ANNUAL REPORT
2021
years
TRADITION ON
THE MOVE
Overview
BUSINESS DEVELOPMENT
IN € MILLION *
2021 2020 Change %
Lending business
a) Mortgage loans 6,799 6,395 6
aa) Residential property financing 4,338 4,019 8
ab) Commercial property financing 2,461 2,376 4
b) Loans to public sector and banks 743 97 666
Total 7,542 6,492 16
OVERVIEW OF PORTFOLIOS
IN € MILLION *
2021 2020 Change %
Total assets 52,538 48,558 8
Mortgage loans 41,662 38,411 8
Public sector and banks 3,619 3,704 – 2
Pfandbriefe and other bonds 41,992 39,576 6
Liable equity capital 1,790 1,676 7
INCOME STATEMENT
IN € MILLION *
2021 2020 Change %
Net interest income and net commission income 272 238 14
Administrative expenses 133 128 4
Results from ordinary business activities 11 3 95 18
Transfer to the Fund for General Banking Risks 0 20 – 100
Net income 59 38 57
EMPLOYEES
NUMBER
2021 2020 Change %
Average number of employees per year 624 611 2
Apprentices 14 15 – 7
Employees participating in parental leave, early retirement and partial retirement (non-working phase) 38 35 9
* Amounts have been rounded.
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Content
6 Letter from the Board of Management
8
Management Report
9 Economic report
9 General economic conditions
15 Business development
18 Financial performance, financial position and net assets
21 Ratings, sustainability and regulatory conditions
24 Registered office, executive bodies, committees and employees
25 Risk, outlook and opportunities report
25 Risk report
33 Corporate planning
33 Outlook – opportunities and risks
37
Annual Statement of Accounts
38 Balance sheet
42 Income statement
43 Statement of development in equity capital and cash flow statement
45 Notes
46 General information on accounting policies
48 Notes to the balance sheet income statement
57 Publication in accordance with Section 28 Pfandbrief Act
66 Other disclosures
68 Bodies
69 Auditing Association
69 Other financial obligations
70 Contingent liability
71 Independent Auditor’s Report
77 Affirmation by the Legal Representatives
78 Annex to Annual Financial Statements pursuant to Section 26a
Para. 1 Sentence 2 of the German Banking Act (KWG)
79 Report of the Supervisory Board
82
Further Information
83 The members of the Delegates Meeting
84 Agenda – General (Delegates) Meeting
85 Executive management and bodies
86 Contact
89 Imprint
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125 years of
Münchener Hyp
125 action-packed years of a cooperative success model.
From the first loans to Bavarian farmers to an international
mortgage bank – we are committed to supporting our cus-
tomers as partners at all times.
1896
The Bavarian state
government founds Bayerische
Landwirthschaftsbank – now
MünchenerHyp.
1971
New name: “Münchener
Hypothekenbank”. Focus on
financing residential proper-
ties as agricultural loans
become increasingly less
relevant.
1991
Business operations
expanded to the
new German states
2021
MünchenerHyp celebrates its
125th anniversary.
2014
MünchenerHyp is
supervised directly
by the ECB. It issues
the world’s first
sustainable Pfand-
brief.
1948
The bank building is
destroyed in the Second
World War. Rebuilt
on Nussbaumstrasse:
Employees pitch in
personally.
1897
Prince Regent
Luitpold loses the
right to use the
crown as a seal
(logo).
1910
The golden age of mortgage
banks: Bayerische Landwirth-
schaftsbank enjoys strong
growth.
1934
Housing financing begins
1999
International commercial
property financing business
launches.
2002
Move to Karl-
Scharnagl- Ring
1926
The bank moves into its
new building at
Ludwigstrasse 7.
1928
The Pfandbrief is
the most impor-
tant source of
refinancing. This is
a gold Pfandbrief
from 1928.
1918
The bank faced a serious crisis
at the end of the First World
War. It achieves a turnaround
with the help of the Bavarian
state government.
www.muenchenerhyp.de/
geschaeftsbericht2021/en/
18901880 1910
19401950 19201960
1980 19901970 2000 2010
1900
Letter from the Board of Management
125 years ago, on 2 December 1896, MünchenerHyp was
founded as Bayerische Landwirthschaftsbank. As the name
suggests, its original task was to support Bavarian farmers with
fair mortgage loans. MünchenerHyp has long since outgrown
its original business purpose. Today, we are an internationally
operating real estate bank specialising in financing residential
and commercial property. We are counted among the signifi-
cant European banks by the European Central Bank (ECB) and
are therefore directly supervised by it.
Through all the changes, successes and setbacks, over 125
years MünchenerHyp has remained true to its core: it is an
independent cooperative bank. The cooperative principle
still shapes our independent business activities today.
Especially in difficult times, it is the willingness and ability to
act that counts. Another financial year dominated by the
COVID-19 pandemic once again demanded a great deal of
energy and flexibility in order to maintain business as usual
for our customers and partners.
Record result in new business
We benefited from continuing high demand for property and
property financing. Low interest rates ensured positive momen-
tum on property markets, resulting in a high volume of new
business. After a slight decline in new business during 2020,
the past financial year put us back on track to achieve a
record result. With property financing totalling EUR 6.8 billion,
we achieved the highest volume of new business in our Bank’s
history. Together with purchases of capital market securities,
which we need in order to manage liquidity requirements, our
new business even exceeded EUR 7 billion for the first time.
In private residential property financing, we were able to
continue the growth of past years. Commitment volume rose
by almost 8 percent to EUR 4.3 billion. Around three quarters
of this figure related to financing brokered by cooperative
primary banks. We were able to significantly expand the busi-
ness referred to us by independent financial service providers
and by PostFinance in Switzerland. In the Austrian market, we
expanded the circle of our cooperation partners and have
now gained a stronger foothold after entering this market
with new business of EUR 48 million.
In commercial property financing, the effects of the COVID-19
pandemic were still felt. We are therefore satisfied that we
were able to increase our new business again. All in all, we
granted approximately EUR 2.5 billion in commercial property
financing, up by 3.5 percent year on year. The focus was on
the German market, which is appreciated by investors for its
high stability.
The strength of new business is also reflected in the mortgage
portfolios. Unlike many property financiers, who struggle to
maintain their loan portfolios, we were able to expand them
by 8 percent to EUR 41.6 billion over the course of the year.
As a result, our total assets jumped over the EUR 50 billion
threshold for the first time, reaching EUR 52.5 billion at year-
end 2021. Credit risks remained at a very low level despite
the ongoing COVID-19 pandemic and the devastating floods.
Higher earning power – good capital base
The development of earnings was encouraging. Net interest
income rose by 16 percent to EUR 402.6 million, thanks in
particular to the positive development of new business over
many years. Net interest and commission income also im-
proved significantly, rising by 14 percent to EUR 272.4 million.
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On the other hand, administrative expenses increased only
moderately by 3.5 percent to EUR 132.9 million. Apart from
higher personnel costs, this was mainly due to the increase
in the bank levy by EUR 3.7 million, which has now reached
the considerable figure of EUR 19.6 million and may not be
recognised as an expense for tax purposes.
We remain satisfied with MünchenerHyp’s capital base. Our
members’ capital contributions increased by EUR 90.1 million
to EUR 1.24 billion. Our regulatory equity capital totalled
EUR 1.79 billion. This gives us a Common Equity Tier 1 ratio
of 20.4 percent as of 31 December 2021, still placing us well
above the minimum capitalisation set for our Bank by the
ECB, even taking into account the additional capital buffers
required of all banks by the banking supervisory authorities.
Positive funding conditions
In the last year, we very successfully issued securities in euros,
British pounds and Swiss francs on the capital market. This
enabled us to refinance on the one hand at attractive condi-
tions and on the other hand in matching currencies. Among
our Pfandbrief issues, two long-dated Mortgage Pfandbriefe
with a volume of EUR 500 million each, which we issued in
the first half of 2021, stood out in particular. In July, we re-
turned to the UK capital market with a Mortgage Pfandbrief
for GBP 350 million. In Switzerland, we again successfully
issued several bonds with a total volume of CHF 1.8 billion.
MünchenerHyp is therefore a well-accepted and established
issuer both on the Swiss market, but MünchenerHyp is also
recognised as an issuer in Swiss francs on the international
capital markets. In uncovered paper, we celebrated a first with
a green senior non-preferred bond of EUR 500 million – our
first green bond in this product category.
