Annual Report 2010 - Muenchener Hypothekenbank eG

corporate planninG for 2011, Münchenerhyp is planning to continue the course established by the business and risk strategy to ensure a rate of portfolio growth in line with the Bank’s ability to carry risk. This course primarily consists of gradually restructuring the loan portfolios, allowing Münchenerhyp to concentrate more heavily on domestic and private property financing without neglecting the other areas of business. in order to move the cost-income ratio back to about 45 percent, which is appropri- ate for a Pfandbriefbank of our size, and in view of the limited opportunities to increase income, restrictive cost management will continue to be especially important. our integrated planning process will play a key role towards the successful implementation of our 2011 plans. This process syn- chronises operational sales goals, supervision of the decentral and central components of administrative expenses – including our project portfolio – with profit and loss plans as they develop during the course of the year. The formal planning framework for these activities consists of our annually updated business and risk strategy. All of the income and expense items, as well as the ability to bear risk are continually monitored, respectively planned on a continuous basis thereby enabling the Bank to respond appropriately to shifts in earnings or costs. outlook economic and financiaL markets According to current estimates, the global recovery will continue in 2011 and 2012. however, the pace of growth is expected to be somewhat slower than in the previous year. The iMf is fore- casting 4.4 percent growth for the global gross domestic prod- uct in 2011, and 4.5 percent in 2012. Above all, uncertainties are caused by the high budget deficits and the expected strain on the economy resulting from their planned reduction. Thus, economic development forecasts, particularly in the euro zone, are modest. Most economic researchers expect to see growth of around 1.5 percent for 2011 and 2012. germany is expected to grow at a faster pace than the Euro- pean average. The federal government estimates that the gross domestic product will grow by 2.3 percent in 2011. in contrast to previous years, domestic demand is expected to generate strong growth drivers. The increase in domestic demand is expected to be mainly influenced by capital expen- ditures, which are anticipated to grow by more than 4 percent. Construction investments will continue to develop favourably with a projected growth of 1.7 percent, especially in the areas of private residential construction and commercial construction. in the private residential construction sector, the ongoing inter- est in safe capital investments as well as the high need for mod- ernisation measures and energy-efficient renovations should stimulate demand. Along with the economic recovery in germany, it is also expected that the job market will continue to improve. The federal gov- ernment expects the unemployment rate to drop back below an annual average of 3 million for the first time again in 2011. in light of this positive job-market forecast, an increase in pri- vate consumer spending is also expected. The inflation rate should increase slightly in 2011, since it is very likely that com- modity prices will continue to rise. A further increase in food costs is also expected in light of the poor annual harvest in 2010. in the financial markets, in addition to the further development of the sovereign debt crisis, there will be a stronger focus in 2011 on central banks’ phasing out their policy of low interests and extensive liquidity. The likelihood of interest rate increase will rise over the course of 2011. The ECB will observe inflation risks more vigilantly and, if necessary, will pursue its interest policy independently from its willingness to provide liquidity. if economic development in Europe is more favourable than expected, interest rates could rise in the second half of the year. cORPORATE PLANNINg ANd OUTLOOk “the recovery of the global economy is expected to continue, although it is likely to lose momentum.”