In the first nine months of 2005, the Hypo Real Estate Group has more than doubled consolidated net income before taxes. All key financials after three quarters were in line with or slightly better than pro-rata budget. The international financier of commercial real estate generated group-wide new business of €14.3 billion between January and September; of this figure, €6.0 billion alone was attributable to the third quarter. This means that the full-year target of around €13.5 billion in total has been attained after nine months, and will accordingly be considerably exceeded by the end of the year.
Group development nine months 2005
In the first nine months, consolidated net income before taxes amounted to 327 million, and was accordingly ahead of pro-rata budget. Net income before taxes of 155 million in the previous year period was more than doubled. Nine-month net income adjusted by the deferred taxes from capitalised losses carried forward of 22 million amounted to 243 million compared with 120 million in the same period of 2004. Including the deferred-tax effect, net income amounted to 221 million. Adjusted earnings per share amounted to 1.81 compared with 0.89 in the same previous year period. Unlike the situation last year, the fact that Hypo Real Estate Holding AG increased its holding in Württembergische Hypothekenbank to 100% meant that no minority interests occurred this year. Return on equity after taxes of the Group adjusted by the tax effect improved to 7.7% (full year 2004: 4.0%). It is thus within the target range of 7.5 to 8% for the whole of 2005. This means that the Hypo Real Estate Group will cover its capital costs for the first time.
The development in total operating revenues (total of net interest income and net commission income, net trading income, net income from investments and the balance of other operating income/expenses) in the first nine months reflects the successful new business and the intensified activities of the Capital Markets unit. Accordingly, despite the very much reduced portfolio at Hypo Real Estate Bank AG, total operating revenues improved by 53 million (9%) to 668 million (nine months 2004: 615 million).
Net interest income of 501 million was only slightly lower ( -6 million) than the corresponding figure for the previous year because new business in Germany and abroad was not able to entirely compensate for the downsizing of the Germany portfolio at Hypo Real Estate Bank AG. Net trading income improved from 5 million to 26 million, and is mainly attributable to the Capital Markets unit. Net income from investments amounts to 39 million compared with 14 million in the same previous year period.
After three quarters, the addition to provisions for losses on loans and advances amounted to 112 million, and were considerably lower than pro-rata budget and 109 million lower than the corresponding previous year figure. If the pro-rata risk shelter of 97.5 million provided by HVB AG to Hypo Real Estate Bank AG (which was contained in last year's figures) is disregarded, the addition declined by around 207 million a clear indication of the dramatic improvement in the portfolio quality of domestic business.
General administrative expenses of 228 million were at the lower end of expectations and slightly below the corresponding previous year figure (229 million). Additional expenses incurred for international expansion were opposed by positive effects from the restructuring of Germany business. The cost-income ratio for the first nine months improved from 37.7% for the whole of 2004 to 34.1%.
The total volume of lending of the Group as of 30 September 2005 amounted to 93.9 billion, and was accordingly 5.3 billion lower than the corresponding figure as of 31 December 2004. The consolidated total assets of the Hypo Real Estate Group as of 30 September 2005 increased compared with the corresponding previous year figure by 2.8 billion to 151.0 billion, due mainly to stronger trading activities.