbrief
issuance.
The cash flow statement, published as part of the financial
statements within this annual report, shows the changes
in cash flows from operating activities, as well as from investing and financing activities, for the financial year under
review and the previous year.
DG HYP’s liquidity situation is adequate.
FINANCIAL PERFORMANCE
DG HYP‘s financial performance continued to reflect its
successful operating performance during 2015. Stable net
interest income in particular was supported by numerous
positive developments in the non-performing loan portfolio. Resulting income from the reversal of existing provisions
for loan losses during the year under review was largely
applied to measures to manage risk exposure and capital
requirements in the non-strategic portfolios.
Against this background, for the purposes of analysing financial performance, DG HYP‘s profit and loss account is
provided in condensed form below, using key performance
indicators.
OVERVIEW OF THE PROFIT AND LOSS ACCOUNT
Change from the previous year
€ mn
2015
2014
€ mn
in %
Net interest income
Risk provision
Operating result
Tax expense
Partial profit transfer
Profit transfer
263.1
29.4
116.4
-5.5
64.3
-91.5
143.4
0.0
0.1
18.3
125.0
263.7
36.6
118.1
-6.0
-33.8
10.6
153.0
68.0
0.2
19.8
65.0
-0.6
-7.2
-1.7
0.5
98.1
-102.1
-9.6
-68.0
-0.1
-1.5
60.0
-0.2
-19.7
-1.4
8.3
> 100.0
-6.3
-100.0
-50.0
-7.6
92.3
Net interest income
DG HYP‘s net interest income of € 263.1 million in 2015
was in line with the positive figure achieved in the previous
year (2014: € 263.7 million). Specifically, interest margins
generated on mortgage loans of € 267.8 million were
€ 11.5 million lower year-on-year (2014: € 279.3 million),
reflecting the portfolio reduction: € 9.4 million or 82 % of
the decline was attributable to the non-strategic lending
business – in particular, private home loan financing. Besides reduced commitment or overdraft interest, the net figure also reflected higher interest expenses incurred in order
to comply with regulatory liquidity requirements. These
charges on net interest income were offset, in the year under review, by higher net income from the early termination
of interest-bearing transactions and related hedges.
The net commission result of € 29.4 million – which is generated in particular through servicing fees in Commercial
Real Estate Finance – was down € 7.2 million on the previous year‘s figure of € 36.6 million. Besides the € 6.0 million
reduction in commission income from the lending business,
owing to the product mix, commission expenses were also
€ 2.0 million higher due to the successful issuance of three
benchmark transactions sized at € 500.0 million each.
Administrative expenses of € 116.4 million, being the total
of general administrative expenses and write-downs on intangible assets and tangible fixed assets, were slightly lower
than the previous year‘s figure of € 118.1 million. Based
39
Management Report
on the final assessment notice, the bank levy due for 2015
(which is included in the total figure) amounted to € 15.4
million – € 2.7 million below the previous year‘s figure of
€ 18.1 million. In contrast, expenses for consultancy services
– largely driven by regulatory projects – rose to € 8.2 million,
up € 1.8 million year-on-year.
In the previous year, this item was burdened by € 6.2 million in non-recurring provisions for the estimated effects
from the judgement of the German Federal Court of Justice (BGH) concerning revocation rights for consumer loan
agreements, as well as for issues related to processing fees.
For the 2015 financial year, the item was influenced by a
€ 5.1 million increase in additions to pension provisions,
driven by interest rate developments. As a result, net operating income/expenses of € -5.5 million is in line with the
previous year‘s figure of € -6.0 million).
Risk provision
Provisioning combines the valuation and realised results of
current assets. Provisions for loan losses developed positively during the 2015 financial year: no material specific
provisions needed to be recognised in the strategic Commercial Real Estate Finance business, nor with respect to
subordinated debt (B notes) or private home loan financing.
At the same time, specific loan loss provisions and portfolio-based allowance for credit losses were reversed to a
material extent, thanks to recoveries in the loan portfolio,
improvements of collateralisation, and lower probabilities of
default. Overall, net provisions for loan losses amounted to
€ 78.1 million (2014: € –34.7 million).
During the year under review, DG HYP waived the intention
to permanently hold certain securities with specific structural features, for strategic reasons, and reclassified these
securities from fixed assets to the liquidity reserve. The resulting fair value measurement, taking the repurchase of
own debt securities and an allocation to general risk provisions pursuant to section 340f of the HGB into account,
let to a net valuation result of € -13.8 million (2014: € 0.9
million).
40
The net financial result includes the valuation and realised
results of investments. DG HYP took the positive development of lending risks as an opportunity to accelerate the
scheduled reduction of non-strategic portfolios, under risk
and equity considerations. In this context, to reduce clustered risks, the bank disposed of securities issued by Italian regional authorities in particular. In combination with
the disposal of the related interest rate hedges, this led to
net expenses of € 39.9 million. In addition, specific MBS
transactions were sold, leading to € 5.7 million in expenses.
Taking net measurement expenses of € 20.9 million and
€ 2.8 million in income on transactions previously written
off into account, the net expense on the MBS portfolio was
€ 23.8 million. In addition, a € 25.0 million write-down on
a security was recognised at the beginning of 2015. Other
realisation and measurement effects on securities, investments, and credit derivatives intended to be held permanently, totalled € -2.8 million (net).
Operating result
Material non-recurring effects related to the risk exposures
during the year under review make a year-on-year comparison difficult. Therefore, the suitability of DG HYP‘s operating
profit in 2015 for assessing sustainable profitability is very
limited indeed. For instance, had the bank refrained from
actively cutting back exposure to Italian regions, this would
have increased 2015 operating profit by € 39.9 million – on
the other hand, reported operating profit of € 143.4 million
once again exceeded the bank‘s expectations.
Cost/income ratio
The cost/income ratio (CIR) expresses the ratio of administrative expenses (including other operating expenses) to the
aggregate of net interest income, net commission result,
and other operating income. CIR of 44.4 % was reasonable, and roughly in line with the previous year‘s figure of
43.9 %.
Net income
DG HYP allocated a partial profit of € 18.3 million (2014:
€ 19.8 million) to its silent investors – slightly lower than
in the previous year, reflecting interest rate levels. In line
with a dividend policy coordinated with DZ BANK AG, no
allocations were made to general risk provisions pursuant
to section 340g of the HGB (2014: allocation of € 68.0 million). After taxes, profits of € 125.0 million (2014: € 65.0
million) is to be transferred to the owner, DZ BANK.
Return on equity
Return on equity (RoE) relates net income before taxes
(adjusted for changes in contingency reserves pursuant to
sections 340f and 340g of the HGB) to the average invested equity (including the general risk provisions pursuant to
sections 340f and 340g of the HGB). RoE for the year under
review declined to 13.9 % (2014: 14.8 %), also reflecting
the non-recurring effects mentioned – a level that is nonetheless positive.
Overall, DG HYP‘s economic situation has thus stabilised
at an adequate level during the 2015 financial year. The
bank‘s robust financial performance is down to a rigorously
pursued business and risk strategy, whereby an accelerated
reduction of non-strategic risk exposures, combined with an
absence of any obvious risks in the target business provided
the basis for a sound financial position and performance,
based on a viable business model.
REPORT ON MATERIAL EVENTS AFTER THE REPORTING DATE
Events after 31 December 2015
No events of particular importance materialised during
the period from 1 January to 11 February 2016 which
would have required a materially different presentation of
DG HYP‘s net assets, financial position and financial performance, had they occurred earlier.
41
WORK-LIFE BALANCE
SOLUTIONS FOR A FLEXIBLE DAILY ROUTINE
Jeffrey Morrison, Manager International &
Institutional Investors II and
Martina Morrison, Recruitment Manager,
with their daughters Helen and Emily
Verena Quast, Head of International &
Institutional Investors II,
with her son Finn
42
We know that it is often difficult to achieve a
FLEXIBLE WORKING HOURS
WITHOUT A SET SCHEDULE
proper work-life balance. Whether it is flexible
working-time models, occasional work from
home, childcare provision or support for employees nursing family members – with our family-
VARIOUS FLEXITIME
MODELS
oriented measures we represent a corporate
culture that reconciles family needs with career
planning. This is the high standard that we
have set ourselves. Together with our employ-
OCCASIONAL MOBILE
WORKING
ees, we are always searching for individual solutions to personal matters. In recognition of our
family-oriented Human Resources policy, the
non-profit Hertie Foundation awarded us the
SUPPORT PROGRAMMES
FOR CHILDCARE AND CARE
OF DEPENDENT RELATIVES
“audit berufundfamilie“ certificate.
POSSIBILITY FOR EMPLOYMENT
DURING PARENTAL LEAVE
FAMILY-FRIENDLY PROVISIONS FOR
PARENTAL AND CARE LEAVE
“STAY-IN-TOUCH” PROGRAMME
DURING FAMILY LEAVE
Occupational benefits for
a good work-life balance
43
Management Report
EMPLOYEES
Initiative ”Developing together – changing together“
launched
DG HYP launched the ”Developing together – changing
together“ initiative during the 2015 financial year. Based on
the results of the staff survey carried out in 2014, the initiative
will continue in 2016. In the survey, employees particularly
expressed their high level of satisfaction with DG HYP as an
employer, whilst potential for improvement was seen in the
areas of collaboration across teams, change management,
and personal career opportunities. The initiative ”Developing
together – changing together“ covered these three topics
during the year under review. Ten workshops, involving a total
of more than 100 attendees, including all the executive staff,
were held to analyse the causes. As a result, employees identified concrete scope for improvement with regard to the speed
of change processes, and the handling of conflicts. The third
topic covered within the scope of the workshops referred to the
desire for career opportunities: employees are looking for more
extensive options to assume higher responsibility and challenging tasks. In this connection, dialogue between managers
and their staff is set to be intensified in a targeted manner.
DG HYP already implemented some measures during the
year under review, adding further continuous professional
development measures in tune with ”Developing together –
changing together“. For example, courses were offered on
topics such as ”Change Management“, ”How are you perceived in conflict settings“, or ”Taking the initiative for your
own career“. During the second half of the year, a training
course on ”Transformational Leadership“ was launched, targeting executives – with the objective of further enhancing
staff motivation, providing employees with optimal support
for their personal career development. DG HYP will introduce
further measures derived from specific workshop results from
2016 onwards.
Increased demand for professional development
measures
During the year under review, DG HYP‘s employees attended 3.4 days of continuous professional development (CPD)
measures on average, up from the previous year‘s figure of
2.8 CPD days. Demand focused on professional development
measures in particular, but personal development courses
focusing on leadership, team spirit and cooperation, and
personality issues were also in demand – as were in-house
language courses. DG HYP‘s Real Estate Academy, which the
44
bank launched in 2010, in cooperation with IRE|BS Real Estate
Business School, is a core pillar of the bank‘s CPD offers. The
Academy started its fourth class in 2015. Within the scope of
three compact learning modules, IRE|BS instructors provide a
comprehensive overview of the real estate business. For the
first time, the current DG HYP Real Estate Academy class also
includes seven colleagues from German cooperative banks.
Promoting women: details of offers and legal
requirements specified
DG HYP actively supports women in their professional development, in order to secure the bank‘s competitiveness
for the long term. For this reason, the bank fleshed out the
related training offers during the year under review, adding
specific in-house seminars targeting female employees, as
well as recommending external seminars and cooperations
with womens‘ networks within the real estate sector. Strong
interest for this topic within the bank was evident, judging
from the proportional attendance of these events by female
colleagues.
The Act on Equal Participation of Women and Men in Executive Positions in the Private and the Public Sector (Gesetz für
die gleichberechtigte Teilhabe von Frauen und Männern an
Führungspositionen in der Privatwirtschaft und im öffentlichen
Dienst) came into effect on 1 May 2015, requiring DG HYP
to determine a gender quota for its Supervisory Board, the
Management Board, as well as the tier one and tier two management levels below the Management Board. Against this
background, in accordance with section 111 (5) of the AktG,
on 19 June 2015 DG HYP‘s Supervisory Board set a target
quota of 22 % for the share of women on the Supervisory
Board, and a target quota of 0 % for the share of women on
the Management Board. In accordance with section 76 (4) of
the AktG, on 2 June 2015 the Management Board of DG HYP
agreed upon a target quota of 9 % for the share of women
on the first management level below the Management Board
(B1), and on a target quota of 13 % for the share of women
on the second management level below the Management
Board (B2). The target date for implementation of all these
quotas is 30 June 2017.
Prize awarded for the promotion of young talent
To promote young talent, DG HYP established an 18-month
trainee programme for the professional training of qualified
university graduates. The bank launched the fourth cycle of
its trainee programme, and hired a total of five trainees – four
in Commercial Real Estate Finance and one in the Treasury
department. ”Absolventa“, the leading online jobs portal for
young academics, once again awarded DG HYP during the year
under review, for its ”career-promoting trainee programme“,
affirming DG HYP‘s high-quality trainee scheme with a seal
of quality. On top of the trainee programme, DG HYP has
established a second pillar for winning talented young professionals, with its three-year dual study programme, which
leads to a Bachelor of Arts degree in Banking & Finance.
The scheme comprises blocks of practical training within the
bank, and courses of study at the vocational academy for
the banking industry (Berufsakademie für Bankwirtschaft) in
Hanover. After two and a half years, participants also have
the opportunity within the framework of their studies to take
the Chamber of Industry and Commerce (IHK) apprenticeship
examination in banking. The second class of the dual-study
course commenced during the year under review, with two
students working at DG HYP.
Further development of DG HYP‘s health
management
During the year under review, DG HYP further expanded the
measures offered within the scope of occupational health
management. The human resources policy approach pursued
in this context is complemented by a versatile range of inhouse sports, healthy meals in the in-house canteen, advice
from the company doctor, regular health checks and seminar
offers designed to promote employee health. In addition,
the bank continued to gradually furnish workstations with
height-adjustable desks during 2015. The focus of DG HYP‘s
health management activities during the year under review
was on assessing the threat of mental stress at the workplace.
The objective was to identify (using an online questionnaire),
assess and mitigate any elements in the design of work
arrangements which might have a negative impact. Once
results have been analysed and compiled, recommendations
and measures to remedy issues will be derived in 2016.
Coordinated human resources policies within DZ BANK Group
Human resources policies within DZ BANK Group benefit from
close cooperation. Launched in 2013, an initiative designed to
deploy a uniform employer brand for DZ BANK Group was
continued throughout 2015, with a focus on marketing the
benefits DZ BANK Group offers as an employer within the
Group, under the motto of ”Erfolgsprinzip WIR“ (”The principle of ‘WE‘ as a success factor“). The launch of the ”WE“
platform – an internal social media application – is designed
to promote networking and an exchange of views within
DZ BANK Group, further supported by editorial contributions.
Cooperation with the Works Council
The trusting cooperation between DG HYP and the Works
Council continued seamlessly during the year under review.
Joint work on the promotion of female potential as well as
on health management was noteworthy, with a particular
highlight being the survey on threat analysis regarding mental stress at the workplace. DG HYP would like to thank the
Works Council for the good and constructive cooperation.
