Dr. Scholz joined the Münchener Hypothekenbank in May 2004 as a deputy member of the Board of Management and was appointed a full member of the Board in April 2005. His main responsibilities as a member of the Board of Management included commercial property financing and the Bank’s IT activities.

We would like to thank Dr. Scholz for his successful work. We extend our best wishes to him for his future personal and professional success.

The Bank’s income situation remained stable due in part to easing conditions in the capital markets. The residential property finance area of business in Germany remained the focal point of the Bank’s lending. Up until September 30, 2009 MünchenerHyp had made lending commitments amounting to € 1.4 billion. This meant that the Bank’s volume of new business in the residential property finance area remained at the level posted in the previous year. The impact of the re-cession and the crisis in the financial markets is clearly noticeable in the commercial property finance sector in Germany and abroad. During the first half of 2009 the volume of transactions completed in the German commercial property market plummeted by 75 percent in comparison to the same year-ago period. Loans paid out by MünchenerHyp for commercial property financ-ing purposes until September 30, 2009 amounted to € 270 million, whereby most of this amount was attributable to follow-up effects from 2008 transactions.

“We purposely decelerated our pace of growth during the first nine months of the year as we adjusted to uncertainties arising from the ambiguous situation in the capital market. This deci-sion enabled us to master the consequences of the crisis in the financial markets and the global recession relatively well,” noted Erich Rödel, Chairman of the Münchener Hypothekenbank’s Board of Management in explaining the Bank’s strategy for the current year. The Bank places great value on being viewed as a reliable partner in its business dealings with the cooperative Financial Services Network.

Net interest income noted on September 30, 2009 was € 91.9 million, and at the level posted in the same year-ago period. Commissions paid rose from € 20.1 million to € 21.2 million as the forward loan business continued to develop favourably. Due to the increased amount of com-missions paid, the sum of net interest less commissions income declined by € 1.5 million from the same year-ago figure to € 70.7 million.

Provisions made for risk remained stable. The Bank’s mortgage portfolio has a broadly diversi-fied regional structure and moderate terms to maturity. The Bank is also active to the greatest extent possible in the top tier financing segment in its commercial property finance business. This focus has led to a well diversified portfolio. Results from operations after making provisions for risk amounted to € 20.1 million, in comparison to the € 22.3 million in the same year-ago pe-riod. The decline was also driven by the lower volume of new business and higher refinancing premiums.

Total assets fell from € 36.1 billion posted at the end of 2008 to € 35.3 billion. This change was mainly due to a decline of about € 0.7 billion in loans made to sovereign states and banks, as well as the payment of interest and principal on a Jumbo Pfandbrief that matured in September 2009. In contrast, the Bank’s portfolio of mortgages and other loans grew by about € 0.5 billion to € 16.5 billion.

Despite a certain degree of recovery seen in the economy and the financial markets, the conse-quences of the crisis in the financial markets will also influence the final quarter of 2009 as well as the year 2010. Against this background, MünchenerHyp’s main goal of retaining a stable cus-tomer base while maintaining and increasing customer satisfaction, remains unchanged. The Bank’s goal of achieving the same level of net income for 2009 as it posted in the previous year remains intact.

Münchener Hypothekenbank had already adjusted its business planning last fall to counteract the changed overall conditions. Against this background, and while retaining its proven risk standards, MünchenerHyp made € 0.9 billion in new mortgage loan commitments in the first half of 2009 in comparison to € 1.8 billion in the same year-ago period.“ A special sense of proportion and a heightened risk awareness are required in light of the ongoing uncertainty in the financial markets and the difficult market situation,” said Erich Rödel, Chairman of the Münchener Hypothekenbank’s Board of Management.

Total assets amounted to € 36.2 billion and were at the level noted at the end of 2008. The bank’s portfolio of mortgages and other property finance loans rose by € 0.4 billion to € 16.4 billion. Earnings continued to develop stably despite the crisis in the financial markets. Although MünchenerHyp, just like all credit institutions, was confronted with higher refinancing surcharges, net interest income for the first six months was € 62.4 Million, and at the previous year’s level. Results from operations after making provisions for risk amounted to € 12.7 million, or € 2.4 million less than the same year-ago figure. 

Overall conditions in the property finance markets are not anticipated to improve significantly in the second half of the year. “For this reason we will continually examine the opportunities and risks of our business model and adjust it as necessary to meet individual market requirements,” said Erich Rödel. Despite unchanged difficult overall conditions, MünchenerHyp is striving to post net income at the end of 2009 at the level recorded in the previous year.

Net income was € 10.2 million (previous year € 12.0 million). Despite facing difficult market conditions, the Bank’s new mortgage business expanded by about 20 percent to € 4.1 billion. “Our business strategy has always been focused on the classical property finance business, and we have never had any involvement with toxic products. As a result, we were able to limit the impact of the financial market and economic crises on our business performance in 2008,” said Erich Rödel, Chairman of the Münchener Hypothekenbank’s Board of Management at today’s annual results press conference.

MünchenerHyp was still able to further expand its new mortgage business in both the private and commercial property finance areas of business while fully retaining its conservative risk standards. Despite the shrinking market volume in Germany, new business generated in the private property finance area of business rose by 12 percent to € 1.8 billion. In the area of commercial property finance the Bank continued to focus on top tier financing transactions as it made lending commitments of € 2.3 billion (+ 26 percent) in 2008.

The Bank’s portfolio of mortgages grew by € 1.9 billion to € 16 billion. Total assets increased from € 32.9 billion to € 36.1 billion. This change was mainly driven by the expansion of the Bank’s new mortgage business as well as the need to hold larger amounts of cash and cash equivalents due to the maturity of a Jumbo Pfandbrief in January 2009. The higher level of new business also led to a greater amount of broker commissions paid to MünchenerHyp’s partners, which had an immediate impact on earnings. In addition, the Bank hired new employees to ensure that customers would continue to receive the accustomed high service levels even as the volume of new business rose. These reasons were behind the increase in the cost-income ratio that rose from 49.8 percent in 2007 to 52.9 percent.

Although the crisis in the financial markets led to deteriorating refinancing conditions,  MünchenerHyp could increase its net interest income by € 7.4 million to € 128.6 million. Results from operations before deducting provisions for risks were € 54.7 million, or € 5.7 million more than the same year-ago figure. After making provisions for risk, results from operations amounted to € 25.5 million, or € 6.1 million less than in the previous year. This figure reflects an appropriate interpretation of risks involved in the current market environment.

Based on the current overall economic conditions MünchenerHyp will continue its business model in an amended form to reflect the situation in the capital and property markets. “We will be operating within our range of visibility in 2009. Our primary goal is to notably cultivate our relationships with our partner banks, commercial customers and investors, and to strengthen them even further,” noted Erich Rödel. In view of the uncertainties regarding how long the crisis in the financial market will continue, serious forecasts for the 2009 financial year cannot be made at this time.

The jury honoured the Bank’s great expertise, as well as the transparency, professionalism and flexibility it demonstrated in support of investors. MünchenerHyp’s transaction had the widest international distribution noted for a covered bond transaction in over a year.

“The award underlines the MünchenerHyp’s good standing as an issuer in the international capital markets as well as our position as a reliable Pfandbrief issuer,” said Klaus Sturm, member of the Münchener Hypothekenbank’s Board of Management responsible for the capital markets area of business, on the occasion of the award ceremony.

The award is issued every year by International Financing Review, a financial trade publication. The award was last won by a German Pfandbrief issuer in 2002.