Deutsche Bank - Historische Gesellschaft der Deutschen Bank e.V.

Development of the Group
Mortgage Banking
Mortgage banks are
Germany's third-largest
group of banks
Stable growtti of loall portfolio
at Gro~ip mortgage banks
Good earnings outlook
P rivate sector mortgage banks comprise the most important group
arnong Germany's specialized credit institutions. The third largest group
of banks in Germnny overnll, their busincss divides into two main sectors,
residential and commercial mortgages, and loans to public sector
en ti ties.
The combined balance sheet total of Deutsche Bank's three mortgage
banking subsidiaries - Deutsche Centralbodenkredit-AG, Frankfurter
Hypothekenbank AG and Lübecker Hypothekenbank AG - amounted to
more than DM 83 billion at year end. Their share of real estate financing
by private sector institutions was about 17%, while their share of public
sector lending stood at over 11 %. With nearly DM 10 billion in new loans
last ycar, thcy garncrcd a morc than 15%share of new real estatefinanc-
ing, while taking a 6% share of lending to the public sector with new
loans of over DM 6 billion.
The mortgage banks fund their loans chiefly through the issuance of
Pfandbriefe. These are bonds that are collateralized either by mortgages
or by loans or guarantees of public-sector entities. With its highly secure
status legally anchored, Pfandbriefe maintain a quality standard com-
parable to public sector issues. Moreover, both German mortgage banks
and borrowers benefitfrom correspondingly advantageous terms on the
capital markets. Pfandbriefe issued by the Group's mortgage banks
receive a AAA rating from Standard & Poor's.
The total volume outstanding of German Pfandbriefe issued by private
sector mortgage banks was DM 602 billion at year end. The Group's
mortgage banks accounted for just over DM 70 billion of that total for an
11.6% market share. In 1993, the Group's mortgage banks issued Pfand-
briefe totaling almost DM 15 billion.
The aggregate capital and reserves of the Group's mortgage banks
stood at DM 2.22 billion at year end. Operating profit after loan loss provi-
sions totaled DM 473 million. The three mortgage banks account for
approximately 13% of the Group's balance sheet total and 9% of its
operating profit.
In the years ahead, the high volume of financing needed for housing 2nd
the public-sector in Germany underpins prospects for the development
of the mortgage banks. These factors may be partially offset by a
downturn in commercial construction resulting from the recession.