The MDax-listed Hypo Real Estate Group, one of the leading European providers of finance for commercial real estate, has exceeded earnings expectations in 2003. Hypo Real Estate Holding AG, as the parent company of the group, has reported a result of ordinary activities (result before taxes) of EUR 156 million. The most recently published management guidance was just over EUR 100 million.
The pro-forma figure for 2002 amounted to EUR 16 million; however, this figure is only comparable to a limited extent as the Hypo Real Estate Group only came into existence in September 2003 as a result of the spin-off of further parts of the commercial real estate financing activities of the HVB Group, and accordingly did not exist in its present-day form in the year 2002.
The net income in 2003 amounted to EUR 116 million (previous year proforma: EUR minus 11 million); after minority interest, consolidated net income amounted to EUR 115 million. This is equivalent to a return on equity after taxes of 2.8%.
The development in earnings has been boosted by the development in overall business which has been partially better than planned, and also by a one-time income of EUR 35 million attributable to the acquisition of minority interests in the former Westfälische Hypothekenbank. This was opposed by restructuring expenses of EUR 86 million for the business segment Hypo Real Estate Germany. Net income also comprises a positive tax effect of EUR 19 million. This was attributable to the profit-and-loss transfer agreement signed in the year under review by Hypo Real Estate Holding AG and Württembergische Hypothekenbank AG.
Net interest income after provisions for losses on loans and advances amounted to EUR 422 million in the Hypo Real Estate Group (previous year pro-forma: EUR 165 million). The provisions for losses on loans and advances comprise a figure of EUR 460 million for the contractually agreed risk shelter provided by HVB AG to Hypo Real Estate Bank AG. Net commission income amounted to EUR 45 million (2002 pro-forma: EUR 11 million). General administrative expenses amounted to EUR 260 million
(2002 pro-forma: EUR 235 million); this item contains for the first time the costs of Hypo Real Estate Holding AG and the newly established headquarters of the business unit Hypo Real Estate International in Dublin. The operating result of the group is stated as EUR 226 million (2002 proforma: EUR minus 42 million).
Georg Funke, Chairman of the Board of Managing Directors of Hypo Real Estate Holding AG: “We are very satisfied with the start which has been made by the Hypo Real Estate Group. We have met and in certain cases exceeded our strategic and business objectives. From the very first day of trading, our shares have achieved a positive performance and were admitted to the MDax after several months. The challenge is now to maintain and in certain areas to boost even further the speed and quality which has been attained for the group’s future development. This involves the following specific items for 2004: Strengthening our sales ability in international
transactions, expanding our regional presence, rapid continuation of the process of restructuring our Germany portfolio and expansion of our range of products for refinancing and transfer of risks.”
Outlook for 2004
For the year 2004, on the basis of expanding new business abroad and further rapid progress being made with restructuring the domestic portfolio, the Board of Management of Hypo Real Estate Holding AG expects profit before taxes to increase to between EUR 205 million and EUR 225 million in conjunction with an improvement in net return on equity to 3.5 to 4%.