Annual Report 2023
MÜNCHENER
HYPOTHEKENBANK
8
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
MANAGEMENT REPORT
9 FUNDAMENTAL ASPECTS OF
BUSINESS ACTIVITIES AND
THE BUSINESS MODEL
10 Integration of Warburg Hypothekenbank
10 Business strategy and corporateplanning
11 ECONOMIC REPORT
11 General economic conditions
11 Economic development
11 Financial markets
12 Property and property financing markets
15 Business development
15 New mortgage business
17 Public and liquid investments
17 Refinancing
18 Financial and non-financial performance
indicators
18 Total new business property financing
18 Operating result after loan loss provisions
18 Administrative expenses
18 Cost-income ratio (CIR)
18 Return on equity (RoE) before tax
18 Proportion of sustainable loans in the new
retail business (private residential property
financing)
19 Proportion of green financing in the
commercial property financing portfolio
19 Financial performance, financial position and
net assets
19 Financial performance
20 Financial position
20 Net assets
21 Ratings, sustainability and general legal
conditions
21 Ratings
22 Sustainability
22 Separate non-financial report
23 General regulatory conditions
23 Executive bodies, committees and employees
23 Executive bodies and committees
23 Employees
23 Corporate governance statement pursuant
tosection 289f HGB
24 RISK, OUTLOOK AND
OPPORTUNITIES REPORT
24 Risk report
24 Counterparty risk
28 Market price risk
30 Liquidity risk
31 Investment risk
31 Operational risk
31 Migration risk
31 Property risk
31 Model risk
31 Risk-bearing capacity
32 Use of financial instruments for
hedging purposes
32 Accounting-related internal control and
risk management processes
32 Outlook – opportunities and risks
32 Economy and financial markets
33 Property markets and property financing
markets
34 Development of business at
Münchener Hypothekenbank
35 Disclaimer regarding forward-looking
statements
Münchener Hypothekenbank is a credit institution specialis-
ing in residential and commercial property financing for re-
tail and corporate customers. It has its registered office in
Munich. The Bank also has a branch in Berlin and 10 offices
across Germany. It is organised as a registered cooperative
society (eingetragene Genossenschaft) under German law.
The Bank is an independent credit institution with no major-
ity shareholder and about 57,000 members (as at 31 De-
cember 2023). The majority of the Bank’s members are
credit unions and private individuals. With assets totalling
EUR54.1billion as at 31 December 2023 and 643 employees,
Münchener Hypothekenbank is categorised as a significant
financial institution and is therefore subject to direct super-
vision by the European Central Bank (ECB).
Münchener Hypothekenbank belongs to the Genossenschaft-
liche FinanzGruppe (Cooperative Financial Network), which
comprises 737 Volksbanken, Raiffeisenbanken and other af-
filiated cooperative enterprises, such as DZ BANK, the insurer
R+V Versicherung, Union Investment and the building society
Bausparkasse Schwäbisch Hall.
The Bank’s core areas of business are residential and com-
mercial property financing in Germany and abroad. Hence,
among the institutions specialising in property financing, the
Bank is one of only a small number that offer private resi-
dential property financing as well as large-scale financing
forcommercial property. It also invests in highly liquid bank
securities and government bonds, which are primarily used
tomanage liquidity and the cover pool.
In the residential property financing segment, Münchener
Hypothekenbank lends to retail customers in Germany via
itscooperation partners, including the Volksbanken and
Raiffeisenbanken, other cooperative credit institutions and
independent financial intermediaries and brokers. Münchener
Hypothekenbank also works with PostFinance in Switzerland
and with select brokers in Austria. Cooperation with the
Volksbanken and Raiffeisenbanken is managed via 11
Münchener Hypothekenbank offices located in Augsburg,
Berlin, Cologne, Dresden, Frankfurt am Main, Hamburg,
Hanover, Munich, Münster, Nuremberg and Stuttgart.
In the commercial property segment, the Bank chiefly fi-
nances residential properties, office buildings, hotels and
retail and logistics properties in Germany and abroad. Be-
sidesGermany, Münchener Hypothekenbank also operates
inAustria, Belgium, France, Luxembourg, the Netherlands,
Spain, the United Kingdom and the United States. The busi-
ness comprises direct acquisition and syndicated business
and is partly arranged via the Volksbanken and Raiffeisen-
banken in Germany.
Funding is mainly via Mortgage Pfandbriefe, which are rated
Aaa, the highest possible rating, by Moody’s. The Bank also
issues unsecured bearer bonds on the capital market and
raises funds on the money market. The Bank’s securities are
purchased predominantly by institutional investors, such as
asset managers and investment funds, pension funds, insur-
ance companies and (central) banks, but also by private in-
vestors in some cases.
Münchener Hypothekenbank belongs to the institutional
protection scheme set up by the National Association of
German Cooperative Banks (Bundesverband der Deutschen
Volksbanken und Raiffeisenbanken, BVR). It is run by BVR
Institutssicherung GmbH, Berlin (BVR-ISG), and is classified
as an officially recognised deposit protection system. The
Bank is also affiliated with the protection scheme operated
by the association Bundesverband der Deutschen Volks-
banken und Raiffeisenbanken e.V. (BVR-SE), which consists
oftwo guarantee funds.
FUNDAMENTAL ASPECTS OF BUSINESS
ACTIVITIES AND THE BUSINESS MODEL
9
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
FUNDAMENTAL ASPECTS
Integration of Warburg
Hypothekenbank
M.M.Warburg & CO Hypothekenbank AG (Warburg Hypothek-
enbank) merged with Münchener Hypothekenbank in the
year under review. The resolutions required for the merger
were adopted by the General Meeting of Warburg Hypothek-
enbank on 24 April 2023 and by the Delegates Meeting of
Münchener Hypothekenbank on 22 April 2023. The merger
was entered in the register of cooperatives on 23June 2023
as planned.
Münchener Hypothekenbank had signed a contract in early
November 2022 to acquire all shares in Warburg Hypotheken-
bank. Once the necessary official approvals were obtained,
the share purchase was completed on 1 June 2023 as planned.
By the time of the merger with Münchener Hypothekenbank,
Warburg Hypothekenbank was thus a wholly owned subsi-
diary of Münchener Hypothekenbank. The merger took place
with retroactive effect from 1 January 2023.
Warburg Hypothekenbank focused mainly on long-term
property financing and the funding of this business. Its target
customers were investors above the level of standardised
retail business with properties in metropolitan regions in
Germany.
Business strategy and
corporateplanning
In the financial year just ended, the banking industry was
impacted in particular by high interest rates, as well as by is-
sues relating to ESG (environmental, social and governance),
banking regulation and digitalisation. As momentum in these
fields shows no signs of abating, it appears likely that exist-
ing structures in the banking industry will experience further
change. Münchener Hypothekenbank is continuously moni-
toring and assessing these developments in light of its busi-
ness activities.
The fundamental aspects of Münchener Hypothekenbank's
business activities are laid down in the business and risk
strategy. The strategic direction is reviewed at regular inter-
vals and revised where necessary. In connection with the
revision initiated in 2023, the Bank’s strategic direction was
essentially confirmed in its current business areas. These are
to be developed further and additional business areas are to
be explored as a potential complement to core business.
In this regard, Münchener Hypothekenbank aims to position
itself as a sustainable institution in terms of the value it con-
tributes to the Cooperative Financial Network, its customers
and its members. Münchener Hypothekenbank views itself
here as an integral part of the Cooperative Financial Network.
It offers its customers and partner banks financial solutions
tailored to their needs. ESG issues are a fixed part of the
Bank’s core business and strategy. Münchener Hypotheken-
bank sees digitalisation as an opportunity to enhance the
business model on a continuous basis and to create efficient
business processes.
In order to achieve its strategic objectives, the Bank has de-
fined specific measures and will consistently implement them
in the years ahead. In this regard, a key aspect is that our
strategic process is compliant with the German Minimum
Requirements for Risk Management (Mindestanforderungen
an das Risikomanagement, MaRisk). The starting point for the
annual strategy cycle is a strategic review of the implemen-
tation and impact of the adopted measures. As part of the
annual planning associated with the strategy process, sales
targets are compared against centralised and decentralised
components of administrative expenses. All earnings and cost
components and our risk-bearing capacity are monitored
continually or projected on a rolling basis so the Bank can
react promptly and appropriately to fluctuations in earnings
or costs.
Planning also includes capital adequacy.
10
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
FUNDAMENTAL ASPECTS
General economic conditions
ECONOMIC DEVELOPMENT
Although the world economy proved resilient in 2023,
growth of 3.1percent was lower than in the previous year.
Anumber of factors caused global economic growth to slow,
particularly high inflation and the marked tightening of
monetary policy, as well as the wars in Ukraine and the
Middle East and the lingering effects of the coronavirus
pandemic. Tight monetary policy had an impact towards
theend of the year especially, resulting in a considerable
slowdown in inflation. Despite the prolonged phase of eco-
nomic weakness, global labour markets developed robustly,
with unemployment rates remaining low.
The eurozone economy posted weak development. As the
geopolitical situation deteriorated, uncertainty increased
further. In addition, strong price pressure, higher interest
rates and weak global demand put a strain on households
and companies. For that reason, the European Central Bank
(ECB) expects growth for 2023 to come in at just 0.6percent.
In Europe as well, economic activity benefited from a strong
labour market, which continued to develop well despite the
slowdown in economic growth.
Inflation in the eurozone eased appreciably in 2023, with an
unexpectedly significant drop setting in halfway through the
year. In December 2023, however, the eurozone inflation rate
rose to 2.9percent, marking a temporary end to the decline.
The rise was mainly driven by trends in Germany, where the
inflation rate outpaced the European average due to one-off
effects relating to energy prices. Nevertheless, inflation in
Germany for 2023 as a whole was lower than in the previous
year, falling from 6.9percent to 5.9percent.
Generally speaking, the German economy needed more time
to recover from the sharp rise in energy prices in 2022 in a
tense geopolitical environment. The economy remained
weakin the second half of the year, with economic output
amounting to minus 0.3percent for 2023 as a whole. A key
reason for this was restrained spending by consumers, since
inflation had eroded their purchasing power. The labour
market weakened but remained stable overall. The shortage
of specialised workers remained an overriding issue. The un-
employment rate rose year on year by 0.4percentage points,
coming in at 5.7percent on average for the year. One striking
feature was that despite the shortage of specialised workers
and higher unemployment, there were fewer job openings on
the market.
FINANCIAL MARKETS
The financial markets were marked by uncertainties in 2023.
High inflation rates, sharp interest rate hikes by central banks,
the crises on the US and Swiss banking markets in spring
2023, geopolitical conflicts and concerns about recession re-
sulted in increased apprehension among market participants.
Nevertheless, the equity markets in particular proved to be
very robust over the course of the year, with significant price
gains.
Central banks responded to high inflation with additional in-
terest rate hikes in the first quarter of 2023. The US Federal
Reserve (Fed), for instance, raised interest rates four times
during the year by a total of 1.00percentage points to a cur-
rent range of 5.25percent to 5.50percent. The ECB increased
the main refinancing operations rate in six increments from
2.50percent to 4.50percent.
In order to further reduce excess liquidity in the monetary
system, the ECB stopped reinvesting cash from maturing
bonds in connection with its asset purchase programme
(APP), meaning that its portfolios will shrink as the bonds
mature. It intends to continue to reinvest, in full, the princi-
pal payments from maturing securities purchased under
thepandemic emergency purchase programme (PEPP) until
mid-2024.
The sharp interest rate hikes by central banks caused yields to
rise further and led to volatility on the bond market. The
yield on ten-year German government bonds fluctuated
markedly from 2.57percent at the start of the year to under
2percent in mid-January, then back up to 2.75percent in
early March. Yields reached their annual high of over 3per-
cent in early October. Lower inflation rates and the emerging
belief that interest rates were about to fall caused yields to
drop back to about 2percent by the end of the year.
On the foreign exchange market, the euro made slight
gainsagainst the US dollar over the course of the year,
strengthening from EUR/USD 1.07 at the start of the year
toEUR/USD1.10 at the end of the year. Faster interest rate
cuts by the Fed and concerns about the US economy con-
tributed to this trend.
ECONOMIC REPORT
11
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
ECONOMIC REPORT
The Swiss franc gained considerably in value against the
euro, rising from EUR/CHF 0.99 at the end of 2022 to EUR/
CHF 0.93 at the end of 2023. The British pound rose slightly
against the euro, from EUR/GBP 0.89 to EUR/GBP 0.87 at the
end of the year. The rate fluctuations here were very moder-
ate, with the euro trading over the course of the entire year
in a narrow range of EUR/GBP 0.85 to EUR/GBP 0.89.
The covered bond market experienced an extraordinarily high
number of issues over the entire year. At the start of the year,
many issuers took advantage of lower interest rates and
spreads for benchmark issues. The rising issue volume and
greater uncertainty on account of inflation and interest rate
hikes caused issue spreads to rise significantly, particularly
for long maturities. In addition, risk considerations prompted
investors to put greater emphasis on shorter maturities of
three to five years. Banks used covered bond issues in some
cases to finance heavier repayment of TLTRO III tenders. In
all, benchmark covered bonds totalling around EUR192bil-
lion were issued in 2023, nearly reaching the previous year's
high volume. The countries with the highest issuance were
again France and Germany.
PROPERTY AND PROPERTY FINANCING
MARKETS
Residential property, Germany
The German residential property market was characterised by
a high level of uncertainty in 2023. Sharply rising construc-
tion and financing costs posed great challenges for all mar-
ket players. On the one hand, the situation brought about a
wave of insolvencies among builders and project developers.
On the other, construction companies reported a steep rise in
order cancellations and a drop in new orders. Overall, only
about 180,000 new homes were approved in the period Jan-
uary to October 2023, corresponding to a decline of nearly
30percent compared with the same previous-year period.
The last time that fewer building permits were issued was in
2012. Permit figures tumbled both for owner-occupied
homes (minus 41percent) and for multi-family homes (mi-
nus 25percent). As a result, the German government fell far
short of its goal of building 400,000 new homes per year.
Current forecasts anticipate fewer than 250,000 completed
homes for 2023.
Transaction activity plummeted as a consequence of changes
in financing terms and the associated differences in price ex-
pectations of buyers and sellers. On the institutional invest-
ment market, residential property sales amounted to around
EUR6.5 billion. Compared with the previous year’s figure,
which was already low, sales fell by more than 30percent,
Yields on ten-year German government bonds 2023
IN %
Source: Bloomberg
January February March April May June July August September October November December
2.0
1.5
1.0
2.5
3.0
3.5
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Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
ECONOMIC REPORT
representing the lowest result since 2011. The number of
homes sold, as well as total sales revenue, also fell sharply in
the case of owner-occupied housing. For instance, the Com-
mittee of Valuation Experts of the City of Munich reported a
drop of 27percent in the number of homes sold and a de-
cline of 35percent in total sales revenue for the first three
quarters of 2023, compared with the previous-year period.
Low levels of new construction activity and reluctance to
purchase housing led to a further deterioration of the situa-
tion on the rental housing market in many cities, partly also
because immigration remained high at around 1.7million
people in the first ten months alone. Although immigration
numbers fell noticeably year on year due to the sharp drop in
the influx of people fleeing the war in Ukraine, they are still
considerably higher than in previous years. This caused a fur-
ther drop in the vacancy rate for housing units that are or
will soon become available, which at the start of 2023 stood
at just 1.6percent in growth regions. At the same time, the
upward trend in rents intensified. Rents under new housing
leases rose sharply throughout Germany by an average of
6.5percent in the first three quarters of 2023 compared with
the previous-year period. In contrast, potential buyers are
seeing a decline in purchase prices. Prices for owner-occu-
pied housing declined by 3.5percent and those for mul-
ti-family homes by 5.6percent. As a result, the gap between
rents and purchase prices narrowed again significantly.
The high level of uncertainty on the residential property mar-
ket was also evident on the financing side. In the first three
quarters of 2023, loan disbursements totalled just short of
EUR146 billion, representing a decline of about 33percent
compared with the previous-year period.
Residential property, international
The situation on the European residential property markets
remained precarious in view of high interest rates, inflation
and geopolitical uncertainties. As a result, transaction vol-
umes declined significantly in 2023 despite unabated high
demand for housing. Demand-side pressure thus caused
rents to rise further, while prices for residential property fell.
Even though prices were dropping, home ownership did not
become more affordable, due to the added interest burden.
Housing construction therefore stalled across Europe, due
also to significantly higher construction costs and stricter
sustainability requirements.
The Swiss residential property market developed robustly in
2023. Although the changed interest rate environment
dampened the rise in prices for residential property, they did
not come under any significant pressure due to excess de-
Trend in prices for owner-occupied housing
INDEX VALUES: 2010 = 100
Owner-occupied housing, total Source: vdp Research property price index, Q3 2023,
Condominiums based on analysis of the vdp transaction database,
Owner-occupied homes as at November 2023
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20232022
80
100
120
140
160
180
200
220
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Münchener Hypothekenbank
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of accounts
4 Notes 5 Further information2 Management report
ECONOMIC REPORT
mand and slight growth in construction activity. In the
fourth quarter of 2023, prices for single-family homes rose
by 4.6percent and prices for condominiums by 4.2percent
compared with the previous-year period. Nevertheless, both
buyers and sellers on the Swiss residential property market
were taking a wait-and-see approach in view of the greater
difficulty in arriving at a mutually acceptable price. This was
particularly evident in transaction numbers, which were sig-
nificantly below the level of previous years. Because of scant
new construction activity, supply remains tight on the Swiss
rental housing market, which has caused rents to rise.
The Austrian housing market was characterised by general
uncertainty brought about by high inflation, the sharp rise in
interest rates and more restrictive lending policies. Having
risen at a brisk pace for years, residential property prices
stagnated and, as in Germany, began to fall. Whereas de-
mand lessened for properties to purchase, it rose sharply for
rental housing. This trend put greater pressure on rents,
which rose by 9.5percent in the third quarter of 2023 com-
pared with the previous-year quarter.
Commercial property, Germany
On the German commercial property market, institutional in-
vestors were even more restrained than in the previous year.
Here as well, the reasons for this were interest rates, eco-
nomic uncertainties and the diverging price expectations of
buyers and sellers. In all, commercial property sales (including
residential property portfolios) in Germany totalled around
EUR29 billion, or half the transaction volume in the previous
year.
Prices for commercial property fell on average by nearly
10percent in the first three quarters, a much sharper decline
than for residential property. The upward trend in rents pre-
vented an even sharper drop in prices in nearly all asset
classes. By contrast, yields trended in a clearly positive direc-
tion.
The office property market registered a steep fall in space
take-up as a result of the weak economy and the increasing
use of new workplace models. All told, space turnover in the
top seven markets amounted to around 2.5million square
meter, the lowest figure since 2009. As a result, the vacancy
rate for office space continued to rise and neared the 6per-
cent mark. Because of these unfavourable general conditions,
investors took a very dim view of office property, causing the
transaction volume to plummet, so that office property con-
stituted only the fourth-strongest asset class in 2023, trailing
housing, logistics and retail.
In the case of retail property, the majority of transactions in
2023 involved large portfolio transactions with supermarkets.
The rental market was characterised, on the one hand, by
business closures as a result of insolvencies and space opti-
misations and, on the other, by high demand for large spaces
in city centres. This ultimately led to a rise in space turnover
and to stabilisation of prime rents. All told, retail suffered
from the weak economy and high inflation in 2023, with
sales in real terms declining year on year by 3.1percent.
Logistics property became the most popular commercial as-
set class on account of a number of portfolio transactions
and a significant upturn in demand in the second half of the
year. The solid annual result was on the level of the volume
in 2018/2019. Yields rose again slightly over the course of the
year.
Commercial property, international
On the international commercial property markets, too, the
difficult market environment meant that investors remained
restrained. According to initial projections, the global trans-
action volume for commercial property and residential port-
folios declined by 52percent to around EUR507 billion. In
Europe, the volume also fell by 52percent to EUR131 billion.
As in Germany, this decline was due to the ongoing price ad-
justment process, which in broad areas of the market is lead-
ing to a discrepancy between the prices that buyers are pre-
pared to offer and those that sellers are prepared to accept.
By contrast, rents continued their upward trend, as did yields
in the individual asset classes.
In the UK, the property market continued to slow. According
to initial forecasts, the volume of investment totalled EUR35
billion, representing a year-on-year decline of 47percent.
The rise in mortgage interest rates led to another slight rise
in yields across all asset classes.
The French commercial property market also significantly un-
der-performed. In total, property transactions amounted to
Trend in commercial property
transaction volumes in Germany
IN EURBILLION
Residential (only portfolio) Source: EY Research,
Commercial as at January 2024
12.8
54.2
18.8
20.3
70.7
58.6
52.9
60.9
6.5 22.8
2019
2020
2021
2022
2023
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ECONOMIC REPORT
EUR24 billion, down by 37percent year on year. Transac-
tions again predominantly involved office property, which
accounted for a share of more than 40percent. Yields rose
for office property as well as for retail property and logistics
property in 2023.
Of the markets described here, the Netherlands experienced
the sharpest drop in investment volume at over 60percent.
The most popular asset class was the residential property
sector, where around 37percent of the total transaction
volume was invested. Logistics came in second with a share
of 27percent, followed by office property with a share of
around 22percent. In addition, the rapid increase in interest
rates resulted in a strong rise in net initial yields in the
Netherlands.
The picture was similar for Spain. Because of the sharp rise in
interest rates, institutional investors remained reluctant to
invest, which slowed down activity on the investment market
considerably. In all, the volume of investment in commercial
property and residential housing portfolios came to nearly
EUR9billion in 2023, a year-on-year drop of 44percent.
Foreign investors accounted for the majority of the invest-
ment volume. In this regard, Madrid and Barcelona remained
the preferred investment targets, which was also reflected in
the continuing rise in rents. As was the case in most major
European cities, yields also rose in Madrid and Barcelona.
Investors and property financiers in the US also remained
cautious. The volume of investment fell by nearly 60percent
in the first three quarters. This was primarily due to uncer-
tainty about the future trend in interest rates, the weak eco-
nomic outlook and stricter lending criteria. With a share of
nearly 35percent, multi-family homes remained the strong-
est asset class, albeit with a total volume for the first three
quarters that fell by 66percent compared with the previ-
ous-year period to USD 81 billion. The largest decline in
terms of total volume was registered by the office sector,
which is currently struggling with very high vacancy rates.
The trend towards remote working and the worsening of
general economic conditions led to a significant decline in
office rentals. At the same time, the flight to quality by in-
vestors in recent years continued in 2023, and this propped
up demand for newer, prime office buildings with state-of-
the-art equipment and furnishings. As a result, rents rose
slightly again.