Dividend for financial year 2021
After not having been allowed to distribute a dividend in the
two previous years, or only to a limited extent, due to ECB
rulings, we are not subject to any restrictions this year. There-
fore, we can finally allow our members once more to take
their due share in the success of MünchenerHyp. The net in-
come for 2021 and profit carried forward from previous years
of around EUR 33 million are available for the distribution.
This results in a dividend of 4.75 percent per share. We thank
our members for their loyalty to MünchenerHyp in these
challenging times.
Tradition on the move
MünchenerHyp’s 125-year history has been shaped by people
working together to overcome the challenges of the times.
Thus, our success in this anniversary year is also based on the
cooperative will to achieve more together. Our employees in
particular have contributed to this success story, achieving a
record result despite the continuing burdens imposed by the
COVID-19 pandemic. For this we thank them most sincerely.
We also thank the Supervisory Board for its valuable advice.
And we thank the Delegates for their support and commit-
ment not only in the last year but also in the five years of
their term of office, which ended as scheduled in 2021. We
look forward to working with the new Delegates Meeting in
the years ahead. We would like to thank the Works Council
and the Executive Employees Committee for their construc-
tive cooperation.
In view of positive economic and growth forecasts and hopes
of an easing COVID-19 pandemic, we started 2022 on a note
of cautious optimism. However, Russia’s attack on Ukraine
and growing concerns over inflation significantly increase
the uncertainties already hanging over this year’s business
development and make it even harder to arrive at a forecast.
So from today’s perspective it will be difficult to achieve the
moderate expansion of our new business planned for this
financial year.
Yours sincerely,
Dr Louis Hagen Dr Holger Horn Ulrich Scheer
CEO CRO CFO
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Management Report
9 ECONOMIC REPORT
9 General economic conditions
9 Economic development
9 Financial markets
11 Property markets and property financing markets
15 Business development
15 New mortgage business
16 Capital markets business
16 Refinancing
18 Financial performance, financial position
and net assets
18 Development of earnings
19 Balance sheet structure
21 Ratings, sustainability and regulatory conditions
21 Ratings
21 Sustainability
22 Separate non-financial report
22 Regulatory conditions
24 Registered office, executive bodies,
committees and employees
24 Registered office
24 Executive bodies and committees
24 Employees
24 Corporate governance statement in accordance
with Section 289f HGB
25 RISK, OUTLOOK AND OPPORTUNITIES
REPORT
25 Risk report
25 Counterparty risk
29 Market price risks
30 Liquidity risk
32 Investment risk
32 Operational risks
32 Risk-bearing capacity
32 Use of financial instruments for hedging purposes
32 Accounting-related internal control and
risk management processes
33 Corporate planning
33 Outlook – opportunities and risks
33 Economic development and financial markets
34 Property markets and property financing markets
35 Business development at
Münchener Hypothekenbank
36 Disclaimer regarding forward-looking statements
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Economic report
GENERAL ECONOMIC
CONDITIONS
Economic development
The global economy picked up again in 2021 after the slump
triggered by the COVID-19 pandemic. However, the upswing
progressively weakened over the course of the year. New
waves of infection caused by mutations of the virus and per-
sistent supply bottlenecks slowed economic recovery from
mid-year onwards. According to IMF data from January 2022,
global gross domestic product rose by 5.9 percent. This strong
growth was mainly due to the easing of massive lockdown
restrictions in many countries, which greatly boosted demand
after the previous year’s decline. Economic recovery, supply
bottlenecks and rising food and energy prices drove inflation
to 3.1 percent in the industrialised countries and 5.7 percent
in the developing countries in 2021.
It was a similar picture for the eurozone. Strong recovery in
economic output, with growth of 5.2 percent, concealed eco-
nomic problems triggered by the latest waves of COVID-19
and supply bottlenecks. Moreover, economic performance
varied quite considerably between member states. Inflation
increased to 4.9 percent as of November 2021, up from just
0.3 percent during 2020. After a significant rise in unem-
ployment at the start of the year, the labour market remained
fairly stable thereafter, resulting in the eurozone unem-
ployment rate of 7.3 percent in October 2021 being half a
percentage point below the annual average for 2020.
In Germany, gross domestic product grew less strongly than
expected in 2021, reaching 2.8 percent. As in other countries,
the pandemic, together with supply and material bottlenecks,
had a dampening effect on the German economy. Economic
output has not yet returned to pre-pandemic levels. Growth
was again supported in particular by public consumption
which, like last year, rose by 3.4 percent. Foreign trade also
recovered. Construction investment, having grown strongly in
past years, rose by only 0.5 percent. This was due to shortages
of labour and materials.
Consumer prices rose by 3.1 percent on average over the year,
the highest increase since 1993. Inflation was driven mainly
by energy prices, which rose by 10.4 percent overall. Food and
goods prices also increased significantly. The labour market,
on the other hand, remained robust. With 44.9 million people
in work, employment stayed at the previous year’s level.
The number of unemployed people fell by around 80,000 to
2.6 million, with the unemployment rate declining by 0.2 per-
centage points to 5.7 percent as a result. Short-time (Kurzarbeit)
work programmes were used considerably less than in the
previous year.
Financial markets
For another year, financial markets were severely impacted by
the development of the COVID-19 pandemic. Optimism about
vaccination campaigns initially buoyed stock markets, but was
dampened again by further waves of infection. Steadily rising
inflation rates over the course of the year were another nega-
tive influencing factor.
Most central banks therefore began to adjust monetary policy.
The US Federal Reserve (“Fed”) announced in November that it
would end its asset purchase programmes by mid-2022. In view
of positive economic data and low unemployment, a faster
exit from bond purchases by March 2022 was already decided
in December 2021. The Bank of England also responded to
rising inflation by raising interest rates by 0.15 percentage
points to 0.25 percent in December 2021. The ECB, on the
other hand, acted more cautiously. Although the Pandemic
Emergency Purchase Programme (PEPP) will be discontinued
in March 2022, the Asset Purchase Programme (APP) will con-
tinue until the end of 2022. According to the ECB’s forward
guidance, an interest rate hike is not expected until net new
purchases have ended. The main refinancing rate thus remained
at 0.0 percent in 2021.
The extremely low yields on ten-year German government
bonds at the beginning of 2021 did not last long. With the
start of the vaccination campaign, the easing of the COVID-19
Economic report
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YIELD ON TEN-YEAR BUNDS 2021
IN %
January February March April May June July August September October November December
– 0.3
– 0.4
– 0.5
– 0.6
– 0.7
– 0.8
– 0.9
– 1.0
– 0.1
– 0.2
0.0
0.1
Source: Bloomberg
wave in spring and rising inflation rates, Bund yields rose
from minus 0.57 percent at the beginning of the year to minus
0.10 percent in May of last year. To maintain favourable
financing conditions, the ECB tried to limit the rise in yields
and increased the monthly purchase volume under the PEPP
programme. As a result, yields fell back to a low of minus
0.5 percent in August. By the end of the year, they had risen
once more to a level of minus 0.18 percent with relatively
high volatility.
On the foreign exchange market, the US dollar made signifi-
cant gains against the euro over the course of the year. From
USD 1.22 at the beginning of the year, it peaked at USD 1.12
and ended the year at USD 1.13. The US dollar was supported
by higher growth rates in the USA, which increased significantly
due to the US government’s stimulus and relief packages. In the
second half of the year, the Fed also announced a more re-
strictive monetary policy, which provided additional support
for the US dollar.
The Swiss franc also gained against the euro over the course
of the year, ending 2021 at CHF 1.035, CHF 0.05 lower than
the rate at year-end 2020. The British pound posted compa-
rable gains, rising over the course of the year from GBP 0.89
at 31 December 2020 to GBP 0.84 at the end of 2021.
Despite quite attractive spread levels on the covered bond
market, many issuers took advantage of especially favourable
long-term tender opportunities at the central bank to refi-
nance. The ECB provided further liquidity on the capital market
in March 2021 by increasing the volume of possible tender
amounts and implementing the monthly securities purchases
in a very flexible manner. The ECB’s monetary policy kept
yields on many bonds in negative territory. Institutional inves-
tors therefore extended their investment term or increased
their credit risk in order to continue generating positive inter-
est income.
