annual report - Hypo Real Estate Holding AG

On another positive note, DEPFA has continued to
expand its activities, both in global presence (with new
offices being established during the year in Greece and
Turkey), and is seeking to penetrate its core markets
more deeply. The important acquisition of a US
municipal finance broker-dealer operation (First Albany
Securities, now “DEPFA First Albany”) was closed in
September 2007 and gives the Bank improved access,
scale and new skill sets to increase its capability to
service the US public finance sector in a number of
different ways.
In the drive for improved cost efficiency, and also
reflective of the need to resource the Bank appropriately
within the revised business scope and the overall
context of the support and resources available from
the HRE Group, headcount was reduced during
the latter part of the year. The Bank would like to
acknowledge the contribution of all former management
and staff colleagues in helping to position DEPFA
proudly as the world’s pre-eminent public finance
bank.
Going forward DEPFA’s business model continues to
be one based principally on intermediating between
the increasingly sophisticated financial requirements of
the global public sector, and the institutional investing
market’s growing appetite for high quality and stable
assets. This is mainly done through the origination of
public sector and infrastructure assets in bond or loan
format, which are held on the Bank’s balance sheet
and refinanced through the issuance of AAA rated
covered bonds (Pfandbriefe in Germany and Asset
Covered Securities (ACS) in Ireland).
One of the expected synergies resulting from the
merging of HPFB into DEPFA BANK (which will be -
come fully effective in the early part of 2008) is the
opportunity to further diversify the Bank’s funding
sources, by utilising HPFB’s covered bond bank in
Luxembourg (which issues AAA rated “Lettre de Gage”
covered bonds).
The Bank expects to be able to continue to take
advantage of some of the more positive effects of the
“sub-prime crisis” – such as improved pricing for credit
availability, and an increased investor requirement for
clarity and understanding of what risks they are
actually taking which should benefit institutions such
as DEPFA with a very clear business focus, while
managing the challenges of the present liquidity
environment.
DEPFA has established an outstanding track record in
public sector finance and places great emphasis on
growing its valuable relationships with its core public
sector clients. As the public sector’s financial needs
continue to evolve the Bank is very well positioned to
respond to the new opportunities and intends to make
sure that it is able to assist, and of course thereby
benefit from, its clients’ requirements.
Budget Finance
Introduction
The Budget Finance segment produces a large proportion
of the Bank’s revenues. This is generated from
the wide range of products provided to the public sector
client base, as well as from the realisation of profits
from the active management of the asset portfolio. The
segment is staffed by specialist teams involved in the
origination of public (“on-budget”) finance assets (both
directly from clients through the Bank’s international office
network (Public Sector Origination “PSO”), and
from the market through the Balance Sheet Management
“BSM” team).
Distribution of products is controlled by the Global
Sales team, which concentrates on providing both
short and long-term products (both assets and
liabilities), to end investors such as central banks,
financial institutions and asset management companies,
as well as the Global Syndications team, which
works closely on the pricing, structuring and placement
of potential transactions with the originators.
The funding of such assets that are retained on the
Bank’s balance sheet is managed by the Money
Markets and Capital Markets teams, who together
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