Business development
NEW MORTGAGE BUSINESS
New business amounted to EUR2.9 billion. Accordingly, the
committed volume of residential and commercial property
financing was 46percent lower than in the previous year.
This was due to the general economic conditions described in
the preceding sections, as well as to the environment on the
property markets, which resulted in plummeting demand for
property financing. In particular, considerably higher interest
rates and the differing price expectations of buyers/investors
on the one hand and sellers on the other caused the number
and volume of transactions to drop sharply. Measures to
counteract this, such as stepped-up market cultivation ef-
forts, also had little success under these conditions.
Accordingly, the development of the markets was worse than
expected at the start of 2023. At that time there were indica-
tions that the markets would stabilise over the course of the
year, but since that did not occur, we fell short of our new
business target of EUR5.4 billion.
In the private residential property financing segment, we
granted loans with a total volume of EUR1.3 billion. This
equates to a year-on-year decline of 59percent.
Brokerage business with partner banks in the Cooperative Fi-
nancial Network was strongly influenced by the contracting
property financing market and by the fact that the coopera-
tive banks were less predisposed to broker loans through us
as a result. This is because many of their customers decided
to sit tight for the time being and not to buy, given that the
economic environment and interest rates had made home
ownership less affordable.
Under these conditions, our sales campaigns were also less
successful than in previous years. Furthermore, fixed-rate fi-
nancing with terms of more than 15 years was not as much
in demand as in previous years, since many customers have
opted for shorter fixed-interest rate periods in the expecta-
New mortgage business 2019 to 2023
IN EURMILLION
Private residential property financing
Commercial property financing
3,257
2,101
3,717
4,338
2,461
4,019
2,690
2,147
1,331 1,593
2019
2020
2021
2023
2022
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ECONOMIC REPORT
tion that interest rates will fall, despite the partially inverse
interest rate structure. The average fixed-interest rate period
in the business with the Cooperative Financial Network
therefore fell from around 20 years to around 18 years, but it
is still very high and ensures stability in terms of interest in-
come. Despite higher interest rates and construction costs,
the average loan-to-value ratio in association business rose
only slightly from 64percent to 68percent and thus remains
quite moderate.
The placement of private property financing generated via
independent financial service providers in Germany fell by
46percent year on year to EUR363million. At EUR156mil-
lion, new business in Switzerland and Austria came in at the
level of the previous year (EUR157million), with the part-
nership with PostFinance in particular generating slight
growth. The main reasons for this were the unabated de-
mand for property financing in Switzerland and a joint sales
campaign, which was accompanied by promotional activities
carried out by PostFinance.
In commercial property financing, we granted loans with a
total volume of EUR1.6 billion, representing a decline of
24percent. This does not take into consideration the mort-
gage portfolio integrated through the takeover of Warburg
Hypothekenbank, which has a volume of around EUR1.5 bil-
lion. The main reason for the lower new business was the
weak transaction market, where, as described, sales were
halved nationally and internationally in 2023. We thus fared
comparatively well with our new business.
New business once again centred on domestic business,
which totalled EUR1.2billion (previous year: EUR1.6 billion).
Foreign business fell to EUR0.4billion (previous year:
EUR0.5 billion). Commitments were spread quite evenly
among the Netherlands, Spain, Austria and the UK. Because
of the difficult situation on the US property market, we pro-
ceeded with great restraint there.
The income situation in commercial property financing was
satisfactory. The budgeted margins were exceeded, which
compensated in part for the lower new business volume
without extending our risk strategy. This applies to domestic
and foreign business equally. The average loan size, which
had grown considerably in recent years, plateaued at around
EUR34million in 2023, on a par with the previous year’s
level.
From a risk perspective, we maintained our conservative fi-
nancing approach with a focus on conventional financing at
completion, giving due consideration to sustainable mini-
Mortgage rates of Münchener Hypothekenbank, 10-year fixed rate
IN %
1990 1992 201620142012201020082006200420022000199819961994 2018 2020 20242022
0
2
1
3
4
5
6
7
8
9
10
0
2
1
3
4
5
6
7
8
9
10
Long-term average 4.74
8.64
■
■
3.78
16
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
ECONOMIC REPORT
mum cash flows and locations. A positive aspect for us is the
high average level of equity that owners have in their prop-
erties in new business, which rose to 48percent in 2023, a
significant improvement on the previous year (41percent).
The same applies to the average initial loan-to-value ratio,
which fell to 86percent.
PUBLIC AND LIQUID INVESTMENTS
Public and liquid investments primarily serve to manage li-
quidity and cover pools. General conditions in this area of
business changed considerably in the year under review com-
pared with previous years. Interest rate hikes and the reduc-
tion of the ECB’s purchases have led to the establishment of
higher spreads on the market again, as long maturities have
risen significantly due to the inverted yield curve. We used
this market situation to make extensive additional purchases.
As a result, new business volume amounted to EUR2.2billion
in 2023. Taking into account disposals of EUR0.3 billion, the
total portfolio increased to EUR5.3billion (previous year:
EUR3.4 billion).
REFINANCING
The market environment for our issues was marked by sub-
stantial changes and strong momentum on the primary mar-
ket for covered bonds. Despite the changed general condi-
tions, we consistently enjoyed access to funding on good
terms during the year under review as compared with the
market.
For our large-volume funding transactions, we continued to
focus on the issuance of Mortgage Pfandbriefe and uncov-
ered bonds in euros and Swiss francs.
In terms of Pfandbrief issues in euros, five Mortgage Pfand-
briefe in benchmark and jumbo format are worth emphasis-
ing:
■
We started in January with the issuance of a Mortgage
Pfandbrief with a volume of EUR1billion and a term of
two years and eight months at a spread of 9 basis points
below the mid-swap rate. Demand from investors was
extremely strong. The bond was oversubscribed shortly
after the order book was opened. After about 1.5 hours,
the order book was closed at a volume of EUR3.5 billion.
■
This was followed in mid-April 2023 by our second
large-volume Pfandbrief issue. With a volume of
EUR750million and a term of six years and four months,
the benchmark Mortgage Pfandbrief was priced with a
spread of 6 basis points above the mid-swap rate.
■
In early June 2023, we issued our second green Pfandbrief
in benchmark format with a volume of EUR500million.
Itis based on Münchener Hypothekenbank’s Green Bond
Framework and fulfils the ICMA Green Bond Principles. It
also meets the minimum standards of the Association of
German Pfandbrief Banks (vdp) for green Pfandbriefe. The
Pfandbrief has a term of seven years and two months. It
was placed at a price of 8basis points above the mid-
swap rate and met with brisk, widespread demand.
■
In August 2023, we issued a benchmark Mortgage Pfand-
brief with an issue volume of EUR500million and a term
of nearly three years. Demand from investors was very
brisk, despite the challenging environment on the capital
market. The spread was fixed at 3 basis points above the
mid-swap rate.
■
In November 2023, we issued another green benchmark
Mortgage Pfandbrief with a volume of EUR500million,
which met with strong and widespread investor interest.
The term is five years. The order book was closed at over
EUR1.5 billion. The issue was placed at a price of 19 basis
points above the mid-swap rate. This green Mortgage
Pfandbrief is also based on Münchener Hypothekenbank’s
Green Bond Framework.
In addition to these issues in euros, the focus in 2023 was
also on issues in Swiss francs, which totalled approximately
CHF 415million. These issues took place exclusively on the
capital market via syndicated bonds. This brisk issuance activ-
ity covered various terms and the product categories Pfand-
brief and Tier 2 bond.
One highlight was the issuance of a green Tier 2 bond in May
2023 in the amount of CHF 115million. It enabled us in par-
ticular to optimise our regulatory capital position. The term is
ten years. The total issue volume was placed in Switzerland
and was ordered mainly by asset managers. The issue was
significantly oversubscribed. The combination of sustainabil-
ity with a Tier 2 bond contributed to the success of this
transaction.
As at 31 December 2023, total issue volume amounted to
around EUR7.6 billion. It consisted of EUR6.7billion in
Mortgage Pfandbriefe and around EUR0.9billion in uncov-
ered bonds. In addition, we obtained funding of around
EUR2.4billion on the money market (including commercial
papers) as well as through repo transactions and deposits.
We launched two new sales channels for our deposit prod-
ucts in the year under review. Retail customers can now also
obtain them on the platforms “Weltsparen” and “DB-Zins-
markt”. They complement GenoFestgeld, which has been of-
fered since 2017 through partner banks in the Cooperative
Financial Network.
17
Münchener Hypothekenbank
Annual Report 2023
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of accounts
4 Notes 5 Further information2 Management report
ECONOMIC REPORT
Financial and non-financial perfor-
mance indicators
1
The Bank’s management uses the following financial perfor-
mance indicators:
■
Total new business property financing
■
Operating result after loan loss provisions (results from
ordinary business activities)
■
Administrative expenses
■
Cost-income ratio (CIR)
■
Return on equity (RoE) before tax
The following two sustainability values are used as non-
financial performance indicators:
■
Proportion of sustainable loans in the new retail business
(private residential property financing)
■
Proportion of green financing in the commercial property
financing portfolio
TOTAL NEW BUSINESS PROPERTY FINANCING
In 2023 we made property financing commitments totalling
EUR2.9 billion. In our planning, we had assumed a new busi-
ness volume of EUR5.4 billion. We were unable to meet this
target because of low demand for property financing due to
the situation on the property markets.
However, the mortgage loan portfolio increased by around
EUR1.5billion with the takeover of M.M.Warburg & CO Hy-
pothekenbank AG.
OPERATING RESULT AFTER LOAN LOSS
PROVISIONS
The operating result after loan loss provisions, i.e. results
from ordinary business activities (item 13 of the income
statement), amounted to EUR170.9million, compared with
EUR133.2million in 2022, representing a rise of 28percent.
As a result of the sharp rise in interest rates and the associ-
ated higher net interest income, as well as considerably lower
commissions paid to our brokerage partners due to the drop
in new business, net interest and commission income as at 31
December 2023 exceeded the target figures by nearly
EUR120million. On the other hand, loan loss provisions in-
creased by EUR66million.
ADMINISTRATIVE EXPENSES
Administrative expenses are the sum total of item 7 “General
administrative expenses” and item 8 “Depreciation, amortisa-
tion and write-downs of intangible and tangible assets” as
shown in the income statement.
As at 31 December 2023, administrative expenses amounted
to EUR164.6million, a year-on-year increase of 5.5percent.
COST-INCOME RATIO (CIR)
The cost-income ratio describes the ratio of administrative
expenses to net interest and commission income. The way in
which administrative expenses are calculated is described in
financial performance indicator "administrative expenses".
Net interest and commission income is calculated by netting
items 1 to 5 in the income statement.
The cost-income ratio for the 2023 financial year was
36.5percent, compared with 46.9percent in the previous
year. In its planning, the Bank assumed that the ratio would
remain nearly unchanged. It aims to keep the cost-income
ratio permanently under 50percent.
RETURN ON EQUITY (ROE) BEFORE TAX
Return on equity before tax is calculated as the ratio of in-
come statement item 13 “Results from ordinary business
activities” to balance sheet liability item 9 “Fund for general
banking risks” (current year) plus liability item 10aa “Members’
capital contributions” (current year) plus item 10b “Revenue
reserves” (previous year) plus income statement item 20
“Retained earnings brought forward from previous year”. The
return on equity before tax for the 2023 financial year was
9.4percent, compared with 7.7percent in the previous year.
The Bank aims for an RoE before tax of around 10percent.
PROPORTION OF SUSTAINABLE LOANS IN
THE NEW RETAIL BUSINESS (PRIVATE RESI-
DENTIAL PROPERTY FINANCING)
The key objective of Münchener Hypothekenbank’s sustaina-
bility strategy is to integrate and expand sustainability within
the Bank’s core business. Sustainable loans in private residen-
tial property financing are a cornerstone in implementing
this strategic approach. These include loans that meet the
criteria for the Green Loan and Family Loan or that fulfil the
criteria for the top 15percent of building stock in Germany
in accordance with Münchener Hypothekenbank’s Green
Bond Framework. The target for 2023 was a share of at least
10percent in new business, as the proportion of financing
1
For the purposes of comparison with 2022, the following figures include the figures for
M.M.Warburg & CO Hypothekenbank AG
18
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
ECONOMIC REPORT
that was for newly built residential properties was well below
average in the year under review, due to the situation on the
market. In the year under review, the share was 11.8percent.
PROPORTION OF GREEN FINANCING IN THE
COMMERCIAL PROPERTY FINANCING PORT-
FOLIO
Another objective of Münchener Hypothekenbank’s sustaina-
bility strategy is to expand green financing within commer-
cial property financing. This includes loans for commercial
properties that have been awarded a recognised sustainabil-
ity certificate or that meet the criteria for the top 15percent
of building stock in Germany in terms of energy efficiency in
accordance with Münchener Hypothekenbank’s Green Bond
Framework. Our target was to ensure that at least 20percent
of our total portfolio consisted of green financing by the end
of 2023. We exceeded this target with a share of 33.3percent.
Financial performance, financial
position and net assets
FINANCIAL PERFORMANCE
2
Net interest income
3
increased by EUR76.0million, or
17.2percent, to EUR518.5million, which was attributable to
higher interest rates, but also to growth of the mortgage
portfolio. In our forecast, we assumed that net interest in-
come would remain unchanged at around EUR430.0million.
Commission paid totalled EUR77.1million, which was down
by EUR45.3million, or 37percent, compared with the previ-
ous year. Commission received amounted to EUR9.6million,
resulting in a net commission income
4
of minus
EUR67.5million, compared with minus EUR109.6million
the previous year.
This resulted in net interest and commission income
5
of
EUR450.9million, which corresponds to an increase of
EUR118.1million, or 36percent, compared with the previous
year. In our planning, we assumed a rise of less than 5per-
cent. In addition to higher net interest income, the increase
was also attributable to lower commission payments due to
the drop in new business.
General administrative expenses rose by EUR9.4million to
EUR161.0million. Personnel costs amounted to
EUR69.2million, nearly at the level of the previous year.
Other administrative expenses rose by EUR9.6million, or
11.7percent. The expense for the bank levy increased by
EUR2.0million. In addition, expenses for renovating and up-
grading workspaces in the Bank's buildings contributed
around EUR2million to the rise. Expenses for projects relat-
ing to regulatory issues and for the Bank’s further strategic
development increased by about EUR3million. The remain-
der of the rise was attributable to investments in IT.
Depreciation, amortisation and write-downs of intangible
and tangible assets amounted to EUR3.6million, or
EUR0.9million less than in the previous year.
Total administrative expenses
6
came to EUR164.6million,
compared with EUR156.1million in the previous year. The
cost-income ratio
7
was 36.5percent, compared with 46.9per-
cent in the previous year.
The net result of other operating expenses and other operat-
ing income amounted to plus EUR2.1million.
The operating result before loan loss provisions
8
increased by
65.6percent year on year to EUR288.4million. In our plan-
ning we assumed EUR 217 million.
The item “Write-downs on and valuation allowances of loans
and advances and specific securities, as well as additions to
loan loss provisions” amounted to minus EUR118.0million.
The net result of changes in loan loss provisions (including
direct write-downs) came to minus EUR103.7million (previ-
ous year: minus EUR17.6million). The changed macroeco-
nomic environment and the associated rise in interest rates
resulted in considerable declines in the value of properties,
especially on foreign property markets. In line with our con-
servative approach, we created a loan loss provision in the
amount of these declines in value.
In addition, we added EUR11million to the collective impair-
ment allowance, which includes the provision for irrevocable
loan commitments. These two positions thus total EUR60million.
The item “Income from reversals of write-downs on partici-
pating interests, shares in affiliated companies and securities
treated as fixed assets” amounted to EUR0.5million.
Income from ordinary business activities totalled EUR170.9million.
2
For the purposes of comparison with 2022, the following figures include the figures for
M.M.Warburg & CO Hypothekenbank AG
3
Net interest income is calculated by adding item 1 “Interest income” plus item 3 “Current
income” minus item 2 “Interest expenses” as shown in the income statement
4
Net commission income is calculated by netting item 4 “Commission received” and item 5
“Commission paid” as shown in the income statement
5
Net interest and commission income is the sum of net interest income and net commission
income
6
Total administrative expenses are the sum total of item 7 “General administrative expenses”
and item 8 “Depreciation, amortisation and write-downs of intangible and tangible assets” as
shown in the income statement
7
Ratio of administrative expenses to net interest and commission income
8
Net result of items 1 to 9 in the income statement
19
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
ECONOMIC REPORT
The merger with Warburg Hypothekenbank resulted in ex-
traordinary income of EUR65.3million and an extraordinary
expense of EUR6.3million.
The wholly owned property subsidiary Nußbaumstraße GmbH
& Co. KG was merged with the Bank by way of absorption,
generating extraordinary income of EUR20.1million.
For the bank levy, Münchener Hypothekenbank made use in
the years prior to 2023 of the ability to provide an irrevoca-
ble payment commitment and to that end deposited 15per-
cent of the amount of the commitment as cash collateral
under a collateral agreement. It recognised a liability and an
extraordinary expense of EUR22.6million for the irrevocable
payment commitment.
The net result of the extraordinary items amounted to
EUR56.5million.
An allocation of EUR59million was made to the fund for
general banking risks on 30 June 2023.
After tax expenses of EUR66.2million, net income came to
EUR102.1million, a year-on-year increase of 49.5percent.
FINANCIAL POSITION
In terms of liquidity management, Münchener Hypotheken-
bank distinguishes between structural refinancing and daily
liquidity management. Liquidity is at all times managed in
consideration of and in compliance with the limits of the in-
ternal liquidity risk model, as well as the regulatory liquidity
requirements mandated by ILAAP, particularly the LCR and
the NSFR.
Structural refinancing is subject to the risk that debt financ-
ing may not be sufficiently available under certain circum-
stances. Münchener Hypothekenbank has a licence to oper-
ate as a Pfandbrief bank, which forms the basis for covered
funding and thus ensures that liquidity can be obtained at
alltimes. It continuously issues Pfandbriefe with a variety of
terms to investors both within the Cooperative Financial Net-
work and outside it. In doing so, it strives to have funding
with matching maturities where possible.
The aim of ongoing liquidity management is to ensure the
supply of liquidity at all times, including when there are sig-
nificant and unexpected outflows of liquidity. Münchener
Hypothekenbank does not offer any liquidity facilities, which
means that unexpected outflows can result only from collat-
eral requirements in the case of derivatives. The Bank has a
large portfolio of HQLAs (high-quality liquid assets) that it
can draw on at any time for this purpose.
Münchener Hypothekenbank’s liquidity situation is more
than adequate.
Our Bank was able to meet its payment obligations in due
form, on time and in full at all times in the last financial year.
The liquidity coverage ratio (LCR) was a minimum of 137per-
cent and on average 370percent in the period under review.
The stress indicator was 648percent at the balance sheet
date.
NET ASSETS
Total assets following the merger with Warburg Hypotheken-
bank came to EUR54.1billion as at the end of 2023, com-
pared with EUR54.2billion for both companies in the previ-
ous year.
Adjusted for the addition from the merger with Warburg
Hypothekenbank, the mortgage loan portfolio grew by
EUR0.6billion to EUR46.5 billion during the course of the
year. Private residential property financing in Germany was
once again the fastest-growing segment, increasing by
EUR0.6 billion.
The private residential property financing portfolio is structured
as follows: domestic – EUR25.5billion (previous year: EUR24.8
billion); foreign – EUR5.5billion (previous year: EUR5.4 bil-
lion). In addition to financing business in Switzerland, this
portfolio also includes financing in Austria. The commercial
property financing portfolio totals EUR15.5billion (previous
year: EUR15.7 billion). Of this amount, EUR4.0billion (previ-
ous year: EUR4.2 billion) is attributable to financing outside
Germany. Within this figure, around 40percent of the port-
folio in the US consists of residential property financing,
since we began several years ago to shift our US portfolio
away from office property in favour of residential property.
Portfolio development 2019 to 2023*
IN EURMILLION
Residential housing, domestic Commercial property, domestic
Residential housing, Switzerland and Austria Commercial property, foreign
*2019–2022 does not include the portfolio figures of Warburg Hypothekenbank
35,498
38,411
41,662
44,342
46,511
2019
2020
2021
2022
2023
20
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
ECONOMIC REPORT
The portfolio of public and liquid investments grew to
EUR5.3 billion, including EUR4.1billion in securities and
bonds.
At the end of 2023, the net balance of hidden charges and
hidden reserves in the securities portfolio amounted to plus
EUR8million (previous year: plus EUR2million).
Following a detailed examination of all bonds, we have come
to the conclusion that there are no permanent impairments.
We aim to hold bonds on the books until maturity. There was
no necessity for write-downs to a lower fair value.
The portfolio of long-term funding instruments increased to
EUR46.6 billion. Mortgage Pfandbriefe accounted for
EUR35.3billion of this amount, Public Pfandbriefe for
EUR1.2billion and uncovered bonds for EUR10.1 billion. The
total volume of funding instruments – including money mar-
ket funds and customer deposits – amounted to
EUR50.4billion as at 31 December 2023.
The item “Other liabilities to customers” consists of:
OTHER LIABILITIES TO CUSTOMERS
IN € 000
Remaining term
< one year
Remaining term
> one year Total
Other liabilities to customers as at 31 December 2023 2,657,012 2,520,323 5,177,335
Registered bonds 16,880 1,546,945 1,563,825
of which institutional investors 15,957 1,387,150 1,394,107
Promissory note loans on the liabilities side 604,970 804,934 1,409,904
of which institutional investors 80,896 453,434 534,330
Other 2,035,162 168,444 2,203,606
of which institutional investors 727,697 77,609 805,306
Members’ capital contributions fell by EUR0.5million and
stood at EUR1,271.5million. Regulatory own funds totalled
EUR2,364.4million (previous year: EUR1,950.0million). The
rise was primarily the result of obtaining Tier 2 capital facili-
ties with a volume of EUR0.4 billion.
Common Equity Tier 1 capital rose from EUR1,690million in
the previous year to EUR1,760million as at 31 December
2023. At the end of 2023, the Common Equity Tier 1 capital
ratio was 16.5percent (previous year: 19.0percent), the Tier
1 capital ratio was 18.7percent (previous year: 21.2percent)
and the total capital ratio was 22.2percent (previous year:
21.9percent). The decline in the capital ratios is due in par-
ticular to an increase in risk-weighted assests. The leverage
ratio at 31 December 2023 was 3.7percent (previous year:
3.7percent).
Ratings, sustainability and
general legal conditions
RATINGS
Moody’s again confirmed all ratings for Münchener Hypo-
thekenbank and also maintained its “stable” rating outlook.