STAFFING INDICATORS
Total*)
Fluctuation rate (%)
Share of voluntary resignations (%)
Years of service
Number of training days per employee
Employment basis (%) **)
Full-time employees
Part-time employees
Share of women (%)
Average age
2015
2014
2013
454
3.7
2.2
13.8
3.4
449
0.9
0.5
13.3
2.8
438
3.1
3.1
12.9
3.6
82.1
17.9
40.5
45.4
84.2
15.8
40.8
45.7
85.9
14.1
40.7
45.4
*) Annual average
**) Average values
45
SPIRIT OF PARTNERSHIP
PERSONAL COMMITMENT TO JOINT SUCCESS
Cooperation at DG HYP is characterised by open,
partner-like and respectful interaction, along with
mutual trust. In the last staff survey – carried out in
2014 – staff confirmed their high degree of satisfaction with the bank, and reaffirmed their strong
identification with DG HYP. The bank‘s solid and
reliable business model, personal relationships and
fair working conditions received special recognition.
This positive result can be seen as an endorsement of
our staff-oriented Human Resources policy, which
aims to create an attractive working environment for
every employee.
46
WOULD CHOOSE DG HYP
AS AN EMPLOYER AGAIN
COMMITMENT
INDICATORS
75 %
WOULD RECOMMEND
DG HYP AS AN EMPLOYER
77 %
FEEL THEY CARRY
RESPONSIBILITY
78 %
CONSIDER DG HYP
TO BE EFFICIENT
79 %
80 %
SUPPORT DG HYP‘S
CORE VALUES
Results of the last employee survey
47
Management Report
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 those 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 many factors
that impact on DG HYP‘s business, and that are beyond
the bank‘s control. These factors primarily include changes to the general economic situation and the competitive
arena, and developments on the national and international
real estate and capital markets. In addition, results can be
impacted by borrowers defaulting or by other risks, some
of which are discussed in detail in the risk report. In this
context, DG HYP would like to point out that despite discernible progress made, no sustainable solution has been
found for the global issue of high sovereign debt; ongoing
reforms are needed.
Quality of forecasts
DG HYP‘s financial performance in the 2015 financial year
exceeded projections, both in terms of new business volume in Commercial Real Estate Finance, which outgrew
expectations – and the average interest margins achieved,
which were above the budgeted figures. Moreover, the favourable macroeconomic environment in Germany has also
led to risk costs markedly below the forecasts. This development was strengthened by meaningful reversals of writedowns, which the bank had not forecast to this extent, not
least due to reasons of prudence. Overall, the quality of
DG HYP‘s forecasts for the year under review proved to be
robust and reliable. The fact that results once again exceeded forecasts underlines the conservative stance on which
the bank‘s projections are based.
Forecast period
Based on the strategic business orientation as part of a
five-year plan, DG HYP derives its operative planning on
an annual basis, focusing on the subsequent financial year.
As a rule, the bank’s forecast is based on the one-year operative planning horizon; in certain cases it also refers to the
results of the five-year plan.
48
Business environment and assumptions underlying
the forecast
Germany benefits from a good macroeconomic situation,
with continuous economic growth accompanied by low unemployment as well as rising wages and salaries. Low interest rates continue to stimulate consumption, whilst keeping
public-sector finances sound. At the same time, however,
there are potential threats to the global economy – and
hence for a highly networked global player such as Germany. Relevant factors in this context include the situation
in the Ukraine (which remains critical), the resulting tension
with Russia, armed conflicts in Syria and Iraq as well as the
associated refugee crisis, and the fight against terrorism.
Within the EU, fears of populist parties winning elections
might restrict governmental readiness for reform.
Nonetheless, DG HYP expects the German commercial real
estate market to remain resilient and stable in this environment during 2016. The high level of capital looking for real
estate investments (especially from abroad), combined with
Germany‘s economic strength, will once again drive high
turnover on the German commercial real estate markets.
At the same time, this means that pressure on yields will
remain strong, with risk premiums set to shrink further.
The robust labour market will support good demand for
office space. Rising wages will support the retail sector, and
will help private households to pay rising residential rents.
The European Central Bank will pursue its expansive monetary policy further in order to achieve its inflation targets; if
needed, the ECB will also buy larger amounts of sovereign
bonds.
Expected development of DG HYP
Based on its risk strategy, DG HYP plans to avoid cyclical
peaks in the long-term business it pursues, to the extent
possible. Moreover, the bank does not calculate any performance contributions from unhedged interest rate or
foreign exchange positions in its projections. Therefore,
any changes to the relevant market parameters do not
materially influence the bank‘s results planning. Key value
drivers for DG HYP‘s future financial performance are thus
the bank‘s target business volume, net credit margins,
commissions earned and risk costs incurred in new business, as well as any write-downs which may be necessary in
the non-strategic portfolios. Given DG HYP’s strengthened
market position, the bank has conservatively accounted for
these factors in its planning calculations.
Under these assumptions, DG HYP will once again engage
in a sufficient level of new commercial real estate finance
business in 2016 to ensure that the bank‘s results are stabilised for the long term on the basis of a balanced risk/return
profile. The aim is to strike a good balance between profitability targets and elevated equity requirements, whilst
closely adhering to the relevant regulatory requirements.
At the same time, DG HYP will affirm its success in joint
lending operations with German cooperative banks.
Net interest income is expected to stabilise at the current
level. Non-strategic private real estate lending will continue
to be successively replaced with commercial real estate
lending, an area of business with higher margins.
Depending upon the levels of new business originated, the
net commission result will remain a sustainable component
of DG HYP’s income over the coming years, at the present
level.
The future development of administrative expenses will not
least be driven by increasing regulatory requirements, which
exert additional pressure on staff and IT costs. All in all, the
bank expects a slight cost increase.
Provisions for loan losses are calculated using individual
standard risk costs which are commensurate with the bank‘s
business model; the long-term forecast projects a mid-range
double-digit million euro figure. Reversals of write-downs,
to the extent seen during the year under review, will not be
repeated. Overall, the potential default risks that may occur
during the 2016 financial year have been conservatively
accounted for. In this context, the bank does not envisage
any material developments concerning the remainder of the
non-strategic portfolio of subordinated debt.
The MBS portfolio is intensively monitored by means of a
detailed risk management system, regular analyses of individual exposures and comprehensive stress testing. The
development of material risk factors indicates stabilisation
at the current levels. The persistent default risks this portfolio is exposed to were identified within the scope of a fiveyear forecast, and adequately incorporated in the bank‘s
projections.
The positive operating results over the last three years exceeded the projections for subsequent periods, which are
based on conservative assumptions. Overall, DG HYP is pursuing a successful path – with new business aligned toward
our clients‘ requirements. The bank consistently reduces
capital markets transactions which are not related to client
business.
49
Management Report
REPORT ON OPPORTUNITIES
DG HYP defines opportunities as positive unexpected deviations from the financial performance expected for the
next financial year. As a subsidiary of DZ BANK, DG HYP is
a member of the Volksbanken Raiffeisenbanken cooperative financial network – a network characterised by a high
degree of solidity, strong credit quality, and high liquidity
through customer deposits. The broadly diversified market
position of the cooperative banking sector, in combination
with Pfandbrief issuance, provides DG HYP with a strong
funding base that gives the bank the room for manoeuvre
it needs to finance business – with adequate returns for the
risks involved. DG HYP will continue to make use of this
ability to act in the future, jointly with the German cooperative banks, as a reliable financing partner to its customers.
Thanks to a robust domestic economy, the bank‘s good
market position benefits from a favourable fundamental
environment for real estate. DG HYP has taken these opportunities into account when adopting its multi-year plan.
The key factors determining value for the financial performance in this context (value drivers) were included in the
forecast, as planning assumptions. Specifically, opportunities exist in the form of sources of income identified therein
exceeding projections, or risk costs remaining below projections. DG HYP once again exploited these opportunities
during the 2015 financial year.
50
Managing opportunities
Exploiting business opportunities whilst observing target
returns is an integral part of DG HYP‘s enterprise management system. The activities driven by the bank‘s business
model require the ability to identify, measure, assess, manage, monitor and communicate opportunities.
DG HYP‘s opportunities management is integrated into
DZ BANK Group‘s annual strategic planning process. Strategic planning allows the identification and analysis of trends
and changes to the market, and to the competitive environment; it forms the basis for assessing potential opportunities. Reports submitted to the Management Board on
opportunities arising from future business development, as
derived from the business strategy, are based on the results
of the strategic planning process. Staff are informed about
potential opportunities identified in the course of communicating the business strategy.
RISK REPORT
DG HYP had already notified the German Federal Financial
Supervisory Authority (BaFin) and Deutsche Bundesbank, in
November 2012, that it would use the waiver pursuant to
section 2a of the German Banking Act (KWG, old wording),
with respect to the provisions of sections 10, 13 and 25a
(1) sentence 3 no. 1 of the KWG (old wording). DZ BANK
Group continued to make use of this waiver rule, which
was incorporated into Article 7 of the CRR, and pursuant
to which – provided certain conditions are met – the supervision of individual institutions domiciled in Germany
within a group of institutions may be performed by the
Group‘s supervisor, for DG HYP during the 2015 financial
year. As a result, DG HYP is not required to comply with the
requirements set out in parts 2 to 5 and 8 of the CRR on a
single-entity level.
In this context, BaFin instructed an audit (ICAAP Audit
2013) which was carried out by Deutsche Bundesbank during 2013. Subject to certain qualifications, the audit result
confirmed that with respect to processes – performed at
DG HYP – for determining and ensuring the Bank‘s risk-bearing capacity – taking the nature, scope, complexity and risk
potential of business in the audited areas into account –
DZ BANK has an orderly business organisation in place, as
defined by section 25a (1) and (1a) of the KWG. DG HYP
remedied the last findings from this audit during 2015, as
planned, and notified the regulatory authorities accordingly.
To qualify for the waiver, DG HYP must be closely integrated into DZ BANK Group management processes, both
through DZ BANK Group‘s committee structure and IRKS,
the Group‘s integrated risk and capital management system
which defines Group-wide standards for risk measurement
and risk reporting. DZ BANK‘s Group Management Report
is in line with German Accounting Standard No. 20; to
this extent, the specifications of DZ BANK‘s Group-wide
risk management system can also be applied to DG HYP.
Against this background, DG HYP performs a risk reporting
system that is in line with the requirements of a subordinated entity.
Threats
Risks arise from unexpected adverse developments for the
net assets, financial position and performance; they carry
the threat of losses, or insolvency. Key risks for the financial
performance of DG HYP exist in the form of value drivers for
income falling short, or risk costs exceeding projections. In
this context, DG HYP points out in particular that no further
write-downs are forecast in the public finance portfolio. The
sustained avoidance of any bail-ins requires no letting up in
the reform efforts and political will to make the euro area
countries more competitive and to ensure that they have
solid state finances.
I) Objectives of risk management
Risk management at DG HYP is an integral part of the strategic and operative management of the bank as a whole.
Assuming risks in a targeted and controlled manner, observing target returns, is an element of enterprise management
within the DZ BANK Group, and hence also within DG HYP.
The activities driven by DG HYP‘s business model require the
ability to identify, measure, assess, manage, monitor and
communicate risks. In addition, maintaining an adequate
level of equity backing for risk exposure is fundamentally
important as a prerequisite for the bank‘s continued operation. As a guiding principle for all of its business activities,
DG HYP assumes risk only to the extent required to achieve
the objectives of its business policy.
To implement this principle, DG HYP‘s Management Board
has defined risk strategies for material risks which are in
line with Group guidelines, and which are based on the
bank‘s business strategy. Each of these sub-risk strategies
comprises the business activities exposed to risk, the risk
management objectives (including provisions concerning
risk acceptance and avoidance), and the measures designed
to achieve these objectives. The business and risk strategy,
as well as the sub-risk strategies, were discussed with the
Supervisory Board.
a) 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”) and the German Regulation on Remuneration
in Financial Institutions (Institutsvergütungsverordnung –
”InstVergV”). 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 control systems that fulfil the needs
arising in the market and competitive environment, as well
51
Management Report
as the requirements arising from the bank‘s integration in
the DZ BANK Group. This forms the basis that ensures the
proper operation and efficiency of the risk management
process.
DG HYP has assigned the relevant tasks to the following
bodies and committees:
Supervisory Board. The entire Supervisory Board decides
on personnel matters and remuneration of the Management
Board, the Rules of Procedure and Schedule of Responsibilities for the Management Board, 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 purchase,
disposal or charges of property assets, and on material issues related to loans or participations that are not explicitly
assigned to the Risk Committee of the Supervisory Board.
The bank‘s strategic and operational planning are also
presented to the Supervisory Board. The Supervisory Board
has constituted the following committees from amongst its
members:
Risk Committee. The Risk Committee is responsible for
risk management. In addition, the Supervisory Board has
assigned responsibility for the bank‘s overall strategy and
the risk strategies derived therefrom to the Risk Committee. The Committee advises the plenary meeting of the
Supervisory Board on the Company‘s current and future
total risk appetite, and supports the Supervisory Board in
monitoring implementation of this strategy by the bank‘s
top management.
The Risk Committee monitors whether terms and conditions
for client business are in line with the Company‘s business
model and risk structure. Where necessary, the Committee
requests proposals and monitors their implementation. The
Committee verifies whether the incentives created by the
remuneration system take the Company‘s risk, capital and
liquidity structure into account, as well as the probability
and timing of income. It also determines the type, scope,
format and frequency of information on strategy and risks,
to be submitted by the Management Board. The Committee
accepts the Management Board‘s reports concerning risk
exposure, participations and credit issues, analyses them
52
and reports material findings to the plenary meeting of the
Supervisory Board.
Moreover, the Risk Committee is one of the recipients of reports to be submitted to the supervisory body in the event of
ad-hoc reporting that may be required pursuant to MaRisk.
The Committee is also responsible for decision-making
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. Due to the Group waiver, decisions regarding
large exposures (as defined in section 13 of the KWG) are
the responsibility of DZ BANK‘s entire Board of Managing
Directors.
Audit Committee. The Audit Committee‘s monitoring
duties include, in particular, the accounting and financial
reporting process, the effectiveness of the risk management
system, the audit of the financial statements, as well as the
independence of the external auditors. The Committee supervises the rectification of any deficiencies identified by the
external auditors. Furthermore, the Supervisory Board has
nominated the Audit Committee as the recipient of quarterly reporting in accordance with MaRisk. The Committee
is also responsible for the approval of certain agreements
related to the bank‘s IT systems, and for instructing the external auditors with any tasks outside the scope of auditing.
Nomination Committee. The Nomination Committee
supports the Supervisory Board; its tasks include identifying
candidates for appointment to the Management Board; assessing the structure, size, composition and performance of
the Management Board and of the Supervisory Board; and
appraising the skills, professional aptitude and experience
of individual Management Board and Supervisory Board
members as well as of the respective body in its entirety.
