Investor Presentation All data as of June 30 th 2021 if not marked differently
October 7th 2021 Berlin Hyp – Brief Overview
Founded 1868 One of Germany‘s leading commercial real estate financiers Main refinancing instrument: Mortgage Pfandbrief
Member of the Savings Banks Finance Group Institutional Protection Scheme; 0% risk-weighted for savings banks Exclusively owned by savings banks Increase of intra-group business
Green bonds as an important expansion of the bank’s funding mix Issuer of the first Green Pfandbrief Most active European bank issuer of green bonds 13 benchmark-sized green bonds outstanding in three different formats (Covered Bonds, Senior Preferred, Senior Non-Preferred) Early achievement of the stratigic goal for 2020 and definition of new sustainability goals First bank to issue a Sustainability-Linked Bond
H1/2021 2020 2019 Total Assets (EUR bn) 35.4 33.4 27.0 Operating Income before risk-provisioning 136.5 158.2 153.6 Allocation to the fund for general banking risks (EUR mn) 112.0 70.0 90.0 Pre-tax profit (EUR mn) 30.1 23.6 61.5 CET1 Ratio 13.9% 13.4% 13.3%
Ratings Senior Non-Preferred Senior Preferred Pfandbriefe Moody’s A2 Aa2 Aaa Fitch A+ AA- --
2 Agenda
01 Business Model 4 02 Financial Figures 8 03 Funding 15 04 Mortgage Pfandbrief 22 05 ESG Funding 27 06 Appendix 54
3 01
Business Model Ownership Structure
Sparkassen
(via Erwerbsgesellschaft der Sparkassen-Finanzgruppe mbH & Co. KG and Beteiligungsgesellschaft der Sparkassen-Finanzgruppe mbH & Co. KG)
100 %
Landesbank Berlin Holding AG
Profit & 100 % 100 % Profit & Loss Loss Transfer Transfer
5 Germany’s Savings Banks Group – a National Champion
No. of German savings banks 376 Branches 16,360 Employees 290,400 Total assets EUR 1,414 bn Loans to customers EUR 906.0bn Deposits from customers EUR 1,075.0bn No. of private customers 50mn (3/4 of Germany's population) No. of business customers 2mn (3/4 of all businesses) Fitch A+ (Group-Rating) Rating Moody's Aa2 (Floor Rating)
As of 31 December 2020
Main advantages for Berlin Hyp
• Member of the Savings Banks Finance Group’s joint liability scheme (institutional protection)
• 0% risk-weighting for our Pfandbrief/Senior Unsecured within Savings Banks Finance Group
• Access to customer deposits via savings banks
6 One of Germany’s Leading Commercial Real Estate Banks
• Berlin Hyp‘s core business segment is commercial real estate finance with focus on the economically sound metropolitan areas in Germany which is predominantly refinanced by the issuance of Mortgage Pfandbrief .
• In addition, Berlin Hyp increasingly acts as an arranger : e.g. arranging of club deals / leading syndicates, placing out, ImmoSchuldschein
6% 2% Germany - A Cities • Selective foreign business (~ 30% of real 12% Germany - B Cities estate portfolio) in order to diversify risk (considerably stricter lending standards) BeNeLux • Lower LTVs, higher requirements New Mortgage 49% Business concerning rating and risk classes 15% Germany - Rest • Limitation concerning property types Poland / Czech Republic • Concentration on capital regions France 17% 7 02
Financial Figures Key Figures & Business Development
Profitability New lending Cost-Income-Ratio (%) in € bn, incl. extension
Return on Equity (%)
19.5 16.9 18.2 52.9 8.1 52.3 51.2 7.3 50.3 6.7 11.8 6,0 6.1 11.6 5.4 9.1 45.2 44.0 6.8 2.9 40.9
2015 2016 2017 2018 2019 2020 H1/2021 2015 2016 2017 2018 2019 2020 H1/2021
Allocation to the fund for general banking risks (€ mn) Loan Portfolio Development, RWA Equity Total Capital Ratio (%) in € bn Loan Portfolio RWA (incl. irrevocable loan CET 1 -Ratio (%) commitments) Leverage Ratio (%) 17.4 17.5 16.8 15.8 16.1
13.9 13.3 13.5 13.5 13.4
27.6 28.6 25.5 23.1 20.5 18.3 18.5 4.3 4.1 4.3 3.5 3.9 10.3 10.7 9.1 9.2 9.9 7.6 7.9
20 50 70 105 90 70 112 9 2015 2016 2017 2018 2019 2020 H1/2021 2015 2016 2017 2018 2019 2020 H1/2021 Statement of Profit and Loss
EUR mn 2020 2019 2018 2017 2016
Interest / Commission income 333.1 327.5 338.6 310.0 298.4 Interest income 313.1 309.7 315.4 270.9 255.9 Commission income 20.0 17.8 23.2 39.1 42.5 General operating expenditure 173.2 172.3 151.2 134.8 122.3 Staff expenditure 82.0 92.4 83.8 73.6 62.6 Other operating expenditure 70.1 67.5 61.5 55.9 55.3 of which expenditure for bank levy 13.4 12.0 10.6 10.1 10.9 Depreciation of tangible assets 21.1 12.4 5.9 5.3 4.4 Other operating earnings / expenditure -1.7 -1.6 -4.4 -47.0 -20.3 Operating income before risk provisioning 158.2 153.6 183.0 128.2 155.8 Risk provisioning -61.6 2.2 37.4 56.2 -35.7 Provisioning loans -81.4 -7.5 15.5 33.5 -51.3 Provisioning bonds 19.8 9.7 21.9 22.7 15.6 Operating income after risk provisioning 96.6 155.8 220.4 184.4 120.1 Income of financial assets -2.8 -4.0 1.2 3.2 2.8 Allocation to the fund for general banking risks 70.0 90.0 105.0 70.0 50.0 Extraordinary expenditures 0.0 0.0 0.0 0.0 0.0 Other taxes 0.2 0.2 0.2 0.2 0.2 Profit before income tax and profit transfer 23.6 61.6 116.4 117.4 72.7 Income tax 0.2 0.6 0.0 0.4 -0.3 Expenditure from profit transfer 23.4 61.0 116.4 117.0 73.0 Net income of the year 0.0 0.0 0.0 0.0 0.0
10 Statement of Profit and Loss
EUR mn H1/2021 H1/2020 ∆ Difference
Interest / Commission income 233.8 178.5 55.3
Net interest income 220.8 167.8 53.0 Net commission income 13.0 10.7 2.3
Operating expenditure 94.3 86.8 7.5
Staff expenditure 45.2 35.1 10.1 Other operating expenditure 44.4 39.6 4.8 of which expenditure for bank levy 16.4 13.4 3.0 Depreciation of tangible assets 4.7 12.1 -7.4 Other operating earnings/expenditure -3.0 0.7 -2.7
Operating result before risk provisioning 136.5 92.4 44.1
Risk provisioning -2.5 65.4 62.9 ❗
