Telephone: +49 40 33 34-0 | Fax: +49403334-1111 | Telephone: +49403334-0 Deutsche Genossenschafts-Hypothekenbank AG Rosenstraße 2 | 20095 Hamburg, | Rosenstraße 2 www.dghyp.de DG HYP

DG HYP Annual Report 2017 ANNUAL REPORT 2017 OVERVIEW

€ mn 2017 2016 2015

Development of new business

Commercial Real Estate Finance 6,431 7,418 5,722 Domestic 6,131 7,140 5,637 International 300 278 85

Treasury Originated loans to local authorities 198 257 378 Pfandbrief sales and other refinancing sources 4,959 5,223 4,114

Portfolio development

Total assets 36,826 36,696 39,821 Mortgage loans 20,505 19,742 18,674 Originated loans to local authorities 5,530 6,054 6,525 Public-sector lending 5,604 6,819 8,442 Bank bonds 723 904 1,520 Mortgage-backed securities (MBS) 745 963 1,273 Pfandbriefe and other debt securities 17,900 19,263 23,086

Own funds 1,743 1,607 1,668 Total capital ratio (%) 14.4 12.4 12.7 Common equity tier 1 ratio (%) 8.4 6.9 7.1 Leverage ratio (%) 3.2 3.1 n/a Liquidity Coverage Ratio (LCR; %) 697 360 369

Profit and Loss Account

Net interest income 276 270 263 Net commission result 34 41 29 Administrative expenses 129 121 116 Net other operating income/expenses -4 11 -5 Risk provisioning -6 -3 64 Net financial result 2 11 -92 Operating result 173 209 143 Allocation to the fund for general banking risks 40 100 – Partial profit transfer 16 17 18 Taxes 67 12 – Profit transfer 50 80 125

Cost/income ratio (%) 45.8 38.6 44.4 Return on equity (%) 16.2 25.0 13.9

Number of employees

Annual average 480 465 454 ANNUAL REPORT 2017

Deutsche Genossenschafts-Hypothekenbank AG DG HYP – PART OF A POWERFUL GROUP (SELECTED GROUP ENTITIES)

DG HYP is a member of the DZ BANK Group, which also comprises Bausparkasse Schwäbisch Hall, DZ PRIVATBANK, R+V Insurance, TeamBank, Union Investment Group, VR Leasing Group, WL BANK as well as various other specialist financial services providers. DZ BANK Group is itself a part of the Volksbanken Raiffeisenbanken cooperative financial network, which comprises approximately 1,000 individual cooperative banks. In terms of total assets, it ranks among the largest financial services organisations in Germany. Within the Volksbanken Raiffeisenbanken cooperative financial network, DZ BANK acts as the central institution, tasked with supporting the local cooperative banks‘ transactions as well as strengthening their competitive position. It also operates as a commercial bank, and exercises the holding entity function for DZ BANK Group.

The various DZ BANK Group entities are the cornerstones of a comprehensive range of bancassurance products and services offered by the Volksbanken Raiffeisenbanken cooperative financial network. DZ BANK Group has organised its strategy and range of services for the cooperative banks and their customers along the lines of four strategic business segments: Private Customers, Corporate Clients, Capital Markets and Transaction Banking.

Combining banking services with insurance products, home loan savings and a range of investment services has a long tradition within the German cooperative banking sector. The specialist institutions within the DZ BANK Group each offer highly competitive and reasonably-priced products in their respective area of expertise. This allows Germany’s cooperative banks to offer their customers an end-to-end range of first-class financial services.

2 DG HYP | Annual Report 2017 CONTENTS

Letter from the Management Board 4

Report of the Supervisory Board 6

DG HYP The commercial real estate bank in the Volksbanken Raiffeisenbanken cooperative financial network 10

Digitalisation 11

Sustainable Corporate Governance 12

Management Report Business Model 16

Economic Report 20

Economic Environment 20

Development of the Real Estate Markets 24

Business Performance 30

Net Assets, Financial Position and Financial Performance 36

Report on