Remuneration Oversight Committee. The Remuneration Oversight Committee monitors whether remuneration systems for the Management Board and for the bank‘s
employees are appropriate – particularly for those employees whose activities have a material impact on the bank‘s
overall risk profile, and for the heads of Risk Controlling
and Compliance. The Committee supports the Supervisory
Board in monitoring whether remuneration systems for the
bank‘s staff are appropriate, and in assessing the impact of
remuneration systems on the management of risk, capital
and liquidity. Furthermore, the Remuneration Oversight
Committee prepares the Supervisory Board‘s resolutions
concerning the remuneration for members of the Management Board.
The following committees are responsible for the internal
management of DG HYP:
Risk/Return Management Committee. The Risk/Return
Management Committee is the central body responsible for
managing risks of the entire bank at a portfolio level, as well
as for the allocation of capital. The Committee also decides
upon the strategy to be adopted for asset/liability management, and determines the bank‘s liquidity costs to be taken
into account for its lending business. 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 members of the Management Board and
the heads of Front Office Credit and Back Office Credit.
The Credit Committee decides on individual credit risk
exposures, within the scope of authority granted to it. It
also deals with strategic issues regarding the bank’s lending
business: in particular, these include the credit risk strategy,
current risk events and risk provisioning, credit portfolio
management as well as credit workflow optimisation.
with Credit Risk Controlling – is responsible for managing
counterparty risk at an individual exposure level, and controlling risks at a portfolio level. 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. Managing operational as well as reputational
risk is the duty of the relevant organisational units, within
the scope of their respective area of responsibility. The Management Board office is responsible for managing risks emanating from the bank‘s portfolio of participating interests.
Risk Controlling. The purpose of a regular risk inventory
carried out within the DZ BANK Group at the end of each
financial year is to identify the relevant types of risk the
DZ BANK Group is exposed to, and to assess their materiality. Where required due to specific events, the Group also
performs a risk inventory during the course of a financial
year, to be able to recognise any material changes to the
risk profile where necessary. A materiality analysis is carried
out for any types of risk that may occur in principle, given
the business activities of DZ BANK Group entities. In a next
step, all types of risk classified as material are evaluated as
to what extent risk concentrations exist.
b) 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. Within
this planning process, risk limits and earnings projections
are determined, taking into consideration the risk-bearing
capacity of DZ BANK Group.
For DG HYP, credit risk, market risk, liquidity risk, operational risk, investment risk, reputational risk, as well as business
risk have been identified as material for DG HYP. These types
of risk are explained in sections II to VII. With the exception
of liquidity risk, economic capital – referred to as the risk
capital requirement – is determined for these types of risk,
generally using a value-at-risk (VaR) figure based on a oneyear holding period and a confidence interval of 99.90%.
Exposure to reputational risk is mapped to business risk.
The confidence interval is consistent with DZ BANK‘s rating.
To account for types of risk for which capital requirements
cannot yet be (sufficiently) determined, DZ BANK has set
aside a so-called capital buffer at Group level. As soon as
adequate measures to quantify such risks become available
(and the exposure can be included in the risk capital requirement), it wil be possible to release this buffer.
Risk Management. As part of the credit risk strategy defined
by the committees detailed above, the back office – together
In contrast to the other types of risk, economic capital is
not allocated for liquidity risk: this is because the allocation
In addition, DG HYP is integrated into the committee
structures of DZ BANK Group and the Volksbanken
Raiffeisenbanken cooperative financial network, where
DG HYP‘s Management Board members or other employees are represented.
53
Management Report
of aggregate risk cover will not prevent an imminent insolvency. Within the framework of an annual suitability check,
the suitability of risk measurement methods for all risk types
classified as material is examined. Measures are taken to
adjust the management toolbox where necessary. Risk inventories and suitability checks are harmonised in terms of
content and timing.
The Controlling units are responsible for current reporting
and – together with the respective risk management unit
– for monitoring risk on a portfolio level. 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. To highlight concentrations of credit risk, portfolio exposure is broken down by
geographical region, type of property, loan-to-value ratio,
remaining term and rating class. These portfolio evaluations
form the basis for the annual review of the credit risk strategy. The report also contains a description of the Group‘s
overall risk situation and the other key types of risk.
Furthermore, Risk Controlling also carries out daily risk
reporting and limit monitoring 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 Committee of the
Supervisory Board.
A risk report for the bank as a whole is drafted monthly,
illustrating credit risks as well as market price risks, operational risk, equity investment risk, as well as business and
strategic risks. The measured risks are standardised for each
risk type on the basis of a confidence level of 99.90% 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 economic risk capital limits (maximum loss
threshold) allocated by DZ BANK to DG HYP (as a managed
unit).
Risks arising from investments in other companies, or reputational risks, are only of minor significance to DG HYP. Reporting on reputational risk is currently being established
and will be further developed in 2016.
Internal Audit. As an independent unit, Internal Audit
examines whether the demands on the internal controlling
54
systems, the risk management and risk controlling systems,
and the necessary reporting, are adequately met.
Compliance. The Bank has established an independent
Compliance Office, which reports directly to the Management Board member responsible for risk management.
The Compliance Office combines the compliance function
in accordance with the MaRisk and the WpHG, it serves
as the Central Unit (which is responsible for coordinating
measures to prevent money laundering, terrorism financing, and fraudulent acts) and holds responsibility for data
protection and IT security. The Compliance Office has sufficient resources in order to fulfil its various tasks. DG HYP
complies with the requirements from DZ BANK‘s Group
Policy. A Compliance Committee has been established to
ensure compliance with the relevant MaRisk requirements.
The Committee consists of the MaRisk Compliance Officer,
the entire Management Board, and all heads of divisions; its
duties include verifying the bank‘s existing legal monitoring. Committee meetings are used to exchange views and
opinions concerning Compliance issues and risks whenever
needed.
c) Ongoing regulatory developments
In close cooperation with DZ BANK, DG HYP analyses and
evaluates the requirements resulting from ongoing regulatory developments. During 2015, DG HYP continued its
activities to prepare for the introduction of the changed
capital requirements known as ”Basel III”, and of the liquidity indicators LCR and NSFR.
Given the classification of DZ BANK as an institution with
systemic relevance on a national level, the European Central
Bank assumed the direct supervision of DZ BANK and the
DZ BANK Group in November 2014. Therefore, DG HYP
generally has to comply with regulatory requirements for
”significant” institutions. In particular, DZ BANK Group –
and hence, DG HYP – must comply with the ”Principles for
effective risk data aggregation and risk reporting” (BCBS
239), published in January 2013 by the Basel Committee
on Banking Supervision. Besides requirements for the organisational structure and workflows of banks‘ risk management function, these rules – which are expected to be
incorporated into the MaRisk in 2016 – also include specific
regulatory requirements concerning the IT architecture and
data management in banks. DG HYP launched an imple-
mentation project in 2015. All steps taken are being closely
coordinated with DZ BANK‘s activities in this context.
of the internal control and risk management system it has
implemented with regard to the financial reporting process.
d) Requirements pursuant to section 27 of the
German Pfandbrief Act
The risk management system, which DG HYP had already implemented prior to the German Pfandbrief Act
(Pfandbriefgesetz – ”PfandBG”) coming into force, fulfils
all requirements under section 27 of the PfandBG. The
TXS-Pfandbrief application is used to determine the market
risk exposure of cover assets pools, based on a coverage
concept using present values, as set out in the Present Value
Cover Regulation (”PfandBarwertV”) promulgated by BaFin. Stress scenarios simulating the impact of standardised
interest rate shocks on the present value of cover assets
pools are used to quantify the market risk exposure.
Organisation
DG HYP‘s accounting and financial reporting system is predominantly assigned to the Finance division (which is independent from the business divisions); it comprises financial
accounting and asset accounting. Securities accounting
is assigned to Securitised and Local Authority Loans, a
back-office (Marktfolge) unit. Loan accounting is performed
by Risk Management, also a back-office unit; for the retail
business it has been outsourced to Hypotheken Management GmbH, Mannheim. Payroll administration has been
outsourced to IT2 Solutions AG, Henstedt-Ulzburg.
BaFin has prescribed some structural parameters for these
interest rate shock scenarios, as well as for the maximum
impact these scenarios may have on the present value of
the cover assets pools. A report on the present values and
liquidity status of the cover assets pools is prepared on a
daily basis and submitted to Treasury.
In addition, a quarterly report is submitted to the Risk/
Return Management Committee, which covers the more
extensive PfandBG requirements regarding historical and
future performance and credit risk exposure of the cover
assets pools. In addition, the Committee receives a monthly
report detailing the existing backlog for inclusion in cover,
together with an analysis of reasons, on a case-by-case
basis. The purpose of this supplementary report is to expedite inclusion in cover and thus to avoid unnecessary
funding costs.
Internal rules regarding the commencement of business in
new products or markets comply with the requirements of
the MaRisk as well as with those under section 27 of the
PfandBG.
e) Internal control and risk management system
related to the financial reporting process
As an issuer of publicly-traded securities (as defined in
section 264d of the HGB), DG HYP is obliged, pursuant
to section 289 (5) of the HGB, to outline the key features
Strategy
The internal control and risk management system implemented for the accounting process consists of accounting-related and other control objectives. Accounting-related
control objectives are designed to ensure the proper functioning and reliability of internal and external accounting
and financial reporting systems. Key objectives in this context are the completeness and accuracy of documentation,
timely recording, the reconciliation of balances across the
IT systems used, and compliance with accounting rules.
Other control objectives relate to ensuring the efficiency of
business activities as well as to compliance with applicable
laws and regulatory requirements related to accounting and
financial reporting.
Integrated business process control mechanisms have been
installed, in order to fulfil the strategy outlined above. In
particular, compliance with the principles of functional
separation, access restrictions, instructions and plausibility
checks are used to avoid mistakes, whilst checks of completeness and accuracy – applying the principle of dual
control – serve to identify any errors. The bank regularly
draws upon support from external experts for implementing new legal regulations. New product processes always
require evidence, prior to the launch of a new product, that
the new product can be implemented in the accounting
and financial reporting system, in an orderly manner that is
in line with applicable rules. Internal Audit regularly carries
out process-independent checks concerning accounting
and financial reporting; in addition, the external auditors
55
Management Report
review the bank‘s accounting and financial reporting system
as part of their audit of the financial statements.
the counterparty‘s failure to perform, when the bank has
already performed its obligation.
Overall, the bank has implemented a control and risk
management system with regard to the financial reporting
process. This system comprises measures to identify and assess material risks (and related risk mitigation measures) to
ensure the proper preparation of the financial statements.
a) Lending process
The front and back offices for commercial real estate finance
in Germany are located in DG HYP’s Real Estate Centres;
for certain sub-markets, these functions are at DG HYP‘s
head office. Key workflow stages include the credit rating,
which is identified using rating procedures that comply with
the CRR, 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. The loan application is authorised on the
basis of lending volume and risk classification, observing
the separation of functions prescribed by MaRisk. Market
coverage, 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 frontoffice and back office departments. With regard to capital
market products, the existing portfolio of mortgage-backed
securities (MBS) is also looked after centrally in Hamburg
by a specialist back office department. The bank no longer
enters into new business in this type of product.
II) Counterparty risk
Risk management in the real estate lending sector focuses on the risk of counterparty default – also referred to as
”credit risk”. This is defined as the risk of losses incurred as
a result of the default of counterparties (borrowers, issuers,
other counterparties) as well as from impairment due to
a rating migration of borrowers. Both traditional lending
business and trading activities may be exposed to credit risk.
At DG HYP, traditional lending business largely comprises
real estate lending including financial guarantees and loan
commitments. In the context of credit risk management,
trading activities relate to capital markets products such
as securities of the banking book, promissory note loans
(Schuldscheindarlehen), derivatives and money-market
instruments.
Counterparty risk in real estate lending is defined as (i) the
risk that a client is unable to honour claims from loans disbursed, or from overdue payments; or (ii) the risk of losses
from contingent liabilities or credit lines committed to third
parties.
Credit risk from trading activities is incurred in the form of
default risks which are further distinguished into replacement risk, issuer risk, and performance risk, depending on
the type of transaction involved. Replacement risk from
derivatives is defined as the risk of a counterparty defaulting during the term of a transaction (with a positive market
value), in which case DG HYP would have to incur additional expenditure (equivalent to this market value, at the time
of default) in order to enter into an equivalent transaction
with another counterparty. Issuer risks denote the threat of
losses from the default of issuers of tradable bonds or losses
from the default of underlying instruments of derivatives
(such as credit derivatives). Performance risk is incurred
with trades which are not settled by way of delivery versus
payment: it is defined as the risk of losses incurred due to
56
b) Limit system
DG HYP has a limit system in place to manage and monitor
counterparty risks and country risks, within the framework
of the strategy adopted by DG HYP/DZ BANK Group. For
this purpose, utilisation of internal country risk and counterparty risk limits is calculated simultaneously. The respective
limits and their utilisation can be viewed at any time via
an online system. Back office units monitor the utilisation
of individual limits on a daily basis, and initiate escalation
procedures in the event of any limit transgressions. These
procedures are designed to restore limit compliance, or to
approve transgressions, in line with delegated authority,
taking the strategy adopted by DG HYP/DZ BANK Group
into account. Group risk management incorporates an
agreed ‚traffic light‘ system for the early detection of risks.
c) Credit rating
In order to adequately account for the risk profiles of different client groups, DG HYP employs customised rating
procedures.
For commercial real estate financings, these rating procedures adequately incorporate the special characteristics of commercial and residential real estate developers,
commercial housing enterprises, special purpose entities,
commercial real estate investors, as well as open-end
and closed-end real estate funds, considering the specific
risks involved. For properties located abroad, the rating
procedures also map the associated risks, as well as special
features of the corresponding real estate markets.
Given its extensive real estate expertise, DG HYP has assumed the lead – within the Volksbanken Raiffeisenbanken
cooperative financial network – for the conception, regular
maintenance and development of rating procedures for
commercial real estate finance in Germany. In this context,
the bank is also responsible for compliance with CRR standards, which the ECB monitors regularly, in its capacity as supervisor. Having been approved by the regulatory authority,
these rating procedures fulfil the highest standards; thanks
to this high quality level, the procedures are also employed
by other real estate banks within the cooperative financial
network, and by numerous cooperative banks.
DG HYP also offers CRR-compliant rating procedures
– approved during the course of regular supervisory audits –
Lending volume*)
€ mn
Investment grade (rating class 2A or better)
Non-investment-grade (rating classes 2B-3E)
Total (excluding defaults)
for other client segments, such as banks, sovereigns, or
large SMEs. Methods are developed in cooperation with
the central institutions of the cooperative financial network
and the National Association of German Cooperative Banks
(BVR). DG HYP regularly validates the adequacy of these
procedures for its own portfolios, by way or internal validation processes.
The risk exposure of the existing portfolio of home loan financings requires high-quality, high-frequency monitoring.
DG HYP applies proprietary, automated procedures for this
purpose, assessing customers‘ credit quality on a monthly
basis. The relevant procedures have been approved by the
supervisory authorities.