Moody’s remains positive about the fact that Münchener
Hypothekenbank has a strong reputation on the capital
market as an issuer of Pfandbriefe, noting that it has a
correspondingly high level of funding capacity, and also
acknowledges the firm ties and corresponding support the
Bank enjoys within the Cooperative Financial Network.
Current ratings at a glance:
RATING
Mortgage Pfandbriefe Aaa
Junior senior unsecured A2
Senior unsecured Aa3
Short-term liabilities Prime-1
Tier 2 Baa2
Long-term deposits Aa3
The long-term unsecured liabilities are rated by the other two
major rating agencies, Standard & Poor’s (A+) and Fitch (AA-),
on the basis of the combined rating of the Cooperative Fi-
nancial Network.
21
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
ECONOMIC REPORT
SUSTAINABILITY
The regulatory requirements for sustainability in corporate
governance set by the EU, the ECB, the European Banking
Authority (EBA) and the German Federal Financial Supervisory
Authority (BaFin) remained high in the year under review.
These requirements stem in particular from the EU taxonomy,
the ECB’s “Guide on climate-related and environmental risks”,
disclosure pursuant to CRR II and the EBA’s “Guidelines on
loan origination and monitoring”. They relate primarily to
Münchener Hypothekenbank’s core business, risk manage-
ment and reporting.
As part of the ESG regulatory project that the Board of
Management set up in 2021 and extended in 2023 for the
purposes of implementing these requirements, important
progress was made with numerous work packages in the
period under review. These include, in particular, the creation
of the necessary processes, structures and corresponding
data architecture with the aim of developing effective and
efficient sustainability management on this basis.
With the aim of responding to the requirements of the mar-
ket and to the increased interest in sustainability, Münchener
Hypothekenbank enacted its sustainability strategy in 2022,
augmenting it in 2023 with a road map that clearly defines
timetables and responsibilities in particular.
As part of our ESG framework, the Bank’s ESG Committee
met monthly as well as when warranted by events. This inter-
disciplinary body advises the ESG Board, consisting of the
entire Board of Management, on sustainability issues, collab-
orates on the further development of the sustainability strat-
egy and prepares decision proposals.
Our sustainability activities remain focused on our core busi-
ness – private and commercial property financing. In private
residential property financing business, our loans with a so-
cial and environmental focus (Green Loan and Family Loan)
that were made with banks in the Cooperative Financial Net-
work accounted for around 17percent of new business in
this segment. We publish an annual impact report on the
specific environmental added value of sustainable loans for
private and commercial property.
As regards sustainable securities, in 2023 we issued ESG
Pfandbriefe, green Pfandbriefe, uncovered senior preferred
and senior non-preferred bonds as well as green commercial
papers and green term deposits. Nearly EUR1.5billion was
successfully placed in this segment.
In its sustainability rating, ISS ESG awarded Münchener Hy-
pothekenbank a rating of C+ for sustainability management.
This again places us among the top performers in the Finan-
cials/Mortgage & Public Sector rating peer group. As a result,
ISS ESG once again granted us “Prime Status”.
Every year, the agency Sustainalytics awards a risk score be-
tween 0 and 40 points. The lower this risk score, the stronger
the company’s sustainability management. Münchener Hy-
pothekenbank’s risk score in 2023 was 15.3, which corre-
sponds to low risk in accordance with Sustainalytics’ ESG risk
rating. This puts the Bank in 10th place out of around 100
banks in the Thrifts and Mortgages peer group.
9
The development of the sustainability ratings in 2023 and
the two previous years at a glance:
THE DEVELOPMENT OF THE SUSTAINABILITY
RATINGS SINCE 2021
2021 2022 2022
ISS ESG
C+
(Prime Status)
C+
(Prime Status)
C+
(Prime Status)
Sustainalytics
Risk Score 18.5
(low risk)
Risk Score 16.3
(low risk)
Risk Score 15.3
(low risk)
SEPARATE NON-FINANCIAL REPORT
Münchener Hypothekenbank has been reporting on the
non-financial aspects and the material economic, environ-
mental and social impacts of its business activities since
2012. It does so in harmony with the Global Reporting Initia-
tive Standards. We comply with the requirements set out in
the German CSR Directive Implementation Act (CSR-Richtlin-
ie-Umsetzungsgesetz, CSR-RUG) by publishing a separate
non-financial report. The non-financial report is published on
the Bank’s website at the same time as the annual report.
9
Copyright ©2023 Sustainalytics. All rights reserved. This section contains information devel-
oped by Sustainalytics (www.sustainalytics.com). Such information and data are proprietary of
Sustainalytics and/or its third-party suppliers (Third Party Data) and are provided for informa-
tional purposes only. They do not constitute an endorsement of any product or project, nor an
investment advice and are not warranted to be complete, timely, accurate or suitable for a
particular purpose. Their use is subject to conditions available at https://www.sustainalytics.
com/legal-disclaimers.
22
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
ECONOMIC REPORT
GENERAL REGULATORY CONDITIONS
Capital
For the most part, Münchener Hypothekenbank calculates
itscapital requirements using the internal ratings-based
approach (IRBA).
Single Supervisory Mechanism for EU banks
The “finalisation” of Basel III also includes the gradual intro-
duction of an output floor of 72.5percent to limit the effects
of internal approaches compared with standard approaches.
This means that in particular banks with low risk weightings
for their receivables, such as Münchener Hypothekenbank,
will be adversely affected by the changes. The introduction
ofthis floor will also impact Münchener Hypothekenbank’s
capital ratios. The Bank is monitoring developments, and
given that its current capital ratios are significantly higher
than the minimum requirements, it believes that this regula-
tory change will be manageable.
The Bank's Compliance unit follows discussions on the publi-
cation of new national and international regulations very
closely and forwards any new regulations to the responsible
departments within the Bank, where they are implemented in
various measures and projects. The abundance of additional
regulatory requirements imposed by supervisory authorities
causes significant costs and poses a considerable challenge
for our Bank’s human and financial resources.
The ECB conducted the annual Supervisory Review and Eval-
uation Process (SREP), comprising a very detailed evaluation
of the business model, internal governance and capital and
liquidity adequacy. Any additional capital and liquidity re-
quirements will be derived from that process. The additional
capital adequacy requirement (P2R) imposed within the
framework of the SREP again amounted to 1.75percent of
total capital; no additional requirements were set for liquidity.
Recovery and resolution plan
The recovery plan was updated, and the information required
for the resolution plan was sent to the resolution authority.
There were no significant changes from the previous year.
Executive bodies, committees
and employees
EXECUTIVE BODIES AND COMMITTEES
In the year under review, Jürgen Hölscher, a member of the
Board of Management of Emsländische Volksbank eG, and
Rainer Jenniches, Chairman of the Board of Management
ofVR-Bank Bonn Rhein-Sieg eG, were re-elected for a fur-
ther term of office on the Supervisory Board of Münchener
Hypothekenbank.
EMPLOYEES
In 2023, human resources work again focused on imple-
menting the human resources strategy. In view of the diffi-
cult labour market, which was characterised by a growing
shortage of specialised workers, key points of emphasis were
ramping up efforts in the area of personnel recruitment, as
well as taking steps to retain staff. In addition, Münchener
Hypothekenbank’s human resources strategy pursues the
objective of creating an optimal work environment that pro-
motes the individual abilities and talents of its employees
and supports their professional development.
The Bank had 643 employees
10
(previous year: 630) on aver-
age over the year.
CORPORATE GOVERNANCE STATEMENT
PURSUANT TO SECTION 289F HGB
The proportion of women in the Bank as a whole came to
49percent in the year under review. At Board of Manage-
ment level, the proportion came to 0percent, while the pro-
portion at the first management level below the Board was
18percent, at the second level 30percent and at the third
level 25percent. The proportion of women on the Super-
visory Board was 17percent in 2023. For the Supervisory
Board and the two management levels below the Board of
Management, the Bank is aiming for a proportion of women
of 20percent, with a target quota for the Board of Manage-
ment of 33percent. In December 2020, the Supervisory
Board’s Nomination Committee addressed the issue of the
proportion of women on the Board of Management and
Supervisory Board and decided to retain the existing target
quotas and to strive to achieve them by 2026 in the context
of upcoming succession arrangements.
10
Number of employees in accordance with section 267(5) of the German Commercial Code
(Handelsgesetzbuch, HGB); excludes trainees, employees on parental leave or in early retire-
ment or partial retirement (non-working phase) and employees on leave of absence.
23
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
ECONOMIC REPORT
RISK, OUTLOOK AND OPPORTUNITIES REPORT
Risk report
The continuous control and monitoring of risks is essential to
the management of business development at Münchener Hy-
pothekenbank. Risk management is therefore a high priority
in terms of the overall management of the Bank.
The framework governing business activities is laid down in
the business and risk strategy. The Board of Management is
responsible for this strategy, which is reviewed regularly to
ensure its objectives are being met, revised where necessary
and discussed with the Supervisory Board at least once a year.
The Supervisory Board’s Risk Committee is informed of the
Bank’s risk profile at least once a quarter and additionally as
necessary so that it can exercise its supervisory function. This
information is based on, among other things, reports on
ICAAP and ILAAP and on credit risks, operational risk reports
and the risk report prepared in accordance with MaRisk.
Risk management is based firstly on the analysis and presenta-
tion of existing risks, and secondly on comparing these risks
with the available risk coverage potential (risk-bearing capac-
ity). There are also various other relevant analyses that need
to be viewed as a whole to enable adequate management of
the Bank. Extensive control procedures involving internal,
process-dependent monitoring are employed for this purpose.
The Internal Audit department, which is independent of all
processes, has an additional supervisory role in this respect.
In terms of our analysis and presentation of existing risks, a
distinction is made between counterparty risk, market price
risk, credit spread risk, liquidity risk, migration risk, invest-
ment risk, model risk, property risk and operational risk. With
the exception of liquidity risk, which is covered by ILAAP,
these risks are measured from an economic perspective to
determine whether they comply with the limit specified for
the type of risk. Additional risks, such as placement risk,
reputational risk, business risk and ESG risk, are each seen
aselements of the above risks and are taken into account
atthe appropriate point in the respective calculations.
COUNTERPARTY RISK
Counterparty risk (credit risk) is of major importance for
Münchener Hypothekenbank. Counterparty risk means the
risk that a counterparty will fail to meet its payment obliga-
tions towards the Bank by paying late or by defaulting com-
pletely or in part.
The Credit Manual sets forth the credit approval procedures
and process regulations for those units involved in lending
business and the permissible credit products. The business
and risk strategy also contains more detailed explanations of
the sub-strategies for target customers and target markets,
as well as basic specifications for measuring and managing
credit risk at individual transaction and portfolio level. Indi-
vidual limits have been set for all types of lending. Another
factor is regional diversification, which is ensured by country
limits.
In mortgage business, we ensure that we grant senior loans
predominantly with moderate loan-to-value ratios; in com-
mercial business, limits also apply with regard to the debt
service coverage ratio (DSCR) and loan to value (LTV). The
current loan-to-value ratios break down as follows:
TOTAL PORTFOLIO OF MORTGAGES AND OTHER LOANS
11
Loan-to-value ratio
31 December 2023 31 December 2022
€ Relative € Relative
Up to 60% 18,910,633,729 39.2% 18,450,179,319 39.3%
> 60% and <= 70% 7,227,826,115 15.0% 6,896,647,557 14.7%
> 70% and <= 80% 7,891,055,770 16.4% 7,898,331,218 16.8%
> 80% and <= 90% 4,936,391,362 10.2% 4,400,454,402 9.4%
> 90% and <= 100% 3,932,960,120 8.2% 4,022,835,569 8.6%
Over 100% 5,301,495,978 11.0% 5,295,250,958 11.3%
Without 26,598,424 0.1% 2,618,630 0.0%
Total 48,226,961,499 100.0% 46,966,317,653 100.0%
11
The total portfolio of mortgages and other loans essentially comprises item 3a. on the assets side of the balance sheet in the amount of EUR46.2 billion, plus EUR1.7billion in irrevocable loan
commitments under “2. Other commitments” that are to be disbursed within the next 12 months and EUR0.3billion in loan loss provisions.
24
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
RISK, OUTLOOK AND
OPPORTUNITIES REPORT
The average loan-to-value ratio stood at approximately
61percent in retail business and at approximately 84percent
in individual business. Since Münchener Hypothekenbank
provides at most purchase price financing, the highest loan-
to-value ratios ranged from 100percent to 110percent.
The regional breakdown within Germany and internationally
is summarised in the following overview:
TOTAL PORTFOLIO OF MORTGAGES AND OTHER LOANS
12
31 December 2023 31 December 2022
Region € Relative € Relative
Baden-Württemberg 4,008,195,363 8.3% 4,010,063,305 8.5%
Bavaria 8,921,489,311 18.5% 8,822,458,827 18.8%
Berlin 2,912,114,153 6.0% 2,485,848,754 5.3%
Brandenburg 889,956,143 1.8% 827,421,461 1.8%
Bremen 198,689,754 0.4% 151,347,036 0.3%
Hamburg 1,287,044,713 2.7% 1,227,295,064 2.6%
Hesse 3,453,589,650 7.2% 3,370,033,196 7.2%
Mecklenburg-West Pomerania 622,533,995 1.3% 587,840,865 1.3%
Lower Saxony 3,462,236,530 7.2% 3,356,204,347 7.1%
North Rhine-Westphalia 5,885,499,259 12.2% 5,743,181,146 12.2%
Rhineland-Palatinate 1,887,313,069 3.9% 1,839,349,385 3.9%
Saarland 413,980,541 0.9% 423,200,795 0.9%
Saxony 1,386,609,059 2.9% 1,215,349,408 2.6%
Saxony-Anhalt 800,081,694 1.7% 813,642,843 1.7%
Schleswig-Holstein 2,056,155,720 4.3% 2,049,672,294 4.4%
Thuringia 478,396,213 1.0% 438,961,354 0.9%
Total domestic 38,663,885,167 80.2% 37,361,870,080 79.6%
Austria 314,875,927 0.7% 235,491,554 0.5%
France 385,652,662 0.8% 455,318,821 1.0%
United Kingdom 431,616,559 0.9% 479,712,176 1.0%
Spain 710,224,093 1.5% 707,255,450 1.5%
Luxembourg 152,859,212 0.3% 152,668,656 0.3%
Switzerland 5,491,981,269 11.4% 5,339,498,930 11.4%
Netherlands 1,004,203,423 2.1% 989,984,062 2.1%
Belgium 105,493,567 0.2% 105,492,105 0.2%
USA 966,169,620 2.0% 1,139,025,819 2.4%
Total foreign 9,563,076,331 19.8% 9,604,447,574 20.4%
Total domestic and foreign 48,226,961,499 100.0% 46,966,317,653 100.0%
12
The total portfolio of mortgages and other loans essentially comprises item 3a. on the assets side of the balance sheet in the amount of EUR46.2 billion, plus EUR1.7billion in irrevocable loan
commitments under “2. Other commitments” that are to be disbursed within the next 12 months and EUR0.3billion in loan loss provisions.
25
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
RISK, OUTLOOK AND
OPPORTUNITIES REPORT
Credit risk management starts with the drafting of loan
terms and conditions when the target transaction is selected.
Regularly reviewed risk cost functions are used for this pur-
pose. Depending on the type and risk level of the transaction,
various rating and scoring procedures are used.
In property financing, a broadly diversified portfolio of
mainly residential property finance and credit approval pro-
cesses that have been tried and tested for years are reflected
in a portfolio with a comparatively low credit risk. However,
the difficult situation on the property markets is also affect-
ing the portfolio of Münchener Hypothekenbank. In 2023,
risks rose nearly exclusively in individual business:
PARAMETER ON CREDIT RISK (TOTAL PORTFOLIO)
IN EURMILLION
Parameter 31 December 2023 31 December 2022
Change from the
previous year
Default volume 744.4 186.9 298%
thereof retail business 130.4 106.3 23%
thereof individual business – Germany 129.9 3.5 3,600%
thereof individual business – USA 354.1 0.0 N/A
thereof individual business – foreign, excluding USA 129.9 77.1 69%
Expected loss 191.9 99.3 93%
thereof retail business 37.7 34.0 11%
thereof individual business – Germany 11.0 7.7 43%
thereof individual business – USA 75.4 11.9 534%
thereof individual business – foreign, excluding USA 67.7 45.7 48%
Unexpected loss 169.2 127.7 33%
thereof retail business 29.6 27.4 8%
thereof individual business – Germany 48.4 33.6 44%
thereof individual business – USA 39.0 40.6 -4%
thereof individual business – foreign, excluding USA 52.2 26.1 100%
Individual impairment allowance 153.1 48.6 215%
thereof retail business 11.3 9.7 17%
thereof individual business – Germany 0.4 0.1 230%
thereof individual business – USA 84.5 0.0 N/A
thereof individual business – foreign, excluding USA 56.9 38.7 47%
26
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
RISK, OUTLOOK AND
OPPORTUNITIES REPORT
Mortgage loans are checked for the need to create an indi-
vidual impairment allowance based on their rating, any pay-
ment arrears or other negative factors. Workout Manage-
ment carries out more extensive monitoring of individual
impairment allowances, especially in non-retail business.
The portfolio distribution broken down by rating category is
as follows and also shows that risks rose year on year. In ad-
dition to poor performance or default by individual borrow-
ers, the higher calibration level to which the CredaRate pro-
cedure was adjusted as a consequence of a supervisory audit
also had an impact here. This procedure rates the customer
segments in foreign individual mortgage business, as well as
domestic open-end funds (special funds).
TOTAL PORTFOLIO OF MORTGAGES AND OTHER LOANS
13
Rating category 31 December 2023 31 December 2022
€ Relative € Relative
0a to 0b 0.00 0.0% 0.00 0.0%
0c to 0e 9,921,666,301 20.6% 10,386,907,954 22.1%
1a to 1c 21,491,954,175 44.6% 23,302,010,446 49.6%
1d to 2a 11,050,538,857 22.9% 10,144,438,199 21.6%
2b to 2c 2,783,048,982 5.8% 1,453,992,753 3.1%
2d to 2e 1,009,277,829 2.1% 267,095,148 0.6%
3a to 3b 951,902,168 2.0% 657,308,116 1.4%
3c to 3d 247,452,360 0.5% 535,178,814 1.1%
3e 25,893,862 0.1% 32,123,226 0.1%
4a to 4e 744,354,783 1.5% 186,909,346 0.4%
No rating 872,181 0.0% 353,650 0.0%
Total 48,226,961,499 100.0% 46,966,317,653 100.0%
13
The total portfolio of mortgages and other loans essentially comprises item 3a. on the assets side of the balance sheet in the amount of EUR46.2 billion, plus EUR1.7billion in irrevocable loan
commitments under “2. Other commitments” that are to be disbursed within the next 12 months and EUR0.3billion in loan loss provisions.
The Bank creates a collective impairment allowance as a pre-
caution to cover latent credit risks. This collective impairment
allowance is calculated on the basis of an expected credit
loss model, with the IFRS 9 methodology being adopted for
levels 1 and 2 and applied to the HGB assessment basis.
Because of the tense situation prevailing specifically on the
US property market, we created individual impairment allow-
ances at an appreciably higher level than in the previous
year, particularly for commercial property financing business.
Individual and collective impairment allowances changed as
follows in the year under review:
TOTAL LENDING BUSINESS
IN €MILLION
Opening balance Additions Reversals Utilisation
Exchange
rate-related and
other changes Closing balance
Individual impair-
ment allowances 51.8 116.7 -13.0 -1.3 -1.1 153.1
Collective impair-
ment allowances 49.0 10.9 0.0 0.0 0.1 60.0
27
Münchener Hypothekenbank
Annual Report 2023
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of accounts
4 Notes 5 Further information2 Management report
RISK, OUTLOOK AND
OPPORTUNITIES REPORT
Our public and liquid investments are focused on central and
regional governments, public local authorities and Western
European banks (covered bonds only). The regional focus is
on Germany and Western Europe, respectively. Highly liquid
sovereign bonds and other highly rated securities will con-
tinue to be needed to a certain extent in order to guarantee
compliance with CRR liquidity requirements.
Business relations with financial institutions are based on
master agreements that allow the netting of receivables
from, and liabilities to, the other institution. Collateral agree-
ments exist with all derivative counterparties. Derivative
transactions, insofar as they are subject to clearing, are set-
tled via a central counterparty (CCP).
MARKET PRICE RISK
Market price risk comprises risks to the value of positions due
to changes in market parameters, including interest rates,
volatility and exchange rates. These risks are quantified as a
potential present value loss using a present value model. A
distinction is made here between interest rate risk, option risk
and currency risk.
In the case of interest rate risk, a distinction is made between
general and specific interest rate risk. General interest rate
risk is the risk that the market value of investments or liabili-
ties that depend on general interest rates will be adversely
affected if interest rates change.
Specific interest rate risk, also known as credit spread risk, is
likewise included under market price risk. The credit spread is
defined as the difference in yield between a risk-free and a
risky bond. Spread risks take account of the risk that the
spread may change even without any change to the rating.
The reasons for a change to yield spreads may include:
■
varying opinions among market participants regarding
positions;
■
an actual change in the creditworthiness of the issuer not
already reflected in its rating;
■
macroeconomic aspects that influence creditworthiness
categories.
The risks inherent in options include volatility risk (vega: the
risk that the value of a derivative instrument will change due
to increasing or decreasing volatility), time risk (theta: the
risk that the value of a derivative instrument will change
over time), rho risk (the risk of a change in the value of the
option if the risk-free interest rate changes) and gamma risk
(the risk of a change in the option delta if the price of the
underlying asset changes; the option delta describes the
change in value of the option due to a change in the price of
the underlying asset). Options in capital market business are
not entered into for the purposes of speculation. All option
positions arise implicitly as a result of the option rights of
borrowers (e.g. statutory termination rights under section
489 of the German Civil Code (Bürgerliches Gesetzbuch, BGB)
or the right to make unscheduled repayments) and are
hedged where necessary. These risks are monitored in the
daily risk report and are limited.
Currency risk is the risk that the market value of investments
or liabilities that depend on exchange rates will be adversely
affected due to changes in exchange rates. Foreign currency
transactions of Münchener Hypothekenbank are hedged to
the maximum possible extent against currency risk; only the
margins included in interest payments are not hedged.
Share price risk is low for Münchener Hypothekenbank and
results almost exclusively from participations in companies in
the Cooperative Financial Network. In addition, the Bank has
invested in a mixed fund (as a special fund of Union Invest-
ment), in which a mix of shares is also possible. Responsibility
for calculating risk ratios is transferred to the investment
fund company; the results are reviewed for plausibility and
then input into the Bank’s systems.
In order to manage market price risk, the present value of all
Münchener Hypothekenbank transactions is determined on a
daily basis. All transactions are valued using the Summit IT
program. Interest rate risk is managed on the basis of the
BPV vector (basis point value), which is calculated daily from
the change in present value per maturity band that would
occur if the mid-swap curve changed by one basis point.