Operating result after risk provisioning 139 27.0 112
Net income from financial investments 3.2 -1.1 2.1 Allocation to the fund for general banking risks 112.0 20.0 92 ❗ Other taxes 0.1 0.1 0.1
Pre-tax profit 30.1 5.8 24.3
Income tax 0.1 0.1 0.0 Expenditure from profit transfer 30.0 5.7 24.3
Net income 0.0 0.0 0.0
11 Protection of Senior Unsecured Investors / Insolvency Hierarchy*
Paid in Capital EUR 753.4mn
CET 1 Provisions EUR 182.5mn EUR Buffer before potential 1,495.0mn Equity § 340g HGB senior losses: MREL-Ratio **: EUR 1,766.7 Mrd. EUR 600.mn included in CET1 (based on LR-Exposure) 5,0% of Balance 0 not included in CET1 24.0% 16,4% der RWA 76.9% (based on RWA)*** Deduction Balance Sheet Profit EUR 0.mn EUR 0.0mn
Subordinated Liabilities T2 Instruments EUR 230.8 mn
Senior Unsecured (Registered Bonds, Bearer Bonds, Promissionary Notes (SSD)) EUR 9,403.0mn
Business modell with conservative credit policy Average LTV (portfolio): 52,9% (30.06.2021)
* All Data as of 30.06.2021; financial figures ** Note: MREL ratio = Equity + T2-Instruments + Senior Unsecured Leverage Exposure For the MREL ratio only the regulatory senior debt EUR 6,477.4 mn is accounted
*** MREL minimum requirement for Berlin Hyp as a single institution is 3% of Leverage Ratio Exposures (LRE) or 10.55 % of Total Risk Exposure Amount (TREA incl. combined capital buffer requirement CBR), effective from 01.02.2021 (to be complied with 100% as of 01.01.2022); in 2021 inclusion of unsecured senior liabilities (Senior Preferred) Berlin Hyp is a member of the Institutional Protection Scheme of the Savings Banks Finance Group. 12 Loan Portfolio
Rating classes %
• High quality loan portfolio Ratingklasse 1-7 95 • Current crisis has main impact on hotels & retail properties limited exposure Ratingklasse 8-12 4 • New business based on stringent conservative lending policy NPLs • Close monitoring and stress testing of loan portfolio Ratingklasse 13-18 1 € 74mn 0.26%
6% 3% Type of Use % 7% Germany Office 42
14% Geographical BeNeLux distribution of Residential 27 mortgage portfolio France Retail 15 Poland / Czech 71% Republic Management Real 11 Estate/Other Ø LTV Others Logstics 5 52.9% 13 Commercial Real Estate Market Overview: Germany (I)
Transaction Volume in Germany 2013-2021 First half of 2021 in EUR bn The first quarter of the year in the commercial and residential real 90 Residential (<50 units ) estate market was dampened by the third wave of the pandemic. 83,8 However, with the progressive easing of the Corona measures in the 79,2 79,2 Other (Hotel) 77,4 second quarter, an investment volume of EUR 33 billion was realised in the first half of the year. Due to the pandemic transactions in large- 72,6 16,3 Logistics scale retail properties slumped - food-anchored properties, on the
17,2 20,0 other hand, remained in demand. Investors continued to focus strongly 23,4 64,2 Retail 15,2 on residential and logistics. 10,5 60 11,3 Forecast 2021 Office 53,9 10,9 6,9 6,9 11,8 7,4 Due to the current easing measures, a gradual normalisation of 46,8 everyday life, a positive economic forecast as well as a full deal 13,4 4,0 11,6 8,3 6,8 10,1 7,6 pipeline, Berlin Hyp expects the real estate investment market to pick 39,1 16,2 4,3 up momentum in the second half of the year. Furthermore, financing 10,6 8,5 33,2 18,3 14,1 conditions remain favorable and investment pressure high. Therefore, 11,4 12,3 compared to the past five years, an average result in the commercial 30 27,6 13,2 9,7 23,1 real estate market should be realistic. 4,8 4,5 9,7 4,0 3,2 4,7 9,1 40,0 1,8 1,5 7,9 32,0 4,4 28,1 27,6 10,5 26,1 3,5 8,8 23,8 17,4 15,1 12,4 10,8 7,0 8,0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 H1/2021
Source: RIWIS / bulwiengesa, Berlin Hyp Research, CBRE ab 2017, BNPPRE, RCA 14 Commercial Real Estate Market Overview: Germany (II)
Ø Top Yields in German A-Cities (Initial Net Yields, weighted average acc. to inhabitants, in %)
Logistics
Retail 7 Office • Retail as the only segment with rising initial yields
10y Bunds 5 • Decrease of the yield spreads between federal bond and office/logistics
3
1
-1 2007 2009 2011 2013 2015 2017 2019 H1/2021
Quelle: Berlin Hyp Research, RIWIS/bulwiengesa, Macrobond vdp-Property-Price-Index
185 2010=100 Office
170 Residential
155 • Price index went slightly down for office in first half-year Retail
• Downward trend continues in retail 140 Overall Index
• Residential real estate is gaining momentum 125
110
95 2007 2009 2011 2013 2015 2017 2019 H1/2021 15 Quelle: Berlin Hyp Research, vdp 03
Funding Berlin Hyp’s Ratings
Outlook/ Outlook/ Outlook/ Rating Rating Rating Watch Watch Watch Mortgage Aaa Stable _ _ _ _ Pfandbrief Senior Preferred Aa2 Stable AA- Stable _ _ Senior Non- A2 _ A+ Stable _ _ Preferred Short Term P-1 _ F1+ Stable A-1 _ Adj. BCA / a3 _ bbb Stable _ _ Viability
Last rating actions August 2021: S&P Global Ratings assigned a " A-1 " Short -Term Rating to Berlin Hyp July 2021: Fitch revises the outlook on Berlin Hyp's IDR to stable from negative which impacts both, senior preffered and senior non-preferred ratings. April 2020: Fitch upgrades Berlin Hyp‘s senior preferred rating by one notch and confirms the rating for senior- non-preferred. The status under criteria observation (UCO) is removed. March 2020: As a result of the world wide coronavirus disruption Fitch changes the outlook on Berlin Hyp‘s IDR from stable to negative which impacts both, senior preffered and senior non-preferred ratings. The revision of the outlook follows a similar rating action on Berlin Hyp‘s ultimate parent Sparkassen-Finanzgruppe to negative.
