Bausparkasse Schwäbisch Hall AG Financial Report 2019 At a glance Bausparkasse Schwäbisch Hall AG 2019 2018 New business Bausparen (presented, in ¤ billion) 28.46 29.70 Housing financing (total, in ¤ billion) 23.81 15.17 Contracted business Bauspar sum (honoured, in ¤ billion) 313.38 305.70 Contracts (in millions) 8.24 8.34 Loans and loan commitments (total, in ¤ billion) 54.16 48.49 Number of customers (in millions) 7.16 7. 24 Schwäbisch Hall Group Non-domestic, including joint ventures 1) 2019 2018 New business Bausparen (presented, in ¤ billion) 7.16 12.04 Housing financing (total, in ¤ billion) 1.47 1.41 Contracted business Bauspar sum (honoured, in ¤ billion) 40.02 62.09 Contracts (in millions) 2.06 3.40 Loans and loan commitments (total, in ¤ billion) 2.55 2.58 Number of customers (in millions) 1.77 3.02 Schwäbisch Hall Group IFRS key financial indicators in ¤ million 2) 2019 2018 Profit/loss before taxes 189 295 Net profit 166 212 Balance sheet total 77,469 71,667 Equity 5,700 5,157 Schwäbisch Hall Group regulatory ratios in % 2019 2018 Common Equity Tier 1 capital ratio 31.4 30.4 Total capital ratio 31.4 30.4 Leverage ratio for Bausparkasse Schwäbisch Hall AG 5.6 5.9 Moody‘s ratings 2019 2018 Bank rating Aa1 – Hypothekenpfandbriefe (German mortgage covered bonds) Aaa – Human Resources 2019 2018 Employees (full-time equivalents in the Group) 2,904 2,882 Trainees and apprentices 191 192 1 In contrast to 2018, the figures for 2019 do not include CMSS, as the interest was sold in full as at 31 May 2019. 2 The income statement amounts for CMSS relate to the period January 1 to May 31 2018, as the interest in CMSS was sold in full as at 31 May 2019. Table of contents 05 LETTER FROM THE MANAGEMENT BOARD 06 COMBINED MANAGEMENT REPORT 07 Fundamental information about the Group 12 Report on economic position 29 Non-financial statement 30 Report on expected developments 35 Disclosures on Schwäbisch Hall’s German GAAP single entity Annual Financial Statements 41 Opportunity and risk report 72 CONSOLIDATED FINANCIAL STATEMENTS 80 Notes to the consolidated financial statements 16 9 Independent Auditor’s Report 179 Report of the Supervisory Board 183 Advisory Board of Bausparkasse Schwäbisch Hall 18 6 SERVICE 18 6 Memberships 187 Addresses 18 8 DZ BANK Group 18 8 Imprint 4 Bausparkasse Schwäbisch Hall AG I Financial report 2019 Board of Managing Directors of Bausparkasse Schwäbisch Hall AG: Jürgen Gießler, Peter Magel, Reinhard Klein (Chief Executive Officer) und Mike Kammann (from left to right) Letter from the Management Board Combined management report I Consolidated financial statements I Service 5 DEAR READERS, An affordable home, and preferably one that they own, is and remains a popular topic for people in Germany: 1.5 million households are planning to buy their own home in the next two to three years alone. At the same time, Germany is suffering from a shortfall of one million homes. What this means is that the already high level of demand for real estate will be sustained until at least 2045 in many parts of the country. These are the findings of a study by the University of Freiburg that was commissioned by the Schwäbisch Hall Foundation. Climate protection is bringing additional momentum to the housing market, as climate change can only be reversed if the existing housing stock is modernised and made more energy-efficient. Both of these need solid financing: and that’s our core business. We are Germany’s largest Bauspar- kasse and one of the leading providers of housing finance. We owe this position to the outstanding commitment of our employees in the back office and the sales force, and to the trust-driven cooper- ation with our partners in the German Cooperative Banking Group. Together with the cooperative banks, we brokered housing finance packages worth more than €16.7 billion in 2019, generating growth of 10 per cent. At €28.5 billion, the Bauspar volume also stayed at a high level. Our net profit for 2019, which declined year-on-year, was impacted by non-recurring effects and historically low interest rates. The persistently low interest rate is hitting Bauspar business especially hard because it puts an extraordinary strain on net interest income, and hence a key earnings component. Under these circumstances, we consider this development to be satisfactory. To enable us to respond to new market challenges and changes in our customers’ needs, we are investing in forward-looking topics, such as modernising our IT environment and digitalisation initiatives. We also founded the digital brokerage marketplace Baufinex, which has already estab- lished a strong position in the market and is growing steadily. The interaction between digital services and regional market expertise generates benefits for our customers and strengthens the German Cooperative Banking Group as a provider for the digital era. Schwäbisch Hall is well positioned for the future, and we look forward to the coming financial year. Board of Managing Directors of Bausparkasse Schwäbisch Hall AG: Jürgen Gießler, Peter Magel, Reinhard Klein (Chief Executive Officer) und Mike Kammann (from left to right) Sincerely, Reinhard Klein (Chief Executive Officer) Jürgen Gießler Mike Kammann Peter Magel 6 Bausparkasse Schwäbisch Hall AG I Financial report 2019 Combined management report Letter from the Management Board Combined management report Consolidated financial statements I Service 7 Fundamental information about the Group The management report of Bausparkasse Outside Germany, Schwäbisch Hall is repre- Schwäbisch Hall AG and the Group manage- sented in China, Luxembourg, Slovakia and ment report are combined in accordance with Hungary. Excluding Schwäbisch Hall’s Luxem- German Accounting Standard (GAS) 20. bourg branch, the foreign investees have more Accordingly, together with the Bausparkasse than 1.7 million customers. Schwäbisch Hall Group, which reports in accordance with International Financial Report- ing Standards (IFRS), the parent company GERMAN COOPERATIVE BANKING GROUP Bausparkasse Schwäbisch Hall AG is also included in this management report, with dis- Bausparkasse Schwäbisch Hall AG is part of closures on the basis of the German GAAP. The the DZ BANK Group and firmly embedded in annual financial statements of Bausparkasse the German Cooperative Banking Group. The Schwäbisch Hall AG prepared in accordance DZ BANK Group’s strategic focus is aligned with German GAAP and the combined manage- with its guiding principle of operating as a “net- ment report will be published at the same time work-oriented central banking institution and in the German Federal Gazette (Bundesan- integrated financial services group”. Its business zeiger). activities concentrate on the cooperative banks and their customers in their home market. Together with specialist institutions such as THE COMPANY Bausparkasse Schwäbisch Hall, the cooperative banks form a community: the German Coopera- The Schwäbisch Hall Group (SHG) is a socially tive Banking Group. It offers a broad range of responsible real estate financing provider for services, from retirement provision through real building society operations and a member of the estate and housing financing, down to insurance DZ BANK Group. As a subsidiary partner of and funds. With its approximately 850 coopera- the cooperative banks, SHG primarily supports tive banks, their more than 10,000 bank branches the DZ BANK Group’s vision of jointly focusing and 30 million customers, it is the leading inte- on the cooperative banks to enable the German grated financial services partner in Germany Cooperative Banking Group (Genossenschaftli- and plans to further consolidate this position. che FinanzGruppe – GFG) to sustainably con- solidate its position as a leading integrated Bausparkasse Schwäbisch Hall is a member of financial services provider in Germany. Together the institutional protection scheme established with the cooperative banks, SHG offers a range by the National Association of German Coopera- of concepts in Germany for retirement provi- tive Banks (Bundesverband der Deutschen sion, asset formation and home ownership, as Volksbanken und Raiffeisenbanken – BVR), well as housing financing from a single source. Berlin. It has entered into a profit and loss The customer service employees at Schwäbisch transfer agreement with DZ BANK AG Hall and the more than 3,300 sales force Deutsche Zentral-Genossenschaftsbank, Frank- experts ensure that more than seven million furt am Main. customers receive expert advice and customer service. 8 Bausparkasse Schwäbisch Hall AG I Financial report 2019 ARCHITECTURE AND BUSINESS MODEL Kreditservice GmbH, Hamburg, SHK is a mar- OF THE SCHWÄBISCH HALL GROUP ket leader in the field of standardised processing of loans and Bauspar products. Architecture of the Schwäbisch Hall Group The Bausparkasse Schwäbisch Hall Group The responsibilities of Schwäbisch Hall Facility mainly consists of its parent company, Bauspar- Management GmbH (SHF) include building kasse Schwäbisch Hall AG. Unless expressly management and operation of the Group’s head stated otherwise, the information disclosed in office in Schwäbisch Hall. It also serves other this combined management report refers to both external customers in the Schwäbisch Hall the Bausparkasse Schwäbisch Hall Group as region as well as GFG customers. Schwäbisch well as Bausparkasse Schwäbisch Hall AG. The Hall Training GmbH (SHT) provides training Schwäbisch Hall Group includes Bausparkasse and personnel development activities for the Schwäbisch Hall AG and its subsidiaries and Schwäbisch Hall Group and other GFG institu- investees in Germany and other countries. tions. Bausparkasse Schwäbisch Hall AG operates the Bauspar (contractual savings and loans for The Group’s foreign subsidiaries and investments housing) and housing financing business in Ger- in China, Slovakia and Hungary are Bauspar- many and manages the domestic and foreign kassen that pursue Bauspar and housing financ- activities of its subsidiaries and investees. ing business in their domestic markets in line with the German model. Its domestic subsidiaries provide services for SHG.