ANNUAL REPORT 2008 - DG Hyp

Earnings forecast
DG HYP recognised at an early stage the need for a
new strategic direction in a market environment that has
grown increasingly difficult for all credit institutions and
implemented a viable business model during the 2008
financial year. As part of this process we have looked intensively
at the changing market conditions in the wake of the
financial market crisis and, on this basis, geared our
growth targets to the expected level of market potential.
The successful implementation of the new business
model will be reflected in a clear improvement in our operating
result before the end of 2009, resulting in a tangible
reduction in the required contribution from income from
DZ BANK. We anticipate sustained positive results from
2010 following the conclusion of the reorientation process.
We also expect the fall-out from the current financial crisis
to have been largely dealt with by the end of the 2009
financial year.
The predicted level of interest income for 2009 is some
13 per cent above that of the 2008 financial year, due to
the less marked impact of earlier structural measures and
the rising margins from new business from 2007 and
2008. The successive increase in the volume of commercial
real estate financing will be reflected in a constant increase
in net interest income in the following financial years. This
forecast is based on the margins that can currently be
realised on the market.
38 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2008
Management Report
The improvement in the net commission result already
recorded during 2008 will be maintained on the basis of
the new business model.
The organisational restructuring and redimensioning of
DG HYP was successfully concluded in 2008. We have
therefore laid the foundation for a greatly improved cost
structure, which we will further optimise as we continue
our efforts to reduce our non-strategic lending portfolio.
With the focus on commercial real estate finance, foreign
business with professional clients, alongside domestic
business, will have a long-term role to play. The risk measurement
system in place is appropriate for the risks associated
with our business model and will be developed further
on an ongoing basis. Against this background, despite
our cautious business policy, our risk position will also
increase over the years to come as our business volumes
rise. We have taken due account of this with regard to provisioning
for loan losses.
Overall, it is our view that our decision to embark on a
new strategy has been proved correct: we firmly believe in
the long-term profitability of our business model with the
turnaround in 2010. These strategic objectives are based
on the first signs of a calming on the financial markets
emerging during the second half of 2009, accompanied by
a renewed upturn on the Pfandbrief market.