17 Berlin Hyp – a stable Credit
bp Covered Bond bp Credit Curve
100 50 iBoxx € Italy Covered Covered Bonds (Aaa/-/WD) iBoxx € Spain Covered 80 40 iBoxx € France Covered Senior Preferred (Aa2/-/A+)
60 iBoxx € Hypothekenpfandbriefe 30 Senior Non Preferred (A2/-/A+) BHH Benchmarks 40 20
20 10
0 0
-20 -10 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Oct-20 Apr-21 Oct-21 Jan-22 Jan-23 Jan-24 Jan-25 Jan-26 Jan-27 Jan-28 Jan-29 Jan-30 Jan-31 Jan-32 Jan-33 SpreadsSpreads Berlin BerlinHyp vs. Hyp Covered vs. Covered Bonds Bonds (bp/mid (bp/mid swaps); swaps); Source: Quel LBBWle: LBBW Credit Credit Research, Research, iBoxx, iBoxx, 7 October 8. September 2021 2021 Asset-Swap Spreads Berlin Hyp (bp); Quelle: Commerzbank, 4 October 2021
bp Senior Unsecured (SP+SNP) bp Senior Preferred 300 120 iBoxx EUR Banks Senior Bail-in BHH 0.500 Nov29
250 100 BNP 1.5 25May28 iBoxx EUR Banks Senior Preferred ACAFP 1.000 Jul29
200 Berlin Hyp Senior SNP Index (created out of iBoxx) 80 RABOBK 1.375 3Feb27 OPBANK 0.100 Nov27 Berlin Hyp PS Index (created out of iBoxx) 150 60 NDASS 1.125 27Sep27
100 40
50 20
0 0 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21
I-Spreads Berlin Hyp vs. Comparables (bp); Source: Commerzbank, 4 October 2021 I-Spreads Berlin Hyp vs. Comparables (bp); Source: Commerzbank, 4 October 2021 18 Berlin Hyp’s Capital Market Funding Mix
Public Subordinated Pfandbrief Benchmarks 0.2 2.8 0,2 1.5
1% Senior Non- 3.0 Preferred PPs 19% 1.7
1.0
11.0 0.5 EUR 23.4 bn
17% 62% Benchmarks 2.5 2.4 Benchmarks 11.2
Senior Preferred Mortgage 3.5 Pfandbrief PPs 1.6 PPs 3.3
Capital market funding as of 7 October 2021: all data in EUR bn
19 Berlin Hyp’s Maturity Profile
Mortgage Pfandbrief
Public Pfandbrief 638
505 Senior Non-Preferred 935 186 565 Senior Preferred 30
142 500 265 831 733 100 126 500 535
525 2.115 105 206 1.938 1.898 725 183 1.248 1.237 30 1.121 1.107 1.020 10 964 776 515 606
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 >2031
As of 7 October 2021; EUR mn
20 Maturity Profile Benchmark Pfandbrief and Senior Unsecured
841
741 732 750 750 633
500 500 500 500 500 500 500 500 500 500 500 500 500 500 500 500 500 500 500 500 500 500 500 500
As of 07 October 2021; EUR mn
EUR 500mn EUR 750mn EUR 500mn EUR 500mn EUR 500mn EUR 500mn EUR 500mn EUR 500mn 0.01% / MS -1 0.01% / MS -2 0.25% / MS -2 0.375% / MS +35 0.01% / MS -3 0.01% / MS +0 0.01% / MS +6 0.01% / MS +5 Mortgage Mortgage Mortgage Senior Preferred Green Pfandbrief Mortgage Green Pfandbrief Green Pfandbrief Due 01/2028 Pfandbrief Due 09/2030 Due 07/2028 Pfandbrief Pfandbrief Pfandbrief SLB Due 02/2027 Due 08/2026 Due 05/2033 Due 04/2031 Due 01/2031 March 2021 January 2021 August 2020 July 2020 February 2020 August 2021 May 2021 April 2021
21 Allocation Policy
Preferred Allocation No Preferred Allocation • Savings Banks (Berlin Hyp’s owners)
• Early participation in the deal • Trading Accounts • Real money / buy-and-hold • Obviously inflated orders • Green / SRI Investors • Late participation in the deal • Investors from abroad • Opportunistic Investors • Investors which we met on roadshows
• New Investors
• Full allocation of small orders (up to € 2mn)
22 04
Mortgage Pfandbrief Overview as of 30 June 2021
18.9 18.5 17.4 18.1 18.0 in EUR Mrd. 17.3 17.0 16.4 16.8 16.0 14.8 15.7 Mortgage Pfandbrief
Cover Pool
nominal value net present value risk-adjusted net present value*
EUR mn 30.06.2021 30.06.2020 30.06.2021 30.06.2020 30.06.2021 30.06.2020 Mortgage Pfandbrief 16,368.7 14,755.1 17,360.6 16,026.0 18,483.0 16,950.0 Cover Pool 16,754.6 15,709.9 18,107.3 17,257.6 18,894.0 18,029.8 Over-collateralisation (OC) 385.8 954.8 746.7 1,231.6 411.0 1,079.8 OC in % 2.4% 6.5% 4.3% 7.7% ------
*The static approach was used for currencies, the dynamic approach for interest when calculating the risk-adjusted net present value.
