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ePaper created 2012-04-20, 15:08:32 | version 1.23.0
9 Münchener Hypothekenbank eG Letter from the Board of Management Investors show confidence The European debt crisis visibly burdened the capital markets. Refinancing costs rose for all market participants from the fi- nancial sector as investors became increasingly uncertain. Re- financing premiums for covered bonds widened substantially, too. Although MünchenerHyp was not completely exempted from this development, we did pay significantly lower premiums for risk over long periods of the year in comparison to other banks that refinance their activities via the capital market. Thus our Pfandbriefe, in particular, were hardly affected by the sharp widening of spreads noted in the covered bond markets. This was a reflection of the great trust investors have in MünchenerHyp. This trust is based on our Pfandbriefe’s high level of quality, as well as the intensive support and care we have been providing to our investors for years. Furthermore, our standing is also strengthened by our membership in the Volks- banken Raiffeisenbanken Cooperative Financial Network. We benefit from our cooperative network’s high level of refinanc- ing strength, especially in the area of uncovered refinancing. Improved equity capital ratio The increased demands placed on credit institutions’ equity capital requirements are a central element of the new supervi- sory regulations. After two and a half years of preparatory work, we converted the method we use to calculate the level of equity capital required to back loans on our books to the internal ratings based approach, or IRBA, in order to meet these demands. Using this process the level of capital required to back loans is based on internal risk assessments, which permits a far more precise measurement of risks than previously. Last year we received authorisation from the banking supervisory authority to use IRBA. This is an important success for our Bank. The use of IRBA will far better reflect our low-risk lend- ing business. IRBA will ease our required level of equity capital by about € 270 million. Our core capital ratio rose from 6.4 percent in the previous year to 8.9 percent at the end of 2011, while the total capital ratio climbed from 10.0 percent to 13.3 percent. will be even more cautious to lend to the public sector in the future. We have defined this area as supplemental business, and it has been shrinking over the past few years. As a result, we have not made any loans to peripheral states of the euro- zone, in particular, for a longer while. New business and loan portfolios develop favourably Our focus on the two core areas of business, residential prop- erty and commercial property financing, has proven its worth. In 2011 we made a total volume of € 3.4 billion of mortgage loans. The majority of these loans according to our strategic focus were made to finance residential property – including housing companies. Once again the Volksbanken and Raiffeisenbanken were our most important sales partners, and together we were able to substantially expand the volume of financing made. And there are two good reasons for this: first, private customers preferred having the Volksbanken and Raiffeisenbanken as their financing partners as they were greatly trusted during the current uncer- tainties. Secondly, many customers still wanted to take advan- tage of the very favourable level of interest rates and lock in fixed-interest financing over longer terms of up to 30 years. MünchenerHyp is one of the leading providers in this segment in Germany. Investor interest in the commercial property financing area of business remained focused on stable markets and safe invest- ments. This was reflected by our new business results, which rose strongly in comparison to the previous year. The major por- tion of the financing made was for transactions in Germany. Our favourable new business results enabled us to increase our portfolio of mortgage loans by € 1 billion to € 19.4 billion. The weighting of the business areas shifted further – as planned strategically – in favour of residential property financing. Our portfolio of commercial property loans in the USA, in particular, has been shrinking. In recent years we successfully restructured the existing loans and today they are developing very satisfac- torily in terms of margins and risk.