Sensitivities to exchange rates and in relation to rotations in
the yield curve and changes to basis spreads and volatilities
are also determined. In addition to the BPV, the daily sensi-
tivities are:
■
Exchange rates: all foreign currencies change by 10per-
cent.
■
Volatilities: all volatilities increase by 1percentage point.
■
Steepening/flattening: a moderate steepening/flattening
of the yield curve is simulated, i.e. at the short end by up
to +/-10 basis points, at the long end by up to +/-20 basis
points, with rotation around the 5-year grid point.
At Münchener Hypothekenbank, market risks are recorded
and limited using the value at risk (VaR) indicator. The VaR
calculation takes account of both linear and non-linear risks
by means of a historic simulation. The impact of extreme
movements in risk factors is also measured here and for
28
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
RISK, OUTLOOK AND
OPPORTUNITIES REPORT
other types of risks using various stress scenarios. The daily
stress scenarios (others are tested less frequently) are:
■
Supervisory requirements:
»
The yield curve is shifted up and down in parallel by
200 basis points separately for each currency. The
worse of the two results is taken into account and lim-
ited.
»
In addition, six further stress tests (parallel shift up/
down, steepening/flattening, parallel shift up/down in
the short-term segment) are calculated. The worst re-
sult is monitored as an early warning indicator for the
limit. The stress tests are prescribed by EBA Guideline
2018/02.
■
Parallel shifting: The current yield curve is shifted up and
down completely by 50 basis points across all currencies
at the same time. The worse of the two results is taken
into account.
■
Parallel shifting – interest rates and volatilities: Here as
well, the current yield curve is shifted up by 50 basis
points across all currencies at the same time. In addition,
all volatilities are increased by 50 basis points.
■
Historic simulation:
»
2008 financial market crisis: changes in interest rates
between 12 September 2008 (the last banking day be-
fore the collapse of the investment bank Lehman
Brothers) and 10 October 2008 are applied to the cur-
rent level.
»
Brexit: change in interest rates and exchange rates due
to the Brexit referendum on 23 and 24 June 2016.
»
COVID-19 scenario (worst case): worst case from four
scenarios that depict the market data movements
within the days/weeks after the start of the COVID-19
pandemic in Germany (5 March 2020).
The most important parameters are presented in the follow-
ing table:
PARAMETER MARKET PRICE RISK
IN €MILLION
Parameter
Average
2023
Max.
2023
Min.
2023
BPV -0.47 -0.15 -0.80
VaR entire portfolio 10d / 99% -36 -27 -57
BaFin risk (+/-200 BP) / SOT -143 -92 -272
BaFin early warning indicator -144 -94 -277
Interest rates +50 BP -10 6 -22
Interest rates -50 BP -3 14 -27
Although Münchener Hypothekenbank is a trading book
institution, it has not concluded any trading transactions
since 2012.
To manage credit spread risk, Münchener Hypothekenbank
calculates the present value of its asset-side capital market
transactions on a daily basis and determines the credit spread
risks. The credit spread VaR, credit spread sensitivities and
various credit spread stress scenarios are calculated in the
Summit valuation system.
At Münchener Hypothekenbank, credit spread risks are
recorded and limited using the VaR indicator. The VaR is
calculated based on a historic simulation.
The current (daily) credit spread stress scenarios are:
■
Parallel shifting: All credit spreads are shifted up and
down by 100 basis points. The worse of the two results is
taken into account.
■
Historic simulation of the collapse of the investment bank
Lehman Brothers: The scenario assumes an immediate
change in spreads based on the change that was meas-
ured in the period from one banking day before the col-
lapse of Lehman Brothers to four weeks after that date.
■
Flight to government bonds: This scenario simulates a
highly visible risk aversion seen on the markets in the
past. The spreads of risky security classes widen, while the
spreads of safe sovereign bonds narrow.
■
Euro crisis: This scenario replicates the change in spreads
during the euro crisis between 1 October 2010 and 8 No-
vember 2011. During that period, the spreads of poorly
rated sovereign bonds in particular increased sharply.
■
Downgrade for Germany: This hypothetical scenario is
based on the assumption that the spreads for German
government bonds rise to the level of the “PIIGS” coun-
tries. These countries were hit particularly hard by the
euro crisis and still have much higher credit spreads than
Germany. This scenario therefore involves a significant in-
crease in spreads for Germany. This increase is also applied
to the portfolio of German states, which constitutes the
largest portfolio at Münchener Hypothekenbank.
■
COVID-19 crisis: This scenario reflects the change in
creditspreads in the wake of the COVID-19 crisis between
28February and 18 March 2020. Spreads increased sig-
nificantly in all asset classes during this period.
The credit spread VaR for the entire portfolio at a 99.9per-
cent confidence level and with a holding period of one year
and the stress test at plus 100 basis points are presented in
the following table:
CREDIT SPREAD (TOTAL PORTFOLIO)
IN €MILLION
Parameter
Average
2023
Max.
2023
Min.
2023
Credit spread VaR 1Y / 99.9% -183 -145 -232
Credit spreads +100 BP -315 -224 -415
29
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
RISK, OUTLOOK AND
OPPORTUNITIES REPORT
LIQUIDITY RISK
Liquidity risk basically comprises the following risks:
■
Inability to honour payment obligations on time (liquidity
risk in the narrower sense).
■
Inability to procure sufficient liquidity on the expected
terms when needed (funding risk).
■
Inability to close out, extend or settle transactions with-
out incurring a loss due to insufficient market depth or
market disruptions (market liquidity risk).
Münchener Hypothekenbank distinguishes between short-
term solvency measures and medium-term structural liquid-
ity planning.
Short-term solvency measures
The purpose of short-term solvency measures is to ensure
that the Bank is able to honour payment obligations in due
form, in time and in full on a daily basis, even during stress
situations (willingness to pay). All supervisory requirements
regarding bank liquidity reserves have been implemented.
Münchener Hypothekenbank classes itself as a capital mar-
ket-oriented institution within the meaning of MaRisk and
therefore also fulfils the requirements of BTR 3.2.
MaRisk distinguishes between five different scenarios, which
have been implemented accordingly:
1) Baseline scenario: corresponds to normal management of
the Bank.
2) Bank stress: the reputation of the institution deteriorates,
for example due to large on-balance-sheet losses.
3) Market stress: short-term event affecting one part of the
financial market. Examples of this include the terrorist
attack on 11 September 2001 and the financial market/
sovereign debt crisis.
4) Combined stress: simultaneous occurrence of bank and
market stress.
5) Combined stress without countermeasures: it is assumed
that it is no longer possible to obtain any liquidity at all.
According to MaRisk, the Bank must meet the liquidity re-
quirements arising from scenarios 1 to 4 for a minimum of
30 days. Scenario 5 is the worst-case scenario for internal
management purposes.
Depending on the scenario, various modelling assumptions
have been deduced for all important cash flows, such as
drawdowns of liquidity lines, drawdowns of loan commit-
ments already made or changes to collateral. In addition, all
securities were allocated to various liquidity classes in order
to deduce the volume in each scenario that could be sold or
placed in a securities repurchase agreement, and in what
time frame, in order to generate additional liquidity. Statu-
tory restrictions, such as the 180-day rule in the German
Pfandbrief Act (Pfandbriefgesetz, PfandBG), were met at all
times. The result is a day-by-day presentation of available li-
quidity over a three-year horizon in three currencies (euros,
US dollars and Swiss francs). Positions in other currencies are
negligible. Limits are set in the stress scenarios across various
horizons as early warning indicators for each scenario.
In addition, the liquidity coverage ratio (LCR) and a forecast
in accordance with CRD IV are calculated across all currencies
at least once a week.
Medium-term structural liquidity planning
The purpose of structural liquidity planning is to safeguard
medium-term liquidity. The legal basis for this is both MaRisk
BTR 3 and CRD IV on the net stable funding ratio (NSFR).
Medium-term liquidity management in accordance with
MaRisk is based on short-term liquidity management in ac-
cordance with MaRisk, i.e. both use the same scenarios and
modelling assumptions. In view of the longer observation pe-
riod, however, additional modelling that is not critical to
short-term liquidity management is taken into account, in-
cluding new business planning and current expenses such as
salaries and taxes.
Medium-term liquidity planning has the following liquidity
ratios over time as profit or loss components:
■
cumulative overall cash flow requirement;
■
available covered and uncovered funding potential, in-
cluding planned new business and extensions in accord-
ance with Moody’s over-collateralisation requirements;
■
other detailed data for planning and management
activities.
Liquidity risks are limited via the structural liquidity forecast
and stress scenarios, based on available liquidity within a
year.
In addition, the NSFR is computed monthly across all curren-
cies in accordance with CRD IV. Forecasts are also created for
monitoring purposes.
In order to reduce the funding risk, Münchener Hypotheken-
bank strives to refinance loans with matching maturities
where possible. The Bank continuously checks whether its
relevant funding sources (especially those within the Cooper-
ative Financial Network) are still available. In order to limit
the market liquidity risk in its business with governments and
banks, the Bank predominantly acquires ECB-eligible securi-
ties that can be used as collateral for ECB open market oper-
ations at any time.
30
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
RISK, OUTLOOK AND
OPPORTUNITIES REPORT
To diversify its funding sources, the Bank has built up a mod-
est deposit business. It can now accept deposits from Welt-
sparen and Deutsche Bank in addition to those from the co-
operative banks. At the end of 2023, the portfolio volume
was EUR449million.
The indicators LCR and NSFR are presented in the following
table:
INDICATOR LCR AND NSFR
IN €MILLION
Indicator
Average
2023
Min.
2023
LCR 369% 161%
NSFR 110% 109%
INVESTMENT RISK
This describes the risk of potential losses if the price of in-
vestments falls below their carrying amount. It applies to
participating interests held by Münchener Hypothekenbank
in the long term for strategic reasons in companies of the
Cooperative Financial Network and, to a small extent, posi-
tions within its special mixed fund.
OPERATIONAL RISK
Operational risk means the risk of potential losses caused by
human error, process or project management weaknesses,
technical failures or negative external factors. Human error
includes unlawful actions, inappropriate selling practices, un-
authorised actions, transactional errors and information and
communication risks.
We minimise our operational risk by using skilled staff, trans-
parent processes, automated standard workflows, written
work instructions, IT system function tests, contingency plans
and preventive measures. Insurable risks are covered by insur-
ance policies to the normal extent required by banks.
The materiality of all services outsourced by Münchener Hy-
pothekenbank in connection with banking transactions and
financial services or other standard banking services has been
examined in a risk analysis. All outsourced services are moni-
tored in accordance with ECB guidelines and included in the
risk management process.
MIGRATION RISK
This means the risk that borrower ratings may be down-
graded, which would reduce the cash reserves of Münchener
Hypothekenbank. The measures and arrangements described
in the section “Counterparty risk” limit migration risks in an
analogous manner.
PROPERTY RISK
Property risk means the risk that properties in Münchener
Hypothekenbank’s own portfolio may lose value. Property risk
is negligible for the Bank.
MODEL RISK
Model risk means the risk that the assessment of the risks
mentioned in the previous sections may have been too low
due to simplistic assumptions/processes, flawed input data or
insufficiently valid parameters. Münchener Hypothekenbank
manages and limits this risk by applying the dual control
principle, as well as through independent validation, conserv-
ative assumptions and safety buffers that can be suitably ap-
plied depending on the type of risk.
RISK-BEARING CAPACITY
The technical concepts and models used to calculate
risk-bearing capacity, known as ICAAP, are continually up-
dated in accordance with supervisory requirements.
Münchener Hypothekenbank calculates its risk-bearing ca-
pacity in accordance with the requirements of the ECB in
both the normative and the economic perspective.
Market risks, loan default risks, operational risks, spread risks,
migration risks, funding risks, investment risks, property risks
and model risks, which include other risks not specifically
listed, are considered in the economic perspective. Risks are
allocated to risk coverage potential conservatively, disregard-
ing any diversification effects between different types of
risks.
In the economic perspective, loan default risks and spread
risks increased in 2023. The causes of loan default risks are
described in the section “Counterparty risk”. The reason for
the rise in spread risks was the larger portfolio of long-term
bonds issued by German state governments, which were pur-
chased on favourable terms. None of the risk types exceeded
their limit in 2023 under any scenario or stress test. Thus,
the Bank maintained its risk-bearing capacity at all times
throughout the year under review in the economic perspective.
In the normative perspective, a multi-year planning horizon
is used to verify that the Bank continuously meets all quanti-
tative regulatory and supervisory capital requirements both
as part of basic planning as well as under adverse scenarios.
The Bank maintained its risk-bearing capacity at all times
throughout the year under review in the normative perspec-
tive. Limit utilisation per risk type as at 31 December 2023 is
presented in the following table:
31
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
RISK, OUTLOOK AND
OPPORTUNITIES REPORT
LIMIT UTILISATION AS AT 31 DECEMBER 2023
IN €MILLION
Risk type Limit
Baseline
scenario Macro stress
Market risks
531 194.8 131.3
l
Credit risks
400 288.7 382.7
▲
Operational risks
80 63.0 63.0
l
Spread risks
275 228.9 101.6
l
Migration risks
150 107.4 133.3
l
Investment risks
30 25.6 25.6
l
Property risks
8 2.2 2.2
l
Funding risks
15 4.0 4.4
l
Model risks and other
risks
50 45.4 45.4
▲
l
In the target range
▲ Approaching to limit
USE OF FINANCIAL INSTRUMENTS FOR
HEDGING PURPOSES
We engage in hedging activities – interest rate and currency
derivatives – in order to further reduce our risks and to
hedge our business activities. We do not use credit deriva-
tives. Asset swaps are used as micro-hedges in larger individ-
ual transactions. Structured underlying transactions, such as
callable securities, are hedged accordingly with structured
swaps. Exchange rate risks for exposures in foreign currency
are hedged primarily by endeavouring to secure funding in
matching currencies; any remaining transactions are hedged
using (interest rate) cross-currency swaps. At portfolio level,
we mainly use interest rate swaps and swaptions as hedging
instruments. Bermuda options on interest rate swaps (swap-
tions) are used in addition to linear instruments to hedge
embedded statutory termination rights or interest rate cap
agreements.
ACCOUNTING-RELATED INTERNAL CONTROL
AND RISK MANAGEMENT PROCESSES
The accounting-related internal control system is docu-
mented in organisational guidelines, process descriptions, ac-
counting manuals and operating instructions. It comprises
organisational security measures and ongoing automatic
measures and controls that are integrated into work pro-
cesses. The main controls are segregation of functions, the
dual control principle, access restrictions, payment guidelines,
processes for new products and new structures and balance
confirmations. Non-process-specific audits are conducted
primarily by Internal Audit.
The risk management methods described in the risk report
provide ongoing qualitative and quantitative information on
the financial situation of Münchener Hypothekenbank, such
as performance development. Aspects of all types of risks are
included in this assessment.
At Münchener Hypothekenbank, there is close coordination
between the risk control and financial reporting units.
The output from the risk management system is used as a
basis for multi-year planning calculations, year-end projec-
tions and reconciliation procedures for the accounting indi-
cators calculated in the Bank’s financial reporting process.
Outlook – opportunities and risks
ECONOMY AND FINANCIAL MARKETS
Global economic growth is expected to slowly stabilise in
2024, with inflation abating. However, the wars in Ukraine
and the Middle East, trade disputes, geopolitical tensions and
China’s further economic development make the outlook less
bright. For 2024, the International Monetary Fund (IMF) ex-
pects global GDP to grow by 3.1percent, similar to the pace
in 2023. A key reason why prospects remain rather modest is
high interest rates, which are continuing to hold back eco-
nomic activity. The weak economy is expected to have an in-
creasing impact on global labour markets, which would cause
the unemployment rate to rise somewhat. New uncertainties
could emerge from the elections being held in Taiwan and
the US in 2024. Both offer the potential for conflict, and the
results could worsen both countries' relations with China and
have a negative impact on the world economy.
Economic prospects are also accompanied by uncertainty in
the eurozone. In view of stricter financing terms and low ex-
port growth, economic growth will remain weak at the out-
set of 2024. The IMF forecasts economic growth of 0.9per-
cent for 2024 as a whole. Economic experts expect growth to
pick up over the course of the year, since real incomes will
rise and export growth will recover on account of an upturn
in demand from abroad. The labour market is expected to de-
velop robustly, despite a slight cooling off, but a slight rise in
the unemployment rate is likely in the short term. Inflation in
the eurozone is expected to remain high at the start of 2024
before declining, since measures adopted to keep prices
down in many eurozone countries expired at the end of
2023. The ECB expects inflation to come in at 2.7percent on
average for 2024.
32
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
RISK, OUTLOOK AND
OPPORTUNITIES REPORT
The forecast for Germany is that the economy will remain
weak. Geopolitical conflicts will continue to inhibit economic
activity, and high interest rates will cause the number of per-
sonal and corporate insolvencies to rise. Nevertheless, there is
a chance that the state of the economy will improve over the
course of the year. The IMF predicts growth of 0.9percent.
Inflation will remain relatively high in 2024. Consumer prices
rose in December 2023 and are not expected to ease as 2024
gets under way. The expiry of the VAT reduction for the ca-
tering sector and the rise in the carbon tax are key reasons
for this. However, the Deutsche Bundesbank expects that in-
flation will fall to 2.7percent as the year progresses. The la-
bour market is expected to develop robustly, even though the
unemployment rate is expected to rise somewhat in the short
term.
Falling inflation and modest economic development will
likely prompt central banks to adjust their restrictive mone-
tary policies. On the bond market, a significant decline in
yields for longer maturities had already begun at the end of
the year. However, high volumes of sovereign bond issues
could cause yields for longer maturities to rise slightly, par-
ticularly if inflation rates do not drop as quickly as antici-
pated.
In 2024, the Fed is expected to lower interest rates in the
range of 100 to 150 basis points, meaning the current rates
of 5.25percent to 5.50percent would fall to 3.75percent to
4.50percent. With inflation abating, the ECB is also likely to
ease its restrictive monetary policy and lower the main refi-
nancing operations rate from its current level of 4.50percent
to between 3.00percent and 3.50percent.
Moreover, the ECB is continuing to reduce excess liquidity on
the money market and will stop reinvesting cash from ma-
turing bonds in connection with its pandemic emergency
purchase programme (PEPP) by the end of 2024. It remains
to be seen to what extent the ECB will require banks to hold
higher minimum reserves and will withdraw additional li-
quidity.
On the foreign exchange market, the euro is expected to
trend in a slightly positive direction against the US dollar,
since the Fed will lower interest rates more quickly and the
ECB will probably take more of a wait-and-see approach. As
for the British pound and the Swiss franc, we expect to see
minor price fluctuations and more or less stable exchange
rates.
Funding spreads for banks rose again at the start of the year.
As the year progresses, we expect them to stabilise or fall
slightly. Since banks’ funding requirements for 2024 will not
be significantly lower than for the year under review, an is-
sue volume for benchmark covered bonds denominated in
euros to amount to around EUR170 billion is expected, with
a tendency towards longer maturities since the focus in re-
cent years was more on shorter maturities. If new property
financing business remains weak, this could put a damper on
issuing activities.
PROPERTY MARKETS AND PROPERTY
FINANCING MARKETS
Although the general conditions that prevailed in the report-
ing year had not changed significantly at the start of 2024,
experts nevertheless expect positive momentum on the prop-
erty markets. Given that economic and geopolitical uncer-
tainties remain high, market participants are hoping that in-
terest rates will stabilise and then begin to fall during the
second half of the year. Under that scenario, market activities
will likely not pick up before the second half of 2024, after
which the upward trend in prices could begin to stabilise.
In our markets of Germany, Switzerland and Austria, falling
housing construction and rising population numbers are
causing rental housing markets to become even tighter. In
view of the low rates of home ownership – the three coun-
tries rank last in Europe – the rental housing market repre-
sents the most important pillar in terms of housing supply.
Because home ownership has become less affordable, there is
continued reluctance to buy. This is creating even greater
scarcity in the supply of rental housing, which will likely
steepen the rise in rents. At the same time, with interest rates
expected to stabilise, yields will likely rise only moderately, so
we do not anticipate that purchase prices for residential
property will fall further over the course of the year. In addi-
tion, investors will likely take a wait-and-see approach on
account of the further regulation of the rental housing mar-
ket that is under discussion in several countries, as well as
future energy-saving requirements for housing stock.
The prospects for the commercial property markets and their
asset class are also modest. This applies first and foremost to
the office property market, since demand for office space
closely correlates with economic development. Therefore, de-
mand for office space is not expected to rise appreciably in
the first half of 2024, particularly because in view of hybrid
working, companies will not yet have definitively clarified the
amount of space they need. On the supply side, we expect
the completion volume to rise, meaning that the vacancy
rate is also likely to rise further. Pressure on rents will thus
increase further, other than in very good office locations. The
office property market in the USA will continue to face sub-
dued demand and rising vacancy rates, given the slight eco-
nomic slowdown in the first half of 2024 and the fact that
hybrid working is becoming increasingly common.
In addition, the situation for bricks-and-mortar retail remains
difficult, which will prompt investors to act with restraint. In
33
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
RISK, OUTLOOK AND
OPPORTUNITIES REPORT
view of the weak economy and budgetary developments,
households can expect to see their disposable income dimin-
ish. That will likely cause them to rein in their purchases. As a
result, retail sales will not improve significantly in 2024, and
if costs remain high, this is likely to trigger further insolven-
cies and space optimisations.
Thus, in the case of office and retail property, it is likely that
investors and buyers will not yet have completed their pric-
ing processes in 2024, which will probably have an impact on
transaction activity. By contrast, an end to yield adjustments
is in sight for logistics property. Because scarcity in the sup-
ply of space will cause rents to rise further, logistics property
will probably remain the preferred commercial asset class for
the time being.
DEVELOPMENT OF BUSINESS AT
MÜNCHENER HYPOTHEKENBANK
With regard to our targets for new business, we expect de-
mand for residential and commercial property financing to
recover slowly, since – as described above – the market envi-
ronment will not improve significantly in 2024. Our planning
therefore has new business coming in at EUR3.5 billion. The
property loan portfolio will decrease to around EUR46billion
due to lower new business compared with the average of
recent years.
Achievement of the new business target presupposes that
GDP will not deteriorate in our core market of Germany. Our
planning assumes zero growth and unchanged interest rates.