24 Composition of Mortgage Cover Pool
2% 1% 3% 3% 3% 1% 3% 5% 10% 1%
9% 32% 17% 36%
8% 18% Overall 46% International Type of Use Distribution Distribution
11%
15% 27% 16% Abroad 33% Office buildings North Rhine-Westphalia The Netherlands France Berlin Multi-family dwellings Other states from former West Germany Retail buildings Poland Czech Republic Hesse Others commercially used buildings Bavaria Belgium United Kingdom Industrial buildings Saxony Single-family houses Lower Saxony Building site Other states from former East Germany
Cover pool volume: EUR 16,754.6mn, of which original mortgage cover assets: EUR 16,368.7mn; Share of foreign countries: EUR 5,011.6mn
Data as of 30 June 2021
25 Composition of Mortgage Cover Pool – Further Cover Assets
7% 4% 2% 7% 1%
External Ratings Geographic Debtors Composition
93% 93% 93%
Central Bank AAA AA+ AA AA- A+ A not rated Germany Canada
Banks (Guaranteed, Covered Bonds, Senior Unsecured)
Cover pool volume: EUR 16,754.6 mn, of which further cover assets: EUR 905.0 mn
Data as of 30 June 2021
26 Deviation of the Market Value from the Mortgage Lending Value by Asset Class
Germany 80% • The charts on the left side show by what percentage the market value of Berlin Hyp’s Management domestic and international portfolio exceeds the
Office mortgage lending value (MLV) 60%
Residential • The MLV is a conservative value of a property that can be expected to be realised at any point during
Logistics the term of the loan, irrespective of temporary 40% fluctuations in the property value Retail • According to the Pfandbrief Act, only 60% of the MLV are eligible for the cover pool 20% Dec 16 Dec 17 Dec 18 Dec 19 Dec 20 Jun 21
Abroad
80%
Management
60% Office
Logistics
40% Retail
Residential
20% 27 Dec 16 Dec 17 Dec 18 Dec 19 Dec 20 Jun 21 05
September 2017: September 2017: Most Impressive Bank Best Green/ SRI Issuer ESG Green/SRI Bond Issuer for Impact Reporting
September 2018: Best Green/ SRI Issuer Funding for Impact Reporting
September 2019: September 2019: September 2019: Most Impressive Bank Most Impressive Green/ Best Green/ SRI Issuer Green/ SRI Bond Issuer SRI Covered Bond Issuer for Impact Reporting
June 2021: Most Impressive Financial Institution Green/SRI Bond April 2021: Issuer TopDeal Award für SLB
September 2021: Best ESG Issuer Sustainability Ratings 2021
Ranked 3rd out of 129 banks in the peergroup Financials/Mortgage & Public Sector (November 2020) S/G Rating C+ „Prime“
Environmental Rating B „Prime“
Total: B- „Prime“
Ranked 2nd out of 389 diversified banks worldwide (October 2020)
ESG Risk Report 11.9 of 100 Low
*
Sustainability Rating AAA (December 2020)
29 Our Path to Become a Green Real Estate Financier
2015 2019
• Issuance of the first Green Pfandbrief • Transfer of brand rights „Green Pfandbrief” to the Association of German Pfandbrief Banks (vdp) • Establishing a Green Building Commission • Update of impact reporting methodology Introduction of standardized processes • Development of minimum standards for Green Pfandbriefe on national level (vdp) September 2019: Most Impressive Green/ • Early achivement of strategic goal for 2020 : 20% of the loan portfolio SRI Covered Bond Issuer green by the end of 2020
2016 2020
• Sales promotion: price incentives for green building loans • First issuance of green private placements • Publication of first Annual Green Bond Reporting • New strategic sustainability goals :climate neutral by 2050, 1/3 green by 2030, complete carbon transparency by 2023, launch of • Development/documentation Green Bond Program transformation loan (Transformationskredit) • Issuance of Berlin Hyp’s first green senior unsecured • First issuance of green bond in foreign currency (CHF 125mn) bond
2017 2021
• Strategic objective: 20% of loan portfolio to be • Development/launch of Carbon Footprint Assesment Methodology to green by 2020 calculate carbon emission and intensity of the entire loan portfolio September 2017: • Most active European bank issuer of green bonds Most Impressive Bank • First bank to issuer a Sustainability-Linked Bond Green/SRI Bond Issuer
April 2021: TopDeal Award für SLB
2018
• Further strengthening of eligibility criteria in Berlin Hyp’s Green Bond Framework September 2018: Best Green/ SRI Issuer • Participation in EeMAP pilot scheme for Impact Reporting 30 New Sustainability Agenda
Commitment to the Paris Climate 1/3 of Portfolio 1. Agreement and the German Climate Path 2. Green by 2025
• Sustainable development on an ecological, economic and social • Even stronger consideration of energy efficiency in future level based on the objectives of the Paris Climate Agreement and lending decisions the Climate Path of the Federal Republic of Germany • Green new business continues to grow in importance • Goal : Climate neutral by 2050; including a 40% reduction in carbon • Goal: 1/3 of all financing in Berlin Hyp's loan portfolio green by emissions between 2020 and 2030 ( Climate path) 2025
New Sustainability Product: Portfolio Transparency 4. 3. by 2023 Transformation loan
• Systematic determination of energy values, carbon emissions • Incentivising and financing of energy-efficiency related and climate risks refurbishments • Expansion of the data base at portfolio level by obtaining, analyzing and recording energy performance certificates for all loans financed by us • Goal: Achieving transparency across the entire portfolio
31 Websites and Reportings
SL- Bonds
www.berlinhyp.de/de/investors/sustainability-linked-bonds https://www.berlinhyp.de/de/investoren/green-bonds 32
Sustainability-Linked Bond to Support Climate-Neutrality
European Real Estate Sector Set Targets