DG HYP also applies a CRR-compliant rating procedure
to assess the credit quality of local authorities. Given the
regulatory exemption for capital requirements concerning
exposures to European local authorities, no regulatory approval is required here.
A breakdown of DG HYP‘s total commercial real estate finance portfolio by rating class (excluding default classes 4A
or worse) is provided below:
31 Dec 2015
31 Dec 2014
Change
%
18,013
1,442
19,455
17,280
1,461
18,741
4.2
-1.3
3.8
*) including disbursement commitments
57
Management Report
A new rating is prepared for each client at least once a year,
or on an event-driven basis.
d) Management of problem loans
DG HYP uses an individual risk management system
(”ERM”) for the purposes of early warning, in a similar way
as employed by the parent company DZ BANK. Cases with
early warning indicators are assigned to a so-called “yellow
list”. Loans with regard to which a subsequent loss cannot
be excluded are kept on a “watch list”. 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 write-downs.
The processing rules and requirements on the transfer from
one ERM list to another are subject to defined criteria. Problem loans that are judged to have a favourable outlook are
passed on to the Restructuring department for further processing. As a basis for a restructuring decision, a concept is
submitted that must comprise a differentiated analysis and
assessment of the overall situation of the exposure and a
cost-benefit analysis, as well as a comprehensive restructuring plan. 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.
Non-performing loans are managed using the following
indicators:
– the provisioning ratio (defined as the share of aggregate provisions for loan losses and allowance for credit
losses in total lending volume)
– the risk coverage ratio (defined as the share of aggregate provisions for loan losses and allowance for credit
losses in aggregate non-performing loans)
– the NPL ratio (defined as the share of non-performing
loans in total lending volume)
Selected indicators used for the internal management of
counterparty risk developed as follows during the year
under review:
31 Dec 2015
31 Dec 2014
Change
%
41,575
22,402
340
44,442
22,773
402
-6.5
-1.6
-15.4
156
0.7
46
1.5
239
1.1
60
1.8
-34.7
-36.4
-22.8
-16.7
Indicators
Total lending volume*) (€ mn)
Volume of real estate loans *) (€ mn)
Non-performing real loans (€ mn)
Aggregate provisions for loan losses
and allowance for credit losses (€ mn)
Provisioning ratio (%)
Risk coverage ratio (%)
NPL ratio (%)
58
e) Provisions for loan losses
The bank has accounted for all identifiable credit risks, in
accordance with prudent commercial judgement, by recognising provisions in the amount of expected losses. Provisions for loan losses comprise write-downs and provisions
for credit risks and inherent default risks, for all receivables
carried on the balance sheet as well as for off-balance-sheet
transactions.
– Specific provisions are recognised when the bank has
reason to doubt the performance of a receivable, due
to the difficult financial circumstances of a borrower,
or in the event of insufficient collateralisation; or if
there are indications that the borrower will be unable
to pay interest on a sustainable basis. The same applies to contingent receivables. Specific provisions must
be recognised in accordance with the requirements
of German commercial law, especially observing the
principle of prudence. Accordingly, such provisions
€ mn
Specific provisions
Portfolio-based allowance for credit losses
Provisions/reserves pursuant to section 340f of the HGB
Total risk provisioning
are measured so as to cover a probable default scenario, appraising the facts of each individual case, and
including a conservative valuation of existing collateral. When determining the amount of a specific
provision, expected future cash flows from the asset
serving as collateral (based on the net collateral value)
are discounted to the reference date and compared
with the residual claim. A specific provision will be
recognised for the portion of the loan receivable not
covered by the present value of the net collateral value.
– Portfolio-based allowance for credit losses (in accordance with IAS 39) has been calculated to account for
inherent default risks and country risk exposure.
Amounts carried for the various types of provision/allowance developed as follows:
31 Dec 2015
31 Dec 2014
Change
97
48
11
156
154
77
8
239
-57
-29
3
-83
59
Management Report
The marked reduction in aggregate provisioning reflected
reversals of write-downs which were necessary due to recoveries of previously non-performing loan exposures. This
shows a further improvement in the quality of the loan
portfolio, thanks to successful restructuring and workout
measures.
f) Concentration risks
The Management Board is informed about economic capital
requirements for credit risks. In addition, internal reporting
provides a more in-depth analysis of the portfolio structure
in terms of concentration risks, using key risk criteria such
as country, sector, property type, credit rating class, or the
volume of loans extended to a single name. These reports
Type of property*)
€ mn
Retail
Office
Housing
Hotels
Logistics
Other
contain details concerning individual exposures as well as
on any specific provisions.
The share of domestic loans in DG HYP’s total real estate
financing portfolio currently stands at 93.2 %. The share of
international loans decreased by 22.4 % in 2015, and thus
continued the above-average run-down of international
business, in line with the bank’s strategy. The target markets of the United Kingdom, France and the Netherlands
account for 69.9 % of international loans.
At the end of 2015, loan exposures in the Commercial Real
Estate Finance division were broken down by property type
as follows:
31 Dec 2015
31 Dec 2014
Change
%
6,123
5,488
4,784
1,524
765
615
6,002
5,495
4,411
1,324
795
579
2.0
-0.1
8.5
15.1
-3.8
6.2
DG HYP is exposed to noticeable concentration risks in the
public finance portfolio in particular. In the event of any
material loan defaults or bail-ins affecting these holdings,
DG HYP might be forced to draw upon DZ BANK’s obliga-
tion to equalise losses, as provided for in the profit transfer
agreement.
The regional breakdown of the securities portfolio is analysed below:
31 Dec 2015
31 Dec 2014
(%; changes in
percentage points)
PIIGS*
Germany
42
33
45
32
-3
1
Rest of Europe
19
17
2
7
5
2
Regional distribution (%)
USA/Canada
*) Portugal, Ireland, Italy, Greece, Spain
60
III) Market risks
Market risks may be incurred in the form of market price
risk or 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 interest-rate swaps, cross-currency swaps and caps. Each derivative hedge forms part of
the overall management of the banking book; no segregated sub-portfolios are managed on an individual basis.
Market Risk Controlling informs the Management Board,
the Treasury unit as well as DZ BANK on the day-to-day
performance of the Treasury and the bank as a whole, and
on the utilisation of the VaR limit and the sensitivity limits
implemented. A multi level escalation plan, comprising escalation paths and measures to be taken, has been imple-
mented to deal with the breach of defined thresholds. No
escalation was required in the financial year under review.
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. As
in the previous years, the development of these indicators
– which are determined on the basis of a 99 % confidence
interval and a ten-day holding period – remained on a low
level, showing little fluctuation.
The bank regularly calculates scenarios based on parameters set by DZ BANK. These also include those defined by
BaFin (in Circular 11/2011) for the purposes of monitoring
interest rate risk exposures of investments.
DG HYP’s Treasury management is in line with the bank’s
business model. In particular, the primary focus of Treasury
management is on managing profit and loss for the period,
taking into account the intent to hold investment securities
permanently. The Treasury unit is not regarded as a profit
centre. Daily calculations include a report on present-value
contributions to results, as well as on the preceding day’s
income contributions. This analysis also contains a breakdown of contributions into the share of interest income that
DEVELOPMENT OF RISK CAPITAL REQUIREMENTS FOR MARKET PRICE RISKS 2015
€ mn
350
Changeover date
300
250
200
150
100
50
0
12|2014
03|2015
Total risk capital requirement
06|2015
09|2015
12|2015
Capital buffer (until 28 Feb 2015) / maximum loss threshold
61
Management Report
portfolios are measured, and limits applied, at Group level,
based on data provided by DG HYP.
is attributable to credit units of the business divisions, and
the structural contribution generated by the Treasury. This
approach also facilitates the management of profitability
clusters within the bank.
b) Liquidity risks
The bank’s liquidity situation is determined daily, in line with
the regulatory and business requirements.
In February 2015, quantification of risk capital requirements
for interest rate risk was transferred to a new risk model,
which is very similar to the method used by DZ BANK, and
which was reviewed by DZ BANK prior to introduction. As
part of production roll-out of the model, the capital buffer
required until then was integrated into DG HYP’s maximum
loss threshold for market price risks.
Based on the management of economic liquidity, Market
Risk Controlling provides Treasury with a differentiated overview on each business day, indicating future liquidity flows
(comprising cash flows as well as a gap analysis of principal
repayments and fixed interest mismatches) resulting from
the individual positions in the portfolio. At the same time,
DG HYP’s liquidity data is transmitted to DZ BANK’s risk control unit, where it is used to determine the Group liquidity
position and risk exposure, and checked against DG HYP’s
individual liquidity limit in the Group.
From 2016 onwards, interest rate risk for pension provisions
will be integrated into the risk model, and the previous
capital buffers set aside for these risks incorporated into
the maximum loss thresholds. This means that from 2016,
minor buffer amounts will be maintained for real estate
risks. Spread and migration risks of DG HYP’s securities
EXPECTED LIQUIDITY DEVELOPMENTS IN 2016
€ mn
4,000
3,000
2,000
1,000
0
-1,000
12|2015
Base scenario
62
03|2016
Stress scenario
06|2016
Threshold for ‘amber‘ status
09|2016
12|2016
Threshold for ‘red‘ status
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 dual objectives of securing
the bank’s long-term liquidity and achieving compliance
with the Liquidity Regulation. A suitable liquidity controlling
system is already in place in line with the requirements of
MaRisk for measuring and reporting on liquidity risk (BTR
3.1 and 3.2). 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 scenario analyses – which comply with the
requirements set out in the relevant sections of MaRisk – are
fed into the risk analysis process.
The first step in determining risk indicators is to calculate a
liquidity run-off profile, based on the contractually agreed
terms of all financial instruments with an impact on liquidity. The base case scenario maps the development of current
and future liquidity reserves, in connection with expected
business activities. Potential changes to liquidity reserves
in the event of a crisis affecting markets or the bank are
simulated for three stress scenarios:
– liquidity reserves in the event of a serious crisis threatening the DZ BANK Group
– liquidity reserves in the event of a two-notch rating
downgrade of DZ BANK Group
– liquidity reserves in the event of a global economic
crisis
Expected liquidity is indicated by the liquidity run-off profile
in the base case scenario. In the stress scenario, liquidity is
defined by the combination of the liquidity run-off profile
and the worst daily value among the three scenarios.
The liquidity risk model is reviewed annually, within the
framework of an adequacy check, and adjusted if necessary.
Additional stress scenarios are planned to be introduced in
2016, in order to expand the scope of calculations.
Funding risk denotes the risk of potential losses which may
be incurred as a result of a widening in DZ BANK Group’s liquidity spread (which forms part of the spread on DZ BANK
Group’s own bond issues): with a wider liquidity spread,
covering any future liquidity requirements would incur ad-
ditional cost. In the context of DG HYP’s business model,
where existing business is funded on a matched-maturity
basis to the widest extent possible, funding risk has no material importance.
During 2015, DG HYP’s funding activities comprised the issuance of Mortgage Pfandbriefe (which were predominantly purchased by counterparties outside the Volksbanken
Raiffeisenbanken cooperative financial network) as well as
unsecured liquidity facilities provided by the bank’s group
parent DZ BANK. As in the previous year, DG HYP did not
issue any Public Pfandbriefe during 2015.
DG HYP defines market liquidity risk as the threat of losses which may be incurred due to unfavourable changes
in market liquidity – for example, due to a deterioration
in market depth, or in the event of market disruptions, in
which case the bank may only be able to sell assets held
at a discount, and active risk management may be restricted. Since the impact of market liquidity risk is evident in
changed spreads and volatility levels, this is implicitly reflected in risk calculations.
For the purposes of regulatory monitoring of the bank’s
liquidity situation, part 6 of the CRR defines the calculation
of the (short-term) Liquidity Coverage Ratio (LCR), which is
designed to ensure the resilience of banks through a 30-day
liquidity stress scenario. The indicator is defined as the ratio
of available highly liquid assets to net cash outflows over
the next 30 days, subject to defined stress conditions. A
minimum LCR of 60 % has been mandatory for banks since
1 October 2015; this minimum level was raised to 70 %,
effective 1 January 2016.
The waiver under Article 7 of the CRR does not cover the
requirements under part 6; therefore, DG HYP must comply with the corresponding requirements at a single-entity
level. Accordingly, DG HYP reports its single-entity LCR, in
accordance with the CRR, to the supervisory authorities on
a monthly basis. Since 1 October 2015, an additional LCR
indicator has been determined for DG HYP, based on Delegated Regulation 2015/61.
%
LCR (month-end)
Oct 2015
355
Nov 2015
373
Dec 2015
369
63
Management Report
The (long-term) Net Stable Funding Ratio (NSFR) is designed
to restrict banks’ ability to enter into mismatches between
the maturity structure of assets vs. liabilities. The NSFR relates the amount of stable funding (equity and liabilities)
to the required amount of stable funding (as required by
the lending business). For this purpose, funding sources
and assets are weighted, depending upon their degree of
stability (or the ability to liquidate them, respectively), using
inclusion factors defined by the supervisory authorities. In
contrast to the Liquidity Coverage Ratio, compliance with
the Net Stable Funding Ratio is only expected to be mandatory from 2018 onwards.
IV) Operational risks
Closely aligned to the definition by banking regulators,
DZ BANK Group defines operational risks as the risks of losses resulting from human behaviour, technical faults, weaknesses in processes or project management procedures, or
from external events. This definition includes legal risks.
Risk capital requirements for operational risks are determined at Group level, as part of risk management and to
determine regulatory capital requirements, applying the
standardised approach as set out in the CRR. Due to the
waiver, DG HYP does not carry out its own determination;
instead, DG HYP’s data is incorporated into Group calcu-
lations. Moreover, economic capital for operational risk is
determined at Group level, using a portfolio model, and
incorporated into internal management, both on a Group
and single-entity level.
DG HYP has had a system for collecting and recording loss
data in place since 2002. Incoming loss reports involving
gross damages exceeding € 1,000 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. Losses incurred by DG HYP are
incorporated into DZ BANK’s economic model, enhancing
the database.
A total of 21 loss events with aggregate net damages of
€ 347,000 were recorded during the year under review (as
at 31 December 2015). The incidents were analysed for any
cues how such losses can be avoided in future (for example,
by changing business processes), and any changes required
were implemented.
Scenario-based risk self-assessments were once again conducted in 2015. Using risk scenarios, material potential risks
are determined, in accordance with the CRR, for all first-level risk categories and mapped in the form of scenarios. The
OPRISK LOSSES 2015
9%
38%
Number
21
1%
Damage to
property
Execution, delivery,
process management
25%
Net damages
€ 347,000
1%
5%
48%
64
HR practices and
workplace safety
Business interruptions
and system failures
73%
results of DG HYP’s assessments are then incorporated into
the economic risk model developed by DZ BANK at Group
level.