Issuing activities on the primary market for covered bonds
were similarly restrained as last year. In particular, the ECB’s
further series of TLTRO tenders affected the volume of publicly
traded covered bond issues. Moreover, the wave-like develop-
ment of the pandemic repeatedly unsettled the markets. All in
all, the euro-denominated issue volume of benchmark covered
bonds came to around EUR 95 billion in 2021, a slight increase
of 3 percent compared with the previous year. The countries
with the highest issuance were France with 24 percent of total
volume and Germany with 17 percent.
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RESIDENTIAL BUILDING PERMITS IN GERMANY 2010–2021
FIGURES IN 000
20112010 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
150
200
250
300
350
400
188
228
241
272
285
313
375
348
347
361
369
375*
* Estimated. Source: German Federal Statistical Office
Property markets and property financing markets
Residential property, Germany
The German residential property market remained buoyant.
The pandemic had no negative effects. High demand com-
bined with short supply in metropolitan areas thus caused
prices to rise more significantly than in the previous year.
Analyses conducted by vdpResearch show that prices for
houses and apartments increased by 12.5 percent in the third
quarter of 2021 compared with the same period of the previ-
ous year. Prices of single and two-family houses were up by
12.6 percent, with condominium prices rising by 12.2 percent.
Despite higher price growth momentum, this was driven not
by speculation but rather by the overall conditions: high excess
demand, low interest rates, rising prices for building land and
higher construction costs.
Thus, construction costs for residential property rose dramati-
cally in 2021, in particular because vital raw materials such as
timber and steel were in short supply. The rise in the number
of building permits slowed down slightly compared with the
previous year. By the end of November 2021, the construction
of over 340,000 housing units had been approved, up 2.8 per-
cent on the previous-year period. The construction backlog,
which includes all construction projects that have been
approved but not yet started or completed, increased further,
rising to just under 780,000 housing units by the end of 2020.
This is essentially because many construction companies are
working at full capacity.
Stable growth in rents meant that multi-family houses remained
an attractive asset class for investors. Rent increases averaging
4.0 percent compared with the previous year led to price rises
for multi-family houses, resulting in the capital value index
for multi-family houses rising by an average of 10.4 percent
year on year. In the top seven cities, growth momentum was
only slightly below the national average. Rent levels in the
cities rose by an average of 3.9 percent and capital values by
9.5 percent compared with the previous year.
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DEVELOPMENT OF PROPERTY PRICES IN GERMANY
YE 2010 = 100
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
90
100
110
120
130
140
150
160
170
180
190
Owner-occupied housing
Condominiums
Single family houses
Source: vdp Research property price index, Q3 2021, based on analysis of the vdp transaction database
As of November 2021
Partly as a result of this trend, more was invested in German
residential property during 2021 than ever before. According
to surveys by Ernst & Young, institutional investors invested
almost EUR 53 billion in German residential property port folios,
two and a half times as much as in the previous year. Of this
figure, the takeover of Deutsche Wohnen by Vonovia alone
accounted for EUR 23.5 billion. But even without this extraor-
dinary transaction, the capital invested in German residential
property increased by over 40 percent compared with the pre-
vious year. The institutional housing market continued to be
dominated by domestic investors with a share of 76 percent.
Furthermore, the German residential property market remained
a safe investment target compared with other countries.
Consequently, demand for construction financing was strong.
In the first three quarters of 2021, loans with a total volume
of around EUR 223 billion were granted for the purchase of
residential property (existing and new builds), an increase of
13.6 percent compared with the same period of the previous
year.
Against the background of the continuing boom in the German
residential property market, in its Financial Stability Report
the ECB called on European countries to counter this devel-
opment with macroprudential measures. In January 2022,
BaFin announced the introduction of additional capital require-
ments due to the rise in residential property prices. The counter-
cyclical capital buffer of previously 0 percent was set at
0.75 percent of risk-weighted assets as of 1 February 2022. In
addition, a ‘sectoral systemic risk buffer’ of 2.0 percent of
risk-weighted assets on loans secured by residential property
is to be introduced. However, the debt-to-equity and asset
encumbrance ratios of private households in residential prop-
erty financing, which have been stable for years, showed no
sign that banks’ lending criteria were relaxed in 2021.
Residential property, international
European residential property markets showed similar momen-
tum to Germany, with rising demand for housing and strong
price growth. Eurostat’s house price index showed a year on
year increase of 7.2 percent in the first half of the year.
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DEVELOPMENT OF COMMERCIAL PROPERTY TRANSACTIONS
IN GERMANY 2017–2021
IN € BILLION
15.6
17.6
18.8
20.3
57.2
60.5
70.7
58.6
52.9
60.9
2017
2018
2019
2020
2021
Residential (only portfolio)
Commercial
Source: EY Research
As of January 2022
The European residential property markets with the strongest
price momentum were Austria, the Netherlands and the UK,
with increases of over 10 percent compared with the same
period in the previous year. The Austrian federal government
is therefore planning to introduce stricter lending rules to
oblige mortgage providers to adopt more cautious lending
policies.
The Swiss residential property market recorded price growth
of 4.7 percent in the first half of 2021 compared with the
equivalent previous-year period, with prices for single-family
houses in particular rising sharply. Price growth momentum
is therefore continuing. On the rental housing market, the
vacancy rate declined slightly for the first time, but a supply
surplus still remains.
Commercial property, Germany
EUR 60.9 billion was invested in German commercial proper-
ties, an increase of 4 percent. Including investments in com-
mercial residential property, 2021 was a record year for the
German commercial property market, with a total volume of
EUR 113.8 billion. For the first time, residential property was
the strongest asset class, accounting for almost 60 percent of
transaction volume. Only around a quarter of total volume
was attributable to office properties. Logistics and retail prop-
erties each accounted for less than 10 percent of transaction
volume.
Measures to combat the COVID-19 pandemic – lockdowns in
particular – continued to put a noticeable strain on commercial
property markets, and this was also reflected in price perfor-
mance during 2021. According to vdpResearch, for example,
prices of commercial properties declined by 0.9 percent in the
third quarter of 2021 compared with the same period of the
previous year. One reason for this was that prices of retail
properties fell by 3.6 percent. On the other hand, office prop-
erties recovered slightly with a price increase of 0.3 percent.
Office prime yields in Germany’s top property markets remained
stable over the course of the year, averaging 2.7 percent on a
net basis. Office properties in Berlin generated the lowest
prime yields at 2.5 percent net.
The positive performance of the German office investment
market is essentially due to the low interest rate environment
and the lack of alternative asset classes. After all, office letting
markets remain characterised by caution and hesitation on
the part of tenants, especially with regard to new leases or
expansion plans. In the first three quarters of 2021, around
2.6 million square metres of office space was let in the top
seven office cities, down by 4 percent on the same period of
the previous year. Compared with market activity in 2019 –
before the outbreak of the COVID-19 pandemic – lease turn-
over actually declined by almost 30 percent. Vacancy rates
have thus risen in all German metropolitan areas, with Berlin
recording the largest increase from 2.8 to 3.9 percent. Frankfurt
am Main has the highest vacancy rate among the German
cities at 7.7 percent. Prime rents for office properties again
recorded slight year on year growth of 1 percent on average
in 2021.
The pandemic has accelerated the process of change in the
retail sector which was already under way before 2020. Many
retail chains have reduced their branch networks and floor
space due to declining sales in bricks-and-mortar retailing. In
all German cities, vacancy rates in retail locations have risen
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and market rents have declined. The change is most pronounced
in Berlin, where the retail vacancy rate rose to 13.4 percent
and prime rents fell by 5 percent in 2021. The most expensive
location for inner city retail properties was Munich with a
net initial yield of 2.9 percent. Since the start of the pandemic,
shopping centre yields have risen to 5.3 percent net, reflecting
uncertainty over investments in this segment. At the same
time, the decline in rents for shopping centres was more pro-
nounced than in the city centres.
Commercial property, international
Transaction volume on European commercial property markets
recovered in 2021 following a significant slump in the previous
year. EUR 275 billion was invested in commercial properties
across Europe, an increase of 23 percent. Germany accounted
for one third of European transaction volume, followed by the
UK with 24 percent, France with 10 percent and the Nether-
lands with 5 percent. Residential portfolios and office proper-
ties each accounted for one third of transaction volume,
putting the residential segment at European level on a par
with office properties for the first time.