75% Energy-inefficient Global: United Nation’s Paris Climate Agreement 40% Share of overall energy demand National: Federal Republic of Germany’s Climate 36% Share of carbon emissions Path for the real estate sector 2020 Sustainability Agenda provides for a 35% Older than 50 years Berlin Hyp: holistic strategic approach 1-2% Renovation rate
Urgent need for ecological Reduce global warming to less than 2°C, transformation of real estate targeting 1,5°C sector
Sustainability-Linked Bond Rationale for Sustainability-Linked Bonds
Bond charecteristics (e.g. coupon, repayment amount) I. Further increase our contribution to combat climate are linked to whether the issuer manages to reach certain change quantifyable strategic ESG targets II. Embed ESG further into the core of our business operations III. Share progress in achieving our ESG targets in a consistent and transparent manner Bond ESG IV. Raising awareness for necessity of carbon reduction Target V. Inspiring capital market participants to provide financial means necessary to achieve climate goals
VI. Broadening and strengthening our investor base 34 Alignment with Sustainability-Linked Bond Principles
Carbon intensity reduction rate of Berlin Hyp‘s KPI entire loan portfolio
Nachhaltigkeitsziel Reducing the carbon intensity of the entire loan Sustainability Performance Target portfolio by 40% between 2020 and 2030
Step-up coupon : coupon will be increased by 25 bp if Bond Characteristics sustainability performance target is not met at the observation date (31 December 2030)
Annual Sustainable-Linked Bond Reporting Reporting on KPI progress
Verification Second Party Opinion by Sustainalytics , annual re- verification, verification assurance certificate
35 1. Key Performance Indicator (KPI)
Carbon intensity reduction rate of Berlin Hyp‘s entire loan portfolio
1. Loan portfolio‘s energy data (% of financed area) 2. Conversion factors Translating kWh into CO 2 Energy data from EPCs recorded in Electricity loan monitoring 26,1% system CI E: based on national energy mixes in kgCO 2e/kWh 71,2% Proxies Heating CF : based on individual e nergy provider or Energy data for 97.3% of entire loan portfolio national energy mixes 2 • Energy demand data for heating and electricity in kWh/m /a in kgCO e/kWh • Financed area (net floor area) in m 2 2
"Icon made by Pixel perfect from www.flaticon.com"
4. 3. (1) Energy demand for heating x (3) Carbon emission of entire and electricity ∑∑∑ loan portfolio (2) Conversion factors x
Financed area Financed area ∑∑∑
= Carbon emission of entire loan = Carbon intensity of entire loan portfolio portfolio 36 2. Sustainability Performance Target – SPT (I)
in % Carbon intensity reduction trajectory 45
2030: 40% (SPT) 40
35
Berlin Hyp’s 30 reduction target
25
20
15
10
5
0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Reducing the carbon intensity of the entire loan portfolio by 40% between 2020 and 2030 1st intermediate target: 14% reduction by 2025 2nd intermediate target: 27% reduction by 2028 37 2. Sustainability Performance Target – SPT (II)
Measures to achieve Risks to hinder us the SPT from achieving the SPT
• Calculation of Scope 1 and Scope 2 emissions for • Political action is underway, but many regulations carbon footprint assessment (Scope 1 + Scope 2 of targetting carbon reduction are still in an implementation the buildings financed by Berlin Hyp represent the phase. Achieving the SPT depends on successful bank‘s own Scope 3 in its core business) implementation
• Increase of data quality (to enhance portfolio • External factors (e.g. related to current pandemic) to transparency) hinder the increase of energy-efficient real estate stock
• Increase share of green buildings in loan portfolio • Decarbonization of energy sector slower than
• Financing energetic renovations (transformation loan) expected
• Inclusion of ESG characteristics (in particular energy- • Technical/engineer-technical ideas to fail in leading to efficiency) in new-business process / credit efficient solutions decisions • Industry sectors closely-linked to building sector to
• Inclusion of ESG characteristics (in particular energy- fail in contributing successfully efficience) in portfolio management
38 3. Bond Characteristics
Step-up coupon: Increase of the coupon by a percentage expressed in bps per annum, payable from the first coupon payment date following the SPT observation date until maturity or at the point of maturity
Single coupon step-up coupon SPT observation date
step-up target target not achieved achieved
coupon remains coupon step-up is unchanged applied
SPT observation time higher final date coupon
39 4. Reporting
Carbon intensity reporting year Carbon intensity 2020 (Baseline)
Carbon intensity 2020 (Baseline)
= Carbon intensity reduction rate (of the entire loan portfolio)
KPI Strategic Performance Target 2019 2020 (Baseline)
Carbon intensity reduction rate of Reducing carbon intensity of the entire loan 40.3 kgCO /m 2 38.6 kgCO /m 2 the entire loan portfolio portfolio by 40% between 2020 and 2030 2 2
Content Results as of 31 December 2020 • Annual KPI values as of 31 December of reporting year Financed area (m 2) 32,046,441 • Historical KPI values since 2019 Total carbon emission (kgCO /a) 1,237,490,355 • Carbon intensity of Berlin Hyp‘s loan portfolio 2 Carbon intensity (kgCO /m 2/a) 38.62 • Historcal carbon intensity since 2019 2 • Average energy demand of buildings included in loan portfolio Total energy demand (kWh) 4,707,625,550 • Carbon conversion factors Energy demand per m 2 (kWh/m 2) 146 • Any relevant information related to methodology and/or data update
40 5. Verification
Sustainalytics is in the opinion that the Berlin Hyp Sustainabililty-Linked Bond Framework aligns with the Sustainability- Linked Bond Principles 2020.
