Eurohypo presents interim report as at 31 March 2008 (DE)

The ongoing global financial market crisis and the resultant economic slowdown in Europe and the USA is continuing to make market conditions very difficult, and increasingly weighing on the real estate sector. Nevertheless, Eurohypo is still in the black: the bank achieved a pre-tax profit of €80 million in the first quarter of 2008 (€206 million in the equivalent quarter last year). Valuation adjustments to the US investment portfolio totalling €84 million and valuation effects of derivatives were the main reasons for profits being lower than in the corresponding period last year, which was unaffected by the subprime crisis.

Despite the challenging market situation, €4.1 billion in new real estate business was approved; as expected, this was considerably below the corresponding figure last year (€11.1 billion). However, the bank achieved significant sales success with well-known business partners in strategically favourable domestic and foreign markets. Irrespective of the challenging environment in the syndications business, the bank managed to place some €1.2 billion of real estate loans during the period under review.

Thanks to its strong market position and solid capital base, Eurohypo can focus on acquiring high-margin business to take onto its own books. "Like all our competitors, we are operating in an exceptionally difficult environment. This is inevitably reflected in our results. Nevertheless, Eurohypo's business model, based on funding by Pfandbriefe and the excellent standing of Eurohypo as a quality-issuer has proved that our strategy is basically on the right course," comments Bernd Knobloch, Chairman of the Board of Managing Directors, on the interim report published today.

The bank remains confident that it can emerge from the financial market crisis in good shape. One reason for this optimism is that net interest income, at €272 million, was only slightly lower than the high level achieved in the corresponding quarter last year (€279 million) despite the deterioration in market conditions.

These results are also encouraging because net interest income was hurt by lower early prepayment fees and higher refinancing costs in Treasury operations. Other negative factors included the lack of growth in the commercial real estate financing business and the planned portfolio reduction in Retail Banking.

Eurohypo once again posted growth in business not dependent on interest rates. Net commission income rose to €68 million (same quarter last year: €47 million). In this area, we also benefited from the new business generated in the preceding quarters.

The bank turned in a trading profit of €1 million in the first quarter, even though the securitisation business has practically come to a standstill. Last year's high trading profit of €44 million mainly resulted from derivative valuations in Public Finance/Treasury.

At €67 million, there was only a small change in provisions for loan losses compared with the fourth quarter 2007 (€66 million); the corresponding figure in the first quarter of 2007 was €58 million. The increase is caused by the CBG Non-Core portfolio.

As can be seen in the trend in operating expenses, which at €113 million fell substantially (-18.7%) from the level in the corresponding quarter last year, Eurohypo has its costs well under control. This was predominantly realised in the Commercial Real Estate division.

Evidence of the Commercial Real Estate division's strong market position is also provided by its pre-tax profits (adjusted for subprime valuation adjustments) of €154 million, which were only slightly lower than those achieved in the first quarter last year (€166 million). The difference is wholly due to the absence of earnings in the US commercial mortgage backed securities (CMBS) business.

Although the amount of new real estate business reflects the tense situation on the global property and capital markets, some regions have still turned in an encouraging perfor

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