annual report - Hypo Real Estate Holding AG

Management Discussion – Segments
infrastructure) ever secured. IFU’s New York team
acted as financial advisor to the private sector consortium
led by Transurban USA earning a significant
success fee.
In other countries significant lead arranging mandates
were executed for inter alia the Millau Viaduct refinancing
in France, the A8 Toll Road in Germany and the
National Conference Centre in Ireland.
Risk-weighted assets, securitisation and sales
DEPFA has already shown, through the EPIC I and
EPIC II synthetic PPP CLO transactions, the ability of
IFU to successfully carry out variations on DEPFA’s
“on-balance sheet securitisation” model. Now that the
Bank has established itself as a lead arranger and
underwriter in the infrastructure finance market, its
ability to manage its risk-weighted assets and, by
extension, capital commitment, through not only securitisation,
but also syndication and sales, is important.
This was especially the case in the fourth quarter, as
the deterioration in the credit markets reduced investor
appetite for credit risk generally, and structured and
asset backed products in particular. Despite these
difficult circumstances, DEPFA was able to securitise
c. €900 million of AAA rated monoline wrapped infra-
Infrastructure Finance
26
structure and utility bond exposures in its EPIC III
transaction in December. It should be noted that in all
of the EPIC issues, the Bank has certain call rights
which can be exercised, for example, when the Bank
can fully avail of the benefits of Basel II. The Bank also
syndicated and sold down over €500 million of commitments
without any form of discounting during the
year. This not only demonstrates its ability to manage
down underwriting exposures, but also that the in -
herent credit quality of these long-dated and seemingly
less-liquid assets is recognised by other banks and
institutional investors.
Asset quality
The rapid growth in the IFU portfolio has not been
achieved at the cost of asset quality. At the end of
2006 the weighted average rating of the portfolio was
A1, and remained unchanged at the end of 2007.
DEPFA will continue to take the prudent approach
towards the management of credit risk in this area
which has served it well to date.
Results*
The infrastructure segment shows a substantial increase
in revenues to €121 million (2006: €55 million) and
financing commitments to €18 billion at the year end
€ m 2007 2006 Change Change %
Net interest income 97 39 58 149%
Non interest revenues 24 16 8 50%
Total operating income 121 55 66 120%
Operating expenses -31 -19 -12 63%
Loan loss provisions - - -
Profit before taxation 90 36 54 150%
Key Balance sheet items**
Financing volume (on-balance sheet) 15,572 5,741 9,831 171%
Financing volume (off-balance sheet) 2,780 2,456 324 13%
Total commitments 18,351 8,197 10,154 124%
* For reconciliation of the results to the published in come statement, see page 62.
** For comparability with the financial statements, 2007 volumes include HPFB and exclude DEPFA Deutsche Pfandbriefbank
AG.