ANNUAL REPORT 2008 - DG Hyp

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RESULTS OF OPERATIONS The restructuring of DG HYP and the implementation of the new business model progressed according to plan during the 2008 financial year. The discernible successes notched up in new business and in the key income and expenditure items confirm that our decision to embark on a process of strategic realignment was the right one. At the same time, however, the Bank’s result for the year is still affected by extraordinary factors from the ongoing crisis on the financial markets and the knock-on effects of restructuring. Gross profit Against this background, gross profit, as expected, was down from € 273.1 million to € 174.0 million. This fall can be attributed in particular to the fact that DG HYP purposely avoided structural measures during the 2008 financial year that were used the year before to stabilise interest income levels. Adjusted to take account of these effects, interest income was in line with the Bank’s expectations, approximately 5 per cent down on the previous year. At the same time, net commission income, at € 1.5 million, showed an improvement of € 37.7 million on the previous year. This reflects the key effects of our new business model. Whilst commission expenses for the procurement of private real estate finance ceased to be incurred with the abolition of the relevant division, there was a rise in commission income generated by the issuing of guarantees and service fees in the core area of commercial real estate finance. Furthermore, issue commissions were down due to the lower funding requirement. Costs development Administrative expenses, at € 129.8 million during the reporting period, were 23.3% down on the previous year’s figure of € 169.0 million. This fall can be attributed to our consistent restructuring and redimensioning of DG HYP. The savings relate to all of the key expense items. In addition to the 17% reduction in personnel expenses to € 47 million and the drop of € 17.8 million (or 52.1%) in processing costs for private real estate lending, particular mention should be made of the fall in legal, auditing and consultancy expenses, which were cut by € 6.7 million to € 6.4 million. 24 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2008 Management Report Provisions for loan losses Based on our cautious risk policy, provisions for loans losses were cut further, from € 68.2 million in 2007 to € 61.5 million during the reporting period. This marks the successful continuation of the downward trend of the past few years. Valuations/impact of the financial market crisis In contrast, the ongoing liquidity squeeze and crisis of confidence on the financial markets had a negative impact on DG HYP’s earnings in 2008. The direct and indirect consequences are reflected in our revaluation losses of € 111.3 million. These include valuation losses of € 25.8 million for securities held in the liquidity reserve. These temporary valuation adjustments are mostly due to the widening of credit spreads in response to the liquidity situation. Additionally, long-term write-downs of € 47.1 million were also recorded with regard to some mortgage-backed securities. Unsecured bank and government-issued papers also required a write-down of € 48.5 million. Extraordinary restructuring expenses As part of the restructuring of DG HYP, the Bank’s main sources of non-personnel costs – such as infrastructure and IT – were further optimised during the 2008 financial year. The sale and lease-back transactions for the Bank’s headquarters in Rosenstrasse and a further rented property, which have been in existence since 2003/04, were unwound. The repurchase of this building at market prices resulted in extraordinary expenses of € 24.8 million. Implementation of these measures also resulted in a significant reduction in personnel and non-personnel costs. Moreover, restructuring provisions in conjunction with personnel measures and consultancy services totalling € 11.6 million were included in the category of extraordinary expenses. Extraordinary contribution to income On the basis of the existing profit and loss transfer agreement, the notable burdens on income during the current period were compensated for by DZ BANK, in the form of an extraordinary contribution to income that was unchanged on the previous year, at € 223 million. DZ BANK has thus further underscored its readiness to provide support for DG HYP’s consistent restructuring program.
Management Report Net income During the reporting year € 153.8 million of silent partnership contributions that had fallen due were repaid. DG HYP – also as a result of the lower interest rate level – transferred a partial profit of € 57.7 million, down € 17.8 million, to its silent partners, with the result that the Bank reported a balanced result overall. OVERVIEW OF THE PROFIT AND LOSS ACCOUNT Change from the previous year € mn 2008 2007 € mn % Net interest income 163.0 297.9 – 134.9 – 45.3 Net commission result 1.5 – 36.2 37.7 104.1 Other operating income 9.5 11.4 – 1.9 – 16.7 Gross profit 174.0 273.1 – 99.1 – 36.3 Administrative expenses 129.8 169.0 – 39.2 – 23.2 Provisions for loan losses – 61.5 – 68.2 6.7 9.8 Revaluation results – 111.3 – 121.4 10.1 8.3 Operating profit – 128.6 – 85.5 – 43.1 – 50.4 Net extraordinary income/expenses 186.6 147.8 38.8 26.3 Taxes 0.3 – 13.2 13.5 102.3 Partial profit transfer 57.7 75.5 – 17.8 – 23.6 Net income 0.0 0.0 0.0 0.0 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2008 25
Page 1 and 2: Deutsche Genossenschafts-Hypotheken
Page 3 and 4: CONTENTS Letter from the Management
Page 5 and 6: We successfully implemented our str
Page 7 and 8: Management Report ECONOMIC ENVIRONM
Page 9 and 10: Management Report COMMERCIAL REAL E
Page 11 and 12: Management Report Differing market
Page 13 and 14: Management Report With regard to re
Page 15 and 16: Management Report Products tailored
Page 17 and 18: Management Report LOANS TO LOCAL AU
Page 19 and 20: Management Report SPECIAL PORTFOLIO
Page 21 and 22: Management Report STRATEGIC REALIGN
Page 23 and 24: Management Report FINANCIAL SITUATI
Page 25: Management Report OWN FUNDS FOR SOL
Page 29 and 30: Management Report RISK REPORT I) Ri
Page 31 and 32: Management Report Furthermore, Risk
Page 33 and 34: Management Report prehensive restru
Page 35 and 36: Management Report From an organisat
Page 37 and 38: Management Report OUR STAFF Job and
Page 39 and 40: Management Report REPORT ON EVENTS
Page 41 and 42: FINANCIAL STATEMENTS Financial Stat
Page 43 and 44: ASSETS BALANCE SHEET 31 Dec 2007
Page 45 and 46: PROFIT AND LOSS ACCOUNT FOR THE PER
Page 47 and 48: Notes to the Financial Statements N
Page 51 and 52: Notes to the Financial Statements (
Page 63 and 64: Notes to the Financial Statements C
Page 65 and 66: Notes to the Financial Statements A
Page 67 and 68: Notes to the Financial Statements A
Page 69 and 70: Notes to the Financial Statements O
Page 73 and 74: RESPONSIBILITY STATEMENT To the bes
Page 75 and 76: REPORT OF THE SUPERVISORY BOARD Dr.
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Corporate Bodies And Committees; Ex
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Corporate Bodies And Committees; Ex
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DG HYP ADDRESSES Deutsche Genossens
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ANNUAL REPORT 2008 - DG Hyp

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