KPI KPI is strong based on its applicability and the relevance and materiality to the subindustry.
SPT aligned with the issuer’s sustainability strategy. SPT is ambitious and demonstrates industry leadership SPT: i) goes beyond business as usual SPT ii) clearly exceeds peer performance/targets iii) aligns with well-below-2-degree climate scenario
KPI Baseline 2020 SPT Strength of the KPI Ambitiousness of SPT
Reduce loan portfolio‘s Carbon Intensity of loan 38.6 kgCO2/m2 carbon intensity by 40% Strong Ambitious portfolio between 2020 and 2030
Annual re-verification and verification assurance certificate following the SPT observation data. Publication on Berlin Hyp’s website: www.berlinhyp.de/en/investors/sustainability-linked-bonds 41 Highlights Sustainability-Linked Bond Issuance
Senior Preferred SLB (04/2021) SLB fever sweeps FIG market after Berlin Hyp debut
Others Issuer Berlin Hyp AG 2% ISIN DE000BHY0SL9 Central Banks Issue Ratings Aa2/AA- (Moody's/Fitch) 11% KPI: strong (SUSTAINALYTICS) Second Party Opinion SPT: ambitious (SUSTAINALYTICS) Funds Banks 55% Coupon 0.375% 32% Re-Offer-Spread MS +35bp Re-Offer-Price 99.648%
Issuance/ 13.04.2021/ Settlement Date 21.04.2021 Austria 2% Spain Maturity 21.04.2031 Nordics 2% 3% Issue Size € 500mn UK 4% Italy Denominations € 100,000 France 4% Berlin Stock Exchange 4% Listing Asia Luxembourg Stock Exchange 10% Commerzbank, Credit Agricole, DZ Bank, Germany Lead Managers HSBC, LBBW, 71% Co-Lead: Bankhaus Lampe
First SLB issued by a credit institution Tightest re-offer spread of a 10-year senior preferred within the last three years 73 investors with EUR 790 million order volume (final book)
Source: Global Capital 15.04.2021; IFR 16.04.2021; SUSTAINABONDS 14.04.2021 42
The Green Bond Program
Green Bond Program
Green Pfandbrief Green Senior Unsecured
Mortgage Pfandbrief as defined Refinancing of loans Refinancing of loans Investors in Berlin Hyp's Green in section 1 para. 1 (1) Green Pfandbrief holders rank collateralized with Green collateralized with Green Senior rank pari-passu with Pfandbrief Act and cover assets pari-passu with all other Buildings which form a part of Buildings which are on Berlin investors in other senior according to paras 13 to 18 Mortgage Pfandbrief holders the mortgage cover pool Hyp‘s balance sheet unsecured notes of the bank Pfandbrief Act
© Masterfile Royalty Free The issuance of all Green Bonds takes place under a unified Green Bond Program. Under the program, both Green Pfandbriefe and green Senior Unsecured bonds can be issued. The program covers...
… the requirements for the issuance of new Green Bonds including the excess of 10 per cent of all eligible assets compared to the Green Bonds,
… the alignment with the Green Bond Principles (Use of Proceeds, Process of Evaluation and Selection, Management of Proceeds, Reporting),
… Berlin Hyp‘s eligibility criteria for Green Buildings with a focus on energy efficiency,
… the bank‘s commitment, to make its best effort to invest an amount equivalent to the net proceeds in new eligible assets.
44 Alignment with Green Bond Principles
Refinancing of loans used for the acquisition, construction or Use of Proceeds renovation of buildings that are eligible under the green building criteria
Nachhaltigkeitsziel Green Building Commission, consisting of representatives from Process of Evaluation corporate strategy, sales, credit, valuation and treasury, defines and and Selection regularly reviews eligibility criteria
The eligible assets are already on Berlin Hyp's balance sheet when Management of Proceeds a new Green Bond is issued (and in the case of a Green Pfandbrief also in its mortgage cover pool )
Annual reporting on asset performance (portfolio, new Reporting business & impact reporting)
External Verification Second Party Opinion, annually verified
45 1. Use of Proceeds – Portfolio Development
Green Finance Portfolio Countries Certificates
2021 Green Bonds • February 2021: Green Senior Preferred CHF 125mn due March 2031 • March 2021: Green Pfandbrief EUR 500mn due January 2028 • September 2021: Grüne Senior Preferred CHF 200mn due October 2029 Type of Use of Type
46 46 2. Process of Evaluation and Selection (I) – Organisation
Green Building Commission Origination One representative from each of the following divisions of the Fowards EPC/Sustainabilty Certificate bank: Corporate Development, Origination, Credit, Appraisal and Treasury
Appraisal Responsible for defining eligibility criteria and keeping them in line with market best practices. Also responsible for processes
Green Building eligible?
yes no Corporate Strategy Price incentive up to 10 basis points
Appraisal Origination Origination Green Building Commision Credit
Documentation of energy efficiency data
Credit Treasury Departments (e.g. Risk Controlling, Green Building Commission, Treasury) 47 2. Process of Evaluation and Selection (II) – Criteria
Green Buildings means energy efficient commercial real estate buildings with an energy demand or consumption that should not exceed:
Framework Property type Energy demand heating Energy demand electricity Total kWh/(m²*a) kWh/(m²*a) kWh/(m²*a)
Residential 60 - 60
Office 80 60 140
Retail 60 75 135
Hotels 95 60 155
Logistics buildings (use:storage) 30 35 65
Light industrial(use: production) 105 65 170
In addition/alternatively eligibility criteria include the following external sustainability certifications 1:
LEED Gold or above BREEAM Very Good or above DGNB Goldor above HQE High Level or above
Eligible assets shall also meet other environmental and/or social criteria. These assets are not to be used for the production of arms, pesticides, tobacco, pornography, nuclear power, coal, oil and fossil fuels:
1) LEED, BREEAM, DGNB and HQE are providers of sustainability certificates for buildings. Buildings financed by Berlin Hyp after issuance of its inaugural Green Pfandbrief on 27 April 2015 have to score at least 50 per cent in the energy efficiency component of the Green Building certificate if the building does not qualify already by its energy demand or consumption as defined above.