In the UK, investment volume was the highest since 2015,
reaching a figure of EUR 67 billion, representing a year on
year increase of 50 percent. The period between the Brexit
referendum and the UK’s actual exit from the EU greatly
unsettled investors because the impacts of Brexit on the
labour market and on demand for commercial property were
difficult to predict. Net initial yields for all property types
therefore rose significantly, because investors had priced the
uncertainty into their yield forecasts. Yields rose most strongly
in regional markets, especially for retail properties in those
markets. In 2021, prime yields for shopping centres in the UK
were 7.5 percent. Prime office properties in the City of London
returned to a net yield level of 3.5 percent in 2021, a figure
last recorded in 2015.
In France, EUR 27 billion was invested in commercial property
and residential portfolios in 2021, down by 18 percent com-
pared with the previous year. The decline is explained by the
very selective behaviour of investors in the office segment,
which is the most important type of use in the French com-
mercial property market. Due to the strict measures taken to
combat the pandemic, office properties stood empty for several
weeks and users began to reduce their space requirements.
As a result, prime rents in central Paris fell by 3 percent year
on year. Rents for commercial properties fell by 16 percent in
France during 2021, while shopping centre rents declined by
4 percent. Net initial yields were unchanged at 3.2 percent for
commercial buildings and rose to 4.8 percent for shopping
centres.
In the Netherlands, transaction volume fell by 26 percent year
on year to EUR 14 billion. This was due to government inter-
vention in the residential property market, which made inves-
tors in commercial residential property portfolios far more
cautious. Yields remained unchanged at 3.1 percent on a net
basis for office properties in Amsterdam and 3.4 percent on
average for all Dutch cities. Office rents were unchanged
compared with the previous year. Retail rents also declined in
the Netherlands, with rents dropping by 6 percent for com-
mercial buildings and by 10 percent for shopping centres.
In Spain, transaction volume recovered to just under
EUR 11.3 billion, up 27 percent on the previous year. Investor
interest in prime office properties in Spanish cities was so
great that the net initial yields in Madrid and Barcelona each
fell by 10 basis points. The net initial yield for office proper-
ties in Madrid was 3.1 percent and in Barcelona 3.2 percent.
In both cities, vacancy rates rose slightly and prime office
rents declined by an average of 3 percent in 2021. At 5 per-
cent, the decline in rents for shopping centres was relatively
moderate compared with other European cities, as footfall
rapidly recovered once lockdown restrictions were eased. Yields
for commercial properties were stable at 3.4 percent in 2021,
while net initial yields for shopping centres rose to 5.3 percent.
In the US, commercial property and residential portfolios
worth USD 582 billion had changed hands by the end of the
third quarter of 2021, up by 39 percent year on year. Multi-
family apartments were the most sought-after asset class,
accounting for almost 40 percent of investment volume. Logis-
tics properties were the second strongest asset class with a
market share of 23 percent, followed by office properties with
a market share of 19 percent.
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MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2021
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
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FOREWORD
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MÜNCHENERHYP NEW MORTGAGE BUSINESS 2017–2021
COMMITMENTS IN € MILLION
3,185
3,142
3,717
4,338
1,629
2,477
2,690
2,461
4,019
2,147
2017
2018
2019
2021
2020
Residential housing
Commercial property
BUSINESS DEVELOPMENT
New mortgage business
In the year under review, we more than made up for the
pandemic-related decline in new business during 2020. We
achieved a record result with a commitment volume of
EUR 6.8 billion, representing an increase of 6.3 percent. With
growth recorded in both private and commercial property
financing, we are satisfied with the overall development of
new business.
New business in private property financing grew by 7.9 per-
cent, the same rate as last year, to reach EUR 4.3 billion. The
continuing property boom and the low level of interest rates
contributed to this growth, leading to very strong demand for
financing with long fixed interest rate periods – an area in which
our offering puts us in a particularly competitive position.
In brokerage business with our partner banks from the Coop-
erative Financial Network, we matched the previous year’s
record result with a commitment volume of EUR 3.1 billion.
We achieved this in particular through further improvements
in digital processes and services for our cooperative brokerage
partners.
Sales of private property finance generated via independent
financial service providers in Germany increased by 22 percent
year on year, to EUR 818 million.
In our partnership with PostFinance in Switzerland, we were
able to significantly expand new business thanks to high
demand for property financing and a very successful joint
sales campaign. The commitment volume rose by 49 percent
to EUR 415 million. In the Austrian market, we entered into
partnerships with other financial service providers, enabling
us to expand new business to EUR 48 million (previous year:
EUR 16 million).
In commercial property financing, our lending business con-
tinued to be affected by the economic consequences of the
COVID-19 pandemic. Against this background, we are satisfied
that we were able to expand our new business by 3.5 percent
to around EUR 2.5 billion. This means that we have returned
to our growth path after last year’s significant decline.
This was attributable in particular to our domestic business,
which contributed the lion’s share with a new business volume
of EUR 1.7 billion. At EUR 0.7 billion, international business
was around EUR 0.2 billion below the previous year’s result of
EUR 0.9 billion. The most important international market for
us in 2021 was the Netherlands with 28 percent of new busi-
ness, replacing last year’s leader, the USA (syndicated business
only), which accounted for 19 percent, followed by Spain
with 16 percent, and France and the UK with 14 percent each.
New business was thus more evenly distributed across our
target markets than in the previous year. By asset class, office
properties accounted for 44 percent of new business, resi-
dential portfolios for 23 percent, retail properties for 13 percent,
logistics properties for 11 percent and mixed use for the remain-
ing 9 percent.
Earnings performance in commercial new business improved
further. We were able to significantly exceed the earnings
target without increasing the risks. This applies to domestic
business and even more so to international business. Average
loan volumes, having increased significantly in previous years,
declined slightly.
From a risk perspective, we maintained our conservative financ-
ing approach with a focus on conventional financing at
completion, giving due consideration to adequate, sustainable
minimum cash flows and locations. We consider the high
equity ratios in the financing structures, which average approx-
imately 45 percent and increased slightly compared with the
previous year, to be a positive aspect. Despite price trends in
the market, which have further widened the gap between
market and lending values, our average loan-to-value ratios
declined slightly.
Economic report
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MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2021
NOTESMANAGEMENT REPORT FURTHER INFORMATION
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MORTGAGE RATES MÜNCHENERHYP
TEN YEAR FIXED RATE | IN %
1990 1992 201620142012201020082006200420022000199819961994 2018 2020
2022
0
2
1
3
4
5
6
7
8
9
10
0
2
1
3
4
5
6
7
8
9
10
long-term average rate 4.81
8.64
■
■
1.13
As of: 02.01.2022
Capital markets business
In line with the business strategy, capital markets business is
conducted with restraint. New purchases serve primarily to
meet regulatory requirements. Liquid securities are needed to
manage liquidity and the cover pools, and also as collateral in
ECB repo transactions or tender operations.
Highly liquid sovereign and bank securities continued to trade
at very high spread levels and resulted in high total asset
costs. As a result, securities purchases were kept to the bare
minimum.
New business increased significantly to EUR 743.0 million in
2021 after EUR 97 million in 2020. This was due to realloca-
tions. The portfolio volume fell slightly to EUR 3.6 billion
( previous year: EUR 3.7 billion).
Refinancing
MünchenerHyp consistently enjoyed access to funding at
good conditions during the reporting year.
In the first six months of the year our focus in terms of large-
volume funding transactions was on the issue of Pfandbriefe
and uncovered bonds in euros and Swiss francs (CHF).
This began in January 2021 with the issue of a Mortgage
Pfandbrief with a volume of EUR 500 million, a term of just
under 19 years at a spread of 1 basis point above the mid-
swap rate and a coupon of 0.01 percent.
At the beginning of March 2021, we successfully issued a green
(uncovered) senior non-preferred bond with a volume of
EUR 500 million. This was a first for the Bank in two respects:
It is its first green bond in this product category, and also
the first time it has issued a senior non-preferred bond in
bench mark format. The bond has a term of eight years and a
coupon of 0.375 percent. The issue was placed at a price of
57 basis points above the mid-swap rate.
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At the end of April 2021, MünchenerHyp reported a record
spread for long-dated Pfandbriefe. An issue with a volume of
EUR 500 million and a term of 15 years was issued at a price
3 basis points below the mid-swap rate and a coupon of
0.25 percent. Investor demand was so brisk that the order
book was closed after two hours at EUR 1.35 billion.
In addition to the above-mentioned bonds in euros, we issued
around 1.1 billion in Swiss francs up to mid-July. Of this, around
CHF 700 million was issued via syndicated bonds on the capi-
tal market and approximately CHF 400 million via private
placements. This lively issuance activity included various terms
(from two to 20 years) and product categories (Pfandbrief,
senior preferred and senior non-preferred). Most of the senior
products were issued as green bonds, which enabled the Bank
to appeal to and win over new groups of investors.