IfGDP contracts in the range of minus 1percent to minus
3percent, our planning scenarios assume that new business
will amount to only 70 to 90percent of the target. The same
applies in the case of a further rise in interest rates. On the
other hand, if interest rates fall by 1percentage point, that
would in all likelihood have a positive effect on the predispo-
sition of cooperative banks and independent financial service
providers to broker loans through us, which in turn would
cause new business to grow by 10 to 15percent. In commer-
cial property financing, new business budgeting is focused on
the financing of existing properties. There as well, high inter-
est rates mean more challenging financing structures that
tend to have higher equity and cash flow requirements. These
structures were already being used in 2023.
In private residential property financing in Germany – coop-
erative banks and independent financial service providers –
we anticipate a new business volume of around EUR1.5 bil-
lion. Our planned figures assume, on the one hand, that the
predisposition of our partners to broker loans through us will
increase moderately as the markets stabilise. On the other
hand, we intend to bolster our market potential with tar-
geted campaigns, including in niche markets, and by expand-
ing the range of products in the upgrading and older bor-
rowers segments. In addition, we plan to strengthen our
position in platform business and refine the digital processes
before and after the loan commitment.
In the brokerage business with our cooperation partners in
Switzerland and Austria, we are budgeting for a volume of
EUR0.2 billion. Particularly in Switzerland, we intend to con-
solidate our market position with joint sales campaigns and
expand the range of products to include longer fixed-interest
rate periods and so-called “forward loans” that have longer
terms.
For commercial property financing, we are assuming moder-
ate growth in new business to EUR1.8 billion, since we ex-
pect market momentum to improve only slightly in 2024. The
focus here is on domestic business, but foreign business in
Western Europe is also expected to grow at a slow pace with
an adjusted, more risk-averse strategy.
This assessment is dependent on how the transaction market
develops. Moreover, we assume that investor portfolios will
generate the majority of financing revenues initially and that
potential acquisition financing will not be offered on the
transaction market until the second half of 2024 at the earli-
est. This will depend in particular on prices stabilising in all
asset classes. It is possible that this process might extend into
2025 in some cases.
We believe that our financial position will remain adequate
in 2024, enabling us to meet our payment obligations and
comply with regulatory requirements for banks.
In the case of public and liquid investments, we will seize op-
portunities to increase income if the market environment is
favourable, as we did in the year under review. Under these
conditions, we are planning new investments in the range of
EUR0.8billion to EUR1.2billion in 2024.
Our overall liquidity requirements (money market and capital
market) will range from around EUR7billion to EUR8billion
in 2024. We expect to raise EUR5billion to EUR6billion of
this sum on the capital market and the remainder on the
money market and through deposits. Mortgage Pfandbriefe
remain our most important source of funding.
In 2024, we will continue to work on implementing our sus-
tainability strategy and the areas of activity included in it
(sustainable business model, responsible corporate govern-
ance, risk management, employees, customers and partners,
climate change and CO
2
emissions), as well as various regula-
tory requirements, including those concerning implementa-
tion of the CSRD in particular.
34
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
RISK, OUTLOOK AND
OPPORTUNITIES REPORT
We are expecting net interest income of EUR485million for
2024, assuming that interest rates remain roughly the same.
If they change, this planning figure may change as well.
However, any impact from possible changes in interest rates
in 2024 will be only marginal. An increase in interest rates
would lead to a slight drop in interest income, while a fall in
interest rates would have the opposite effect.
In our planning, we are forecasting a net commission income
of minus EUR74million. This item changes on a one-to-one
basis in line with business development in private residential
property financing. If this business increases by 10percent,
the net commission expense also rises by around 10percent.
If new business declines, commission expenses will fall ac-
cordingly.
Total administrative expenses are expected to fall year on
year to around EUR148million. This drop is due to the re-
duction in the contribution to the European bank levy from
EUR25.6million in 2023 to less than EUR3million in 2024.
Personnel costs are budgeted at around EUR72million,
which equates to a rise of 4percent compared with 2023.
The employee headcount is expected to remain more or less
stable year on year.
Other administrative expenses will fall to EUR72million,
mainly as a result of the above-mentioned reduction in the
bank levy from 2024.
We are expecting loan loss provisions to decrease compared
with 2023 and anticipate that they will be up to EUR85mil-
lion. This is based on the assumption that the economic situ-
ation in Europe will remain unfavourable and that the prop-
erty market will be difficult, especially in the US.
We expect the operating result after loan loss provisions (re-
sults from ordinary business activities) to amount to
EUR179million and thus to be slightly higher than in 2023.
We consider our earnings to be sufficient to ensure a decent
return on equity and an adequate allocation to reserves.
No significant capital measures are planned for 2024. We ex-
pect the total capital ratio to be around 21percent and thus
consider it to be adequate.
In the current market environment, we are confident that we
will attain our targets for the 2024 financial year, and we an-
ticipate that net income will come in at the level of the pre-
vious year.
With regard to our performance indicators, our planning is
based on the following figures for 2024:
■
Total new property financing business: EUR3.5 billion
■
Operating result after loan loss provisions (results from
ordinary business activities): EUR179million
■
Administrative expenses: EUR148million
■
Cost-income ratio (CIR): under 40percent
■
Return on equity (RoE) before tax: around 10percent
■
Proportion of sustainable loans in the new retail business
(private residential property financing): 10percent
■
Proportion of green financing in the commercial property
financing portfolio: 30percent
As Münchener Hypothekenbank specialises in providing long-
term loans, any changes in the environment will not have a
direct impact on net interest income for 2024. A change in
interest rates entails opportunities and risks for the Bank. In
all probability, a further rise in interest rates would result in
new business being lower than forecast. A drop in interest
rates would have the opposite effect. Any changes in new
business figures would have only a minor impact on net in-
terest income in 2024. Changes in retail business, on the
other hand, impact net commission income. If new business
were above forecast in this area, this would lead to a propor-
tionate increase in commission expenses. The reverse would
be the case if new business were lower than forecast.
Thepercentage change in new business can thus be applied
proportionately to thepercentage change in commission in-
come. In view of the current situation on the property mar-
kets, we expect loan loss provisions to be in line with our
budgeted figures. If the situation improves, this will have a
positive impact on loan loss provisions. If the market situa-
tion deteriorates further, loan loss provisions may have to in-
crease.
Overall, the Bank considers the risks outlined here to be ac-
ceptable, based on its internal management.
DISCLAIMER REGARDING
FORWARD-LOOKING STATEMENTS
This management report contains statements concerning our
expectations and forecasts for the future. These for-
ward-looking statements, in particular those regarding
Münchener Hypothekenbank’s business development and
earnings performance, are based on planning assumptions
and estimates and are subject to risks and uncertainties. Our
business is influenced by a large number of factors, most of
which are beyond our control. These mainly include eco-
nomic developments, the state and further development of
financial and capital markets in general and our funding
conditions in particular, as well as unexpected defaults by
our borrowers. Actual results and developments may there-
fore differ from the assumptions that have been made today.
Such statements are thus valid only at the time this report
was prepared.
35
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
4 Notes 5 Further information2 Management report
RISK, OUTLOOK AND
OPPORTUNITIES REPORT
BALANCE SHEET
31 December 2023
ASSETS
IN €
31 Dec. 2023
€ 000
31 Dec. 2022
1
€ 000
31 Dec. 2022
2
1. Cash reserve
a) Cash on hand 0.00 0 1
b) Balances with central banks 51,309,218.06 39,245 122,781
of which: with Deutsche Bundesbank € 51,309,218.06
51,309,218.06 39,245 122,782
2. Claims on banks
a) Mortgage loans 13,887,994.20 171 171
b) Public-sector loans 25,220,359.03 25,109 25,110
c) Other claims 1,212,560,643.53 1,502,674 1,511,182
of which: payable on demand € 644,066,247.73
1,251,668,996.76 1,527,954 1,536,463
3. Claims on customers
a) Mortgage loans 46,231,703,516.31 44,187,378 45,788,704
b) Public-sector loans 1,191,675,605.60 1,199,492 1,200,851
c) Other claims 54,078,740.71 49,625 49,964
47,477,457,862.62 45,436,495 47,039,519
4. Bonds and other fixed-income securities
a) Bonds and notes 4,168,879,005.85 2,263,363 2,391,392
aa) Public-sector issuers € 3,548,610,045.38 (1,632,942) (1,750,816)
of which: eligible as collateral for Deutsche Bundesbank advance € 3,511,722,704.50
ab) Other issuers € 620,268,960.47 (630,421) (640,576)
of which: eligible as collateral for Deutsche Bundesbank advance € 477,719,353.01
b) Own bonds and notes 503,414,784.72 2,560,526 2,560,526
Nominal value € 500,000,000.00
4,672,293,790.57 4,823,889 4,951,918
Carried forward: 53,452,729,868.01 51,827,583 53,650,682
1
Prior-year figures, Münchener Hypothekenbank
2
Prior-year figures, including M.M.Warburg & CO Hypothekenbank AG
37
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 2 Management report 4 Notes 5 Further information3 Annual statement
of accounts
BALANCE SHEET
ASSETS
IN €
31 Dec. 2023
€ 000
31 Dec. 2022
1
€ 000
31 Dec. 2022
2
Brought forward: 53,452,729,868.01 51,827,583 53,650,682
5. Equities and other variable-yield securities 147,000,000.00 144,424 144,424
6. Participations and shares in cooperatives
a) Participations 102,723,767.61 102,724 102,724
of which: credit institutions € 37,234,870.64
b) Shares in cooperatives 18,500.00 18 18
of which: in credit cooperatives € 15,500.00
102,742,267.61 102,742 102,742
7. Shares in affiliated companies 1,151,088.34 11,752 11,752
8. Intangible assets
Concessions acquired for consideration, commercial rights and similar rights and values, as well as licenses
to these rights and values
347,597.29 183 183
9. Tangible assets 93,033,480.68 65,186 65,261
10. Other assets 128,268,270.65 143,818 144,600
11. Deferred items
a) From issuing and lending business 133,054,489.63 107,806 108,863
b) Other 2,207,827.90 2,040 2,039
135,262,317.53 109,846 110,902
Total assets 54,060,534,890.11 52,405,534 54,230,546
1
Prior-year figures, Münchener Hypothekenbank
2
Prior-year figures, including M.M.Warburg & CO Hypothekenbank AG
38
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 2 Management report 4 Notes 5 Further information3 Annual statement
of accounts
BALANCE SHEET
LIABILITIES, CAPITAL AND RESERVES
IN €
31 Dec. 2023
€ 000
31 Dec. 2022
1
€ 000
31 Dec. 2022
2
1. Liabilities to banks
a) Registered Mortgage Pfandbriefe issued 961,254,636.40 844,256 1,011,229
b) Registered Public Pfandbriefe issued 65,762,888.17 68,884 68,884
c) Other liabilities 3,201,184,490.38 5,550,025 5,552,416
of which: payable on demand € 1,078,844,784.54
4,228,202,014.95 6,463,165 6,632,529
2. Liabilities to customers
a) Registered Mortgage Pfandbriefe issued 10,232,021,385.35 9,440,098 10,042,686
b) Registered Public Pfandbriefe issued 1,147,008,995.68 1,228,771 1,228,771
c) Other liabilities 5,177,335,344.17 4,976,986 5,484,113
of which:payable on demand € 14,534,760.87
16,556,365,725.20 15,645,855 16,755,570
3. Certificated liabilities
a) Bonds issued 30,236,758,083.95 27,686,592 28,078,546
aa) Mortgage Pfandbriefe € 24,329,701,285.94 (21,618,275) (22,010,229)
ab) Public Pfandbriefe € 40,964,173.55 (41,054) (41,054)
ac) Other bonds and fixed-income securities € 5,866,092,624.46 (6,027,263) (6,027,263)
b) Other certificated liabilities 171,926,794.51 339,177 339,177
30,408,684,878.46 28,025,769 28,417,723
4. Other liabilities 207,740,585.28 143,521 167,814
Carried forward 51,400,993,203.89 50,278,310 51,973,636
1
Prior-year figures, Münchener Hypothekenbank
2
Prior-year figures, including M.M.Warburg & CO Hypothekenbank AG
39
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 2 Management report 4 Notes 5 Further information3 Annual statement
of accounts
BALANCE SHEET
LIABILITIES, CAPITAL AND RESERVES
IN €
31 Dec. 2023
€ 000
31 Dec. 2022
1
€ 000
31 Dec. 2022
2
Brought forward: 51,400,993,203.89 50,278,310 51,973,636
5. Deferred items from issuing and lending business 46,999,166.06 64,145 64,575
46,999,166.06 64,145 64,575
6. Provisions
a) Provisions for pensions and similar obligations 32,900,378.00 35,903 35,903
b) Provisions for taxes 11,047,000.24 360 360
c) Other provisions 51,333,304.36 46,273 46,972
95,280,682.60 82,536 83,235
7. Subordinated liabilities 391,390,064.79 0 20,000
8. Instruments of the additional regulatory core capital 225,982,721.38 203,108 213,108
9. Fund for general banking risks 114,000,000.00 55,000 55,000
10. Capital and reserves
a) Subscribed capital 1,271,496,030.00 1,272,003 1,366,326
aa) Members´ capital contributions € 1,271,496,030.00 (1,272,003) (1,272,003)
b) Revenue reserves 463,000,000.00 412,000 412,100
ba) Legal reserve € 457,000,000.00 (406,000) (406,000)
bb) Other revenue reserves € 6,000,000.00 (6,000) (6,100)
c) Unappropriated profit 51,393,021.39 38,432 42,566
1,785,889,051.39 1,722,435 1,820,992
Total liabilities, capital and reserves 54,060,534,890.11 52,405,534 54,230,546
1. Contingent liabilities
Contingent liability on guarantees and indemnities 766.94 1 1
2. Other commitments
Irrevocable loan commitments 3,239,163,561.18 4,334,875 4,345,007
1
Prior-year figures, Münchener Hypothekenbank
2
Prior-year figures, including M.M.Warburg & CO Hypothekenbank AG
40
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 2 Management report 4 Notes 5 Further information3 Annual statement
of accounts
BALANCE SHEET
INCOME STATEMENT
For the year ended 31 December 2023
INCOME STATEMENT
IN €
1 Jan. to 31 Dec. 2023
€ 000
1 Jan. to 31 Dec. 2022
1
€ 000
1 Jan. to 31 Dec. 2022
2
1. Interest income from 1,417,980,508.90 971,326 1,001,634
a) Lending and money market operations 1,291,285,202.30 906,903 936,726
of which: negative interest on financial assets 0.00 6,370 6,405
b) Fixed-income securities and government debt register claims 126,695,306.60 64,423 64,907
2. Interest expenses 902,136,654.72 542,977 562,622
of which: positive interest on financial liabilities 204,348.75 47,600 47,603
3. Current income from 2,602,089.77 3,406 3,406
a) Shares and other non-fixed income securities 0.00 0 0
b) Participating interests and shares in cooperatives 2,602,089.77 2,906 2,906
c) Investments in affiliated companies 0.00 500 500
4. Income from profit-pooling, profit transfer or partial profit transfer
agreements
9,554,815.81 12,628 12,845
5. Commission paid 77,084,684.14 122,320 122,397
6. Other operating income 5,528,470.29 1,676 1,806
7. General administrative expenses 161,019,627.11 142,615 151,616
a) Personnel expenses 69,174,553.71 65,674 69,361
aa) Wages and salaries 58,516,067.91 55,433 58,633
ab) Social security contributions and cost of pensions and other benefits 10,658,485.80 10,242 10,728
of which: for pensions 1,770,116.39 € (2,176) (2,248)
b) Other administrative expenses 91,845,073.40 76,941 82,255
8. Depreciation, amortisation and write-downs of intangible and
tangible assets 3,600,276.62 4,477 4,500
9. Other operating expenses 3,410,996.96 4,381 4,382
10. Write-downs on and valuation allowances of loans and advances and
specific securities, as well as additions to loan loss provisions 118,036,923.35 45,467 46,460
1
Prior-year figures, Münchener Hypothekenbank
2
Prior-year figures, including M.M.Warburg & CO Hypothekenbank AG
41
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 2 Management report 4 Notes 5 Further information3 Annual statement
of accounts
INCOME STATEMENT
INCOME STATEMENT
IN €
1 Jan. to 31 Dec. 2023
€ 000
1 Jan. to 31 Dec. 2022
1
€ 000
1 Jan. to 31 Dec. 2022
2
11. Depreciation, amortisation and write-downs of participating interests,
shares in affiliated companies and securities treated as fixed assets 506,069.27 5,476 5,476
12. Expenses from loss transfer 11,571.86 0 0
13. Results from ordinary business activities 170,871,219.28 132,275 133,190
14. Extraordinary income 85,427,293.82 0 0
15. Extraordinary expenses 28,935,958.41 0 0
16. Extraordinary result 56,491,335.41 0 0
17. Allocations to the fund for general banking risks 59,000,000.00 0 0
18. Taxes on revenue and income 66,241,658.41 64,189 64,872
19. Net income 102,120,896.28 68,086 68,318
20. Retained earnings brought forward from previous year 272,125.11 347 4,248
21. Allocation to revenue reserves 51,000,000.00 30,000 30,000
a) Legal reserve 51,000,000.00 30,000 30,000
b) Other revenue reserves 0 0 0
22. Unappropriated profit 51,393,021.39 38,433 42,566
1
Prior-year figures, Münchener Hypothekenbank
2
Prior-year figures, including M.M.Warburg & CO Hypothekenbank AG
42
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 2 Management report 4 Notes 5 Further information3 Annual statement
of accounts
INCOME STATEMENT
STATEMENT OF DEVELOPMENT IN EQUITY
CAPITAL AND CASH FLOW STATEMENT
STATEMENT OF DEVELOPMENT IN EQUITY CAPITAL FOR 2023
IN € 000
Subscribed capital
Members’ capital
contributions
Silent
participations
Revenue
reserves
Unappropriated
profit
Total capital
and reserves
Capital and reserves as of 1 Jan. 2022 1,243,221 372,000 67,108 1,682,329
Net change in capital 28,782 +10,000 -10,000 28,782
Dividends paid 56,761 56,761
Net income 30,000 38,085 68,085
Capital and reserves as of 31 Dec. 2022 1,272,003 412,000 38,432 1,722,435
Net change in capital -507 -507
Dividends paid 38,160 38,160
Net income 51,000 51,121 102,121
Capital and reserves as of 31 Dec. 2023 1,271,496 463,000 51,393 1,785,889
43
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 2 Management report 4 Notes 5 Further information3 Annual statement
of accounts
STATEMENT OF DEVELOPMENT
IN EQUITY CAPITAL AND
CASH FLOW STATEMENT
CASH FLOW STATEMENT 2023
IN € MILLION
31 Dec. 2023
1. Profit for the period 102.1
2. Depreciation, amortisation and write-downs of and valuation allowances on receivables and items of fixed assets / reversals of such write-downs and valuation allowances 181.2
3. Increase / decrease in provisions 5.1
4. Other non-cash expenses / income -7.1
5. Gain / loss on disposal of fixed assets 0.0
6. Other adjustments (net) 0.0
7. Increase / decrease in receivables from credit institutions 446.6
8. Increase / decrease in receivables from customers -2,157.1
9. Increase / decrease in securities (unless classified long-term financial assets) 2,053.6
10. Increase / decrease in other assets relating to operating activities -54.4
11. Increase / decrease in liabilities to credit institutions -2,407.3
12. Increase / decrease in liabilities to customers 873.1
13. Increase / decrease in securitised liabilities 2,316.5
14. Increase / decrease in other liabilities relating operating activities 133.9
15. Interest expense / interest income -238.1
16. Income tax expense / income 0.3
17. Interest and dividend payments received 889.4
18. Interest paid -132.8
19. Income taxes paid -66.5
20. Cash flows from operating activities (total of lines 1 to 19) 1,938.5
21. Proceeds from disposal of long-term financial assets 317.5
22. Payments to acquire long-term financial assets -2,173.6
23. Proceeds from disposal of tangible fixed assets 0.0
24. Payments to acquire tangible fixed assets -31.1
25. Proceeds from disposal of intangible fixed assets 0.0
26. Payments to acquire intangible fixed assets -0.5
27. Cash flows from investing activities (total of lines 21 to 26) –1,887.7
28. Proceeds from capital contributions –0.5
29. Dividends paid to shareholders –38.2
30. Changes in cash funds relating to other capital (net) 0.0
31. Cash flows from financing activities (total of lines 28 to 30) –38.7
32. Net change in cash funds 12.1
33. Effect on cash funds of exchange rate movements and remeasurements 0.0
34. Cash funds at beginning of period 39.2
35. Cash funds
1
at end of period (total of lines 32 to 34)
51.3
1
Assets item 1 “Cash reserve”
44
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 2 Management report 4 Notes 5 Further information3 Annual statement
of accounts
STATEMENT OF DEVELOPMENT
IN EQUITY CAPITAL AND
CASH FLOW STATEMENT
45
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
NOTES
47 GENERAL INFORMATION ON
ACCOUNTING POLICIES
50 NOTES TO THE BALANCE SHEET
INCOME STATEMENT
50 Maturity analysis by residual term
54 Shareholdings
54 Tangible assets
54 Other assets
55 Deferred items
55 Deferred taxes
55 Assets pledged to secure liabilities
55 Other liabilities
55 Subordinated liabilities
55 Additional Tier 1 capital instruments
56 Members capital contributions
56 Details of revenue reserves
56 Foreign currency items
57 Other commitments
57 Other operating expenses
57 Extraordinary expenses
57 Extraordinary income
57 Write-downs on and value allowances of loans
and advances and specific securities, as well as
additions to loan loss provisions
57 Taxes on revenue and income
57 Forward trades | Derivatives
59 Cover statement for Pfandbriefe
60 PUBLICATION IN ACCORDANCE
WITH SECTION 28
PFANDBRIEF ACT
60 Pfandbriefe outstanding and their cover
62 Maturity structure of Pfandbriefe outstanding
and their respective cover pools
64 Mortgage loans used as cover for Mortgage
Pfandbriefe according to their amount in
tranches
64 Cover assets used to secure public Pfandbriefe
according to their amount in tranches
65 Volume of claims used to cover Mortgage
Pfandbriefe according to states in which the
real property is located, according to property
type and the total amount of payments in
arrears for at least 90 days as well as the total
amountof these claims inasmuch as the
respective amount in arrears is at least
5 percent of the claim
66 Volume of claims used to cover Public
Pfandbriefe
67 Total amount of payments in arrears for at least
90 days as well as the total amount of these
claims inasmuch as the respective amount in
arrears is at least 5 percent of the claim
68 Further cover assets – in detail for Mortgage
Pfandbriefe
69 Further cover assets – in detail for Public
Pfandbriefe
70 Key figures about outstanding Pfandbriefe
andcover pool
72 Key figures about outstanding Pfandbriefe
andcover pool
74 List of International Securities Identification
Numbers of the International Organization for
Standardization (ISIN) by Pfandbrief class
75 Overdue interest
75 Foreclosures and receiverships
46
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
76 OTHER DISCLOSURES
76 Membership movement
76 Personnel statistics
76 Special disclosure requirements
76 Proposed appropriation of distributable income
76 Company
77 BODIES
77 Supervisory Board
77 Board of Management
77 Mandates
78 AUDITING ASSOCIATION
79 CONTINGENT LIABILITY
80 REPORT OF THE INDEPENDENT
STATUTORY AUDITOR
86 AFFIRMATION BY THE LEGAL
REPRESENTATIVES
87 ANNEX TO ANNUAL FINANCIAL
STATEMENTS PURSUANT TO
SECTION 26A (1) SENTENCE 2
OF THE GERMAN BANKING ACT
(KWG)
88 REPORT OF THE SUPERVISORY
BOARD
NOTES
The Münchener Hypothekenbank eG annual financial state-
ments as of 31 December 2022 were prepared in accor-
dance with the provisions of the German Commercial Code
(Handelsgesetzbuch, HGB), in conjunction with the German
Accounting Regulation for Banks and Financial Service
Institutions (Verordnung über die Rechnungslegung der
Kreditinstitute, RechKredV), and in accordance with the rules
contained in the German Cooperatives Act (Genossenschafts-
gesetz, GenG) and the German Pfandbrief Act (Pfandbrief-
gesetz, PfandBG).