48 3. Management of Proceeds
Assets Liabilities … …
Standard Standard loans funding
Loan Liabilities Loans for Interest, repayment Borrower Interest, repayment Green portfolio Asset Green Investor Buildings Bonds mortgage Proceeds of the issuance An amount equivalent to the proceeds of the issuance is invested in new loans for Green Buildings
• Eligible assets are already on the bank‘s balance sheet at issuance (in case of a Green Pfandbrief in its mortgage cover pool, too) • No interim allocation of the proceeds necessary • Eligible assets > outstanding Green Bonds at any time • As Berlin Hyp flags loans for Green Buildings in its loan monitoring system, they cannot be used for more than one Green Bond
49 4. Impact Reporting
1. Benchmark 2. Conversion factor (kWh in CO2)
Heating Energy demand (acc. to EPC) based on individual heating source = Electricity Country-specific emission factors Energy savings (kWh) based on energy mix
1 2 Η ͦΗ Η 3. savings in kWh ∗ m ∗ conversion factor ȕ ∑ outstanding issuance in €
Η ͦΗ & Η ̡̬̯̮ ̯̦ ̥̲̬̩̮̈ ̹̰̎ savings in kWh ∗ m ∗ conversion factor ∗ ̴̡̭̲̫̥ ̶̵̡̬̥ ̯̦ ̴̨̥ ̵̢̧̩̬̤̩̮ ȕ ∑ outstanding issuance in €
Avoided tCO2 / € mn / year 100% allocated to Berlin Hyp Proportionally allocated to Berlin (as of 31.12.2020) financing Hyp’s initial financing share
against EnEV standards (heating energy and electricity) 26.60 (PY 39.89) 14.52 (PY 22.58)
against the European average (heating energy only) 23.56 (PY 24.77) 12.92 (PY 13.93)
Source: "Icon made by Pixel perfect from www.flaticon.com" 50 5. External Verification – Second Party Opinion von ISS ESG
Berlin Hyp AG commissioned ISS ESG to assist with its Green Bond re-verification by assessing three core elements:
The issuer shows a good sustainability performance against the industry peer group on key ESG issues. The Part I issuer is rated 3rd out of 129 companies within its sector.
Part II The Green Bond Programme’s formal concept is in line with the Green Bond Principles.
The overall sustainability quality of the asset pool in terms of sustainability benefits, risk avoidance and Part III minimisation is good based upon the ISS ESG assessment.
51 Transaction Highlights
Green Pfandbrief (03/2021) Green Pfandbrief (08/2020)
Others Others 3% Issuer Berlin Hyp AG 8% Issuer Berlin Hyp AG ISIN DE000BHY0GE9 ISIN DE000BHY0GX9 Central Banks Issue Ratings Aaa (Moody's) Banks Issue Ratings Aaa (Moody's) 13% Second Party Opinion good (ISS ESG) 34% Second Party Opinion good (ISS ESG) Coupon 0.01% Central Banks Coupon 0.01% Banks 25% Re-Offer-Spread MS -3bp Re-Offer-Spread MS +6bp 45% Asset Re-Offer-Price 101.809% Re-Offer-Price 101.329% Manager Issuance/ 16.03.2021/ Asset Issuance/ 25.08.2020/ 39% Manager Settlement Date 24.03.2021 33% Settlement Date 02.09.2020 Maturity 24.01.2028 Maturity 02.09.2030 Issue Size € 500mn Issue Size € 500mn Asia France AUT/CHE Switzerland Italy 1% Southern Europe 2% Denominations € 1,000 1% 1% Denominations € 1,000 3% 3% Berlin Stock Exchange Berlin Stock Exchange Listing Listing France Luxembourg Stock Exchange Asia Luxembourg Stock Exchange 4% Commerzbank, Credit Agricole, 6% Credit Agricole , DZ Bank, HSBC, JPM UK BeNeLux Lead Managers LBBW, UBS, UniCredit; Lead Managers LBBW; 6% Co-Lead: Bankhaus Lampe 12% Co-Lead: Bankhaus Lampe UK Germany 10% Nordics 48% Barclays MSCI Green Bond Index Barclays MSCI Green Bond Index Nordics Germany 14% Indices Index S&P Green Bond Index Indices Index S&P Green Bond Index 16% 56% Solactive Green Bond Index BeNeLux Solactive Green Bond Index 17%
Order book reached a final size of more than EUR 1.3bn with Order book reached a final size of more than EUR 2.15bn with more than 50 investors more than 100 investors Berlin Hyp allocated more than 40% to SRI investors Berlin Hyp allocated more than 40% to SRI investors 52% share of foreign investors 44% share of foreign investors
52 Your Contacts at Berlin Hyp
Bodo Winkler-Viti You will find further information on Berlin Hyp Head of if you visit our website www.berlinhyp.de : Funding & Investor Relations • Ratings Tel.: +49 30 2599 9521 • Green Bonds [email protected] • Framework, reportings, external verification • Sustainability-Linked Bonds • Framework, reportings (from 2022), Julian Pfister external verification, videos Funding & Investor Relations • Financial Reportings • Base Prospectus / Final Terms Tel.: +49 30 2599 9529 • §28 Pfandbrief Act / HTT [email protected] • Euro Commercial Paper Programme • Awards
53 Disclaimer
This presentation was produced by Berlin Hyp AG (hereinafter “Berlin Hyp”) for information purposes only. It is not investment advice. The prior consent of Berlin Hyp is required for the copying of information or data, in particular for the use of texts, parts of text or picture material. To the best of our knowledge, the facts and information contained in this presentation are correct at the time of production and are subject to change in future. Neither Berlin Hyp nor members of its Board of Management, management staff, employees, advisors or other persons furnish any warranty or guarantee, explicit or implied, in relation to the correctness or completeness of the information contained in this presentation. All liability by Berlin Hyp, members of its Board of Management, management staff, employees, advisors or other persons for losses incurred, directly or indirectly, in whatever way by the use of this presentation or its contents or otherwise in connection therewith is excluded. Every reasonable care has been taken to ensure that the facts contained in this presentation are correct at the time they were collected, and that the views expressed are fair and reasonable. However, this document contains selected information and is merely an introduction to and overview of the business activities of Berlin Hyp. Opinions expressed in this document can change at any time. Neither Berlin Hyp nor any other person is obliged to correct, update or keep updated the information contained herein, or inform you about this. A significant proportion of the information contained in this document, including market data and information about trends, is based on estimates or expectations of Berlin Hyp and there is no guarantee that these estimates or expectations will be proved correct in future. This presentation may contain future-oriented statements which reflect our present view with regard to future developments. These statements can be identified as such by words like “expectation” or “target” or “forecast” and similar expressions, or by their context. These statements are made on the basis of current knowledge and current assumptions in each case at the time they are made. They harbour risks and uncertainties including but not limited to changes in interest rates or exchange rates. If these risks or uncertainties materialise, or if the knowledge or assumptions forming the basis of our future-oriented statements prove incorrect, actual future results, performance or events in the future could differ from those described in these statements. There is no obligation to update future- oriented statements or to inform you about this. This document does not constitute an offer for the sale of securities. Securities of Berlin Hyp may not be offered or sold in the United States if they are not registered there or are not exempt from the obligation of registration according to the U.S. Securities Act 1993 in its current applicable version.