In order to be able to identify operational risks in good time,
an early warning system used by DG HYP regularly records
a total of 69 risk indicators (aligned with the CRR event categories, including system failures, fraud, staff fluctuation)
and analyses results by way of a traffic light system. The risk
indicator system did not yield any indications of particular
operational risks during 2015. Throughout the year, the vast
majority of risk indicators were in ‘green’ status. ‘Yellow’
or ‘red’ signals were given in isolated cases only; as a rule,
these were returned to ‘green’ in the following month.
DG HYP has outsourced certain activities and processes to
external service providers. The outsourcing unit is predominantly responsible for determining, as part of the outsourcing risk analysis, whether an outsourced activity or process
is material, and for assessing the risk involved. Other relevant organisational units (such as the Legal department) are
involved in this process. This risk analysis is reviewed and
updated once a year.
DG HYP has outsourced its IT and network operations to
T-Systems International GmbH, Frankfurt/Main, and Ratiodata IT-Lösungen & Services GmbH, Münster. The processing
of home loan financings has been outsourced to Hypotheken Management GmbH, an indirect subsidiary of BSH.
From an organisational perspective, DG HYP’s Controlling
unit is responsible for measuring operational risks, and for
coordinating outsourcing control. 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) Equity investment risk
Equity investment risk is defined as the risk of losses due
to negative changes in value affecting the part of the investment portfolio that is not taken into account for other
types of risk.
Within the framework of further standardisation of methods to quantify risks, the risk capital requirements for the
bank’s equity investment risk have been calculated by
DZ BANK since August 2015, in line with the measurement
of equity investment risk by DZ BANK AG. For this purpose,
risk capital requirements are measured using a value-at-risk
concept based on a variance/covariance approach, with a
one-year holding period. Risk drivers are the market values
of investments, volatility of such market values and correlation among them. Market value fluctuations are predominantly derived from exchange-listed reference assets.
VI) Reputational risk
Reputational risk is defined as the risk of losses caused by
events which damage the confidence of, in particular, clients, shareholders, labour market participants, the general
public or regulatory authorities – in the bank, or the products and services it offers.
The bank’s fundamental strategic objectives for dealing
with reputational risk, which was previously handled as an
element of business risk, were incorporated in a separate
risk strategy in 2015. This strategy defines the following key
objectives, which also apply on a Group-wide level:
– to avoid losses from reputational events, through preventive measures
– to mitigate reputational risks, through preventive as
well as responsive measures
– to strengthen awareness of reputational risk within the
Bank – including by appointing persons responsible for
this risk type, and by establishing a Group-wide framework and reporting structure for reputational risks
As a matter of principle, reputational risk continues to be
implied for risk measurement and capital backing purposes
through business risk. Moreover, liquidity risk management
explicitly covers the threat of funding problems as a result
of potential reputational damage.
VII) Business risks and strategic risks
DG HYP defines business risk as the threat of losses arising
from unexpected fluctuations in the bank’s results which
cannot be offset by cutting costs; assuming an unchanged
business strategy, such fluctuations usually materialise
on a short-term horizon (within a one-year period) due
to changed external circumstances (e.g. in the business
65
Management Report
or product environment, or due to customer behaviour).
DG HYP models this risk using a so-called earnings volatility
approach.
In contrast, strategic risk is defined as the risk of future
(erroneous) strategic management decisions, which are
taken in response to developments concerning other types
of risk. DG HYP manages this risk generally via investment
calculations and projections, business plans including scenario-based simulations, cost/benefit analyses, and risk
analyses. The regular review of business unit strategies is
also a core element of the continuous process of business
unit planning and control. The results of this review are
regularly discussed with the Supervisory Board of DG HYP.
66
VIII) Summary
Managing DG HYP’s opportunities and risks is an integral
part of the strategic planning process at DZ BANK Group.
High-performance management and control tools are deployed across all risk areas; these tools are continously finetuned and developed. DG HYP’s expected performance is
appropriate in terms of the risks assumed. Hence, there
are no indications for any threats to DG HYP’s continued
existence.
Balance Sheet | Profit and Loss Account | Statement of Changes in Equity | Cash Flow Statement | Notes to the Financial Statements
FINANCIAL STATEMENTS
Balance Sheet
68
70
Statement of Changes in Equity
71
Cash Flow Statement
72
Notes to the Financial Statements
73
General Notes
73
Notes to the Balance Sheet
75
Notes to the Profit and Loss Account
86
Coverage
87
Other Information on the Annual Financial Statements
95
67
BALANCE SHEET AS AT 31 DECEMBER 2015
ASSETS
€ 000‘s
Note
€ 000‘s
31 Dec 2015
€ 000‘s
31 Dec 2014
€ 000‘s
Cash funds
Balances with central banks
of which: with Deutsche Bundesbank
10
10
Loans and advances to banks
a) Mortgage loans
b) Loans to local authorities
c) Other loans and advances
of which: payable on demand
32
(32)
(4)
3,076,557
22,198
140,950
2,913,409
5,940
313,532
2,966,723
(1,535,274)
1,212,193
Loans and advances to customers
a) Mortgage loans
b) Loans to local authorities
c) Other loans and advances
(4)
Debt securities and other fixed-income securities
(7)
3,286,195
27,782,261
17,298,811
9,070,944
1,412,506
8,619,662
29,081,461
18,454,093
9,521,960
1,105,408
10,115,059
a) Bonds and debt securities
(8,548,564)
(10,056,678)
aa) Public-sector issuers
4,972,791
6,171,908
3,575,773
(5,620,714)
3,893,770
71,098
(2,116,153)
49,381
of which: securities eligible as collateral
with Deutsche Bundesbank
ab) Other issuers
4,051,036
of which: securities eligible as collateral
with Deutsche Bundesbank
b) Own bonds issued
2,017,960
Nominal amount
69,122
(47,051)
Participations
(7)
524
49
Investments in affiliated companies
(7)
1,566
1,566
Trust assets
(6)
81,039
103,852
of which: trustee loans
Intangible fixed assets
a) Concessions, industrial property rights
55,781
(71,142)
(7)
930
1,132
and similar rights and assets as well as
licences in such rights and assets
b) Advance payments made
Tangible fixed assets
Other assets
Prepaid expenses
a) From new issues and lending
b) Other
Total assets
68
899
1,077
31
55
(7)
143,740
145,690
(22)
7,876
3,578
106,832
173,077
(9)
105,679
1,153
171,785
1,292
39,820,997
42,911,691
BALANCE SHEET AS AT 31 DECEMBER 2015
LIABILITIES AND EQUITY
€ 000's
Note
Liabilities to banks
(11)
a) Outstanding Registered Mortgage Pfandbriefe (Hypotheken-Namenspfandbriefe)
b) Outstanding Registered Public Pfandbriefe (öffentliche Namenspfandbriefe)
c) Other liabilities
118,681
Registered Mortgage Pfandbriefe
and Registered Public Pfandbriefe
surrendered to lenders as collateral for borrowings
195
Liabilities to customers
(11)
a) Outstanding Registered Mortgage Pfandbriefe (Hypotheken-Namenspfandbriefe)
b) Outstanding Registered Public Pfandbriefe (öffentliche Namenspfandbriefe)
c) Other liabilities
and Registered Public Pfandbriefe
surrendered to lenders as collateral for borrowings
Other liabilities
Deferred income
From new issues and lending
14,987,745
15,958,222
1,297,544
1,016,679
13,643,999
(224,325)
1,082,261
936,983
12,968,501
(247)
10,312,442
1,824,360
7,042,467
1,445,615
10,793,176
2,099,514
7,481,179
1,212,483
(519,498)
(5,113)
(11)
12,199,754
13,622,890
7,587,938
5,664,073
370,879
(6)
81,039
103,852
(71,142)
(23)
150,554
92,564
141,289
191,395
191,395
148,698
132,866
107,299
25,567
235,218
452,468
157,000
157,000
1,407,258
1,407,258
(725,000)
90,000
635,000
589,113
(93,145)
945
92,200
39,820,997
42,911,691
495,770
534,099
3,278,919
2,981,842
7,719,979
4,112,937
366,838
55,781
(9)
141,289
116,554
32,144
(12)
Fund for general banking risks
Equity
a) Subscribed capital
aa) Share capital
ab) Silent partnership contributions
b) Capital reserves
c) Retained earnings
ca) Legal reserves
cb) Other retained earnings
31 Dec 2014
€ 000‘s
5,113
Provisions
a) Provisions for pensions and similar obligations
b) Other provisions
Subordinated liabilities
31 Dec 2015
€ 000‘s
798,877
Securitised liabilities
Bonds issued
a) Mortgage Pfandbriefe (Hypothekenpfandbriefe)
b) Public Pfandbriefe (öffentliche Pfandbriefe)
c) Other debt securities
Trust liabilities
of which: trustee loans
€ 000's
(13)
Total equity and liabilities
Contingent liabilities
Liabilities from guarantees and indemnity agreements
(14)
Other commitments
Irrevocable loan commitments
(15)
(725,000)
90,000
635,000
589,113
(93,145)
945
92,200
69
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2015
€ 000's
Note
€ 000's
2015
€ 000‘s
2014
€ 000‘s
Interest income from
a) Lending and money market transactions
1,035,216
b) Fixed-income securities and debt register claims
1,200,900
310,191
Interest expenses
Current income from participations
Income from profit-pooling, profit transfer and
partial profit transfer agreements
1,345,407
1,084,561
260,846
356,065
1,556,965
1,295,492
261,473
69
86
2,204
Commission income
Commission expenses
47,031
8,371
10,384
Other operating income
2,102
37,778
(26)
29,407
36,647
14,216
13,628
General administrative expenses
a) Personnel expenses
aa) Wages and salaries
ab) Compulsory social security contributions and
expenses for pensions and other employee benefits
of which: pension expenses
39,621
5,993
7,827
45,614
45,844
781
(2,886)
b) Other administrative expenses
67,745
69,217
113,359
115,061
2,992
3,008
19,740
19,665
Income from amounts written back on loans and
advances and specific securities and from the
reversal of loan loss provisions
64,338
-33,843
Amortisation and write-downs on participations,
investments in affiliated companies
and investment securities
91,540
-10,597
–
68,000
143,449
84,956
145
145
125,000
65,000
18,304
19,811
–
–
Amortisation/depreciation and write-downs
of intangible and tangible fixed assets
Other operating expenses
Result from ordinary activities
Other taxes not disclosed under
'Other operating expenses'
Profits transferred under
profit transfer agreements
Profits transferred under
partial profit transfer agreements
Net income
70
38,017
(27)
STATEMENT OF CHANGES IN EQUITY
31 Dec
2014
Issue of
shares
Dividends
paid
Net
income/
loss
€ 000's
€ 000's
€ 000's
(725,000)
90,000
–
–
635,000
Capital reserves
589,113
Retained earnings
(93,145)
–
–
–
945
–
–
–
92,200
–
–
–
–
–
–
1,407,258
–
–
Subscribed capital
– Share capital
– Silent partnership contributions
– Legal reserves
– Other retained earnings
– Net retained profit
Equity
Other
changes
31 Dec
2015
€ 000's
Transfers
to/from
retained
earnings
€ 000's
€ 000's
€ 000's
–
–
–
–
–
–
–
–
(725,000)
90,000
–
–
–
–
–
635,000
–
–
–
–
–
589,113
–
–
(93,145)
–
–
945
–
–
92,200
–
–
–
–
–
–
–
1,407,258
71
CASH FLOW STATEMENT
€ mn
Net income for the period
(net income/loss including interests
of other shareholders)
+/-
Amortisation/depreciation, write-downs and write-ups on loans
and advances, and non-current assets
2015
2014
143
85
-15
48
14
+/-
Increase/decrease in provisions
16
+/-
Other non-cash expenses/income
10
68
-/+
Profit/loss from the disposal of non-current assets
41
-15
-/+
Other adjustments (net balance)
-/+
Increase/decrease in loans and advances to banks
-/+
Increase/decrease in loans and advances to customers
-/+
Increase/decrease in securities (excluding financial assets)
-/+
Increase/decrease in other assets from operating activities
85
83
+/-
Increase/decrease in liabilities to banks
-965
-217
+/-
Increase/decrease in liabilities to customers
+/-
Increase/decrease in securitised liabilities
+/-
Increase/decrease in other liabilities from operating activities
+/-
Interest expenses/income
+
Interest and dividend payments received
Interest paid
=
Cash flow from operating activities
-
Receipts from the disposal of financial assets
Payments for investments in financial assets
-
Payments for investments in tangible fixed assets
-
Payments for investments in intangible fixed assets
=
Cash flow from investing activities
-
Dividends paid to shareholders of parent company
Dividends paid to other shareholders
+/-
Changes in cash funds due to other capital movements (net balance)
=
Cash flow from financing activities
=
Cash funds at the beginning of the period
-6
-4
208
-537
1,351
2,415
-83
20
-469
-885
-1,383
-2,028
-73
-50
-263
-264
1,380
-1,143
1,606
-1,405
-1,166
-1,066
1,470
-1
1,815
-460
–
-1
-1
-1
1,468
1,353
-65
-20
-215
-20
-217
-52
-302
-287
–
–
+/+/-
Cash flow from operating activities
Cash flow from investing activities
-1,166
1,468
-1,066
1,353
+/-
Cash flow from financing activities
-302
-287
Cash funds at the end of the period
–
–
=
The cash funds correspond to the balance sheet item ”Cash funds” and include cash on hand and balances with central banks.
72
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
2015 have been prepared in accordance with the provisions
of the German Commercial Code (Handelsgesetzbuch
– “HGB”).
Furthermore, the financial statements are prepared in accordance with the Regulation on the Accounting of Credit
Institutions and Financial Services Institutions (Verordnung
über die Rechnungslegung der Kreditinstitute und Finanzdienstleistungsinstitute – “RechKredV”); they fulfil
the requirements of the German Stock Corporation Act
(Aktiengesetz – “AktG”) and the German Pfandbrief Act
(Pfandbriefgesetz – “PfandBG”).
Given the non-materiality of all subsidiaries, even if considered in aggregate, in accordance with section 290 (5) in
conjunction 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
The present financial statements are based on the same
accounting policies as were applied in the financial statements as at 31 December 2014.
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 differs from the amount
disbursed, or cost, the amount of the difference is reported
under prepaid expenses or 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.
As prescribed by international accounting standards, changes over time in the value of real estate collateral recognised
for the purposes determining the value of Commercial
Real Estate Finance receivables are reported in net interest
income (unwinding effect). Besides this policy, no income
received on commercial real estate financings for which a
specific provision has been recognised is reported in net
interest income: unexpected receipts for such exposures are
set off against the provision for loan losses.
In case of settlement of a private real estate financing,
interest income is no longer recognised where it becomes
obvious during execution proceedings that the realisable
proceeds will fall short of the carrying amount.
Inherent default risks and country risks covered by the portfolio-based allowance for credit losses in accordance with
IAS 39.
Prepayment indemnities charged for loan repayments or
extensions during the fixed-interest term of a loan are fully
recognised in interest income.