In exercise of the option provided for in Section 24 of the
German Transformation Act (Umwandlungsgesetz, UmwG),
the assets and liabilities assumed in connection with the
merger with M.M.Warburg& CO Hypothekenbank AG (legal
entity being acquired) were carried forward at the carrying
amounts in the closing balance sheet.
The transfer of assets as a result of the merger with the
wholly owned subsidiary Nußbaumstraße GmbH & Co. KG
took place in accordance with the exchange principles of
German commercial law, in exercise of the fair value option.
To create comparability with the previous-year figures as a
result of additions through the merger with M.M.Warburg&
Co. Hypothekenbank AG, the actual previous-year figures and
GENERAL INFORMATION ON
ACCOUNTING POLICIES
the current figures were presented along with the adjusted
previous-year figures.
With regard to creation of comparability with the previous-
year figures as a result of the merger with Nußbaumstraße
GmbH & Co. KG (“Shares in affiliated companies”, “Tangible
assets”), please see the remarks below the statement of chan-
ges in fixed assets.
In addition, the mergers also had a material impact on finan-
cial performance through the lower carrying amount and the
raising of hidden reserves. In this respect, please see the re-
marks about “Extraordinary expenses” and “Extraordinary in-
come” in the section “Notes to the balance sheet / income
statement”.
The balance sheet was drawn up with partial use of the an-
nual result.
The following accounting policies were applied when drawing
up the balance sheet and the income statement. Where we
departed from the accounting policies of the previous year,
this is discussed at the end of this section under “Departures
from accounting policies”.
All claims are stated at nominal amounts in accordance with
Section 340e (2) HGB. The difference between the amounts
disbursed and the nominal amount is shown under deferred
items. All identifiable individual credit risks are covered by
specific value adjustments and provisions set up against
claims for repayment of principal and payment of interest.
General allowances are calculated in accordance with IDW
RSBFA 7 using an expected credit loss model, whereby the
IFRS9 methodology is employed for stage 1 and 2 and ap-
plied using the HGB basis for assessment. Taking into ac-
count the probability of default, the loss given default and
the exposure at default, general allowances are created for
latent default risks for all transactions reported under the
balance sheet items loans and advances to credit institutions
and loans and advances to customers, as well as for irrevoca-
ble loan commitments. General allowances for irrevocable
loan commitments are reported in the balance sheet in the
form of a provision. All transactions not subject to a specific
allowances requirement test are assigned to stage 1 and 2,
whereby the expected 12-month expected loss is calculated
for stage 1 and the lifetime expected loss is calculated for
stage 2. All transactions are generally assigned to stage 1
atthe time they are acquired. The assignment to stage 2 is
made at the balance sheet date if the transaction’s risk of
default has increased significantly compared to the risk of
default when the transaction was originally acquired. The
47
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
GENERAL INFORMATION
ON ACCOUNTING POLICIES
relevant point-in-time parameters for calculating risk provi-
sions are determined on the basis of macroeconomic fore-
casts, which are updated quarterly by Münchener Hypothe-
kenbank’s stress testing committee on the basis of external
macroeconomic data. General allowances are calculated
using probability-weighted results from three scenarios:
thebaseline scenario, at 80%; the downside scenario, at
20%; and the upside scenario, at 0%.
In addition, contingency reserves were formed pursuant to
Section 340f HGB.
Securities held in the liquidity reserve are measured at cost
or, as the case may be, the lower exchange or market price
orat fair value, whichever is lower (strict lower of cost or
market principle).
Securities held as fixed assets, which were mainly acquired as
cover for Public Pfandbriefe and for other coverage purposes,
are valued at their cost of purchase. Discounts and premiums
are recognised as interest income or expense over the resi-
dual life of the securities. Securities associated with swap
agreements are valued together with these agreements as a
single item. To the extent that derivatives are used to hedge
risks they are not valued individually. As in the previous year,
securities held as fixed assets in the business year, and which
were not subject to a sustained decrease in value, are valued
in accordance with the modified lower of cost or market
principle. In cases involving securities treated as fixed assets
where a permanent decrease in value is anticipated, a write-
down takes place to the lower exchange or market price or
the lower fair value.
Borrowed securities do not appear on the balance sheet.
In accordance with the rules pertaining to the valuation of
fixed assets, participations and holdings in affiliated compa-
nies are valued at their cost of purchase. Depreciation is
taken on those assets where the reduction in value is ex-
pected to be long term.
Intangible assets and tangible assets are valued at cost or
production costs less accumulated depreciation. Scheduled
depreciation is carried out in accordance with the normal
useful life. Due to technical innovation, the normal useful life
for software is based on empirical business reality. Low-value
business assets are treated in accordance with tax regulations.
Non-scheduled depreciation is taken in the event of a per-
manent loss in value. Other assets were valued at nominal
value or their cost of purchase in observance of the strict
lower of cost or market principle.
Existing deferred taxes arising due to temporary differences
between values calculated for trading and tax purposes are
cleared. A backlog of deferred tax assets is not recorded in
the balance sheet.
Liabilities are shown at settlement value. Zero bonds are
carried in the accounts at the issuing price plus earned inter-
est based on the yield at the time of purchase in accordance
with the issuing conditions. The difference between the
nominal amount of liabilities and the amount disbursed is
shown under deferred items. Based on the principles of pru-
dent business practice, provisions have been made for uncer-
tain liabilities in the amount of the settlement value of these
liabilities. Provisions with a remaining term of more than one
year were discounted using the commensurate average rate
of market interest rates.
Provisions made for pension obligations are calculated based
on the projected unit credit method, a discount rate of
1.78 percent and a 2.5 percent rate of salary growth, as well
as a 2.0 percent rate of pension growth. The calculation is
made on the basis of the “Heubeck mortality tables 2018 G”
prepared by Klaus Heubeck. In accordance with the terms of
Section 253 (2) HGB, the average market rate of interest of
the last 10 financial years is used for discounting purposes
with an assumed remaining term to maturity of 15 years.
Effects on profit or loss from a change in the discounting
rate in connection with pension provisions are shown in the
other operating result analogous to the discounting/com-
pounding effect.
The difference between the recognition of provisions for
pension obligations in accordance with the corresponding
average market interest rate for the past 10 financial years
and the recognition of the provisions in accordance with the
corresponding average market interest rate for the past
seven financial years amounted to €319thousand.
The provisions for partial retirement are based on actuarial
calculations derived from the Heubeck mortality tables
2018G. The provisions for partial retirement are calculated
inaccordance with actuarial principles using the net present
value method in line with IDW RS HFA 3. Discounting took
place in line with the remaining term to maturity using an
interest rate of 1.04 percent.
The provisions for long-term service emoluments and for be-
nefit obligations are based on actuarial calculations derived
from the Heubeck mortality tables 2018 G. These provisions
were discounted at the average market interest rate of the
48
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
GENERAL INFORMATION
ON ACCOUNTING POLICIES
past seven financial years of 1.74 percent, with an assumed
remaining term to maturity of 15 years.
In addition, provisions were created in the appropriate
amount for uncertain liabilities.
Per the terms of Section 256a HGB, monetary assets and
liabilities denominated in foreign currencies are calculated
using the European Central Bank’s exchange rate valid on the
balance sheet date. Results realised from the conversion of
particularly covered foreign currency positions are recogni-
zed net in the income statement under other operating in-
come. Costs and income are valued at the individual daily ex-
change rate. Considered particularly covered were foreign
currency positions in the opposite direction, to the extent
that they matched in terms of amount and maturity.
Results from the foreign currency valuation of individual im-
pairment allowances are recognised in the income statement
under “Other operating income”.
These effects from currency translation that are recognised
under “Other operating income” amounted to €962thousand
in the 2023 financial year (31 December 2022: €992thousand).
Income and expenses are valued at the respective daily rate.
Negative interest on financial assets or financial liabilities has
been deducted from the related interest income items or in-
terest expense items shown on the income statement.
We departed from the accounting method of the previous
year in the following case for the reason described below:
Until now, a portion of the bank levy was presented through
an irrevocable payment commitment (with no effect on the
balance sheet), and cash collateral was deposited for this
purpose. Based on a current ruling by the European Court of
Justice, this portion of the bank levy, together with the re-
cognition of an asset under “Other assets”, was now booked
for the first time in the income statement as “Other liability”.
The expense arising for this in the amount of €22,634thou-
sand was recognised in the income statement under “Extra-
ordinary expenses” and thus worked to reduce income.
49
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
GENERAL INFORMATION
ON ACCOUNTING POLICIES
NOTES TO THE BALANCE SHEET
INCOME STATEMENT
Maturity analysis by residual term
ASSETS
IN €000
31 Dec. 2023 31 Dec. 2022
1
31 Dec. 2022
2
Claims on banks 1,251,669 1,527,955 1,536,463
– Three months or shorter 1,213,007 1,511,295 1,511,295
– Three months – one year 684 11 11
– One year – five years 12,895 59 59
– Five years or longer 25,083 25,098 25,098
Claims on customers 47,477,458 45,436,495 47,039,520
– Three months 1,229,134 1,117,737 1,169,855
– Three months – one year 2,637,734 2,124,318 2,205,210
– One year – five years 15,352,799 14,096,011 14,713,304
– Five years or longer 28,257,791 28,098,429 28,951,151
Bonds and other fixed-income securities
≤ one year 161,836 63,668 114,168
LIABILITIES, CAPITAL AND RESERVES
IN €000
31 Dec. 2023 31 Dec. 2022
1
31 Dec. 2022
2
Liabilities to banks 4,228,202 6,463,165 6,632,529
– Three months or shorter 1,720,903 1,753,708 1,777,072
– Three months – one year 394,335 1,708,662 1,721,662
– One year – five years 761,353 1,509,849 1,610,849
– Five years or longer 1,351,611 1,490,946 1,522,946
Liabilities to customers 16,556,366 15,645,855 16,755,570
– Three months or shorter 1,435,591 1,135,897 1,248,942
– Three months – one year 1,549,283 1,457,049 1,797,569
– One year – five years 1,961,008 1,328,896 1,792,046
– Five years or longer 11,610,484 11,724,013 11,917,013
Certificated liabilities 30,408,685 28,025,769 28,417,723
Bonds issued
– Three months or shorter 536,816 273,723 273,723
– Three months – one year 3,879,991 2,382,303 2,394,553
– One year – five years 13,974,500 11,671,628 11,894,728
– Five years or longer 11,845,451 13,358,938 13,515,542
Other certificated liabilities
– Three months or shorter 64,622 69,802 69,802
– Three months – one year 107,305 269,375 269,375
1
Prior-year figures, Münchener Hypothekenbank
2
Prior-year figures, including M.M.Warburg & CO Hypothekenbank AG
50
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
NOTES TO THE BALANCE
SHEET INCOME STATEMENT
Claims on | Liabilities
CLAIMS ON AND LIABILITIES TO AFFILIATED COMPANIES AND COMPANIES IN WHICH PARTICIPATING INTERESTS ARE HELD
IN €000
Affiliated companies
31 Dec. 2023
Companies in which
participating interests are held
31 Dec. 2023
Affiliated companies
31 Dec. 2022
Companies in which
participating interests are held
31 Dec. 2022
certificated non-certificated certificated non-certificated certificated non-certificated certificated non-certificated
Claims on banks 0 0 0 459,941 0 0 0 236,011
Claims on customers 0 0 0 0
Bonds and other fixed-income securities 0 0 92,075 0 0 0 92,076 0
Liabilities to banks 0 0 0 1,503,336 0 0 0 1,683,790
Liabilities to customers 0 697 0 0 0 2,027 0 0
Certificated liabilities 0 0 0 0 0 0 0 0
Subordinated liabilities 0 0 0 0 0 0 0 0
Securities
SECURITIES MARKETABLE ON THE STOCK EXCHANGE
IN €000
31 Dec. 2023 31 Dec. 2022
Asset category Listed Unlisted Listed Unlisted
Bonds and other fixed-income securities 3,930,120 180,911 2,075,057 169,163
Shares and other non-fixed-income securities 0 0 0 0
Participations 0 0 0 0
51
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
NOTES TO THE BALANCE
SHEET INCOME STATEMENT
Separate funds
SHARES IN SEPARATE FUNDS
IN €000
Description of the fund Investment goal
Valuation pursuant to Section 168 and
278 Capital Investment Code (KAGB), or
Section 36 Investment Act (old version)
or comparable foreign regulations Difference to book value Distribution paid out for financial year
UIN-Fonds No. 903
Long-term return and diversification
benefits compared to a direct investment
in shares, taking the structure of the
Bank’s portfolio into consideration 147,000 7,217 0
There are no restrictions on the ability to redeem daily.
SUBORDINATED ASSETS
IN €000
31 Dec. 2023 31 Dec. 2022
Bonds and other fixed-income securities 92,075 92,076
Trading book
As of 31 December 2023, the portfolio contained no financial
instruments used in the trading book. During the year under
review no changes were made to the Bank’s internal criteria
for including financial instruments in the trading portfolio.
52
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
NOTES TO THE BALANCE
SHEET INCOME STATEMENT
Fixed assets
DEVELOPMENT OF FIXED ASSETS
IN €000
Net book value on
Acquisition
and produc-
tion costs Changes total + / –
1
31 Dec. 2023 31 Dec. 2022
Bonds and other
fixed-income securities 2,263,363 + 1,905,516 4,168,879 2,263,363
Shares and other non
fixed-income securities 0 0 0 0
Participations and shares
in cooperatives 102,742 0 102,742 102,742
Shares in affiliated
companies 11,751 - 10,600 1,151 11,751
Changes in legal depreciation
taken related to Net book value on
Acquisition
and produc-
tion costs
at start of
business year
Additions
during
business
year
Disposals
during
business
year
Transfers
during
business
year
Acquisition
and
production
costs at
end of
business
year
Accumula-
ted depre-
ciation at
start of
business
year
Deprecia-
tion during
business
year
Additions
during
business
year Additions Disposals Transfers
Accumula-
ted depre-
ciation at
end of
business
year 31 Dec. 2023 31 Dec. 2022
Intangible assets 19,323 464 19,787 19,140 299 19,439 348 183
a) Internally generated
commercial property
rights and similar
rights and assets 0 0 0
b) Concessions acquired
for consideration,
commercial rights and
similar rights and
values, as well as
licenses to these
rights and values 19,323 464 19,787 19,140 299 19,439 348 183
Tangible assets 101,841 31,149 336 132,654 36,655 3,301 336 39,620 93,034 65,186
1
The Bank has exercised the option, available under Section 34 (3) of the accounting regulation for banks and financial services institutions, to combine certain items.
53
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
NOTES TO THE BALANCE
SHEET INCOME STATEMENT
The change to the item “Bonds and other fixed-income secu-
rities” includes the addition of securities in the amount of €
31,015 thousand from the merger with M.M.Warburg & CO
Hypothekenbank AG.
The transfer of assets as a result of the merger with the
wholly owned subsidiary Nußbaumstraße GmbH & Co. KG
(carry amount of limited partner interests: € 10,600 thou-
sand) took place in accordance with the exchange principles
of German commercial law, in exercise of the fair value op-
tion. Additions to tangible assets included the corresponding
countervalue of € 30,705 thousand. No information was
available on the other participations on the balance sheet
date that the fair value of the Bank’s participations and capi-
tal holdings at cooperatives, holdings in affiliated companies,
as well as the value of shares and other non-fixed-income
securities was less than their book values.
The item “Bonds and other fixed-income securities” includes
securities with a book value of € 1,575,468 thousand (previ-
ous year: € 605,189 thousand) exceeding the fair value of
€ 1,534,980 thousand (previous year: € 574,978 thousand).
To the extent that these securities are associated with a swap
transaction, they are valued together with the transaction as
a single item.
Of the bonds and other fixed-interest securities held as fixed
assets, there are € 3,904 million in valuation units within the
meaning of Section 254 HGB as at the balance sheet date.
Securities held as fixed assets, which are separately identified
in the portfolio management system and are not expected
tobe subject to a permanent impairment in value, are valued
in accordance with the moderated lower of cost or market
principle. In light of our intention to hold these securities
until they mature, we generally assume that market price-
related decreases in value will not become effective and that
these securities will be repaid in full at their nominal value
atmaturity.
Of the securities that are valued in accordance with the mod-
erated lower of cost or market principle € 4,111,030 thousand
(previous year: € 2,244,220 thousand) are marketable securities.
Shareholdings
The Cooperative holds the following investments in other
enterprises with which a group relationship exists:
SHAREHOLDINGS
Percentage
of capital
held
IN %
Equity
IN €000
Profit / loss
IN €000
M-Wert GmbH, Munich
1
100.00 435 182
Immobilienservice GmbH
der Münchener
Hypothekenbank eG,
Munich (profit transfer
agreement)
2
100.00 509 0
M-4tec GmbH, Munich
1
100.00 595 -10
1
Annual financial statements 2022.
2
Annual financial statements 2023.
Consolidated financial statements were not prepared because
preparation was able to be dispensed with due to the minor
significance for the assets, liabilities, financial position and
financial performance (Section 290 (5) HGB in conjunction
with Section 296 (2) HGB).
Other investments were listed due to the overall minor signi-
ficance pursuant to Section 286 (3) HGB.
Tangible assets
The portion of the total value attributable to the land and
buildings used by the Bank is € 52,068 thousand (previous
year: € 53,026 thousand), and of plant and office equipment
€ 3,465 thousand (previous year: € 3,324 thousand).
Other assets
The item “Other assets” includes deferred items of
€ 52,451 thousand related to the derivative business, and
€ 46,439 thousand in commissions for mortgage loans
that will be paid after the balance sheet date. Furthermore
this item also includes € 22,634 thousand in cash collate-
ral pledged within the framework of the banking levy.
54
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
NOTES TO THE BALANCE
SHEET INCOME STATEMENT
Deferred items
DEFERRED ITEMS FROM THE ISSUING
AND LOAN BUSINESS
IN €000
31 Dec. 2023 31 Dec. 2022
Assets side 11.
Discount from liabilities 116,523 87,811
Premium from claims 1,998 2,907
Other deferred charges 16,741 19,128
Liabilities side 5.
Premium from liabilities 32,788 46,337
Discount from claims 818 1,388
Other deferred income 13,393 16,420
The remaining deferred items include compensatory payments
by the Bank to derivative counterparties due to a change in
the collateralisation agreements or agreements arising from
the transition from EONIA to €STR. These compensatory pay-
ments are shown on a proportionate basis in the income
statement.
Deferred taxes
Because the values recognised in the balance sheet prepared
for commercial law purposes differ from those recognised in
the balance sheet prepared for tax purposes, deferred tax
assets arise for the items “Claims on customers”, “Equities
and other variable-yield securities” and “Provisions”. Deferred
tax liabilities result from the item “Tangible assets”. The re-
maining backlog of deferred tax assets arising after clearing
is not recorded in the balance sheet.
Assets pledged to secure liabilities
Within the framework of open market deals with the Euro-
pean Central Bank, securities valued at € 0 thousand (previ-
ous year: € 2,202,000 thousand) were pledged. Within the
framework of security arrangements for derivative trans-
actions, cash collateral of € 858,320 thousand (previous year:
€ 1,286,540 thousand) was provided. Securities valued at
€ 19,970 thousand (previous year: € 14,734 thousand) were
pledged to secure pension obligations and requirements of
the partial retirement model for older employees. Securities
valued at € 20,000 thousand (previous year: € 20,000 thou-
sand) were pledged to secure financial aid obligations within
the framework of a Contractual Trust Arrangement (CTA).
Claims in respect of loans valued at € 661,665 thousand
(previous year: € 632,437 thousand) were assigned to secure
loans obtained from credit institutions.
Pursuant to Section 12 (5) of the German Restructuring
FundAct (Restrukturierungsfondsgesetz, RStruktFG),
€ 22,634 thousand in cash collateral has been pledged.
Other liabilities
The item “Other liabilities” consists of € 122,223 thousand
fordeferred items and adjustment items for valuation of
foreign currency items, and € 20,191 thousand related to de-
rivative transactions, as well as interest deferrals under Ad-
ditional Tier 1 (AT1) bonds of € 5,443 thousand and interest
deferrals under subordinated liabilities of € 6,766 thousand.
In addition, because of the changed accounting method,
there is afurther liability under this item in the amount of
€ 22,634 thousand for cash collateral pledged pursuant to
Section 12 (5) of the RStruktFG.
Subordinated liabilities
Subordinated liabilities incurred interest expenses of
€ 8,297 thousand (previous year: € 738 thousand).
Subordinated liabilities which individually exceed 10 percent
of the overall statement amount to:
Nominal amount Currency Interest rate Maturity date
200,000,000.00 EUR 7.125 31.10.2028
124,190,064.79 CHF 4.2525 07.06.2023
The instruments comply with the provisions of Section 63 of
the Capital Requirements Regulation (CRR).
Early repayment obligations are excluded in all cases. The
conversion of these funds into capital or other forms of debt
has not been agreed upon nor is it foreseen. Reporting on
the balance sheet is shown at nominal value.
Additional Tier 1 capital instruments
Additional Tier 1 (AT1) capital with a total nominal value
of€10million from the takeover of M.M.Warburg & CO
Hypothekenbank AG and CHF 200million, or a book value
of€ 216 million valued at the exchange rate on the balance
sheet date, is reported under the item Additional Tier 1 (AT1)
instruments. Interest expenses amounted to € 9,050 thousand
on the balance sheet date, of which € 5,443 thousand was
attributable to accrued interest.
