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To Form the New Eurohypo AG Merger of the Property

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To Form the New Eurohypo AG Merger of the Property Merger of the property and public sector financing activities of to form the new Eurohypo AG Conference call for international analysts 6 November 2001 1 Introduction 2 Strategic positioning Transaction objects, organisational structure, corporate 3 governance, integration 4 Synergies 5 Financial Data 6 The new Eurohypo – expertise, size, and clear focus on profitability 1 Introduction “The merger at a glance” 1 n Commerzbank, Deutsche Bank, and Dresdner Bank are bundling their property- financing businesses, and are terminating their own activities in this area n The new institution is being created through a merger into Deutsche Hyp, and will be named Eurohypo n Including free float, the relative valuation of the mortgage banks is Deutsche Hyp 30%, Eurohypo 35%, and Rheinhyp 35% n The core capital ratio according to BIS (Bank for International Settlements) is 6%. In order to achieve this ratio, Commerzbank, and Dresdner Bank will contribute additional equity n The target return on equity will clearly exceed the current cost of capital of around 9% n Cost synergies will amount to around EUR120m p.a. beginning 2004 4 2001iF106 Goals of the new Eurohypo 1 n Leading provider of commercial-property financing in Germany and Europe with mixed-bank status n Expansion of presence in North America n Increase in commission income through real estate investment banking and syndicated loan business n Leading market position in servicing and refinancing of standardised home loans in Germany n Public sector financing characterised by conservative risk policy and focus on higher margin foreign business n Benchmark issuer in the Pfandbrief market and leading issuer of MBS 5 2001iF106 Transaction background 1 Market environment Mortgage bank environment n Increasing competitive pressure in n Selective growth in foreign markets German property financing raises the n More intensive use of instruments need to consolidate for easing strain on balance sheet n Weak margin in German public n Restructuring of the real estate sector business activities of the three groups: n Real estate investment banking and mortgage banks as centre of foreign markets offer growth and competence of commercial-property margin potential financing n Formation of partnerships between institutions of different banking groups to – significantly improve market position – realise synergy potential n Concentration of property financing expertise in one optimised unit 6 2001iF106 2 Strategic positioning Business model 2 Professional real estate customers/Commercial-property financing n Quality edge through bundling of expertise n Broader range of financing through use of mixed-bank status n Stronger European focus and expansion in North America Standardised home loans Public sector financing n Market leader in servicing and n Expansion of higher-margin foreign refinancing business n Sales handled by agents and through n Conservative risk policy agency agreements with parent n Realisation of adequate financing companies and third parties volumes n Concentration on higher-margin business and expansion of commission income business n Best possible risk diversification and realisation of economies of scale 8 2001iF106 Market leader in commercial-property financing 2 Sales performance in 2000 The new Eurohypo – share of (in EUR bn) foreign business in sales performance 18.4 4.2 41% 57% 68% 14.2 59% 8.2 43% 4.6 32% 2.0 (1) Eurohypo Hypo DePfa AHBR 1998 1999 2000 Vereinsbank International National (1) Combined figure for Eurohypo, Rheinhyp, Deutsche Hyp, Deutsche Bank (real-estate centres); syndicated business shown separately Sources: Annual reports, VdH, Deutsche Bank, Deutsche Hyp, Rheinhyp, Capital Data Loanware n The new Eurohypo is the leading German bank for commercial-property financing n Growth potential in the higher-margin foreign business – the new Eurohypo already has an excellent track record 9 2001iF106 Commercial-property financing – Operations in Germany 2 Currently: 25 branches in 10 locations In the future: 10 branches in 10 locations Hamburg Hamburg Berlin Berlin Dortmund Dortmund Düsseldorf Düsseldorf Leipzig Leipzig Cologne Cologne Frankfurt Frankfurt Mannheim Mannheim Stuttgart Stuttgart Munich Munich Deutsche Hyp Eurohypo Rheinhyp (8 branches) (8 branches) (9 branches) n Combination of improved distribution and optimised cost basis n Branches to be merged by end of 2002 10 2001iF106 Commercial property financing – Foreign operations 2 Stockholm London Amsterdam Warsaw Chicago New York Brussels Paris Los Angeles Prague Zurich Vienna Budapest Madrid Milan Lisbon Barcelona n Presence in the most important business centres in Europe and the USA n Significant improvement