Hypo Real Estate Holding AG / Quarter Results
06.05.2008
Release of a Corporate News, transmitted by DGAP - a company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.
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Hypo Real Estate Group closes the first quarter with a profit
Pre-tax profit of 190 million, excl. effect from mandatory convertible
bond pre-tax profit amounted to 6 million
Positive new business in public finance, sound new business with
attractive margins in infrastructure and real estate financing
Negative valuation changes affecting income totalling 175 million for
the CDO portfolio due to the further downturn in the market climate
Market turmoil means that reliable statements concerning the further
development of business in 2008 are not possible
Munich, 6 May 2008: The Hypo Real Estate Group has completed the first
quarter of financial 2008 with a positive result in an extremely difficult
climate on the international capital and financing markets. The
international provider of financing solutions for commercial real estate,
the public sector and infrastructure financing has reported consolidated
pre-tax profit of 190 million for the first three months, after deducting
an effect attributable to the mandatory convertible bond issued in
connection with the DEPFA acquisition pre-tax profit amounted to 6
million. Earnings benefited from a stable development of provisions for
losses on loans and advances and synergies attributable to the speedy
integration of DEPFA Bank which was acquired in 2007.
Because DEPFA has only been part of the Hypo Real Estate Group since 2
October 2007,reference is made to pro-forma figures in the following for
ease of comparison for the year 2007.
Development in new business
In Commercial Real Estate Financing, new business in the first quarter
amounted to 3.1 billion and was thus considerably lower than the
corresponding previous year figure ( 6.2 billion). Attractive margins were
achieved, because the markets are focusing to a greater extent on the
principle of pricing which is commensurate with the level of risk involved.
The internal rate of return after taxes of new business (IRR) was more than
15%.
New business for Public Finance performed very positively in the quarter
under review, and was stated as 15.1 billion, equivalent to growth of 7%
compared with the previous year quarter ( 14.1 billion). This demonstrates
the increasing attractiveness of this sound and low-risk business.
New business in Infrastructure Finance amounted to 1.6 billion (Q1
2007: 2.5 billion).
Group development in the first quarter of 2008
Operating revenues (the sum of net interest income and similar income,
net commission income, net trading income, net income from financial
investments, result from hedge relationships and the balance of other
operating income/expense) amounted to 184 million in the first three
months of 2008, considerably lower than the corresponding previous year
figure ( 498 million). The decline is mainly due to net trading income and
net income from financial investments, which are reflecting the effects of
the current market turmoil.
The item net interest income and similar income declined by 40 million
to 299 million (previous year period: 339 million). This decline is
attributable to two factors: Firstly, net interest income includes less
one-off income than was the case in the previous year period, and secondly,
net interest income in the current quarter was burdened by the interest
rate positioning of DEPFA which was already closed in the meantime.
Net commission income amounted to 35 million (Q1 2007: 54 million).
The result reflects the lower new business in real estate financing and
lower income from asset management.
Net trading income ( -98 million compared with 28 million in the
previous year quarter) and net income from financial investments
( -29 million compared with 77 million in the previous year period)
include negative valuation changes affecting income totalling 175 million
in relation to the group portfolio of collateralised debt obligations
(CDOs). The valuation result affecting income reflects the spreads which
widened considerably again in the first quarter as a result of the crisis
on the capital and financing markets. The devaluation corresponds to around
10% of US-american and European CDOs reported on 31 December 2007. The
model reserve in the amount of 90 million which has been recognised in
the income statement in 2007 for uncertainty with regard to the assumptions
and estimates which have been made exists furthermore.
Provisions for losses on loans and advances in the first quarter amounted
to 33 million, which was slightly lower than the corresponding previous
year figure ( 34 million). As was the case in the previous year period, it
was not necessary for any further provisions for losses on loans and
advances to be created at DEPFA.
General administrative expenses of 145 million were 15 million lower
than the corresponding previous year quarter. This underlines the
considerable success achieved with the integration of DEPFA and the
synergies which have already been achieved.
Of the figure stated for the balance of other income/expenses, 184
million relates to an effect attributable to the mandatory convertible bond
for partially financing the DEPFA acquisition. The income is attributable
to the fair value to be recognised in the income statement of the
derivative based on shares of Hypo Real Estate Holding AG embedded in the
bond.
The Group has reported pre-tax profit of 190 million (previous year
quarter: 304 million). Adjusted by the market valuation of the derivative
included in the mandatory convertible bond, pre-tax profit amounted to 6
million.
The figure for pre-tax profit which is shown in the income statement for
the first quarter of 2007 and which is only comparable to a limited extent
and in which DEPFA was not included in the previous year amounted to 172
million.
After taxes of 35 million excluding the deferred tax expense of
7 million attributable to capitalised losses carried forward net income
in the first quarter of 2008 amounted to 155 million. After additional
adjustment for the after-tax effects of the derivative embedded in the
mandatory convertible bond ( 137 million) and the valuation result of the
CDO portfolio affecting income ( 117 million), adjusted net income
amounted to 135 million, resulting in adjusted return on equity after
taxes of 7.2%. Excluding the effects, net income amounted to 148 million;
this is completely attributable to the shareholders because there are no
minority interests.
Asset and capital ratios as of 31 March 2008
Total assets of the Hypo Real Estate Group amounted to 392.1 billion as
of 31 March 2008, compared with 400.2 billion as of 31 December 2007.
