In the first quarter of 2005, the Hypo Real Estate Group has achieved strong growth in earnings and profitability compared with the corresponding previous year period. The development in net income at the international financier of commercial real estate is thus overall in line with the ambitious plans. All three business segments saw their net income improve, business in Germany is now operating in the black.
New business (real estate financing) in the group attained a total volume of more than 3.3 billion compared with 1.2 billion in the same previous year period. The group was very successful in terms of refinancing in the first quarter of 2005. The managing board has fully confirmed the objectives for the full year in 2005 which were originally communicated in March.
Development in net income at the group 1st quarter 2005
In the first three months, consolidated net income before taxes increased from 55 million in the first quarter of 2004 to 102 million. Consolidated net income excluding a deferred tax expense from capitalised losses carried forward of 9 million amounted to 78 million compared with 41 million in the equivalent previous year period. Return on equity after taxes in the group was accordingly stated as 7.6% (2004: 4.0%). Earnings per share for the quarter came in at 0.58 (previous year period: 0.31). Including the effect from capitalised losses carried forward, after taxes net income amounted to 69 million; this is equivalent to earnings per share of 0.51.
Operating revenues (including net income from investments) at the group were reported as 210 million in the first three months. Despite the significant reduction in the domestic portfolio which took place in the course of 2004, operating revenues were 8 million higher than the corresponding figure for the same previous year period as a result of the growth in the international portfolio. It has to be borne in mind that new business in the first quarter is normally weaker. Net trading income, attributable mainly to "Capital Markets", contributed 7 million to operating revenues.
The addition to provisions for losses on loans and advances (35 million) was much lower than the corresponding previous year figure (71 million). General administrative expenses of 73 million were virtually unchanged compared with the previous year (72 million). Within this context, the cost-income ratio improved from 37.7% in 2004 to 34.8%.
Balance sheet development: Group
Consolidated total assets of the Hypo Real Estate Group amounted to 146.9 billion as of 31 March 2005, which was 1.2 billion lower than the figure stated as of the end of 2004. Total lending volume declined by 2.9 billion to 96.2 billion. At Hypo Real Estate Germany, total lending volume declined by 3.0 billion. On the other hand, total lending volume at Württembergische Hypothekenbank (-0.2 billion) and Hypo Real Estate International (+0.1 billion) was virtually unchanged compared with the end of 2004.
The core capital ratio was virtually unchanged at a very strong level, namely 8.2% compared with 8.3% at the end of 2004; this was also true for the equity funds ratio of 11.5% (31 December 2004: 11.7%).
Outlook for the whole of 2005
For the whole of 2005, the Management Board is still forecasting that consolidated net income before taxes will increase to 400 to 425 million, compared with 221 million in 2004, combined with return on equity after taxes of 7.5 to 8%. On this basis, 2005 would be the first time that the Hypo Real Estate Group covered its capital costs two years earlier than originally planned on the occasion of the spin-off of the group from the HVB Group in the autumn of 2003.
Georg Funke, chairman of the managing board of Hypo Real Estate Holding AG: "Following the rapid and far-reaching changes which have taken place during the past one and a half years, the aim is now to ensure that the Hypo Real Estate Group continues to achieve further sound growth. We will focus on growth, profitability and innovative abil