in sales reach outside Germany n All locations are maintained, while the number of branches will be reduced from 33 to 17 11 2001iF106 Growing commission income through established real estate investment banking 2 Development of commission income Business model (in EUR m)(1) 89.0 Real estate 69.3 investment banking 57.3 52.3 Origination/ Structured Advisory Funding 38.0 finance n Senior Debt n Securitisa- n On-balance n Mezzanine tion n MBS/CMBS n Equity n Asset Sales n Private placements 1998 1999 2000 1H 2000 1H 2001 (1) Sum of Deutsche Hyp, Eurohypo, and Rheinhyp Source: Annual and interim reports, Commerzbank, Deutsche Bank, Dresdner Bank n Focus on structured finance and securitisation n Strong starting position through established activities in London and the USA n Dynamic growth of commission income maintained 12 2001iF106 Syndicated loans 2 Syndicated real estate loans in Europe – Major transactions rankings in 2000 (US$ m) 1 Eurohypo (1) 3,979 Canary Wharf Whitehall MP 2 Royal Bank of Scotland 1,962 MILLENNIUM PARTNERS 3 Barclays 1,842 EUR 1,600m EUR 431.6m US$ 400m 4 Société Générale 1,272 Eurohypo Eurohypo Dresdner Bank Real Estate 5 Crédit Lyonnais 1,014 Arranger Arranger Arranger March 2001 January 2001 February 2001 (UK) (F) (USA) (1) Combined syndicated volume of Deutsche Hyp, Eurohypo, and Rheinhyp Source: Capital Data Loanware, Rheinhyp, Deutsche Hyp The new Eurohypo is market leader in Europe for syndicated real estate loans and also holds a strong position in North America 13 2001iF106 Standardised home loans – Distribution channels 2 Sales through agents Agency agreements n Continuation of Rheinhyp model n Existing co-operation models with the parent banks to continue n No end-consumer business n Further agency agreements with third n Current key figures(1) parties are planned – approx. 2,400 independent sales agents – approx. 140 full-time staff – 20 offices – EUR 794,1m of new business volume(2) (1) as of 30.06.2001 (2) 1st half year 2001 Reduction of acquisition costs per customer combined with significant new business volume 14 2001iF106 Standardised home loans – Servicing 2 Business model Structure n “Factory-style“ processing and n Rheinhyp's subsidiary prompter AG administration of private home loans responsible for servicing business from third-party providers n Open platform – third-party providers can convert their fixed costs into n Own portfolios will be processed in variable costs through outsourcing two, instead of previous five, in-house service centres n Currently over 425,000 loans in the combined portfolio n Number of locations reduced to what is economically necessary n Cost leadership through economies of scale n Creation of additional, less volatile sources of commission income 15 2001iF106 Broadly diversified property loan portfolio(1) 2 Split by property type Regional split Office Former West Other building Germany 11% 22% 54% Berlin GB/Ireland 11% Spain/ 35% Portugal Residential 19% Foreign – other countries 26% Trade buildings 16% 14% France Other 12% Residential Former East 13% Scandinavia Austria/ – owner Germany 10% Switzerland occupied 18% 27% 11% Total: EUR 90.0bn International portfolio: EUR 14.6bn (1) Deutsche Hyp, Eurohypo, and Rheinhyp combined, as of June 30, 2001 Source: Annual reports, Deutsche Hyp, Eurohypo, Rheinhyp n Active portfolio management n Broad diversification by property type and region n Rising share of foreign business n Further diversification possible through North American operations 16 2001iF106 Public sector financing 2 Total financing volume per 31.12.2000 The new Eurohypo – (in EUR Mrd.) Share of foreign business (2000) 138.3 112.4 65% 69.8 84% 42.9 35% 16% Eurohypo(1) DePfa AHBR HVB Total New business Real Estate(2) International National (1) Deutsche Hyp, Eurohypo, and Rheinhyp combined, incl. Source: Annual reports, Deutsche Hyp, Rheinhyp foreign subsidiaries (Europäische Hypothekenbank S.A., Rheinhyp Europe plc) (2) Sum of Bayerische Handelsbank, NürnbergHyp, Südboden, and PBI (Pfandbrief Bank International, Luxembourg) Source: VdH, DePfa 2000 annual report, PBI 2000 annual report n Strong position in public sector financing n Continuation of conservative risk policy n Further growth in higher-margin foreign business 17 2001iF106 Establishing as a benchmark issuer 2 Pfandbriefe – Volume outstanding Pfandbriefe – New issue volume (in EUR bn)(1) in 2000 (in EUR bn) 183.1 27.4 21.5 9.5 74.4 5.6 59.8 59.5 12.9 48.3 10.5 5.2 7.0 17.9 15.8 0.7 7.7 9.8 7.0 Eurohypo(2) AHBR DePfa HVB Real Hypotheken- Eurohypo AHBR HVB Real Hypotheken- DePfa Estate(3) bank Estate(3) bank in Essen in Essen Public sector Pfandbriefe Mortgage Pfandbriefe (1) as of 31.12.2001 (3) Bayerische Handelsbank, NürnbergHyp, Südboden (2) Deutsche Hyp, Eurohypo, and Rheinhyp combined Source: Annual reports, HVB, Deutsche Hyp Source: Annual reports
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