55
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
NOTES TO THE BALANCE
SHEET INCOME STATEMENT
As at 31 December 2023, there were four bonds in the portfolio.
Nominal amount Currency Interest rate Date issued
First interest
rate adjustment
(every 5 years
thereafter)
Margin on
interest rate
adjustment
125,000,000.00 CHF 3.125 12.12.2019 02.06.2025 3.656
75,000,000.00 CHF 5.750 02.06.2022 02.06.2027 4.945
6,000,000.00 EUR 6.400 10.12.2018 30.11.2028 4.000
4,000,000.00 EUR 6.400 30.11.2018 30.11.2028 4.000
Both CHF bonds were issued in denominations of CHF 50,000.
Both EUR bonds are divided into units of 1 each. The bonds
are perpetual. The CHF bonds are callable by Münchener
Hypothekenbank after 5.5 years, and the EUR bonds after
5years. The interest rate for the CHF bonds will be adjusted
to the current 5-year CHF mid-swap rate on the interest rate
adjustment date, as well as an additional margin. For the
EURbonds, the interest rate is equal to the yield on debt
securities outstanding for government bonds with a residual
term of 4 to 5 years, as well as an additional margin.
Payment of interest will not take place if the issuer has insuf-
ficient distributable items available for distribution, if the is-
suer is ordered to do so by a competent regulatory authority,
or due to non-compliance with equity capital and capital
buffer requirements.
Interest payments are not cumulative.
The CHF bonds will be written down in the event Münche-
nerHyp’s Common Equity Tier 1 capital ratio (CET1 ratio) falls
below a minimum level of 7 percent, and the EUR bonds will
be written down if the CET ratio falls below 5.125 percent. A
write-up of the bond is at the full discretion of the issuer and
requires sufficient net income for the year and may not con-
travene any statutory or official prohibition on distribution.
Pursuant to the terms of commercial law, this is a liability
and not equity.
Members capital contributions
Members capital contributions disclosed under capital and
reserves item 10aa) consisted of:
MEMBERS CAPITAL CONTRIBUTIONS
IN €
31 Dec. 2023 31 Dec. 2022
Capital contributions 1,271,496,030.00 1,272,002,690.00
a) of remaining
members 1,260,874,370.00 1,264,006,170.00
b) of former
members 7,674,170.00 7,293,020.00
c) in respect of
shares under no-
tice 2,947,490.00 703,500.00
Outstanding obligatory
payments in respect of
shares 0.00 0.00
Details of revenue reserves
DEVELOPMENT OF REVENUE RESERVES
IN €000
Legal
reserve
Other revenue
reserves
1 Jan. 2023 406,000 6,000
Transfer from 2022
retained earnings
Transfer from 2023
net income 51,000
31 Dec. 2023 457,000 6,000
The increase in the assessment period used for defining the
average discount rate from 7 to 10 years resulted in a posi-
tive contribution to income of € 319 thousand, which is
barred from being distributed and is included under the item
“Other revenue reserves”.
Foreign currency items
FOREIGN CURRENCY ITEMS
IN €000
31 Dec. 2023 31 Dec. 2022
Assets side 6,816,818 6,976,033
Liabilities side 6,440,055 5,987,279
Contingent liabilities
and other obligations 236,249 170,961
56
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
NOTES TO THE BALANCE
SHEET INCOME STATEMENT
Other commitments
The irrevocable loan commitments contained in this item
consist almost solely of mortgage loan commitments made
to customers. It is anticipated that the irrevocable loan
commitments will be drawn down. Against the background
of the ongoing monitoring of loans, the probable need to
create provisions for risks related to contingent obligations
and other obligations is viewed as minor.
The loan commitments are shown in the nominal amount. If
individual impairment allowances for irrevocable loan
commitments that have not been utilised, or collective im-
pairment allowances for latent credit risks, are classified as a
liability, the respective item is curtailed at the bottom line in
the amount of the provision.
Other operating expenses
This item contains expenses arising from adding interest ef-
fects of € 655 thousand (previous year: € 1,122 thousand)
for established provisions.
Extraordinary expenses
This item includes expenses of €6,302thousand from the
merger with M.M.Warburg & CO Hypothekenbank AG and ex-
penses for recognition of the liability of € 22,634 thousand
for cash collateral pledged pursuant to Section 12 (5) of the
RStruktFG.
Extraordinary income
This item includes the gain of €65,322thousand from the
merger with M.M.Warburg & CO Hypothekenbank AG and the
gain of €20,105thousand from the merger with Nußbaum-
straße GmbH & Co. KG.
Write-downs on and value allowances of loans and
advances and specific securities, as well as additions
to loan loss provisions
The item “Depreciation, amortisation and value adjustments
on accounts receivables and certain securities as well as
allocations to provisions for possible loan losses” amounted
to minus € 118,037 thousand (previous year: minus
€ 45,467 thousand). The net result of changes in loan
lossprovisions (including direct depreciation) amounted
tominus € 103,708 thousand (previous year: minus
€ 18,658 thousand). The calculation of general loan loss
provisions for the lending business in accordance with
IDWRS BFA 7 resulted in an addition of € 10,920 thousand
(previous year: € 28,000 thousand), of which € 0 thousand
(previous year: € 1,000 thousand) wasinthe form of a provi-
sion for latent default risks for commitments. In addition, a
provision in the amount of €3,399 thousand was created for
an open loan commitment at risk of default.
Taxes on revenue and income
This item includes expenses of €1,771thousand relating to
other periods (previous year: €6,674thousand).
Forward trades | Derivatives
The following derivative transactions were made to hedge
swings in interest rates or hedge against exchange rate risks.
These figures do not include derivatives embedded in under-
lying basic transactions stated on the balance sheet.
57
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
NOTES TO THE BALANCE
SHEET INCOME STATEMENT
NOMINAL AMOUNTS
IN €MILLION
Residual term
≤ one year
Residual term
> one year ≤
five years
Residual term
> five years Total
Fair value at
balance sheet
date
1
neg. (–)
Interest-rate-related transaction
Interest rate swaps 9,848 29,303 64,607 103,758 240
Interest rate options
– Calls 29 488 390 906 21
– Puts 40 239 0 279 -17
Other interest rate contracts 50 10 2,893 2,953 51
Currency-related transactions
Cross-currency swaps 1,129 2,414 162 3,705 -140
Currency swaps 627 0 0 627 19
1
Valuation methods:
Interest rate swaps are valued using the present value method based on the current interest rate curve at the balance sheet date. In doing so the cash flows are discounted using market interest rates
appropriate for the related risks and remaining terms to maturity. Interest that has been accrued but not yet paid is not taken into consideration. This approach is known as “clean price” valuation.
The value of options is calculated using option price models and generally accepted basic assumptions. In general, the particular value of an option is calculated using the price of the underlying
value, its volatility, the agreed strike price, a risk-free interest rate and the remaining term to the expiration date of the option.
The derivative financial instruments noted involve premiums
stemming from option trades in the amount of € 38.7 million
(previous year: € 38.6 million) which are carried under the
balance sheet item “Other assets”.
Interest attributable to derivative deals is carried under the
balance sheet items “Claims on banks” with € 423.4 million
(previous year: € 255.2 million) and “Liabilities to banks” with
€ 350.8 million (previous year: € 224.4 million) or “Claims on
customers”, which amounted to € 8.9 million (previous year:
€ 7.7 million) while “Liabilities to customers” were € 11.0 mil-
lion (previous year: € 12.3 million). The accrual of compen-
satory payments made is entered under “Other assets” with
€ 13.8 million (previous year: € 11.9 million); the accrual of
compensatory payments received is entered under “Other
liabilities” with € 20.2 million (previous year: € 21.1 million).
Compensatory items in the amount of € 122.2 million (previ-
ous year: € 113.7 million) related to the valuation of foreign
currency swaps are carried under the balance sheet item
“Other liabilities”.
The counterparties of derivative contracts are banks and pro-
viders of financial services, located in OECD countries.
Hedging arrangements were made to reduce credit risks as-
sociated with these contracts. Within the framework of these
arrangements collateral was provided for the net claims / lia-
bilities arising after the positions were netted.
In the context of the Bank’s hedging positions, € 3,904 mil-
lion (previous year: € 2,075 million) in balance sheet hedging
positions were designated in accounting to hedge interest
rate risks associated with securities carried on the balance
sheet under “Bonds and other fixed-income securities”. It
may be assumed that the effectiveness of the hedging positi-
ons will remain unchanged over the entire term of the trans-
action as the conditions of the securities correspond to those
of the hedging derivatives (critical term match method).
Offsetting changes in value are not shown in the balance
sheet; uncovered risks are treated in accordance with stan-
dard valuation principles. The total amount of offsetting
value changes for all valuation units amounted to € 326 mil-
lion.
Interest-based finance instruments carried in the banking
book, including the interest rate derivatives concluded to
manage general interest rate risk (asset/liability manage-
ment), are valued without losses within the framework of
anoverall valuation of all transactions in accordance with
IDS FS BFA 3 (new version). For this purpose, the interest
rate driven net present values are compared. The resulting
amount of the positive difference is then reduced by the net
present value of the risk costs and the net present value of
the portfolio management costs. In the event of a negative
result, a provision for contingent losses is created, which is
recognised under “Other provisions”. A related provision did
not have to be created based on the results of the calculation
made on 31 December 2023.
All interest income and interest expenses from swaps that are
assigned to asset/liability management are netted by the
Bank. The net amount is then recognised either under “Inter-
est income” or “Interest expenses” in order to present a true
and accurate view of the company’s net assets, financial
position and financial performance.
58
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
NOTES TO THE BALANCE
SHEET INCOME STATEMENT
In the current financial year, interest income of €2,313 mil-
lion (previous year: €285 million) was netted with interest
expenses of €2,092 million (previous year: €310 million),
and the net amount of €221 million was recognised under
“Interest income” (previous year: €25 million under “Interest
Expenses”).
As at the date of record the portfolio contained no de-
rivatives used in the trading book
Cover statement for Pfandbriefe
A. MORTGAGE PFANDBRIEFE
IN €000
31 Dec. 2023 31 Dec. 2022
Ordinary cover assets 36,310,758 33,795,563
1. Claims on banks (mortgage loans) 13,719 168
2. Claims on customers (mortgage loans) 36,244,575 33,742,931
3. Tangible assets (charges on land owned by the Bank) 52,464 52,464
Substitute cover assets 1,240,400 581,414
1. Cash reserves 0 1,000
2. Other claims on banks 0 0
3. Bonds and other fixed-income securities 1,240,400 580,414
Total cover 37,551,158 34,376,977
Total Mortgage Pfandbriefe requiring cover 35,241,283 31,693,890
Surplus cover 2,309,875 2,683,087
B. PUBLIC PFANDBRIEFE
IN €000
31 Dec. 2023 31 Dec. 2022
Ordinary cover assets 1,375,944 1,406,984
1. Claims on banks (public-sector loans) 25,000 25,000
2. on customers (public-sector loans) 1,150,944 1,171,984
3. Bonds and other fixed-income securities 200,000 210,000
Substitute cover assets 0 50,000
1. Other claims on banks 0 0
2. Bonds and other fixed-income securities 0 50,000
Total cover 1,375,944 1,456,984
Total public-sector Pfandbriefe requiring cover 1,226,268 1,308,390
Surplus cover 149,676 148,594
59
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
NOTES TO THE BALANCE
SHEET INCOME STATEMENT
PUBLICATION IN ACCORDANCE
WITH SECTION 28 PFANDBRIEF ACT
PUBLICATION PURSUANT TO SECTION 28 (1) SENTENCE 1, 3 PFANDBRIEF ACT (PFANDBRIEFGESETZ, PFANDBG)
Pfandbriefe outstanding and their cover
Q4 2023
PFANDBRIEFE OUTSTANDING AND THEIR COVER
IN €MILLION
nominal value net present value risk-adjusted net present value
1
Q4 2023 Q4 2022 Q4 2023 Q4 2022 Q4 2023 Q4 2022
Outstanding total Mortgage Pfandbriefe 35,241.3 31,693.9 33,368.0 28,407.9 30,922.5 21,197.3
of which derivatives – – – – – –
Cover pool 37,551.2 34,377.0 36,958.0 32,304.3 34,130.9 24,490.0
of which derivatives – – – – – –
Over-collateralisation (OC)
2,309.9 2,683.1 3,590.0 3,896.4 3,208.4 3,292.7
OC in % of Pfandbriefe outstanding
6.6 8.5 10.8 13.7 10.4 15.5
Statutory OC
2
1,274.0 1,148.8 667.4 1,162.0
Contractual OC
3
– – – –
Voluntary OC
4
1,035.9 1,534.3 2,922.6 2,734.3
“Over-collateralization in consideration of
vdp credit quality differentiation model” 2,309.9 2,683.1 3,590.0 3,896.4
OC in % of Pfandbriefe outstanding 6.6 8.5 10.8 13.7
1
The dynamic approach was used for calculating the risk-adjusted net present value according to Section 5 (1) No. 2 of the Net Present Value Regulation (PfandBarwertV).
2
According to nominal value: sum of the nominal statutory over-collateralisation pursuant to Section 4 (2) PfandBG and the nominal value of the net present value statutory over-collateralisation pursuant to Section 4 (1) PfandBG
3
Contractual over-collateralisation
4
Residual, depending on the statutory and contractual over-collateralisation; net present value includes the net present value of the nominal statutory over-collateralisation pursuant to Section 4 (2) PfandBG
Note: The release of the over-collateralisation with a view to the vdp-credit quality differentiation model is voluntary.
60
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
OUTSTANDING TOTAL PUBLIC PFANDBRIEFE
IN €MILLION
nominal value net present value risk-adjusted net present value
1
Q4 2023 Q4 2022 Q4 2023 Q4 2022 Q4 2023 Q4 2022
Outstanding total Mortgage Pfandbriefe 1,226.3 1,308.4 1,359.0 1,401.9 1,256.7 993.8
of which derivatives – – – – – –
Cover pool 1,375.9 1,457.0 1,531.6 1,552.6 1,360.8 1,041.4
of which derivatives – – 14.4 12.0 7.3 -15.8
Over-collateralization (OC) 149.6 148.6 172.6 150.7 104.1 47.7
OC in % of Pfandbriefe outstanding 12.2 11.4 12.7 10.7 8.3 4.8
Statutory OC
2
47.9 51.1 27.2 55.9
Contractual OC
3
– – – –
Voluntary OC
4
101.7 97.5 145.5 94.8
Over-collateralization in consideration of
vdp credit quality differentiation model 149.7 148.6 172.7 150.7
OC in % of Pfandbriefe outstanding 12.2 11.4 12.7 10.7
1
The dynamic approach was used for calculating the risk-adjusted net present value according to Section 5 (1) No. 2 of the Net Present Value Regulation (PfandBarwertV).
2
According to nominal value: sum of the nominal statutory over-collateralisation pursuant to Section 4 (2) PfandBG and the nominal value of the net present value statutory over-collateralisation pursuant to Section 4 (1) PfandBG
3
Contractual over-collateralisation
4
Residual, depending on the statutory and contractual over-collateralisation; net present value includes the net present value of the nominal statutory over-collateralisation pursuant to Section 4 (2) PfandBG
Note: The release of the over-collateralisation with a view to the vdp-credit quality differentiation model is voluntary.
61
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
PUBLICATION PURSUANT TO SECTION 28 (1) SENTENCE 2, NOS. 4 AND 5 OF THE GERMAN PFANDBRIEF ACT (PFANDBRIEFGESETZ, PFANDBG)
Maturity structure of Pfandbriefe outstanding and their respective cover pools
Q4 2023
MORTGAGE PFANDBRIEFE
IN €MILLION
Q4 2023 Q4 2022
Q4 2023 Mat-Ex
(12 months)
1
Q4 2022 Mat-Ex
(12 months)
1
Maturity:
Pfandbriefe
outstanding Cover pool
Pfandbriefe
outstanding Cover pool
Pfandbriefe
outstanding
Pfandbriefe
outstanding
<= 0.5 years 1,866.8 1,590.2 1,280.9 1,414.7 – –
> 0.5 years and <= 1 year 1,392.0 1,494.7 1,613.0 1,603.7 – –
> 1 year and <= 1.5 years 1,308.2 1,417.0 731.9 1,399.8 1,866.8 1,280.9
> 1.5 years and <= 2 years 1,756.7 2,104.3 885.6 1,192.9 1,392.0 1,613.0
> 2 years and <= 3 years 3,512.0 3,537.2 1,186.6 3,229.2 3,064.9 1,617.4
> 3 years and <= 4 years 3,473.9 3,554.7 2,723.1 2,800.0 3,512.0 1,186.6
> 4 years and <= 5 years 3,498.5 2,278.7 3,197.7 2,916.4 3,473.9 2,723.1
> 5 years and <= 10 years 8,253.6 10,770.0 9,446.0 10,078.2 10,625.5 10,954.7
> 10 years
10,179.6 10,804.4 10,629.2 9,741.9 11,306.2 12,318.2
PUBLIC PFANDBRIEFE
IN €MILLION
Q4 2023 Q4 2022
Q4 2023 Mat-Ex
(12 months)
1
Q4 2022 Mat-Ex
(12 months)
1
Maturity:
Pfandbriefe
outstanding Cover pool
Pfandbriefe
outstanding Cover pool
Pfandbriefe
outstanding
Pfandbriefe
outstanding
<= 0.5 years 56.5 7.2 36.7 24.9 – –
> 0.5 years and <= 1 year 46.8 15.8 48.0 24.9 – –
> 1 year and <= 1.5 years 11.3 13.3 53.9 26.4 56.5 36.7
> 1.5 years and <= 2 years 41.6 11.8 46.8 28.0 46.8 48.0
> 2 years and <= 3 years 172.2 240.9 77.9 128.6 52.9 100.6
> 3 years and <= 4 years 3.0 20.0 129.6 134.6 175.2 77.9
> 4 years and <= 5 years 233.4 68.8 5.4 12.4 3.0 129.6
> 5 years and <= 10 years 437.6 120.4 402.4 210.6 367.4 324.1
> 10 years
223.9 877.8 507.9 866.5 524.5 591.5
1
Effects of an extension of maturity on the maturity structure of the Pfandbriefe / extension scenario: twelve months. This is an extremely unlikely scenario, which could only come into play after the appointment of a cover pool administrator.
62
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
INFORMATIONS ON THE MATURITY EXTENSION OF THE PFANDBRIEFE
Q4 2023 Q4 2022
Prerequisites for the extension of
maturity of the Pfandbriefe
The extension of the maturity is necessary in order to avoid the imminent insolvency
of the Pfandbrief bank with limited business activity, the Pfandbrief bank with limited
business activity is not overindebted and there is reason to believe that the Pfandbrief
bank with limited business activity will be able to meet its liabilities then due after the
expiry of the maximum possible extension date, taking into account further possibilities
for extension. See also, in addition, section 30 para 2b Pfandbrief Act.
The extension of the maturity is necessary in order to avoid the imminent insolvency
of the Pfandbrief bank with limited business activity, the Pfandbrief bank with limited
business activity is not overindebted and there is reason to believe that the Pfandbrief
bank with limited business activity will be able to meet its liabilities then due after the
expiry of the maximum possible extension date, taking into account further possibilities
for extension. See also, in addition, section 30 para 2b Pfandbrief Act.
Powers of the cover pool administrator
in the event of the extension of
maturity of the Pfandbriefe
The cover pool administrator may extend the maturity dates of the principle payments,
if the relevant requirements pursuant to section 30 para. 2b Pfandbrief Act are met.
The administrator shall determine the period of the extension of the maturity, which
may not exceed a period of 12 months, in accordance with necessity.
The cover pool administrator may extend the maturity dates of the principal and
interest payments falling due within one month after the appointment of the cover
pool administrator to the end of that monthly period. If the cover pool administrator
decides in favor of such a extension of the maturity, the existence of the prerequisites
pursuant to section 30 para. 2b Pfandbrief Act shall be irrefutably presumed. Such
anextension shall be taken into account within the maximum extension period of
12months.
The cover pool administrator may only exercise his authority uniformly for all Pfand-
briefe of an issue. In this connection, the maturities may be extented in full or on a
pro rata basis. The cover pool administrator must extend the maturity for a Pfandbrief
issue in such a way that the original order of servicing of the Pfandbriefe which could
be overtaken by the postponement is not changed (prohibition of overtaking). This
may result in the maturities of later maturing issues also having to be extended in
order to comply with the prohibition on overtaking. See also, in addition, section 30
para. 2a and 2b Pfandbrief Act.
The cover pool administrator may extend the maturity dates of the principle payments,
if the relevant requirements pursuant to section 30 para. 2b Pfandbrief Act are met.
The administrator shall determine the period of the extension of the maturity, which
may not exceed a period of 12 months, in accordance with necessity.
The cover pool administrator may extend the maturity dates of the principal and
interest payments falling due within one month after the appointment of the cover
pool administrator to the end of that monthly period. If the cover pool administrator
decides in favor of such a extension of the maturity, the existence of the prerequisites
pursuant to section 30 para. 2b Pfandbrief Act shall be irrefutably presumed. Such
anextension shall be taken into account within the maximum extension period of
12months.
The cover pool administrator may only exercise his authority uniformly for all Pfand-
briefe of an issue. In this connection, the maturities may be extented in full or on a
pro rata basis. The cover pool administrator must extend the maturity for a Pfandbrief
issue in such a way that the original order of servicing of the Pfandbriefe which could
be overtaken by the postponement is not changed (prohibition of overtaking). This
may result in the maturities of later maturing issues also having to be extended in
order to comply with the prohibition on overtaking. See also, in addition, section 30
para. 2a and 2b Pfandbrief Act.
