A partnership built on trust #sharing inspiration 2019 Interim Financial Report S Finanzgruppe Key Figures Excerpt from the Condensed Statement 01.01. – 01.01. – of Profit or Loss in € m 30.06.2019 30.06.2018 Net interest income 155.4 161.4 Net commission income 8.4 10.8 Operating expenditure 86.1 76.1 Risk provisioning – 5.4 – 47.3 Operating result 80.7 141.7 Provision for general banking risks 55.0 80.0 Profit transfer 25.9 62.2 Net income for the year 0.0 0.0 Cost-income ratio in % 53.3 44.6 Return on equity in % 12.7 23.9 Excerpt from the Condensed Balance 30.06.2019 31.12.2018 Sheet in € m Balance sheet total 26,999 27,178 incl. mortgage loans 21,108 20,223 NPL 193 183 01.01. – 01.01. – Business Development in € m 30.06.2019 30.06.2018 New lending 1,889 2,681 Extensions (capital employed ≥ 1 year) 328 799 Regulatory Law Key Figures 30. 06. 2019 31. 12. 20181 Risk weighted assets (RWA) in € m 9,752 9,215 CET1 capital ratio in % 13.3 13.5 Total capital ratio in % 16.3 16.8 Leverage ratio in % 4.6 4.3 1 after adoption Issue Ratings 30. 06. 2019 31.12.2018 Moody’s Pfandbriefe Aaa (stable) Aaa (stable) Senior preferred Aa2 (stable) Aa2 (stable) Senior non-preferred A2 A2 Fitch Pfandbriefe – – Senior preferred A+ (stable) A+ (stable) Senior non-preferred A+ (stable) A+ (stable) Sustainability Ratings oekom Sustainalytics B- (Prime) 86/100 (Leader) Others 30.06.2019 31.12.2018 Number of employees (as at the reporting date) 596 601 Content Management 2 Preface 2 Organs of the Bank and Other Important Functions 4 Interim Management Report 6 Business Report 6 Macroeconomic and Sector-Related Underlying Conditions 6 Business Development 7 Earnings Situation 8 Net Assets Position 9 Equity 9 New Lending 9 S-Group Business 10 Financial Position 10 Financial and Non-Financial Performance Indicators 12 Opportunities, Forecast and Risk Report 14 Opportunities and Forecast Report 14 Risk Report 15 Condensed Interim Financial Statements 18 Condensed Balance Sheet as at 30 June 2019 18 Condensed Profit and Loss Account from 1 January to 30 June 2019 20 Condensed Statement of Changes in Equity 21 Selected Explanatory Notes 22 Statement by the Statutory Representatives 25 Further Information for Investors 26 Service 28 1 Management Interim Management Report Condensed Interim Financial Statements Service Preface Dear Business Partners, dear Employees, The first six months of this year were character- corresponds to the previous record year. In ised by generally lower transaction figures on addition to our reported equity, we now also the German market, continued fierce com- have reserves of € 383 million available for petition in commercial real estate financing regulatory purposes. Therefore, the common and the resulting high pressure on margins, equity Tier 1 ratio was 13.3 % and the total as well as persistently low interest rates and equity ratio was 16.3 % as at 30 June 2019. strict regulatory requirements. For Berlin Hyp, We have thus exceeded our internal target the first half of 2019 progressed to plan. Profit for 2019. before profit transfer amounted to € 25.9 mil- lion and was thus - as expected - well below Other underlying conditions and especially the record results of recent years (2018: € the competition in the real estate financing 62.2 million). We are satisfied with the interim market remain challenging. The expansionary result on account of the challenging underlying monetary policy and the low-interest phase conditions. The Bank further consolidated its remain unchanged. The margin pressure also position as a leading commercial real estate remains noticeable. financier. However, it is particularly under these In order to secure the future viability of our conditions that it is important to focus on our Bank, it was particularly important that we conservative risk strategy and remain true to strengthen our equity base in order to enable the Bank’s credo of “quality over quantity”. We future growth in the mortgage loans portfolio. will therefore continue to focus on financing We were able to allocate € 55.0 million to the sustainable real estate and be deliberately special item for general bank risks, using our selective when it comes to new lending. income from the current financial year. Last year, on the other hand, this could only be In order to achieve our goal of becoming the achieved through a notable net release of most modern commercial real estate financier risk provisioning. The pro rata allocation thus in Germany, Berlin Hyp has continued to 2 intensively pursue and drive forward the strength, the motivation of our employees and “berlinhyp21” future-oriented process in the the trusting partnership with our customers first half of 2019. We are consistently pro- form a good basis for the