The very successful issuing activity in Swiss francs continued
in the second half of the year. We issued further Pfandbriefe
with a volume of CHF 0.7 billion. About CHF 550 million of this
sum was issued via syndicated bonds on the capital market
and approximately CHF 150 million via private placements. In
2021 as a whole, bonds in Swiss francs totalling around
CHF 1.8 billion were sold, making MünchenerHyp once again
one of the most important foreign issuers in Switzerland.
In the second half of the year, we also made a very successful
return to the British capital market. For the first time since
2013, we issued a benchmark Pfandbrief in British pounds
(GBP). The volume is GBP 350 million, the term just under
3.5 years and the coupon 0.5 percent. Owing to high demand,
it was possible to reduce the spread in the course of the
transaction. The spread is 39 basis points above gilts (UK sov-
ereign bonds).
In November 2021, we tapped an existing EUR 500 million
Pfandbrief with a remaining term of almost 18 years by a
further EUR 250 million. The issue was placed at a price of
2 basis points above the mid-swap rate. The outstanding
nominal volume of this bond, which matures in 2039, is now
EUR 750 million.
MünchenerHyp’s total issue volume on the capital market in
the year under review was around EUR 6.6 billion. In covered
funding, Mortgage Pfandbriefe accounted for EUR 4.1 billion,
including our own Mortgage Pfandbriefe deposited with the
ECB, with a volume of EUR 2.5 billion for uncovered funding.
Once again, no Public Pfandbriefe were issued, in keeping
with MünchenerHyp’s business strategy.
Economic report
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FINANCIAL PERFORMANCE,
FINANCIAL POSITION AND
NET ASSETS
Development of earnings
Net interest income
1
increased in the year under review, rising
by EUR 54.8 million, or 15.8 percent, to EUR 402.6 million. The
increase was driven primarily by strong new business in the
year under review and previous years. Net interest income
also includes a premium for targeted longer-term refinancing
operations III (TLTRO III) with the European Central Bank in
the amount of EUR 18.3 million.
Commission paid totalled EUR 142.2 million, up by
EUR 19.7 million or 16.1 percent on the previous-year level,
thanks to very successful new business. Commission received
fell to EUR 12.0 million, resulting in net commission income
2
of minus EUR 130.2 million, compared with minus
EUR 109.5 million in the previous year.
This resulted in net interest and commission income
3
of
EUR 272.4 million, which corresponds to an increase of
EUR 34.1 million, or 14.3 percent compared with the previous
year.
General administrative expenses rose by EUR 8.5 million to
EUR 126.7 million. This included an increase in personnel
costs of EUR 5.0 million, or 8.7 percent. This is due to the
continued need to expand the workforce and salary increases.
Other administrative expenses rose by EUR 3.5 million, or
5.8 percent. The expense for the bank levy alone increased by
EUR 3.7 million. This means that the increase in the bank levy
alone exceeded the increase in the overall item. This shows
that very close attention was paid to cost discipline in the
year under review.
Depreciation, amortisation and value adjustments of intangible
assets and fixed assets fell by EUR 4.0 million year on year to
EUR 6.2 million.
Total administrative expenses
4
amounted to EUR 132.9 million
compared with EUR 128.4 million in the previous year. The
cost-income ratio
5
was 48.8 percent after 53.9 percent in the
previous year, and is thus within the target corridor of below
50 percent.
The net result of other operating expenses and income
amounted to minus EUR 3.3 million.
The operating result before risk provisions
6
increased by
28.1 percent year on year, to EUR 136.2 million.
The item “Depreciation, amortisation and value adjustments
on accounts receivable and certain securities as well as
allocations to provisions for possible loan losses” amounted
to minus EUR 27.0 million. The required loan loss provisions
remained at a very low level despite the ongoing COVID-19
pandemic. The net result of changes in loan loss provisions
(including direct write-downs) amounted to minus
EUR 5.9 million (previous year: minus EUR 10.1 million).
The early application of IDW RS BFA 7 for the formation of
general loan loss provisions for the lending business resulted
in an effect of minus EUR 8.0 million. An amount of
EUR 6.0 million was set aside for risks arising from a legal
dispute.
The item “Income from reversals of write-downs on partici-
pating interests, shares in affiliated companies and securities
treated as fixed assets” amounted to EUR 3.5 million.
Income from ordinary business activities amounted to
EUR 112.7 million. After tax expenses of EUR 53.6 million,
net income for the financial year comes to EUR 59.1 million,
a year on year increase of 56.7 percent.
The return on equity (RoE) before tax amounted to 6.7 per-
cent
7
. After tax, the Bank achieved an RoE of 3.5 percent
8
.
1
Net interest income is calculated by adding item 1 ‘Interest income’ plus item 3 ‘Current
income’ plus item 4 ‘Income from profit-pooling, profit transfer or partial profit transfer
agreements’ minus item 2 ‘Interest expenses’ as shown in the income statement.
2
Net commission income is calculated by offsetting item 5 ‘Commission received’ and item 6
‘Commission paid’ as shown in the income statement.
3
The net interest and commission income is the sum of net interest income and net commission
income.
4
Total administrative expenses are the sum total of item 8 ‘General administrative expenses’ and
item 9 ‚Depreciation, amortisation and write downs of intangible assets and tangible assets‘ as
shown in the income statement.
5
Ratio of total administrative expenses to net interest and net commission income
6
Net result of items 1 to 10 in the income statement.
7
RoE before tax is calculated as the ratio of income statement item 14 ‘Results from ordinary
activities’ to balance sheet liability item 9 ‚Fund for general banking risks (previous year)‘ plus
liability item 10aa ‘Members capital contributions (current year)’ plus item 10b ‘Revenue
reserves (previous year)’ plus income statement item 18 ‚Retained earnings brought forward
from previous year‘.
8
RoE after tax is calculated as the ratio of income statement item 16 ‘Allocation to fund for
general banking risks’ plus item 17 ‘Net income’ to balance sheet liability item 9 ‚Fund for
general banking risks (previous year)‘ plus liability item 10aa ‘Members capital contributions
(current year)’ plus item 10b ‘Revenue reserves (previous year)’ plus income statement item 18
‘Retained earnings brought forward from previous year’.
Economic report
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PORTFOLIO DEVELOPMENT MÜNCHENERHYP 2017–2021
IN € MILLION
29,227
31,956
35,498
38,411
41,662
2017
2018
2019
2020
2021
Residential housing Germany
Residential housing Switzerland and Austria
Commercial property Germany
Commercial property abroad
Balance sheet structure
Total assets increased to EUR 52.5 billion at the end of the
2021 financial year, compared with EUR 48.6 billion at 31 De-
cember 2020. This 8 percent increase is mainly due to growth
in the mortgage loan business portfolio.
During the course of the year, the mortgage loan portfolio
grew by EUR 3.2 billion, to EUR 41.7 billion. Private residential
property financing in Germany was once again the fastest
growing segment, with growth of EUR 2.0 billion.
The private residential property financing portfolio is struc-
tured as follows: domestic – EUR 23.5 billion (previous
year: EUR 21.5 billion); foreign – EUR 5.2 billion (previous year:
EUR 4.7 billion). In addition to the financing business in
Switzerland, this portfolio also includes financing in Austria.
The commercial property financing portfolio totals EUR 13.0 bil-
lion (previous year: EUR 12.2 billion). Of this amount, EUR 3.7 bil-
lion (previous year EUR 3.2 billion) is attributable to financing
outside Germany. The most important international market is
the Netherlands with 23 percent (previous year: 21 percent),
followed by the USA with 22 percent (previous year: 23 per-
cent), Spain with 18 percent (previous year: 19 percent) and
the UK with 15 percent (previous year: 17 percent).
In line with our business and risk strategy, the portfolio of
public-sector and bank loans and securities decreased from
EUR 3.7 billion to EUR 3.6 billion, EUR 2.2 billion of which
was made up of securities and bonds.
At the end of 2021, the net sum of hidden charges and
hidden reserves in the securities portfolio amounted to
EUR 33 million (previous year: EUR 43 million).
A detailed examination of all securities indicated that there
are no permanent impairments. We have accounted for bonds
on a held-to-maturity basis. Write-downs to a lower fair value
were not necessary.