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 (financial
assets), at amortised cost, except repurchased own issues,
which are valued strictly at the lower of cost or market,
and mortgage-backed securities (MBS) reclassified due to
an existing intention to sell. Premiums and discounts are
amortised in net interest income over the term of the
transactions.
The fair value of liquid debt securities and other fixed-income securities is generally determined on the basis of
external market prices. If a valid market price for securities
already held cannot be determined as at the balance sheet
date, due to a lack of transaction volume, spread curves
are used to determine the relevant price on the basis of
the discounted cash flow method. Future cash flows from
interest and principal were discounted to their present value
as at the balance sheet date, using market interest rates in
line with the risks and maturities concerned.
Participations and interests in affiliated companies
Participations and interests in affiliated companies are carried at amortised cost.
Intangible and tangible fixed assets
Tangible fixed assets are carried at cost less regular depreciation, where applicable. Where necessary, extraordinary
write-downs were taken into account in accordance with
section 253 (3) sentence 5 of the HGB. Moveable fixed assets are depreciated on a straight-line basis, or degressively
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
73
assets, as prescribed by accounting standard HFA 11 issued
by the Main Committee of the IDW (IDW RS HFA 11).
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 prepaid expenses or deferred income, and
amortised over the term of the transaction.
Liabilities classified as structured products (as defined in
Accounting Standard 22 issued by the Auditing and Accounting Board of the IDW) are accounted for as uniform
liabilities, since they only contain embedded interest rate
derivatives.
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 recognised
in accordance with actuarial principles and determined
on the basis of the projected unit credit method, using Dr
Klaus Heubeck’s 2005 G actuarial tables. The calculation of
the provisions takes into account future salary increases of
2.5 % p.a. as well as pension increases of 1.75 % p.a. The
discount rate of 3.88 % as determined by Deutsche Bundesbank was used.
The addition to provisions for pensions due to interest rate
effects is recognised in other operating expenses.
Derivative financial instruments
Financial derivatives are accounted for separately in auxiliary
ledgers. These instruments are generally used to hedge
against the interest rate and currency risk exposure of
on-balance-sheet transactions. Each derivative transaction
forms part of the overall management of the banking book;
segregated sub-portfolios (valuation units) are not managed
on an individual basis. Accordingly, section 254 of the HGB
is not applicable. In accordance with Statement IDW RS BFA
3 issued by the Banking Committee of the Institute of Pub-
74
lic Auditors in Germany (IDW), the fair value measurement
(verlustfreie Bewertung) of the banking book is based on
the present value. As at the balance sheet date, DG HYP
is not obliged to recognise a provision pursuant to section
249 (1) sentence 1 alternative 2 of the HGB, since the present value of the banking book is larger than the carrying
amount of the banking book.
Current interest payments are amortised and recorded in
net interest income.
In connection with the early redemption of hedged items
recognised on the balance sheet, the bank also generally
sells derivative financial instruments. Any resulting gains are
reported in net interest income.
Where interest rate swaps can be allocated to individual
securities synthetically within the context of the overall
management of the bank, income realised upon closing out
swaps is recognised in line with the recognition of income
of the underlying transaction, in the net financial result, 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. Compensation payments received under Credit
Default Swaps are offset against provisions for loan losses.
(3) Currency translation
Assets and liabilities from foreign exchange transactions
are translated in line with section 340h in conjunction with
section 256a of the HGB and the Statement IDW RS BFA 4
issued by the Banking Committee of the Institute of Public
Auditors in Germany (IDW). Book receivables, securities,
liabilities and unsettled spot transactions denominated in
foreign currencies are translated into euros using the ECB
reference rate. Due to the specific coverage of all existing
foreign currency items, all currency translation effects have
been recognised in income. Currency translation effects are
reported in net other operating income/expenses.
NOTES TO THE BALANCE SHEET
(4) Lending business
Principal
€ mn
Carrying amount
€ mn
to banks
to customers
22
17,106
22
17,299
Total
17,128
17,321
€ mn
€ mn
Mortgage loans
Portfolio development (principal)
Balance at 31 Dec 2014
18,091
Additions during the financial year 2015
through Disbursements
Reclassifications
Other additions
4,303
4,237
–
66
Disposals during the financial year 2015
through Scheduled repayments
Unscheduled repayments
Reclassifications
Other disposals
5,266
2,028
2,438
800
–
17,128
Principal
€ mn
Carrying amount
€ mn
to banks
to customers
141
9,026
141
9,071
Total
9,167
9,212
Portfolio development (principal)
€ mn
€ mn
Loans to local authorities
9,778
Additions during the financial year 2015
through Disbursements
Reclassifications
Other additions
424
298
100
26
Disposals during the financial year 2015
through Scheduled repayments
Unscheduled repayments
Reclassifications
Other disposals
1,035
907
28
100
–
9,167
75
(5) Negotiable securities
Balance sheet item
Debt securities
and other fixedincome securities
Listed
Unlisted
Carrying amount of negotiable
securities not valued at the
lower of cost or market
31 Dec 2015
€ 000‘s
31 Dec 2014
€ 000‘s
31 Dec 2015
€ 000‘s
31 Dec 2014
€ 000‘s
31 Dec 2015
€ 000‘s
31 Dec 2014
€ 000‘s
7,776,999
9,301,515
842,663
813,544
1,862,281
2,241,994
As at 31 December 2015, we did not recognise an extraordinary write-down in the aggregate amount of € 186.6 million
for negotiable securities with a fair value of € 1,675.7 million not measured at the lower of cost or market, due to the
expected temporary nature of the impairment. Our expectations are based on the noticeable success of the stabilisation
measures (political reforms, purchase programmes, etc.) taken within the euro zone, which have led to gradually improving
competitiveness of the respective economies.
The hidden burdens and reserves in the bank’s portfolio of negotiable securities amount to a total of € 662.4 million. Taking
into account the aggregate effects from hedges within the context of the overall management of the bank, these hidden
burdens amount to € 929.1 million; € 685.2 million of which relate to securities attributable to the so-called PIIGS countries
(taking into account all hedging transactions). Since impairments of interest and principal payments are not expected to
occur – in our view – with respect to the securities concerned and the hedges, no write-downs were recognised based on
such a high-level portfolio view.
(6) Trust business
31 Dec 2015
€ 000‘s
31 Dec 2014
€ 000‘s
– Loans and advances to customers
55,781
71,142
– Participations
25,258
32,710
81,039
103,852
– Banks
30,221
44,811
– Customers
50,818
59,041
81,039
103,852
Assets held in trust comprise:
Trust liabilities are carried vis-à-vis:
76
(7) Breakdown of, and statement of changes in fixed assets
Purchase or production cost
I.
Intangible
assets
1. Software
2. Advance payments made
on intangible
assets
II. Tangible fixed assets
1. Land
and buildings
2. Office furniture
and
equipment **)
III. Financial assets
1. Participations
2. Investments in
affiliated
companies
3. Investment
securities
Depreciation and amortisation
1 Jan
2015
Additions
Reclassifications
Disposals
€ 000‘s
€ 000‘s
€ 000‘s
30,649
318
55
Carrying amounts
Reclassifications
Disposals
Total
31 Dec
2015
1 Jan
2015
€ 000‘s
in the
financial
year
€ 000‘s
€ 000‘s
€ 000‘s
€ 000‘s
€ 000‘s
€ 000‘s
150
36
646
–
36
30,182
899
1,077
126
-150
–
–
–
–
–
31
55
30,704
444
–
36
646
–
36
30,182
930
1,132
179,321
36
–
–
2,089
–
–
36,882
142,475*)
144,528
5,165
360
–
14
257
–
14
4,246
1,265
1,162
184,486
396
–
14
2,346
–
14
41,128
143,740
145,690
Additions
Disposals
49
475
–
524
49
1,566
–
–
1,566
1,566
10,023,430
91,252
1,736,869
8,377,813
9,929,360
10,025,045
91,727
1,736,869
8,379,903
9,930,975
*) of which: owner-occupied properties: € 57.5 million; used by third parties: € 85.0 million.
**) Fully used for the bank’s own operations.
(8) List of investments pursuant to sections 285 no. 11 and 340a of the HGB
Minimum stake of 20%
Name/registered office
Equity interest
%
Equity
€ 000‘s
Result 2015
€ 000‘s
VR WERT Gesellschaft für Immobilienbewertungen mbH, Hamburg
100.0
50
2,204 *)
VR HYP GmbH, Hamburg
100.0
25
– **)
VR REAL ESTATE GmbH, Hamburg
100.0
25
– **)
24.5
200
287 **)
TXS GmbH, Ellerau
*) Domination and profit and loss transfer agreement with DG HYP.
**) Result for the financial year 2014.
77
(9) Prepaid expenses and deferred income
31 Dec 2015
€ 000‘s
31 Dec 2014
€ 000‘s
– Difference between the nominal amount
and the higher disbursement amount
of receivables
44,528
78,104
and the lower issuing amount
of liabilities
19,984
23,868
31,792
37,217
31 Dec 2015
€ 000‘s
31 Dec 2014
€ 000‘s
884,496
884,271
1,163,923
1,164,242
Principal
€ mn
Carrying
amount
€ mn
to banks
1,068
1,082
to customers
1,788
1,824
7,677
7,720
10,533
10,626
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 receivables
(10) Securities repurchase agreements
Carrying amount of securities pledged under repo agreements
Repurchase amount
(11) Breakdown of, and statement of changes in debt securities and borrowed funds
Registered Public Pfandbriefe
to banks
to customers
Public Pfandbriefe
Other debt securities
924
937
6,878
7,042
4,077
4,113
11,879
12,092
363
367
10,837
10,862
625
639
11,462
11,501
34,237
34,586
Borrowed funds
from banks
from customers
Total
78
Development (principal)
Balance on
31 Dec 2014
Additions
Disposals
Balance on
31 Dec 2015
€ mn
Reclassifications and other
adjustments
€ mn
€ mn
€ mn
Mortgage Pfandbriefe and Registered
10,873
1,707
2,047
–
10,533
Public Pfandbriefe and Registered Public
Pfandbriefe
13,909
–
2,090
60
11,879
366
83
86
–
363
Borrowed funds
10,496
2,324
1,358
–
11,462
Total
35,644
4,114
5,581
60
34,237
Other debt securities
€ mn
(12) Subordinated liabilities
Subordinated
other debt securities
borrowed funds
Expenses incurred
31 Dec 2015
€ 000‘s
31 Dec 2014
€ 000‘s
25,000
210,218
25,000
427,468
235,218
452,468
8,124
11,542
Pursuant to the CRR, subordinated liabilities in the amount of € 81.0 million qualify as tier 2 capital in the determination of
own funds for regulatory 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 1.6 %, and have original maturities of between 10 and 20 years.
Disclosures on subordinated liabilities amounting to 10.0 % or more of the aggregate amount of subordinated liabilities:
Amount
€ mn
Currency
Coupon *)
%
Maturity
100.0
EUR
0.46
23 Nov 2016
90.0
EUR
0.50
23 Jan 2017
25.0
EUR
6.61
21 Mar 2022
*) Reporting date: 31 Dec 2015
79
(13) Equity
The share capital amounts to € 90.0 million and is divided into 3,500,000 notional no-par value shares (“unit shares”).
DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, has given notice pursuant to section 20 (4) of the
German Stock Corporation Act (Aktiengesetz – “AktG”) that it holds a majority shareholding.
With effect from 31 December 2012, DZ BANK has issued a letter of comfort for DG HYP. Except in the event of political
risk, DZ BANK has undertaken to ensure in total for the consolidated entity DG HYP that DG HYP is able to meet its contractual obligations.
Silent partnership contributions in the amount of € 635.0 million are open-ended and comply with the provisions of section
10 (4) of the KWG on the balance sheet date. The silent partnership contributions are partial profit transfer agreements
within the meaning of section 292 (1) no. 2 of the AktG. Pursuant to the transitional regulations of the CRR, € 444.5 million
of the silent capital contributions are considered as tier 1 capital. The remaining € 190.5 million is included in tier 2 capital.
(14) Contingent liabilities
Contingent liabilities (€ 495.8 million) comprise mainly guarantees for commercial real estate loans, € 226.0 million of
which are extended to DZ BANK. The bank’s credit risk management is responsible for monitoring contingent liabilities.
(15) Other commitments
Irrevocable loan commitments of € 3,278.9 million are related primarily to mortgage financing, and were decreased by
€ 3.3 million in provisions for contingent losses
(16) Obligations
DG HYP is a member of the BVR Institutssicherung GmbH (BVR-ISG) and the deposit insurance scheme of the National
Association of German Cooperative Banks (Bundesverband der Deutschen Volksbanken und Raiffeisenbanken – “BVR”).
According to the articles of association of the deposit insurance scheme of the BVR, DG HYP has issued a letter of indemnity
to BVR. As a result, DG HYP is liable to contingent liabilities in the amount of € 19.3 million.
According to BVR-ISG’s articles of association, DG HYP has undertaken to make special contributions and payments to BVRISG in proportion to the volume of the covered deposits. Pursuant to section 27 (4) of the German Deposit Guarantee Act
(Einlagensicherungsgesetz), BVR-ISG may generally raise, as a statutory deposit guarantee scheme, special contributions
and payments of a maximum amount of up to 0.5 % of the covered deposits of the credit institutions allocated to it within
a given settlement year.
(17) Revaluation reserves
No revaluation reserves were included in liable capital.
80
(18) Relationships with affiliated companies and subsidiaries
Affiliated companies
31 Dec 2015
€ 000‘s
31 Dec 2014
€ 000‘s
2,082,619
2,271,466
43,065
44,178
Other assets
2,233
2,154
Liabilities to
banks
13,606,319
14,317,089
Loans and advances to
banks
customers
customers
389,924
453,409
2,013,461
2,754,942
Subordinated liabilities
190,000
405,000
Other liabilities
143,678
85,947
Securitised liabilities
Subsidiaries
There were no loans and advances, or liabilities, to subsidiaries at the reporting date.
(19) Related-party transactions
There were no related-party transactions entered into – at terms not in line with prevailing market terms – which would
give rise to a disclosure duty pursuant to section 285 no. 21 of the HGB.
81
(20) Breakdown of maturities for loans and advances, and liabilities
31 Dec 2015
€ 000‘s
31 Dec 2014
€ 000‘s
1,212,193
1,352,824
361,987
106,745
42,808
1,535,309
1,316,169
349
403,794
30,574
3,076,557
3,286,195
310,732
1,050,406
2,503,695
11,277,044
12,640,384
1,141,932
1,056,289
1,793,867
11,455,770
13,633,603
27,782,261
29,081,461
Bonds and other fixed-income
securities maturing
in the following year
1,776,062
1,043,696
Liabilities
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
118,681
2,263,177
1,749,092
6,642,946
4,213,849
224,325
2,534,788
2,661,795
6,481,218
4,056,096
14,987,745
15,958,222
798,877
541,338
1,089,700
2,960,527
4,922,000
519,498
393,352
430,100
3,856,169
5,594,057
10,312,442
10,793,176
4,199,647
3,322,161
Assets
Liabilities to customers
Certificated liabilities maturing
in the following year
82
(21) Assets and liabilities in foreign currencies
Assets include foreign-currency receivables
in the total amount of
Liabilities and equity include foreign-currency liabilities
in the total amount of
31 Dec 2015
€ 000‘s
31 Dec 2014
€ 000‘s
2,239,222
2,496,563
671,408
645,727
(22) Other assets
Other assets (€ 7.9 million) mainly include the cash collateral for the restructuring fund (€ 4.6 million), loans and advances
to fiscal entity subsidiaries in the amount of € 2.2 million as well as receivables from maturing securities of € 0.8 million.
