2023-09-11 11:20:47
In view of the recent market turbulence, DZ Hyp, the real estate financier of DZ Bank, stands out with low risk provisions compared to the real estate business of the state banks. DZ Bank co-head Uwe Fröhlich recently suggested that this could also be related to the strength of the foreign commitments of the individual institutes.
“We are not internationally active at all, especially in North America, like some of our peers from the Landesbank environment,” said Fröhlich a few days ago at an event in Frankfurt. With a view to risk provisioning, this might then be reflected in the figures for the competitors, he explained.
Although business models and figures are not directly comparable, there are indeed major differences in the foreign share of the respective real estate commitments. While DZ Hyp decided many years ago to avoid the American market, which has meanwhile been hit hard by the real estate crisis, Landesbanken have recently continued to be involved in North America.
Small foreign share at DZ Hyp
At the end of 2022, DZ Hyp had a foreign share of only around 3 percent in the real estate sector, while Helaba, for example, reported a foreign share of around 60 percent in the real estate finance sector – i.e. business with commercial real estate customers. North America is the largest foreign real estate market for both Helaba and LBBW, and BayernLB is also active there.
DZ Bank had reported additions to risk provisions of only 20 million euros for DZ Hyp, which is primarily active in the commercial real estate sector, for the first six months of this year. The provisions for commercial real estate at the three large state banks Helaba, LBBW and BayernLB each amounted to hundreds of millions of euros, with the loan volumes not differing too much.
Situation on the US market tense
The rapidly rising interest rates had recently put pressure on real estate markets worldwide. In many places, building valuations are falling. There is also the trend towards home offices. With a vacancy rate of almost 20 percent, the USA has the most unoccupied office space in the world, according to current figures from real estate service provider JLL. Some large investors have already questioned whether they want to keep office properties in their portfolios. “The price pressure is therefore significantly greater than in Europe and Germany,” explained Hela Hinrichs, Senior Director EMEA Research & Strategy at JLL.
Even if the current situation should make the real estate loans of the Landesbanken more vulnerable to provisions, they can benefit from diversification in other phases of the market.
The following overview shows how the real estate business of DZ Hyp and the Landesbanken is distributed abroad and domestically. The share of foreign financing in DZ Hyp’s real estate portfolio was 3.2 percent at the end of 2022. DZ Hyp is active abroad primarily in Austria, France, Great Britain and the Netherlands. The total real estate loan business amounted to around 62 billion euros. The addition to risk provisions amounted to 20 million euros in the first half of 2023. DZ Hyp is primarily active in commercial real estate financing, but – unlike the Landesbanken – part of the overall portfolio under consideration also goes to private customers.
At Helaba, the foreign share in the real estate finance area, in which commercial real estate financing is bundled, was around percent at the end of 2022. Within the foreign markets, North America was the most important with a share of 27 percent of the total real estate portfolio, followed by France and Great Britain with a combined 16%. The real estate finance portfolio had a business volume of around 39 billion euros. The additions to risk provisions in the real estate segment amounted to 173 million euros in the first half of 2023.
LBBW reported a foreign share of around 35% of its real estate exposure excluding financing for private customers at the end of 2022. Within the foreign markets, North America was the most important with a share of 8% of the total real estate exposure, which the Landesbank put at around 71 billion euros. The acquired Berlin Hyp is already taken into account. Another important foreign market was Great Britain. Risk provisions in the real estate and project financing segment amounted to 109 million euros in the first half of 2023.
Markus Frühauf Published/Updated: , Recommendations: 77 Markus Frühauf Published/Updated: , Recommendations: 10 Hanno Mußler Published/Updated: , Recommendations: 12
At BayernLB, the foreign share of commercial real estate was 15.1% at the end of last year. The data refers to the entire group, i.e. including commercial real estate financing at the subsidiary DKB. In this perspective, the bank had a real estate portfolio of 67 billion euros. Although BayernLB does not show a detailed regional distribution at group level, for BayernLB without subsidiaries it estimated the proportion of USA exposure to Bloomberg at around 8%. In the real estate business area, BayernLB recorded risk provisions of 127 million euros in the first half of 2023.
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