The portfolio of long-term funding instruments increased by
EUR 2.4 billion to EUR 42.0 billion. Mortgage Pfandbriefe
accounted for EUR 30.3 billion of this amount, Public Pfand-
briefe for EUR 1.5 billion and uncovered bonds for EUR 10.2 bil-
lion. The total volume of funding instruments – including
money market funds and customer deposits – increased to
EUR 49.7 billion as of 31 December 2021.
Economic report
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The item “Other liabilities to customers” can be broken down
as follows:
OTHER LIABILITIES TO CUSTOMERS
IN € 000
Remaining term < one year Remaining term > one year Total
Other liabilities to customers as of 31 Dec. 21 2,065,449 2,393,353 4,458,802
Registered bonds 27,908 1,514,764 1,542,672
of which institutional investors 27,572 1,360,764 1,388,336
Promissory note loans on the liabilities side 485,077 808,589 1,293,666
of which institutional investors 119,289 507,589 626,878
Other 1,552,464 70,000 1,622,464
of which institutional investors 860,015 70,000 930,015
Members capital contributions grew by EUR 90.1 million, to
EUR 1,243.2 million. Together with the issue of the Additional
Tier 1 bond in the amount of CHF 125 million in 2019, regula-
tory equity capital totalled EUR 1,790.1 million (previous year:
EUR 1,676.4 million).
Common Equity Tier 1 capital rose from EUR 1,517 million in
the previous year to EUR 1,626 million. At 31 December 2021,
the Common Equity Tier 1 capital ratio was 20.4 percent
(previous year: 20.6 percent), the Tier 1 capital ratio was
21.9 percent (previous year: 22.2 percent) and the total capital
ratio was 22.5 percent (previous year: 22.8 percent). The lever-
age ratio at 31 December 2021 was 3.6 percent (previous year:
3.6 percent).
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RATINGS, SUSTAINABILITY AND
REGULATORY CONDITIONS
Ratings
In October 2021, the rating agency Moody’s confirmed all of
MünchenerHyp’s ratings. At the same time, it changed the
outlook from “negative” to “stable”.
Moody’s remains positive about the fact that MünchenerHyp
has a strong reputation on the capital market as an issuer of
Pfandbriefe, noting that it has an accordingly high level of
refinancing strength, and also acknowledges the firm ties and
corresponding support the Bank enjoys within the Cooperative
Financial Network.
CURRENT RATINGS AT A GLANCE
Rating
Mortgage Pfandbriefe Aaa
Junior Senior Unsecured A2
Senior Unsecured Aa3
Short-term liabilities Prime-1
Long-term deposits Aa3
MünchenerHyp has not issued any Public Pfandbriefe for
some years now, as these are only profitable through
cross-selling income. As a result, it withdrew its rating for
Public Pfandbriefe in 2020.
Even to achieve the highest Pfandbrief rating of Aaa, Moody’s
still only requires compliance with the legally required over-
collateralisation, but no additional over-collateralisation.
The long-term unsecured liabilities have ratings from the
other two major rating agencies, Standard & Poor‘s (A+) and
Fitch (AA-), via the combined rating of the Cooperative Finan-
cial Network.
Sustainability
The regulatory requirements of the EU, the ECB, the European
Banking Authority (EBA) and BaFin regarding sustainability in
corporate governance increased significantly in the year under
review. These requirements relate primarily to MünchenerHyp’s
core business, risk management and reporting.
In the year under review, the focus was particularly on the
topics of EU taxonomy, the ECB guide on climate-related and
environmental risks, disclosure pursuant to CRR II and the
guidelines on loan origination and monitoring (LOaM). In order
to implement these requirements, the Board of Management
launched a project that encompasses almost all areas of
MünchenerHyp and aims to create the processes, structures
and data foundations needed for appropriate sustainability
management.
In order to embed sustainability even more deeply in the
Bank’s organisation, an ESG framework was developed in
2021 that defines structures and responsibilities for all sus-
tainability issues, including ESG risk management issues. For
this purpose, an ESG committee was set up to advise the
Board of Management on all matters relating to sustainability.
It consists of representatives from all affected areas and in
particular has the task of further developing the sustainability
strategy and preparing sustainability-relevant decision pro-
posals for the Board of Management.
The focus of our sustainability activities remains on our core
business. In the private residential property financing business,
our loans with a social and environmental focus (MünchenerHyp
Green Loan and MünchenerHyp Family Loan) accounted for
more than 20 percent of new business in private property
financing. We publish an annual impact report on the specific
environmental value-added of sustainable loans for private
and commercial property.
In terms of sustainable securities, in 2021 we issued ESG
Pfandbriefe, uncovered senior preferred and non-preferred
bonds and commercial paper. Approximately EUR 875 million
was successfully placed in this segment in 2021.
In its sustainability rating, ISS ESG awarded MünchenerHyp a
rating of C+ for sustainability management in 2020. Although
this is a slight downgrade compared with the B- rating received
in previous years, it still places us among the top performers
in the Financials/Mortgage & Public Sector rating peer group.
As a result, ISS ESG has granted us “Prime Status” again.
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The agency Sustainalytics introduced a new rating method-
ology in 2020. It now assesses sustainability commitment
using a scoring system from 0 to plus 40. The lower the risk
score, the stronger the sustainability management.
Separate non-financial report
MünchenerHyp has been reporting on the non-financial aspects
and the material economic, environmental and social impacts
of its business activities since 2012. We comply with the require-
ments set out in the German CSR Directive Implementation
Act (CSR-Richtlinie-Umsetzungsgesetz – CSR-RUG) by pub-
lishing a non-financial report. In accordance with the Dele-
gated Act specifying the disclosure obligations under Article
8 of the Taxonomy Regulation, we will publish information
on our taxonomy-eligible economic activities for the first time
in 2021, as well as further key indicators relating to selected
risk positions. The non-financial report is published at the
same time as the annual report on the Bank’s website and in
the electronic Federal Gazette (Bundesanzeiger).
Regulatory conditions
Capital
MünchenerHyp calculates its capital requirements largely using
the internal ratings based approach (IRBA).
Liquidity
The Liquidity Coverage Ratio (LCR) was maintained without
issue throughout the year, with values above 400 percent on
average. The minimum was above 200 percent. The Net Stable
Funding Ratio (NSFR) was always above 110 percent.
MünchenerHyp’s risk score in 2021 was 18.5, which corre-
sponds to a low risk. This puts the bank in 5th place in the
Thrifts and Mortgages peer group.
9
THE DEVELOPMENT OF THE SUSTAINABILITY RATINGS SINCE 2019
2019 2020 2021/2022
ISS-ESG
B –
(Prime Status)
C +
(Prime Status)
C +
(Prime Status)
Sustainalytics 65 out of 100 points Risk score of 17.4 (low risk) Risk score of 18.5 (low risk)
9
Copyright © 2021 Sustainalytics. All rights reserved. This section contains information developed
by Sustainalytics (www.sustainalytics.com). Such information and data are proprietary of Sus-
tainalytics and/or its third party suppliers (Third Party Data) and are provided for infor mational
purposes only. They do not constitute an endorsement of any product or project, nor an invest-
ment advice and are not warranted to be complete, timely, accurate or suitable for a particular
purpose. Their use is subject to conditions available at https://www.sustainalytics.com/legal-
disclaimers.
The development of the sustainability ratings in 2021/2022
and the two previous years at a glance:
Single Supervisory Mechanism for EU banks
The “finalisation” of Basel III also includes the gradual intro-
duction of an output floor of 72.5 percent to limit the effects
of internal approaches compared with standard approaches.
This means that in particular banks with low risk weightings
for their receivables, such as MünchenerHyp, will be adversely
affected by the changes. The introduction of this floor will
also impact MünchenerHyp’s capital ratios. Overall, we take a
critical view of the new regulation, because it will make lend-
ing more expensive. The Bank is monitoring developments and,
given the currently high Common Equity Tier 1 ratio, believes
that this regulatory change will be manageable.
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The Bank’s Compliance unit follows discussions on the publi-
cation of new national and international regulations very
closely and forwards any new regulations to the responsible
departments within the Bank, where they are implemented
in various measures and projects. The abundance of additional
regulatory requirements imposed by supervisory authorities
causes significant costs and poses a considerable challenge for
our Bank’s human and financial resources.