(23) Other liabilities
This item (€ 150.6 million) consists mainly of liabilities from profit transfers of € 125.0 million and of € 18.4 million in profits
to be transferred under partial profit transfer agreements, as well as interest for subordinated liabilities in the amount of
€ 2.1 million.
83
(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:
Nominal amounts by
residual term
≤ 1 year >1–5 yrs
> 5 yrs
€ mn
Interest rate instruments
OTC products
Interest rate swaps*)
including: forward swaps
including: with embedded
caps/floors
including: with embedded
puts/calls
Currency-related instruments
Cross-currency swaps
Credit-related transactions
Credit default swaps
including: protection seller
including: protection buyer
Total return swaps
including: protection seller
Total
Total
2015
2014
Fair value
2015
2014
positive negative positive negative
30,161
26,393
29,849
86,403
92,448
3,842
5,039
5,079
6,530
30,161
–
26,393
4
29,849
473
86,403
477
92,448
450
3,842
9
5,039
7
5,079
7
6,530
36
–
–
51
51
51
–
31
–
36
–
5
240
245
310
11
67
17
77
223
223
795
795
831
831
1,849
1,849
2,021
2,021
30
30
336
336
18
18
273
273
–
–
–
–
–
–
6
–
–
–
6
6
82
4
–
4
78
78
88
4
–
4
84
84
228
28
4
24
200
200
10
–
–
–
10
10
1
–
–
–
1
1
14
–
–
–
14
14
6
–
–
–
6
6
30,384
27,194
30,762
88,340
94,697
3,882
5,376
5,111
6,809
–
1,592
–
1,902
including: contracts used to hedge investment securities
within the framework of overall bank management**)
*) Including interest rate swaps with identical foreign currency.
**) The negative market value of € 1,592 million is included in the write-downs which were not recognised (as mentioned in Note (5)).
The breakdown of the carrying amounts of forward contracts not reflected on the balance sheet by balance sheet items
pursuant to section 285 no. 19 of the HGB is as follows:
Carrying
amount
2015
€ mn
Carrying
amount
2014
€ mn
157
179
Interest rate swaps
Balance sheet item
Assets
banks, loans and
advances to customers,
prepaid expenses
Cross-currency swaps
84
Carrying
amount
2015
€ mn
Carrying
amount
2014
€ mn
203
260
Liabilities to banks,
liabilities to customers,
deferred income
248
192
Balance sheet item
Liabilities
Credit default swaps
–
–
Other assets
–
–
Other liabilities, provisions
Total return swaps
7
11
banks, prepaid expenses
6
–
Provisions
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 € 25.8 million) in connection with loan agreements.
Interest rate and currency swaps are valued using present values, determined by discounting cash flows to their present
value as at the balance sheet date using interest rates in line with the credit risk and maturities concerned, as indicated by
individual yield curves prevailing on the balance sheet date. Furthermore, credit adjustments are applied in the valuation of
such trades, to reflect default risks and closing costs.
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. Provisions have been recognised in the amount of € 5.5 million for the three total return swaps held
since 2006 and 2007, respectively, in order to hedge the immediate counterparty risk exposure.
Market values are determined without consideration of netting agreements. The market values of derivatives are offset by
compensating market values of the related hedged balance sheet items at overall bank level.
Cash collateral was provided for derivatives, as part of the bank’s collateral management, in the amount of € 1,244.8
million (31 December 2014: € 1,155.9 million).
85
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 %
2015
2014
Germany
77.8
69.0
International
22.2
31.0
(26) Other operating income
Other operating income totalling € 14.2 million is mostly due to rental income totalling € 8.7 million and income on services
totalling € 3.0 million.
(27) Other operating expenses
Other operating expenses totalling € 19.7 million include expenses of € 14.7 million for the discounting of provisions for
pensions and similar obligations, and expenses for buildings not directly used for bank business of € 2.0 million.
86
COVERAGE
(28) Coverage by balance sheet item
Mortgage
Pfandbriefe
31 Dec 2015
€ mn
Ordinary Cover
Loans secured by property mortgages
Loans secured by property mortgages
Own bonds issued
Mortgage
Pfandbriefe
31 Dec 2014
€ mn
Public
Pfandbriefe
31 Dec 2015
€ mn
Public
Pfandbriefe
31 Dec 2014
€ mn
12,041
12,954
13,332
15,969
11,935
12,864
9,024
9,652
11,935
12,864
84*)
97*)
–
–
8,940
9,555
21
5
141
312
21
5
–
–
–
–
141
312
–
–
4,167
6,005
Bank buildings
85
85
–
–
Extended cover
442
373
358
187
Monetary claims
Own bonds issued
Total
–
–
358
187
–
–
358
187
442
373
–
–
12,483
13,327
13,690
16,156
*) Under a municipal guarantee.
(29) Details pursuant to section 28 of the German Pfandbrief Act
Outstanding Pfandbriefe and related cover assets
Nominal amount
a) Total amount of
outstanding
Risk-adjusted present value*)
Present value
31 Dec 2015
€ mn
31 Dec 2014
€ mn
31 Dec 2015
€ mn
31 Dec 2014
€ mn
31 Dec 2015
€ mn
31 Dec 2014
€ mn
10,503
10,873
11,103
11,634
10,615
11,287
Cover assets pool
of which: derivatives
12,483
–
13,327
–
13,715
–
14,799
–
13,109
–
14,311
–
1,980
2,454
2,612
3,165
2,494
3,024
18.9
22.6
23.5
27.2
23.5
26.8
Excess cover
Excess cover %
*) When calculating stress scenarios, the static method is used for currencies and the dynamic method for interest rates.
87
ad a) Maturity structure
Cover assets pool
31 Dec 2015
€ mn
31 Dec 2014
€ mn
31 Dec 2015
€ mn
31 Dec 2014
€ mn
1,154
724
436
1,054
1,409
1,408
817
3,449
52
975
1,006
1,156
774
1,397
909
1,354
3,033
269
985
850
626
1,138
1,763
1,440
1,266
4,182
233
1,303
984
946
855
1,915
1,739
1,488
3,834
263
10,503
10,873
12,483
13,327
<= 6 months
> 6 months and <= 12 months
> 18 months and <= 2 years
> 2 years and <= 3 years
> 10 years
Total
Ref. a) Disclosure pursuant to section 6 of the German Pfandbrief Present Value Ordinance
(“Pfandbrief-Barwertverordnung”)
Stress-tested present value*)
of cover assets pools
in foreign currency
Currency
EUR
of Mortgage Pfandbriefe outstanding
in foreign currency
Net present value
in foreign currency
Exchange rate
Net present value
in €
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014
mn
mn
mn
mn
mn
mn
mn
mn
12,790
13,870
10,615
11,287
1.00
1.00
2,174
2,583
2,174
CHF
35
27
–
–
1.08
1.20
35
27
32
2,583
22
GBP
157
277
–
–
0.73
0.78
157
277
214
355
JPY
–
266
–
–
–
145.23
–
266
–
2
NOK
–
69
–
–
–
9.04
–
69
–
8
SEK
80
93
–
–
9.19
9.39
80
93
9
10
USD
115
117
–
–
1.09
1.21
115
117
105
96
Ref. a) additional indicators on Mortgage Pfandbriefe outstanding
31 Dec 2014
Share of fixed-interest assets in total cover assets pool
%
76.05
75.01
Share of fixed-interest Pfandbriefe in liabilities to be covered
%
77.58
71.21
€ mn
–
–
in years
5.58
5.78
Average weighted loan-to-value ratio
%
54.43
50.63
Share of ordinary cover in total volume outstanding
%
114.64
119.14
Total amount of assets breaching the limits
as set in section 19 (1) no. 2 of the PfandBG
€ mn
–
–
€ mn
–
–
as set in section 13 (1) of the PfandBG
Average volume-weighted age of assets
88
31 Dec 2015
Nominal amount
b) Total amount
of outstanding
Risk-adjusted present value*)
Present value
31 Dec 2015
€ mn
31 Dec 2014
€ mn
31 Dec 2015
€ mn
31 Dec 2014
€ mn
31 Dec 2015
€ mn
31 Dec 2014
€ mn
Public Pfandbriefe
11,868
13,894
14,264
16,860
13,156
15,904
Cover assets pool
of which: derivatives
13,690
-
16,156
-
16,656
-
19,790
-
15,208
-
18,481
-
1,822
2,262
2,392
2,930
2,052
2,577
15.4
16.3
16.8
17.4
15.6
16.2
Excess cover
Excess cover %
ad b) Maturity structure
Public Pfandbriefe
Cover assets pool
31 Dec 2015
€ mn
31 Dec 2014
€ mn
31 Dec 2015
€ mn
31 Dec 2014
€ mn
942
2,821
718
129
686
524
1,005
2,416
2,627
1,754
258
937
2,822
860
686
524
2,457
3,596
1,009
1,379
850
1,384
1,095
763
702
2,935
3,573
760
1,023
867
1,371
2,433
1,148
755
3,804
3,995
11,868
13,894
13,690
16,156
<= 6 months
> 18 months and <= 2 years
> 10 years
Total
Ref. b) Disclosure pursuant to section 6 of the
German Pfandbrief Present Value Ordinance (“Pfandbrief-Barwertverordnung”)
of cover asset pools
in foreign currency
of Public Pfandbriefe
outstanding
in foreign currency
Exchange rate
Net present value
in foreign currency
Net present value
in €
Currency
mn
mn
mn
mn
mn
mn
mn
mn
2,105
EUR
14,379
17,527
12,688
15,422
1.00
1.00
1,691
2,105
1,691
CHF
249
335
183
245
1.08
1.20
66
90
61
75
USD
811
1,021
412
432
1.09
1.21
399
589
367
485
89
Ref. b) Additional indicators on Public Pfandbriefe outstanding
31 Dec 2015
31 Dec 2014
Share of fixed-interest assets in total cover assets pool
%
90.63
88.38
Share of fixed-interest Pfandbriefe in liabilities to be covered
%
96.15
96.86
€ mn
–
–
Assets included in cover for Mortgage Pfandbriefe
by loan amount
<= € 300,000
> € 300,000 / <= € 1 mn
31 Dec 2014
€ mn
2,251
3,104
270
329
> € 1 mn / <= € 10 mn
3,726
3,639
> € 10 mn
5,794
5,882
12,041
12,954
by type of property
31 Dec 2015
€ mn
31 Dec 2014
€ mn
Housing properties
4,172
5,159
Commercial properties
7,869
7,795
12,041
12,954
Total
Total
90
31 Dec 2015
€ mn
Year under review
Belgium
Federal Republic of Germany
Denmark
Finland
France
United Kingdom
Luxembourg
The Netherlands
Norway
Austria
Poland
Sweden
Hungary
USA
Total portfolio
Assets included in cover for Mortgage Pfandbriefe, by country where real property collateral is located,
and by type of property
2015
–
405
–
–
–
–
–
–
–
–
–
–
–
–
405
2014
–
535
–
–
–
–
–
–
–
–
–
–
–
–
535
2015
– 1,331
–
–
3
–
–
–
–
–
–
–
–
–
1,334
2014
– 1,871
–
–
5
–
–
–
–
–
–
–
–
–
1,876
2015
– 2,396
–
–
14
–
–
–
–
–
–
–
–
–
2,410
2014
– 2,735
–
–
15
–
–
–
–
–
–
–
–
–
2,750
2015
– 2,540
–
10
177
143
–
210
–
3
–
–
–
75
3,158
2014
4 2,312
–
10
264
218
48
206
8
3
–
–
–
67
3,140
2015
– 2,228
–
–
74
52
–
28
–
–
90
9
42
–
2,523
2014
– 2,099
–
–
85
108
–
47
–
–
54
8
42
–
2,443
2015
–
64
–
–
–
–
–
–
–
–
–
–
–
–
64
2014
–
78
–
–
–
–
–
–
–
–
–
–
–
–
78
Other commercial
properties
2015
2014
– 1,972
– 2,023
–
–
–
–
–
6
–
–
–
–
18
30
–
–
–
–
–
–
–
17
2,007
10
–
–
16
2,085
Unfinished new
buildings not yet
yielding returns
2015
–
140
–
–
–
–
–
–
–
–
–
–
–
–
140
2014
–
33
–
–
–
–
–
–
–
–
–
–
–
–
33
2015
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2014
–
14
–
–
–
–
–
–
–
–
–
–
–
–
14
2015
– 11,076
–
10
268
195
–
256
–
3
90
9
42
92 12,041
2014
4 11,700
–
10
375
326
48
283
8
3
64
8
42
83
€ mn
Residential properties
Single-family homes
Multi-family homes
Office buildings
Commercial buildings
Industrial buildings
Building plots
Total
12,954
Assets included in cover for Mortgage Pfandbriefe,
total amount of registered cover assets
Assets pursuant to section 19 (1) no. 2 of the PfandBG
Equalisation claims
pursuant to section 19 (1)
no. 1 of the PfandBG
Sovereign
borrowers
Total
of which: covered debt
securities pursuant to art.