The total volume of lending amounted to 257.4 billion, compared with
256.2 billion at the end of 2007.
At the end of March 2008, the Group reports financial investments of
94.5 billion, equivalent to growth of 5.6 billion compared with the end
of 2007 ( 88.9 billion). Of the total volume, 89.4 billion (31 December
2007: 82.2 billion) was attributable to financial assets in the category
'available for sale' (AfS). These are mainly government paper with a
relatively low risk profile.
The AfS revaluation reserve of -1,296 million (31 December 2007: -346
million) and the cash flow hedge reserve of -1,287 million (31 December
2007: -1,511 million) were netted directly with equity.
The Hypo Real Estate Group reported a core capital ratio of 8.3% under
Basel II on the balance sheet date (31 December 2007: 7.0% under Basel I,
after profit distribution) as well as an own funds ratio of 10.9% (31
December 2007: 9.4% under Basel I, after profit distribution). The Group
accordingly still reports sound capital backing which complies with the
requirements of the rating agencies.
Result of the segments
The Commercial Real Estate segment, which comprises German and
international commercial real estate financing business, saw pre-tax profit
increase from 153 million to 164 million in the first quarter of 2008.
This was due to higher operating revenues, a constant development in
provisions for losses on loans and advances and lower general
administrative expenses.
The Public Sector & Infrastructure Finance segment, which mainly
comprises the public sector finance activities of DEPFA as well as
infrastructure finance, reported pre-tax profit of 172 million, which is
equivalent to growth of 8% compared with the figure for the first quarter
of 2007 ( 160 million). Very positive performances in terms of net
interest income and net trading income more than compensated for a
considerable decline in net income from financial investments due to lower
sales of financial investments.
The result of the Capital Markets & Asset Management segment reflected
the effects of the turmoil on the international financial markets and the
resultant deterioration in credit spreads. The segment closed the first
quarter with pre-tax profit of -19 million, compared with 27 million in
the same previous year period.
Outlook
The crisis in the capital and financing markets continued and became even
more serious in certain cases in the first quarter of 2008; it is still
impossible to make a reliable assessment of the conditions on the markets
in the near term. The international financing markets are still fragile and
are not capable of functioning in certain areas, or only to a limited
extent. In this context, it is not possible to preclude the possibility of
further problems for the financial sector and thus also for the Hypo Real
Estate Group in the course of the next few quarters.
The Management Board is, in principle, anticipating a further positive
development in its operating business.
However, as a result of the continuing volatile market development and the
possible effects on the development of the Group's earnings, it is not
possible at present to make any concrete statements regarding the further
development of business in 2008.
On 16 April 2008, a group of investors coordinated by J.C. Flowers & Co.
LLC announced that it intends to submit a voluntary public offer to acquire
50,076,000 shares of Hypo Real Estate Holding AG. This is equivalent to
approximately 24.9% of the entire outstanding shares of the company,
excluding the additional shares to be issued as a result of the mandatory
convertible bond issued in 2007. The offer price is expected to be 22.50
in cash per share of Hypo Real Estate Holding AG. The Management Board
welcomes the offer in principle and supported the process of preparing the
offer. However, the Management Board and Supervisory Board will only
publish a final statement regarding the offer and in particular with
regard to the aspect of the adequacy of the offered price on the basis of
the offer document which has not yet been published by the bidder.
In addition, the Commercial Real Estate financing segment, as previously
announced, will in future consist of only one legal entity with registered
office in Munich. The preparations for merging Hypo Real Estate Bank
International AG, Munich, into Hypo Real Estate Bank AG, Munich, are
starting now.
Georg Funke, CEO of Hypo Real Estate Holding AG: 'The first three months of
2008 have without doubt been the most difficult quarter for our sector for
many years. Although the market turmoil has again had a negative impact on
our earnings, the Hypo Real Estate Group has been affected by the current
crisis to a comparatively lesser extent than many of our competitors. The
problems must also not disguise the fact that operations in our core areas
of business have been satisfactory and in certain cases have been pleasing.
It is evident that the acquisition of DEPFA Bank which took place last year
and with which we have considerably strengthened our public finance
business has resulted in a well balanced business model for our Group, and
we are already benefiting from this aspect.'
Press contact:
Hypo Real Estate Group
Oliver Gruß
Telephone: +49 (0)89 203007 781
Telefax: +49 (0)89 203007 772
Email:oliver.gruss@hyporealestate.com
An analyst call will be held today at 08:30 hours with Dr. Markus Fell, CFO
of the Hypo Real Estate Group; this will also be broadcast in the Internet
under www.hyporealestate.com.
Contact:
Kontakt: Herr Oliver Gruss +49-89-203007-781
DGAP 06.05.2008
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Language: English
Issuer: Hypo Real Estate Holding AG
Unsöldstraße 2
80538 München
Deutschland
Phone: +49 (0)89 203 007-780
Fax: +49 (0)89 203 007-772
E-mail: ir@hyporealestate.com
Internet: www.hyporealestate.com
ISIN: DE0008027707, DE0008027731,
WKN: 802770, 802773,
Indices: DAX
Listed: Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr
in Berlin, München, Hamburg, Düsseldorf, Stuttgart;
Terminbörse EUREX
End of News DGAP News-Service
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DGAP-News: Hypo Real Estate Holding AG:Hypo Real Estate Group closes the first quarter with a profit
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