As every year, the ECB conducted the so-called Supervisory
Review and Evaluation Process (SREP), comprising a very
detailed evaluation of the business model, internal governance
and capital and liquidity adequacy. Any additional capital
and liquidity requirements are derived from that process. The
additional capital adequacy requirement (P2R) imposed within
the framework of the SREP amounts to 1.75 percent of total
capital; no additional requirements were set for liquidity.
Minimum Requirements for Risk Management (MaRisk)
The German Minimum Requirements for Risk Management
(Mindestanforderungen an das Risikomanagement – MaRisk)
were updated in the year under review by way of an amend-
ment. However, because the existing European requirements,
which MünchenerHyp already fulfilled, were essentially trans-
posed into German law, hardly any change was needed.
Recovery and resolution plan
The recovery plan was updated and the information required
for the resolution plan was sent to the resolution authority.
There were no significant changes compared with the previ-
ous year.
IBOR reform
IBOR reference interest rates came under heavy criticism in
the wake of the manipulation scandals a few years ago; at
the same time, the abolition of the submission obligation for
panel banks made it necessary to replace the LIBOR rates.
Alternative risk-free rates (RFRs) were developed and estab-
lished; existing IBOR reference rates are gradually being
replaced based on the new RFR benchmarks.
MünchenerHyp is affected both by the announced changes in
relation to the interest rate benchmarks and by the Benchmarks
Regulation. However, due to the highly specialised business
model, there is much less of a need for change than for most
other banks directly supervised by the ECB. The necessary
adjustments are being undertaken as part of a project.
Economic report
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MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2021
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
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REGISTERED OFFICE, EXECUTIVE
BODIES, COMMITTEES AND
EMPLOYEES
Registered office
Münchener Hypothekenbank eG has its registered office in
Munich. The Bank also has a branch in Berlin and 10 regional
offices.
Executive bodies and committees
The Supervisory Board appointed Ulrich Scheer – previously
General Executive Manager – as a member of the Board of
Management (CFO) effective as of 1 September 2021.
The Supervisory Board appointed Dr. Holger Horn as Deputy
Chairman of the Board of Management (CRO) effective as of
1 January 2022.
The Supervisory Board intends to appoint Markus Wirsen as a
member of the Board of Management effective as of 1 April
2022. He was previously Head of Restructuring & Recovery at
DZ HYP AG.
In June 2021, the four employee representatives on the Super-
visory Board were regularly elected for a new period of office.
Reimund Käsbauer, Michael Schäffler and Frank Wolf-Kunz
were re-elected. Claudia Schirsch was newly elected to the
Supervisory Board. Barbara von Grafenstein stood down from
the Board.
The Delegates Meeting was regularly elected for a new period
of office during the year under review. Due to the COVID-19
pandemic, the election was conducted by postal vote. Eighty
delegates and six substitute delegates were elected.
Employees
In a second year dominated by the COVID-19 pandemic,
employee health was the particular focus of our human
resources work. With the measures in place, such as the crisis
team, working from home and hygiene rules, we were able
to maintain the Bank’s operations at all times and to contain
infections to the extent possible. Since March 2020, around
70 employees have had the coronavirus, almost all of them
having been infected outside the Bank. Happily, all have since
recovered.
In the second year of the pandemic, there was less inclination
to join or leave MünchenerHyp. Both new hires and employee
turnover declined compared with 2020. Recruitment remains
a key challenge for the Bank given the tight labour market.
For this reason, MünchenerHyp’s human resources strategy is
focused on, among other things, enhancing our employer
brand, attracting and promoting talent, creating attractive
overall conditions for all employees and offering attractive
remuneration.
The Bank employed 624 employees
10
(previous year: 611) on
average over the year.
Corporate governance statement in accordance with
Section 289f HGB
The proportion of women in the Bank as a whole came to
50 percent in the reporting year. At Board of Management level,
the proportion came to 0 percent, while the proportion at the
first management level below the Board was 22 percent, at
the second level 18 percent and at the third level 31 percent.
The proportion of women on the Supervisory Board was
17 percent in 2021. MünchenerHyp has set itself the objective
of increasing the proportion of women in management posi-
tions. For the Supervisory Board and the two management
levels below the Board of Management, the Bank is aiming for
a proportion of women of 20 percent, with a target quota for
the Board of Management of 33 percent. In December 2020,
the Nomination Committee of MünchenerHyp’s Supervisory
Board addressed the issue of the proportion of women on the
Board of Management and Supervisory Board and decided to
retain the existing target quotas and to strive to achieve them
by 2026 in the context of upcoming succession arrangements.
10
Number of employees in accordance with Section 267 (5) of the German Commercial Code
(Handelsgesetzbuch – HGB); excludes trainees, employees on parental leave, in early retirement
or in partial retirement (non-working phase) and employees on leave of absence.
Economic report
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MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2021
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
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Risk, outlook and opportunities report
RISK REPORT
Continuous risk control and monitoring is essential to manag-
ing business development at MünchenerHyp. Risk management
is therefore a high priority in terms of the overall management
of the Bank.
The framework governing business activities is laid down in
the business and risk strategy. The MünchenerHyp Board of
Management as a whole is responsible for this strategy, which
is reviewed regularly to ensure its objectives are being met,
revised where necessary and discussed with the Supervisory
Board at least once a year.
The Supervisory Board’s Risk Committee is informed of the
Bank’s risk profile at least once a quarter and additionally as
necessary, so that it can exercise its supervisory function. This
information is based on, among other things, reports on
ICAAP and ILAAP and on credit risks, operational risk reports
and the risk report prepared in accordance with MaRisk. The
Risk Committee also receives numerous detailed reports from
internal management, regarding funding and liquidity, for
example.
Risk management is based firstly on the analysis and presenta-
tion of existing risks, and secondly on comparing these risks
with the available risk coverage potential (risk-bearing capac-
ity). There are also various other relevant analyses that need
to be viewed as a whole to enable adequate management of
the Bank. Extensive control procedures involving internal,
process-dependent monitoring are employed for this purpose.
The Internal Audit department, which is independent of all
processes, has an additional supervisory role in this respect.
When analysing and presenting the existing risks, a distinction
is made between counterparty risks, market price risks, credit
spread risks, liquidity risks, participation risks, model risks,
property risks and operational risks. Additional risks, such as
placement risk, reputational risk, business risk and ESG risk,
etc. are each seen as elements of the above risks and are
taken into account at the appropriate point in the respective
calculations.
Counterparty risk
Counterparty risk (credit risk) is of major importance for
MünchenerHyp. Counterparty risk is the risk that a counter-
party will fail to meet its payment obligations towards the
Bank, by paying late or by defaulting completely or in part.
The Credit Manual sets forth the credit approval procedures
and process regulations for those units involved in the lending
business and the permissible credit products. The business
and risk strategy also contains more detailed explanations on
the sub-strategies for target customers and target markets,
as well as basic specifications for measuring and managing
credit risks at individual transaction and portfolio level. Individ-
ual limits have been set for all types of lending, e.g. depend-
ing on the rating. Another factor is regional diversification,
which is ensured by country limits.