successful continua- gressing with our internal digitisation for the tion of our business activities. purposes of becoming an SAP bank. Further- more, we have generated two new business Best wishes from Berlin, approaches in this half-year within the frame- work of our external digitisation activities by engaging a strategic investor in our subsidiary OnSite ImmoAgent and with our investment in the PropTech1 venture capital fund. Provided no unexpected shifts occur in the Sascha Klaus Gero Bergmann Roman Berninger capital and real estate markets, and risk provisioning is as planned, Berlin Hyp expects Berlin, August 2019 overall earnings in the second half of 2019 to develop in line with the first half of the year. Overall, we are confident that we will be able to continue on our successful path even in an increasingly difficult environment. We set the course for this at an early stage with our consistent pursuit of cultural change and our digitisation strategy. Our market position and sound refinancing strategy, together with our innovative 3 Management Interim Management Report Condensed Interim Financial Statements Service Organs of the Bank and Other Important Functions Supervisory Board Helmut Schleweis Siegmar Müller Chair Chair of the Board of Management President of Deutscher Sparkassen- und of Sparkasse Germersheim-Kandel Giroverband e. V. State Chair (Landesobmann) of the Rhineland-Palatinate Jana Pabst Savings Banks Board of Management Deputy Chair Members Bank Employee Deputy Chair of the Works Council Reinhard Sager of Berlin Hyp AG President of the German Administrative District Parliament Joachim Fechteler County Council Chairman of East Holstein Bank Employee District Member of the Works Council of Berlin Hyp AG Andrea Schlenzig Bank Employee Bernd Fröhlich Chair of the Board of Management of Peter Schneider Sparkasse Mainfranken Würzburg President of Sparkassenverband Baden-Württemberg Gerhard Grandke Managing President of Sparkassen- Walter Strohmaier und Giroverband Hessen-Thüringen Chair of the Board of Management of Sparkasse Niederbayern-Mitte Artur Grzesiek Federal Chair (Bundesobmann) Former Chair of the Board of Management of the German savings banks of Sparkasse KölnBonn René Wulff Dr. Harald Langenfeld Bank Employee Chair of the Board of Management of Member of the Works Council Stadt- und Kreissparkasse Leipzig of Berlin Hyp AG Thomas Mang President of Sparkassenverband Vorstand Niedersachsen Sascha Klaus Thomas Meister Chair Bank Employee Chair of the Works Council Gero Bergmann of Berlin Hyp AG Roman Berninger 4 Supervisory Board Committees Staff and Strategy Committee Audit Committee (until 17 June 2019) Thomas Mang Presiding and Nomination Committee Chair (since 17 June 2019) Gerhard Grandke Deputy Chair Helmut Schleweis Chair Joachim Fechteler Walter Strohmaier Siegmar Müller Deputy Chair Peter Schneider Dr. Harald Langenfeld Thomas Mang Compensation Control Committee (since 17 June 2019) Thomas Meister Helmut Schleweis Andrea Schlenzig Chair Walter Strohmaier Loans Committee Deputy Chair Walter Strohmaier Thomas Mang Chair Jana Pabst Dr. Harald Langenfeld Deputy Chair Bernd Fröhlich Cover Pool Monitor Artur Grzesiek Christian Ax René Wulff Deputy Cover Pool Monitor Wolfgang Rips Philip Warner 5 Management Interim Management Report Condensed Interim Financial Statements Service Business Report Macroeconomic and Sector-Related and the rise in disposable household incomes Underlying Conditions as demand for new residential construction increased. Private consumption also had a Macroeconomic Development positive impact on the economy. Following a short-term recovery at the beginning of the year, the growth rates of the global Sources for macroeconomic underlying conditions: DIW, IfW economy again developed at a slightly slower pace in the first half of 2019. This is illustrated Specific Industry Development by the continued deterioration in key business After several interest rate hikes in the last two climate indicators. The main reason for the years, the FED kept key interest rates stable in negative development is the US-China trade the range of 2.25 % to 2.50 % in the reporting dispute which is linked with and therefore period. Against the background of growing affects global economic development as well. economic risks and only moderate inflation, This and other economic policy uncertainties more and more members of the Federal have curbed both industrial production and Open Market Committee are leaning towards corporate investment. reducing the target range. The economic slowdown continued in the As planned, the European Central Bank eurozone. In addition to the trade conflicts completed the net purchases of the Asset driven by the US, the still uncertain Purchase