54 06
Appendix Anhang – ImmoSchuldschein as a Competitive Advantage
€ 750 Mio. for GSG: thereof € 500 Mio. financed via ImmoSchuldschein
• Berlin Hyp financing commercial portfolio for GSG Gewerbesiedlungs-Gesellschaft mbH with € 750mn, of which € 250mn in syndicate with Investitionsbank Berlin • The syndicate – consisting of Berlin Hyp and Investitionsbank Berlin – has provided GSG Gewerbesiedlungs-Gesellschaft mbH with a total loan amount of € 250mn. The remaining € 500mn euros of the total financing volume is realised together with savings banks via an ImmoSchuldschein. • A total of 41 commercial real estate properties with a total rental area of 772,000 square metres and around 5,600 parking spaces are being financed. The loan properties include business parks and econoparks located in the Berlin districts of Kreuzberg, Mitte and Pankow, among others.
Advantage Customer Advantage Savings Banks Advantage Berlin Hyp • Fast decision from one single hand • Interesting return/risk structure • Reduced risk-weighted assets • No coordination of several banks • Geographic diversification without • Increase of intra-group business • Provision of larger loan volume violating the regional principle • Additional earnings potential • Insolvency-proof transfer of the collateral via RefiReg 56 Appendix – Balance Sheet as of 31 December 2020
Assets Liabilities
in EUR Mrd.
Morgage loans 25,4 19,3 Securitised liabilities
Debentures 6,5 9,2 Liabilities to banks
Remaining assets 2,9 4,4 Liabilities to customers
Public sector loans 0,4 1,6 Others
Other Claims 0,2 0,9 Equity
57 Appendix – Development of Capital Ratios
17.4 17.5 16.8 16.0 16,1 15.7 15.5 15.8 14.0 13.3 12.7 11.7 12.0 12.1
10.1 9.8 9.7 Core Tier 1 capital ratio Total capital ratio
13.5 13.5 13.4 13,9 13.3 12.5 13.3 Data in % 10.6 11.6 8.7 8.6 9.4 7.6 6.5 5.5 5.8 5.3
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 H1/2021
Allocation to the fund for general banking risks: 2018 EUR 105mn, 2019 EUR 90.0mn, 2020 EUR 70mn Corporate actions in 2009 (EUR 88.1mn), 2010 (EUR 97.5mn) and 2014 (EUR 105.0mn – equity transfer from Berliner Sparkasse) Increase of total assets from 2017 - 2020: EUR 27.1bn to EUR 33.4bn
58 Appendix – Composition of Mortgage Portfolio
New Business According to Rating Classes Portfolio in % in % H1/2021 94 6 H1/2021 95 5
2020 99 1 2020 95 4 1
2019 98 2 2019 96 3 1
2018 99 1 2018 95 4 1
2017 91 9 2017 94 5 1
2016 95 5 2016 90 7 3
2015 91 9 2015 87 9 3
2014 97 3 2014 86 8 5
Rating classes 1-7 Rating classes 8-12 Rating classes 13-18 Rating classes 1-7 Rating classes 8-12 Rating classes 13-18
New Business According to Property Types Portfolio in % in % H1/2021 41 30 15 11 3 H1/2021 42 27 15 10 6
2020 40 34 9 8 9 2020 42 27 15 11 5
2019 49 24 14 3 10 2019 44 26 16 9 5
2018 49 28 9 7 7 2018 41 27 20 9 3
2017 44 21 25 6 4 2017 40 27 21 8 4
2016 51 17 17 5 10 2016 35 30 23 7 5
2015 38 18 28 10 6 2015 36 34 22 8
2014 23 46 19 12 2014 36 37 18 9
Office Residential Retail Other Logstics Office Residential Retail Other Logstics 59 Appendix – Security Holdings Composition
EUR mn Germany 1% Germany 3,463 2% 1% 3% 1% France 5% France 864 Scandinavia (N, S, FIN) 6% Scandinavia (N, S, FIN) 644 Canada Canada 331 BE/NE/LUX 263 according to BE/NE/LUX 10% Supranational 411 Countries Supranational 55% UK 148 UK Spain 144 Spain Austria 75 16% Austria Eastern Europe (CZ, LT, PL, SK, SLO) 74 Eastern Europe (CZ, LT, PL, SK, SLO) Switzerland 20 Total 6,487
7% 3% Covered
13% Sovereign 35% 305 Green Government Thereof guaranteed according to Use of Proceeds Debtors Bonds 462 Social Senior 11% Unsecured Supras
Corporate 32%
Data as of 30 June 2021 60