In the mortgage business, we ensure that we grant senior
loans predominantly with moderate loan-to-value ratios; in
the commercial business, limits also apply with regard to
DSCR and LTV. The current loan-to-value ratios break down
as follows:
Risk, outlook
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TOTAL PORTFOLIO OF MORTGAGES AND OTHER LOANS
INCLUDING OPEN COMMITMENTS IN €
Loan-to-value ratio 31 Dec. 2021 Relative 31 Dec. 2020 Relative
Up to 60 % 17,712,207,741.73 39.5 % 16,401,392,390.88 39.6 %
> 60 % and <= 70 % 6,840,677,939.84 15.3 % 7,042,011,598.28 17.0 %
> 70 % and <= 80 % 7,817,675,352.88 17.4 % 7,619,966,869.31 18.4 %
> 80 % and <= 90 % 4,114,483,751.81 9.2 % 3,423,715,652.17 8.3 %
> 90 % and <= 100 % 3,513,107,035.49 7.8 % 2,918,027,657.66 7.1 %
Over 100 % 4,826,847,133.62 10.8 % 3,921,580,700.76 9.5 %
Without 1,656,656.42 0.0 % 52,169,575.59 0.1 %
Total 44,826,655,611.79 100.0 % 41,378,864,444.65
100.0 %
The regional breakdown within Germany is summarised below:
TOTAL PORTFOLIO OF MORTGAGE AND OTHER LOANS
INCLUDING OPEN COMMITMENTS IN €
Region
31 Dec. 2021 Relative 31 Dec. 2020 Relative
Baden-Württemberg 3,756,142,446.13 8.4 % 3,459,145,234.81 8.4 %
Bavaria 8,474,865,821.42 18.9 % 7,698,948,641.11 18.6 %
Berlin 2,275,822,809.98 5.1 % 2,156,619,521.57 5.2 %
Brandenburg 764,316,946.44 1.7 % 614,702,291.86 1.5 %
Bremen 146,032,821.18 0.3 % 117,028,114.15 0.3 %
Hamburg 1,216,985,454.59 2.7 % 1,218,687,423.53 2.9 %
Hesse 3,276,664,075.86 7.3 % 3,015,553,722.32 7.3 %
Mecklenburg-West Pomerania 595,844,836.17 1.3 % 556,461,832.57 1.3 %
Lower Saxony 3,196,387,918.79 7.1 % 2,996,660,642.83 7.2 %
North Rhine-Westphalia 5,609,760,400.35 12.5 % 5,223,538,665.42 12.6 %
Rhineland-Palatinate 1,813,885,036.53 4.0 % 1,702,546,791.15 4.1 %
Saarland 431,112,825.77 1.0 % 424,211,558.98 1.0 %
Saxony 1,113,316,958.79 2.5 % 1,088,839,097.08 2.6 %
Saxony-Anhalt 695,276,822.37 1.6 % 634,003,054.63 1.5 %
Schleswig-Holstein 2,052,971,928.16 4.6 % 1,955,811,355.81 4.7 %
Thuringia 355,371,130.18 0.8 % 334,394,103.65 0.8 %
Total domestic 35,774,758,232.71 79.8 % 33,197,152,051.47 80.2 %
Risk, outlook
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MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2021
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ANNUAL STATEMENT
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FOREWORD
CONTENT
SEARCH
The international breakdown is as follows:
TOTAL PORTFOLIO OF MORTGAGE AND OTHER LOANS
INCLUDING OPEN COMMITMENTS IN €
Country 31 Dec. 2021 Relative 31 Dec. 2020 Relative
Austria 224,186,194.19 0.5 % 181,484,755.12 0.4 %
France 472,425,600.20 1.1 % 441,156,481.80 1.1 %
United Kingdom 541,450,654.06 1.2 % 544,295,423.01 1.3 %
Spain 659,341,232.09 1.5 % 611,836,583.85 1.5 %
Luxembourg 105,094,688.44 0.2 % 64,900,000.00 0.2 %
Switzerland 5,224,247,514.15 11.7 % 4,803,985,406.13 11.6 %
Netherlands 868,016,719.22 1.9 % 701,825,145.19 1.7 %
Belgium 105,544,541.73 0.2 % 38,101,461.97 0.1 %
USA 851,590,235.00 1.9 % 794,127,136.11 1.9 %
Total foreign 9,051,897,379.08 20.2 % 8,181,712,393.18 19.8 %
Total domestic and foreign 44,826,655,611.79 100.0 % 41,378,864,444.65 100.0 %
Credit risk management starts when the target transaction is
selected with the drafting of loan terms and conditions.
Regularly reviewed risk cost functions are used for this purpose.
Depending on the type and risk level of the transaction, various
rating and scoring procedures are used.
In property financing, a broadly diversified portfolio of mainly
residential property finance and credit approval processes
that have been tried and tested for years are reflected in a
portfolio with a low credit risk. Our lending business with
public sector borrowers and banks is focused on central and
regional governments, public local authorities and Western
European banks (covered bonds only). The regional focus is on
Germany and Western Europe, respectively. Highly liquid sov-
ereign bonds and other highly rated securities will continue to
be needed to a certain extent, in order to guarantee compliance
with CRR liquidity requirements.
Mortgage loans are checked for the need for a specific loan
loss provision based on their rating, any payment arrears or
other negative factors. Workout Management carries out
more extensive specific loan loss provision monitoring, espe-
cially in non-retail business.
Risk, outlook
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Broken down by rating classes, the portfolio distribution is as
follows:
TOTAL PORTFOLIO OF MORTGAGE AND OTHER LOANS
INCLUDING OPEN COMMITMENTS IN €
Rating category 31 Dec. 2021 Relative 31 Dec. 2020 Relative
0a to 0b 0.00 0.0 % 0.00 0.0 %
0c to 0e 10,321,572,171.81 23.0 % 9,247,515,408.72 22.3 %
1a to 1c 22,541,286,450.37 50.3 % 21,862,138,711.57 52.8 %
1d to 2a 9,367,647,410.66 20.9 % 8,002,947,835.60 19.3 %
2b to 2c 1,183,501,713.56 2.6 % 1,031,810,223.26 2.5 %
2d to 2e 374,436,327.41 0.8 % 330,512,201.14 0.8 %
3a to 3b 567,687,876.18 1.3 % 530,722,388.44 1.3 %
3c to 3d 212,184,459.98 0.5 % 146,036,067.04 0.4 %
3e 36,082,435.09 0.1 % 20,611,297.77 0.0 %
4a to 4e 221,905,737.35 0.5 % 206,086,646.53 0.5 %
without rating 351,029.38 0.0 % 483,664.58 0.0 %
Total 44,826,655,611.79 100.0 % 41,378,864,444.65 100.0 %
The Bank sets up a general loan loss provision as a precaution
to cover latent credit risks. This general loan loss provision is
calculated based on an expected credit loss model, with the
IFRS 9 methodology being adopted for levels 1 and 2 and
applied to the HGB assessment basis. Latent default risks are
thus taken into account at an early stage compared with the
previous calculation based on the letter by the German Federal
Ministry of Finance dated 10 January 1994. The early applica-
tion of IDW RS BFA 7 via an expected credit loss model leads
to an increase in general loan loss provisions of EUR 8 million.
As property markets remain largely very stable despite the
COVID-19 pandemic, specific loan loss provisions continue
to be recognised at a very low level for both the residential
property financing business and the commercial property
financing business.
Business relations with financial institutions are based on
master agreements that allow the netting of receivables from
and liabilities to the other institution. Collateral agreements
exist with all derivative counterparties. Derivative transactions,
insofar as they are subject to clearing, are settled via a central
counterparty (CCP).
Risk, outlook
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MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2021
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Specific and general loan loss provisions changed as follows
in the year under review:
TOTAL LENDING BUSINESS
*
IN EUR MILLION
Opening balance Additions Reversals Utilisation
Exchange rate-
related and other
changes Closing balance
Specific provisions 29.5 7.7 – 2.6 – 0.7 0.7 34.6
General provisions 13.0 8.0 0.0 0.0 0.0 21.0
* Including a provision for irrevocable loan commitments in the amount of EUR 1.0 million.
Market price risks
Market price risks include the risks to the value of positions
due to changes in market parameters, including interest rates,
volatility and exchange rates. They are quantified as a poten-
tial present value loss using a present value model. This dis-
tinguishes between interest rate, option and currency risks.
In the case of the interest rate risk, a distinction is made
between general and specific interest rate risks. General inter-
est rate risk is the risk that the market value of investments
or liabilities that depend on general interest rates will be
adversely affected if interest rates change.
Specific interest rate risk, also known as the credit spread risk,
is also included under market price risk. The credit spread is
defined as the difference in yield between a risk-free and a
risky bond. Spread risks take account of the risk that the
spread may change even without any change to the rating.
The reasons for a change to yield spreads may include:
■
varying opinions among market participants regarding
positions;
■
an actual change in the creditworthiness of the issuer not
already reflected in its rating;
■
macroeconomic aspects that influence creditworthiness
categories.
The risks inherent in options include: volatility risk (vega: the
risk that the value of a derivative instrument will change
due to increasing or decreasing volatility), time risk (theta: the
risk that the value of a derivative instrument will change
over time), rho risk (the risk of change to the value of the
option if the risk-free interest rate changes) and gamma risk
(the risk of a change to the option delta if the price of the
underlying asset changes; the option delta describes the change
in value of the option due to a change in price of the under-
lying asset). Options in capital market business are not con-
tracted for the purposes of speculation. All option positions
arise implicitly as a result of borrower’s option rights (e.g.
statutory termination rights under Section 489 of the German
Civil Code (Bürgerliches Gesetzbuch – BGB) or the right to
make unscheduled repayments) and are hedged where neces-
sary. These risks are carefully monitored in the daily risk report
and are limited.
Currency risk is the risk that the market value of investments
or liabilities that depend on exchange rat