129 of the EU Regulation
no. 575/2013
Assets pursuant to
section 19 (1) no. 3 of the
PfandBG
Total
€ mn
€ mn
€ mn
€ mn
€ mn
€ mn
€ mn
€ mn
€ mn
€ mn
Federal Rep.
of Germany
–
–
–
–
–
–
442
374
442
374
Total
–
–
–
–
–
–
442
374
442
374
91
Overview of payments in arrears on cover assets for Mortgage Pfandbriefe
Total amount disclosed if applicable
arrears equal at least 5%
of total asset value
Aggregate payments in arrears
by at least 90 days
31 Dec 2015
€ mn
31 Dec 2014
€ mn
31 Dec 2015
€ mn
31 Dec 2014
€ mn
Germany
France
The Netherlands
3.18
0.02
–
12.25
0.56
–
4.29
0.08
–
16.89
0.52
–
Total
3.20
12.81
4.37
17.41
Assets included in cover for Mortgage Pfandbriefe
Forced sales/forced administration
Commercial properties
2015
Number
Housing properties
2014
Number
2015
Number
2014
Number
37
73
197
249
8
8
26
26
63
63
88
88
37
22
173
203
Number
Number
Number
Number
–
–
–
–
€ mn
€ mn
€ mn
€ mn
0.09
0.12
0.05
0.26
No. 4a
Forced sales pending
Forced administrations pending
of which: Included in forced sales pending
Forced sales executed
No. 4b
Purchases of properties to prevent losses (foreclosed assets)
No. 4c
Purchases of properties to prevent losses (foreclosed assets)
Assets included in cover for Public Pfandbriefe
Share in total amount of Pfandbriefe outstanding (nominal)
Total cover assets pool
of which: ordinary cover
of which: hedging excess cover
of which: additional cover
of which: hedging excess cover
92
31 Dec 2015
€ mn
31 Dec 2014
€ mn
31 Dec 2015
%
31 Dec 2014
%
13,690
13,332
1,285
358
170
16,156
15,969
1,453
187
–
115.35
112.33
10.82
3.02
1.43
116.28
114.94
10.46
1.34
–
by loan amount
31 Dec 2015
€ mn
31 Dec 2014
€ mn
4,753
3,284
5,295
n/a
n/a
n/a
13,332
n/a
<= € 10 mn
> € 10 mn / <= € 100 mn
> € 100 mn
Total
Assets included in cover for Public Pfandbriefe, by country of domicile of the borrower and,
in the case of full guarantee, of the guarantor
€ mn
Sovereign
borrowers
2015
2014
Regional
public-sector
entities
2015
2014
Local
public-sector
entities
2015
2014
Other
2015
2014
Total portfolio
2015
2014
Belgium
30
30
58
59
–
–
–
–
88
89
88
88
2,512
3,238
5,974
6,402
580
506
9,154
10,234
–
–
–
–
–
–
–
50
–
50
UK
75
75
–
–
–
–
–
–
75
75
Italy
842
842
113
559
105
109
–
–
1,060
1,510
Canada
–
–
519
466
–
–
–
–
519
466
Luxembourg
–
–
–
–
–
–
307
325
307
325
Austria
170
170
–
113
–
–
100
206
270
489
Poland
5
50
–
–
–
–
–
–
5
50
250
300
–
–
75
75
–
–
325
375
–
–
263
237
–
–
100
100
363
337
30
30
–
–
–
–
–
–
30
30
Spain
–
–
1,166
1,541
328
438
–
–
1,494
1,979
Czech Republic
–
15
–
–
–
–
–
–
–
15
USA
–
–
–
132
–
–
–
–
–
132
1,490
1,600
4,631
6,345
6,482
7,024
1,087
1,187
13,690
16,156
France
Portugal
Switzerland
Slovenia
Total
93
Total amount of registered cover assets
Equalisation claims pursuant to section 20 (2)
no. 1 of the PfandBG
Assets pursuant to section 20 (2) no. 2 of the PfandBG
Total
of which: covered debt
securities pursuant to art.
129 of the EU Regulation
no. 575/2013
Total
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014
Sovereign borrowers
€ mn
€ mn
€ mn
€ mn
€ mn
€ mn
€ mn
€ mn
Luxembourg
–
–
–
–
188
170
170
17
–
–
–
–
188
170
170
17
Total
–
–
358
187
–
–
358
187
Overview of payments in arrears on cover assets for Public Pfandbriefe
Aggregate payments in arrears
by at least 90 days
31 Dec 2015
€ mn
Total amount disclosed if applicable arrears
equal at least 5% of total asset value
31 Dec 2014
€ mn
31 Dec 2015
€ mn
31 Dec 2014
€ mn
Germany
Sovereign states
Regional public-sector entities
–
–
–
–
1.31
–
Local public-sector entities
–
–
–
–
Other
–
–
–
–
0.76
–
1.31
–
Total
94
–
0.76
OTHER INFORMATION ON THE ANNUAL FINANCIAL STATEMENTS
(30) Audit and consulting fees within the meaning of section 285 no. 17 of the HGB
Auditors’ fees are recognised in the consolidated financial statements of DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt/Main.
(31) Executive bodies of DG HYP
Supervisory Board
Frank Westhoff
Member of the Management Board,
DZ BANK AG Deutsche
Zentral-Genossenschaftsbank,
Frankfurt/Main
– Chairman –
Dagmar Mines
Bank employee,
Deutsche GenossenschaftsHypothekenbank AG
– Deputy Chairwoman –
Thomas Müller
Spokesman of the Management
Board,
Dresdner Volksbank
Raiffeisenbank eG
– Deputy Chairman –
Brigitte Baur
Deputy Chairwoman of the
Management Board,
VR Bank Nürnberg eG
(since 6 March 2015)
Michael Bockelmann
Vice-president,
Deutscher Raiffeisenverband e.V.
Ralph Gruber
Bank employee,
Jürgen Handke
Chairman of the Management Board,
VR Bank Hof eG
(until 6 March 2015)
Martin Schmitt
Kasseler Bank eG
Volksbank Raiffeisenbank
Dr Holger Hatje
Berliner Volksbank eG
Werner Thomann
Volksbank Rhein-Wehra eG
Peter Heinrich
Bank director (ret’d)
Thorsten Wenck
Bank employee,
Anja Iversen
Bank employee,
(since 6 March 2015)
Olaf Johnert
Bank employee,
Dr Reinhard Kutscher
Chairman of the
Management Board,
Union Investment
Real Estate GmbH
Ulrike Marcusson
Bank employee,
Holger Willuhn
Volksbank Mitte eG
Gerd Wittkop
Bank employee,
(until 22 January 2015)
Stefan Zeidler
Member of the Management Board
DZ BANK AG Deutsche
Frankfurt/Main
Hans Rudolf Zeisl
Volksbank Stuttgart eG
Management Board
Dr Georg Reutter
– Chairman –
Manfred Salber
95
(32) Remuneration of the executive bodies
2015
€ 000‘s
2014
€ 000‘s
296
286
1,334
1,233
60
54
2,110
2,078
26,973
25,726
31 Dec 2015
€ 000‘s
31 Dec 2014
€ 000‘s
Supervisory Board
65
70
Advisory Council
48
53
Supervisory Board
Management Board
Advisory Council
Former members of the Management Board
or their surviving dependants
Provisions for current pensions
and pension commitments for former members
of the Management Board
or their surviving dependants
33) Loans to members of executive bodies
34) Offices held by members of the Management Board or members of staff in supervisory bodies
of large limited companies
As at 31 December 2015, the members of the Management Board or members of staff held no offices in supervisory bodies
of large limited companies.
96
(35) Average number of employees
Male
Female
2015
Total
Male
Female
2014
Total
Total number of employees
269
185
454
265
184
449
of which: full-time employees
256
119
375
258
124
382
part-time employees
number
weighted
13
66
79
7
60
67
(10)
(43)
(53)
(5)
(38)
(43)
(36) 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, 11 February 2016
Dr Georg Reutter
Manfred Salber
97
Responsibility Statement
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.
Dr Georg Reutter
98
Manfred Salber
Audit Opinion
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, the statement of
changes in equity, the statement of cash flows 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 to 31 December 2015. 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 accounting-related 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 GmbH
Wirtschaftsprüfungsgesellschaft
Lösken
Wirtschaftsprüfer
(German Public Auditor)
Meyer
Wirtschaftsprüfer
(German Public Auditor)
99
Service
Corporate Bodies and Committees, Executives | DG HYP Adresses
CORPORATE BODIES AND COMMITTEES, EXECUTIVES
Supervisory Board
Frank Westhoff
DZ BANK AG Deutsche
Frankfurt/Main
– Chairman –
Dagmar Mines
Deutsche GenossenschaftsHypothekenbank AG,
Hamburg
– Deputy Chairwoman –
Thomas Müller
Board
Dresdner Volksbank
Raiffeisenbank eG,
Dresden
– Deputy Chairman –
Brigitte Baur
Deputy Chairwoman of the
Management Board,
Nürnberg eG,
Nuremberg
Michael Bockelmann
Vice-President,
Deutscher Raiffeisenverband eV,
Berlin
Ralph Gruber
Hamburg
Martin Schmitt
Kasseler Bank eG,
Kassel
Dr Holger Hatje
Berliner Volksbank eG,
Berlin
Heinrich Stumpf
Augusta-Bank eG
Raiffeisen-Volksbank,
Augsburg
Anja Iversen
Hamburg
Olaf Johnert
Hamburg
Dr Reinhard Kutscher
Union Investment
Real Estate GmbH,
Hamburg
Ulrike Marcusson
Hamburg
Werner Thomann
Volksbank Rhein-Wehra eG,
Bad Säckingen
Thorsten Wenck
Hamburg
Holger Willuhn
Board,
Volksbank Mitte eG,
Duderstadt
Stefan Zeidler
DZ BANK AG Deutsche
Frankfurt/Main
Hans Rudolf Zeisl
Volksbank Stuttgart eG
Stuttgart
As at 31 March 2016
100
Management Board
and distribution of responsibilities
Dr Georg Reutter
Chairman
Manfred Salber
–
–
–
–
–
–
–
–
–
–
–
Real Estate Financing 1
Organisation and IT
Human resources
Treasury
Management Board Office / Legal /
Communications
Finance
Internal Audit
Credit Risk Management
Restructuring / Recovery
Securities and Loan Processing
Department Heads
Heike Bausch
Human Resources
Jörg Hermes
Finance
Patrick Ernst
Treasury
Axel Jordan
Norbert Grahl
Credit Risk Management
Thomas Mirow
Restructuring / Recovery
Steffen Günther
Peter Ringbeck
Organisation and IT
Siegfried Schneider
Securities and Loan
Processing
Peter Vögelein
Internal Audit
Eckhard Wulff
Management Board Office / Legal /
Communications
Trustees
Dr Michael Labe
Judge at the Hamburg
Higher Regional Court
(Hanseatisches Oberlandesgericht
Hamburg),
Hamburg
Björn Reher
Deputy Trustee,
Public Auditor,
Hamburg
(since 1 May 2015)
Florian Degenhardt
Deputy Trustee
Solicitor,
Hamburg
(until 30 April 2015)
Volker Thilo
Deputy Trustee
Public Auditor,
Hamburg
101
Service
Advisory Council
Jürgen Beissner
Dortmunder Volksbank eG,
Dortmund
Thomas Jakoby
Vereinigte Volksbank Münster eG,
Münster
Armin Bork
Volksbank Alzey-Worms eG,
Worms
Thomas Janßen
Volksbank Braunlage eG,
Braunlage
Manfred Bub
Chairman of the Management
Board,
Raiffeisenbank Kocher-Jagst eG,
Ingelfingen
Rainer Jenniches
Board,
VR-Bank Bonn eG,
Bonn
Jürgen Dünkel
VR-Bank Bayreuth eG,
Bayreuth
Hubert Kamml
Board,
Rosenheim-Chiemsee eG,
Rosenheim
Ingolf Epple
Board,
Fellbacher Bank eG,
Fellbach
Uwe Fabig
Volksbank Magdeburg eG,
Magdeburg
Günther Heck
Board,
Volksbank Dreiländereck eG,
Lörrach
Norbert Herten
Member of the Management Board
Volksbank Straubing eG,
Straubing
As at 31 March 2016
102
Johann Kramer
Board,
Raiffeisen-Volksbank eG,
Aurich
Armin Kühn
VR Bank im Enzkreis eG,
Niefern-Öschelbronn
Johann Luber
VR-Bank Erding eG,
Erding
Klaus Merz
Board,
Vereinigte Volksbank eG Limburg,
Limburg
Michael F. Müller
Volksbank eG Braunschweig
Wolfsburg,
Wolfsburg
Astrid Piela
Volksbank Ulm-Biberach eG,
Ulm
Thorsten Rathje
Hamburger Volksbank eG,
Hamburg
Manfred Resch
Vereinigte Volksbank eG Maingau,
Obertshausen
Cornelia Rosenau
Winterlinger Bank eG,
Winterlingen
Bernd Schmidt
Kieler Volksbank eG,
Kiel
Uwe Schulze-Vorwiek
Volksbank Bochum Witten eG,
Bochum
Hendrik Ziegenbein
Deputy Chairman of the
Management Board,
Volksbank eG Gera Jena
Rudolstadt,
Jena
Service
DG HYP ADDRESSES
Rosenstrasse 2
20095 Hamburg, Germany
PO Box 10 14 46
20009 Hamburg
Telephone +49 40 3334-0
Fax
+49 40 3334-1111
Internet: www.dghyp.de
Real Estate Centres
DG HYP
Real Estate Centre Berlin
Pariser Platz 3
10117 Berlin, Germany
Telephone +49 30 31993-5101
Fax
+49 30 31993-5036
DG HYP
Real Estate Centre Dusseldorf
Steinstrasse 13
40212 Dusseldorf, Germany
Telephone +49 211 220499-10
Fax
+49 211 220499-40
DG HYP
Real Estate Centre Frankfurt
CITY-HAUS I, Platz der Republik 6
60325 Frankfurt/Main, Germany
Telephone +49 69 750676-21
Fax
+49 69 750676-99
DG HYP
Real Estate Centre Hamburg
Rosenstrasse 2
Telephone +49 40 3334-3778
Fax
+49 40 3334-1102
DG HYP
Real Estate Centre Munich
Türkenstrasse 16
80333 Munich, Germany
Telephone +49 89 512676-10
Fax
+49 89 512676-30
DG HYP
Real Estate Centre Stuttgart
Heilbronner Strasse 41
70191 Stuttgart, Germany
Telephone +49 711 120938-0
Fax
+49 711 120938-30
DG HYP
Regional Office Hanover
Berliner Allee 5
30175 Hanover, Germany
Telephone +49 511 866438-08
Fax
+49 40 3334-7823775
DG HYP
Regional Office Leipzig
Schillerstrasse 3
04109 Leipzig, Germany
Telephone +49 341 962822-92
Fax
+49 03 41 96 28 22-93
DG HYP
Regional Office Nuremberg
Am Tullnaupark 4
90402 Nuremberg, Germany
Telephone +49 911 94 00 98 16
Fax
+49 40 3334-7824711
DG HYP
Regional Office Kassel
Rudolf-Schwander-Str. 1
34117 Kassel, Germany
Telephone +49 561 602935-23
Fax
+49 561 602935-24
DG HYP
Regional Office Mannheim
Augustaanlage 61
68165 Mannheim, Germany
Telephone +49 621 782727-20
Fax
+49 621 782727-21
Regional Offices
Institutional Clients
Hamburg
Rosenstrasse 2
Telephone +49 40 33 34-21 59
Fax
+49 40 3334-1260
103
104
DG HYP
Rosenstrasse 2 | 20095 Hamburg, Germany
Telephone: +49 40 33 34-0 | Fax: +49 40 33 34-11 11
www.dghyp.de

PDF format. - DG-Hyp

Transcription

Similar documents

TAKE THE REBOSA EQUALITY PLEDGE TODAY

before they were brokers

Tweet your support #RespectAllMusic

DIBELLA`S REAL ESTATE CRITERIA

BeauBox Property: River Palms Two Bedroom Condo

Two Harbors—Amoco BP Service Station Thriving Business and

32 Hobbs Industrial Estate

Property Brochure - The Heidi Klum Estate

Wednesday, Dec. 12, 11 am to 1 pm Texins Activity Center

News Journal - Bay to Beach Builders