63
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
PUBLICATION PURSUANT TO SECTION 28 (2) NO. 1 A, (3) NO. 1 AND (4) NO. 1 A
OF THE GERMAN PFANDBRIEF ACT (PFANDBRIEFGESETZ, PFANDBG)
Mortgage loans used as cover for Mortgage Pfandbriefe
according to their amount in tranches
Q4 2023
COVER ASSETS
IN €MILLION
Q4 2023 Q4 2022
Up to EUR 300,000 20,213.9 19,684.7
Between EUR 300,000 and EUR 1million 5,700.7 4,962.8
Between EUR 1million and EUR 10million 2,716.1 2,286.7
Over EUR 10million 7,680.1 6,861.3
Total 36,310.8 33,795.6
Cover assets used to secure public Pfandbriefe
according to their amount in tranches
Q4 2023
COVER ASSETS
IN €MILLION
Q4 2023 Q4 2022
Up to EUR 10million 35.9 51.9
Between EUR 10million and EUR 100million 370.0 430.0
Over EUR 100million 970.0 975.1
Total 1,375.9 1,457.0
64
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
PUBLICATION PURSUANT TO SECTION 28 (2) NO. 1 B AND C AND NO. 2 OF THE GERMAN PFANDBRIEF ACT (PFANDBRIEFGESETZ, PFANDBG)
Volume of claims used to cover Mortgage Pfandbriefe according to states in which the real property is located,
according to property type and the total amount of payments in arrears for at least 90 days as well as the total
amountof these claims inasmuch as the respective amount in arrears is at least 5 percent of the claim
Q4 2023
MORTGAGE BONDS COVER
IN €MILLION
ACCORDING TO GROUP OF
BORROWERS AND REGIONS
IN €MILLION
Cover assets
Total amount of
payments in
arrears for at
least 90 days
Total amount of
these claims
inasmuch as the
respective amount
in arrears is at least
5% of the claim
Total
thereof
Residential Commercial
Total
thereof
Total
thereof
State Q4
Apart-
ments
Single-and
two-family
houses
Multiple-
family
houses
Buildings
under con-
struction
Buil-
ding
land
Office
buildings
Retail
buildings
Industrial
buildings
Other
commerci-
ally used
buildings
Buildings
under
construc-
tion
Build-
ing
land
Total –
all states
year
2023 36,310.8 29,352.3 5,470.1 18,275.1 5,599.0 7.4 0.7 6,958.5 4,521.2 2,186.1 6.4 244.8 – – 15.1 17.7
year 2022 33,795.6 27,774.0 5,136.1 17,406.1 5,222.4 8.1 1.3 6,021.6 3,874.9 1,860.5 6.9 279.3 – – 11.6 12.9
Germany year 2023 29,173.2 24,190.0 3,787.4 15,471.0 4,923.5 7.4 0.7 4,983.2 3,407.4 1,366.0 6.4 203.4 – – 14.9 17.3
year 2022 26,682.6 22,840.3 3,524.8 14,718.8 4,587.3 8.1 1.3 3,842.2 2,513.5 1,089.6 6.9 232.2 – – 11.6 12.9
Belgium year 2023 71.6 – – – – – – 71.6 71.6 – – – – – – –
year 2022 71.6 – – – – – – 71.6 71.6 – – – – – – –
France year 2023 217.8 – – – – – – 217.8 159.8 58.0 – – – – – –
year 2022 259.2 – – – – – – 259.2 201.2 58.0 – – – – – –
Great Britain year 2023 271.9 82.1 – – 82.1 – – 189.8 152.4 14.0 – 23.4 – – – –
year 2022 281.9 – – – – – – 281.9 231.2 27.6 – 23.0 – – – –
Luxembourg year 2023 116.7 – – – – – – 116.7 116.7 – – – – – – –
year 2022 90.9 – – – – – – 90.9 90.9 – – – – – – –
Netherlands year 2023 734.5 293.7 – – 293.7 – – 440.8 175.8 265.0 – – – – – –
year 2022 716.6 299.6 – – 299.6 – – 417.0 175.2 241.8 – – – – – –
Austria year 2023 250.7 56.1 16.3 39.6 0.2 – – 194.6 46.3 130.3 – 18.0 – – 0.2 0.4
year 2022 173.7 45.4 14.2 30.9 0.3 – – 128.3 36.2 92.1 – – – – 0.0 –
Spain year 2023 479.1 31.8 – – 31.8 – – 447.3 116.5 330.8 – – – – – –
year 2022 469.0 8.5 – – 8.5 – – 460.5 132.0 328.5 – – – – – –
Switzerland year 2023 4,430.9 4,430.9 1,666.4 2,764.5 – – – – – – – –
– – – –
year 2022 4,253.5 4,253.5 1,597.1 2,656.5 – – – – – – – – – – – –
USA year 2023 564.4 267.7 – – 267.7 – – 296.7 274.7 22.0 – – – – – –
year 2022 796.5 326.6 – – 326.6 – – 469.9 423.0 22.8 – 24.0 – – – –
65
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
PUBLICATION PURSUANT TO SECTION 28 (3) NO. 2 OF THE GERMAN PFANDBRIEF ACT (PFANDBRIEFGESETZ, PFANDBG)
Volume of claims used to cover Public Pfandbriefe
Q4 2023
VOLUME OF CLAIMS USED TO COVER PUBLIC PFANDBRIEFE
IN €MILLION
State Q4
Cover assets
Total thereof owed by thereof granted by
Total includes
claims granted
for promoting
exports State
Regional
authorities
Local
authorities Other debtors State
Regional
authorities
Local
authorities Other debtors
Total –
all states year 2023 1,375.9 – 120.0 1,135.0 35.9 85.0 – – – –
year 2022 1,457.0 – 120.0 1,200.1 51.9 85.0 – – – –
Germany year 2023 1,220.9 – – 1,100.0 35.9 85.0 – – – –
year 2022 1,302.0 – – 1,165.1 51.9 85.0 – – – –
Austria year 2023 155.0 – 120.0 35.0 – – – – – –
year 2022 155.0 – 120.0 35.0 – – – – – –
66
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
PUBLICATION PURSUANT TO SECTION 28 (3) NO. 3 OF THE GERMAN PFANDBRIEF ACT (PFANDBRIEFGESETZ, PFANDBG)
Total amount of payments in arrears for at least 90 days as well as the total amount of these claims
inasmuch as the respective amount in arrears is at least 5 percent of the claim
Q4 2023
AMOUNT OF CLAIMS IN ARREARS ON PUBLIC-SECTOR PFANDBRIEFE
IN €MILLION
State Q4
Amount of claims in arrears for at least 90 days
Total amount of these claims inasmuch as the respectiveamount
in arrears is at least 5% of the claim
Total
thereof
Total
thereof
State
Regional
authorities
Local
authorities
Other
debtors State
Regional
authorities
Local
authorities
Other
debtors
Total –
all states year 2023 – – – – – – – – – –
year 2022 – – – – – – – – – –
Germany year 2023 – – – – – – – – – –
year 2022 – – – – – – – – – –
67
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
PUBLICATION PURSUANT TO SECTION 28 (1) SENTENCE 1 NOS. 8, 9 AND 10 OF THE GERMAN PFANDBRIEF ACT (PFANDBRIEFGESETZ, PFANDBG)
Further cover assets – in detail for Mortgage Pfandbriefe
Q4 2023
FURTHER COVER ASSETS – IN DETAIL FOR MORTGAGE PFANDBRIEFE
IN €MILLION
State Q4
Further cover assets for Mortgage Pfandbriefe according to
Section 19 (1) No. 2 a) and b), Section 19 (1) No. 3 a) to c), Section 19 (1) No. 4
Total
thereof
Claims according to
Section 19 (1) No. 4
claims according to Section 19 (1)
No. 2 a) and b)
claims according to Section 19 (1)
No. 3 a) to c)
Overall
thereof
Overall
thereof
Covered bonds according
to Article 129 Regulation
(EU) No 575 / 2013
Covered bonds according
to Article 129 Regulation
(EU) No 575 / 2013
Total –
all states year 2023 1,240.4 – – – – 1,240.4
year 2022 581.4 – – 1.0 – 580.4
Germany year 2023 1,230.0 – – – – 1,230.0
year 2022 571.0 – – 1.0 – 570.0
Austria year 2023 10.4 – – – – 10.4
year 2022 10.4 – – – – 10.4
68
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
PUBLICATION ACCORDING TO SECTION 28 PARA. 1 NOS. 8, 9 PFANDBRIEF ACT (PFANDBRIEFGESETZ, PFANDBG)
Further cover assets – in detail for Public Pfandbriefe
Q4 2023
FURTHER COVER ASSETS - IN DETAIL FOR PUBLIC PFANDBRIEFE
IN €MILLION
State Q4
Further cover assets for Public Pfandbriefe according to section 20 para. 2 no. 2, section 20 para. 2 nos. 3 a) to c), section 20 para. 2 no. 4
Total
thereof
claims according to section 20
para. 2 no. 2
claims according to section 20
para. 2 nos. 3 a) to c)
claims according to section 20
para. 2 no. 4
Overall
thereof
Overall
thereof
Overall
thereof
covered bonds
according to Art. 129
Regulation (EU)
No 575 / 2013
covered bonds
according to Art. 129
Regulation (EU)
No 575 / 2013
covered bonds
according to Art. 129
Regulation (EU)
No 575 / 2013
Total – all states year 2023 – – – – – – –
year 2022 – – – – – – –
Germany year 2023 – – – – – – –
year 2022 – – – – – – –
69
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
PUBLICATION ACCORDING TO SECTION 28 (1) SENTENCE 1 NOS. 6, 7, 11, 12, 13, 14, 15 PFANDBRIEF ACT
AND SECTION 28 (2) SENTENCE 1 NOS. 3, 4 PFANDBRIEF ACT (PFANDBRIEFGESETZ, PFANDBG)
Key figures about outstanding Pfandbriefe andcover pool
Q4 2023
MORTGAGE PFANDBRIEFE
Q4 2023 Q4 2022
Outstanding Pfandbriefe
(€mn.)
35,241.3 31,693.9
thereof percentage share of fixed-rate Pfandbriefe Section 28 (1) 13
%
96.1 91.0
Cover pool
(€mn.)
37,551.2 34,377.0
thereof total amount of the claims according to Section 12 (1) which exceed the limits laid down
in section 13 para. 1 s. 2, 2nd half sentence section 28 para. 1 no. 11
(€mn.)
– –
thereof total amount of the assets according to section 19 para. 1 which exceed the limits laid down
in Section 19 (1) sentence 6 Section 28 (1) No. 11
(€mn.)
– –
Claims which exceed the limits laid down in Section 19 (1) No. 2 Section 28 (1) No. 12
(€mn.)
– –
Claims which exceed the limits laid down in Section 19 (1) No. 3 Section 28 (1) No. 12
(€mn.)
– –
Claims which exceed the limits laid down in Section 19 (1) No. 4 Section 28 (1) No. 12
(€mn.)
– –
thereof percentage share of fixed-rate cover assets Section 28 (1) No. 13
%
95.9 96.0
Net present value pursuant to Section 6 of the Pfandbrief Net Present Value Regulation
for each foreign currency in €million Section 28 (1) No. 14 (net total)
CAD – –
CHF 870.9 795.2
CZK – –
DKK – –
GBP -113.6 -120.4
HKD – –
JPY – –
NOK – –
SEK – –
USD -19.6 450.3
AUD – –
70
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
MORTGAGE PFANDBRIEFE
Q4 2023 Q4 2022
Volume-weighted average of the maturity that has passed since the loan was granted (seasoning) Section 28 (2) No. 4 Years 5.3 5.0
Average loan-to-value ratio, weighted using the mortgage lending value Section 28 (2) No. 3 % 52.4 52.0
Average loan-to-value ratio, weighted using the market value % – –
Key figures on liquidity according to Section 28 (1) No. 6 Pfandbrief Act
1
Largest negative amount within the next 180 days within the meaning of Section 4 (1a) sentence 3 Pfandrief Act for Pfandbriefe
(€mn.)
581.7 82.2
Day on which the largest negative sum results
Day (1–180)
179 166
Total amount of cover assets meeting the requirements of Section 4 (1a) sentence 3 Pfandbrief Act
(€mn.)
1,324.1 620.7
Key figures according to Section 28 (1) sentence 7 Pfandbrief Act
Share of derivative transactions included in the cover pools according to Section 19 (1) No. 1 (credit quality step 3) % – –
Share of derivative transactions included in the cover pools according to Section 19 (1) No. 2c (credit quality step 2) % – –
Share of derivative transactions included in the cover pools according to Section 19 (1) No. 3d (credit quality step 1) % – –
Share of derivative transactions in liabilities to be covered according to Section 19 (1) No. 1 (credit quality step 3) % – –
Share of derivative transactions in liabilities to be covered according to Section 19 (1) No. 2c (credit quality step 2) % – –
Share of derivative transactions in liabilities to be covered according to Section 19 (1) No. 3d (credit quality step 1) % – –
Key figures according to Section 28 (1) No. 15 Pfandbrief Act
Share of cover assets in the cover pool for which or for whose debtor a default pursuant to Article 178 (1) of Regulation (EU) no. 575 / 2013 is
deemed to have occurred. % 0.7 0.3
71
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
PUBLICATION ACCORDING TO SECTION 28 (1) SENTENCE 1 NOS. 6, 7, 11, 12, 13, 14, 15 PFANDBRIEF ACT
AND SECTION 28 (2) SENTENCE 1 NOS. 3, 4 PFANDBRIEF ACT (PFANDBRIEFGESETZ, PFANDBG)
Key figures about outstanding Pfandbriefe andcover pool
Q4 2023
PUBLIC PFANDBRIEFE
Q4 2023 Q4 2022
Outstanding Pfandbriefe
(€mn.)
1,226.3 1,308.4
thereof percentage share of fixed-rate Pfandbriefe Section 20 (1) No. 13
%
91.0 92.0
Cover pool
(€mn.)
1,375.9 1,457.0
thereof total amount of the claims according to Section 20 (1 and 2) which exceed the limits laid down in Section 20 (3)
Section 28 (1) No. 11
(€mn.)
– –
Claims which exceed the limits laid down in Section 20 (2) No. 2 Section 20 (1) No. 12
(€mn.)
– –
Claims which exceed the limits laid down in Section 20 (2) No. 3 Section 20 (2) No. 12 –
thereof percentage share of fixed-rate cover assets Section 28 (1) No. 13 % 94.6 91.0
Net present value pursuant to Section 6 of the Pfandbrief Net Present Value Regulation for each foreign currency in €million
Section 28 (1) No. 14 (net total)
CAD – –
CHF – –
CZK – –
DKK – –
GBP – –
HKD – –
JPY – –
NOK – –
SEK – –
USD – –
AUD – –
Key figures on liquidity according to Section 28 para. 1 no. 6 Pfandbrief Act
Largest negative amount within the next 180 days within the meaning of section 4 para. 1a s. 3 Pfandrief Act for Pfandbriefe (€mn.) 58.7 19.3
Day on which the largest negative sum results Day (1-180) 115 111
Total amount of cover assets meeting the requirements of Section 4 para 1a s. 3 Pfandbrief Act (€mn.) 158.5 225.9
72
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
PUBLIC PFANDBRIEFE
Q4 2023 Q4 2022
Key figures according to Section 28 (1) No. 7 Pfandbrief Act
Share of derivative transactions included in the cover pools according to Section 20 (2) No. 1 (credit quality step 3) % – –
Share of derivative transactions included in the cover pools according to Section 20 (2) No. 2 (credit quality step 2) % 1.0 0.8
Share of derivative transactions included in the cover pools according to Section 20 (2) No. 3c (credit quality step 1) % – –
Share of derivative transactions in liabilities to be covered according to Section 20 (2) No. 1 (credit quality step 3) % – –
Share of derivative transactions in liabilities to be covered according to Section 20 (2) No. 2 (credit quality step 2) % – –
Share of derivative transactions in liabilities to be covered according to Section 20 (2) No. 3c (credit quality step 1) % – –
Key figures according to Section 28 (1) No. 15 Pfandbrief Act
Share of cover assets in the cover pool for which or for whose debtor a default pursuant to Article 178 (1) of Regulation (EU) no. 575 / 2013
is deemed to have occurred. % – –
73
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
PUBLICATION ACCORDING TO SECTION 28 (1) SENTENCE 1 NO. 2 PFANDBRIEF ACT (PFANDBRIEFGESETZ, PFANDBG)
List of International Securities Identification Numbers of the International
Organization for Standardization (ISIN) by Pfandbrief class
Q4 2023
MORTGAGE PFANDBRIEFE
Q4 2023 Q4 2022
1
ISIN CH0386949314, CH0417086086, CH0438965532, CH0457206842, CH0460872341,
CH0463112059, CH0471297991, CH0481013768, CH1100259808, CH1122290237,
CH1131931375, CH1137407453, CH1139995810, CH1175016091, CH1195555409,
CH1233900005, CH1271360427, DE000A11QCG1, DE000A254ZY0, DE000A2AASW0,
DE000A2G9GY4, DE000A2GS2H6, DE000A2GSRM2, DE000A2LQ4R6, DE000A2LQ4T2,
DE000A2TR7N9, DE000A2TSS66, DE000A2YNRE3, DE000A30V3C8, DE000A30V3D6,
DE000A30V3E4, DE000A351LJ5, DE000A3E5FC1, DE000A3E5P03, DE000A3H2002,
DE000A3H2YT0, DE000A3H3JW3, DE000MHB10J3, DE000MHB12J9, DE000MHB13J7,
DE000MHB17J8, DE000MHB18J6, DE000MHB1954, DE000MHB19J4, DE000MHB20J2,
DE000MHB2234, DE000MHB2242, DE000MHB2283, DE000MHB22J8, DE000MHB2317,
DE000MHB2374, DE000MHB2440, DE000MHB2457, DE000MHB25J1, DE000MHB2648,
DE000MHB2697, DE000MHB26J9, DE000MHB2705, DE000MHB2721, DE000MHB2739,
DE000MHB2754, DE000MHB27J7, DE000MHB2812, DE000MHB2820, DE000MHB2838,
DE000MHB2853, DE000MHB2861, DE000MHB28J5, DE000MHB2945, DE000MHB2960,
DE000MHB2978, DE000MHB2994, DE000MHB29J3, DE000MHB30J1, DE000MHB31J9,
DE000MHB32J7, DE000MHB33J5, DE000MHB34J3, DE000MHB35J0, DE000MHB36J8,
DE000MHB37J6, DE000MHB4057, DE000MHB4107, DE000MHB4149, DE000MHB4156,
DE000MHB4214, DE000MHB4289, DE000MHB4297, DE000MHB4305, DE000MHB4388,
DE000MHB4396, DE000MHB4412, DE000MHB4420, DE000MHB4446, DE000MHB4479,
DE000MHB4487, DE000MHB4529, DE000MHB4552, DE000MHB4560, DE000MHB4586,
DE000MHB4610, DE000MHB4636, DE000MHB4644, DE000MHB4651, DE000MHB4669,
DE000MHB4677, DE000MHB4685, DE000MHB4693, DE000MHB4701, DE000MHB4719,
DE000MHB4727, DE000MHB4735, DE000MHB4743, DE000MHB4750, DE000MHB4776,
DE000MHB4784, DE000MHB4792, DE000MHB4818, DE000MHB4826, DE000MHB4842,
DE000MHB4859, DE000MHB4867, DE000MHB4875, DE000MHB4883, DE000MHB4891,
DE000MHB61H0, DE000MHB9171
CH0386949314, CH0417086086, CH0438965532, CH0457206842, CH0460872341,
CH0463112059, CH0471297991, CH0481013768, CH1100259808, CH1122290237,
CH1131931375, CH1137407453, CH1139995810, CH1175016091, CH1195555409,
DE000MHB10J3, DE000MHB12J9, DE000MHB13J7, DE000MHB14J5, DE000MHB17J8,
DE000MHB18J6, DE000MHB1954, DE000MHB19J4, DE000MHB20J2, DE000MHB2135,
DE000MHB2192, DE000MHB21J0, DE000MHB2234, DE000MHB2242, DE000MHB2283,
DE000MHB22J8, DE000MHB2317, DE000MHB2374, DE000MHB2432, DE000MHB2440,
DE000MHB2457, DE000MHB24J4, DE000MHB25J1, DE000MHB2648, DE000MHB2697,
DE000MHB26J9, DE000MHB2705, DE000MHB2721, DE000MHB2739, DE000MHB2754,
DE000MHB27J7, DE000MHB2812, DE000MHB2820, DE000MHB2838, DE000MHB2853,
DE000MHB2861, DE000MHB2895, DE000MHB28J5, DE000MHB2945, DE000MHB2960,
DE000MHB2978, DE000MHB2994, DE000MHB29J3, DE000MHB30J1, DE000MHB31J9,
DE000MHB32J7, DE000MHB4024, DE000MHB4057, DE000MHB4107, DE000MHB4149,
DE000MHB4156, DE000MHB4172, DE000MHB4206, DE000MHB4214, DE000MHB4248,
DE000MHB4263, DE000MHB4289, DE000MHB4297, DE000MHB4305, DE000MHB4354,
DE000MHB4370, DE000MHB4388, DE000MHB4396, DE000MHB4404, DE000MHB4412,
DE000MHB4420, DE000MHB4438, DE000MHB4446, DE000MHB4479, DE000MHB4487,
DE000MHB4495, DE000MHB4529, DE000MHB4552, DE000MHB4560, DE000MHB4586,
DE000MHB4602, DE000MHB4610, DE000MHB4636, DE000MHB4644, DE000MHB4651,
DE000MHB4669, DE000MHB4677, DE000MHB4685, DE000MHB4693, DE000MHB4701,
DE000MHB4719, DE000MHB4727, DE000MHB4735, DE000MHB4743, DE000MHB4750,
DE000MHB61H0, DE000MHB9171
PUBLIC PFANDBRIEFE
Q4 2023 Q4 2022
1
ISIN DE000MHB3349 DE000MHB3349
74
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
Overdue interest
COVERING MORTGAGES WITH OVERDUE INTEREST
IN €000
Total Thereof residential Thereof commercial
2023 2022 2023 2022 2023 2022
Overdue interest 414 293 414 292 0 1
Foreclosures and receiverships
FORECLOSURES AND RECEIVERSHIPS OF MORTGAGES USED AS COVER
Total Thereof residential Thereof commercial
Pending on balance sheet date 2023 2022 2023 2022 2023 2022
– Foreclosure proceedings 68 64 67 62 1 2
– Receivership proceedings 6 12 4 10 2 2
4
1
11
1
4
1
10
1
0
1
1
1
Foreclosures completed
during business year 20 14 20 14 0 0
1
Thereof included in pending Foreclosure proceedings.
During the year under review, no property had to be taken over to salvage our claims.
75
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
PUBLICATION IN
ACCORDANCE WITH
SECTION 28
PFANDBRIEF ACT
OTHER DISCLOSURES
Membership movement
MEMBERSHIP DATA
Number of members
Beginning of 2022 60,347
Additions in 2022 289
Reductions in 2022 3,677
End of 2022 56,959
€
Increase in remaining members capital
contributions 3,131,800.00
Amount of each share 70.00
Members' liability 0.00
Personnel statistics
In the reporting year, the average number of employees was:
Male Female Total
Full-time employees 299.00 182.50 481.50
Part-time employees 37.00 124.25 161.25
Total number of employees 336.00 306.75 642.75
These figures do not include:
Apprenticed trainees 4.00 9.50 13.50
Employees participating
in parental leave, early
retirement, partial
retirement (non-working
phase), or employees
suspended with pay 13.50 28.80 42.25
Special disclosure requirements
Pursuant to Section 8 CRR (Articles 435 to 455), Münchener
Hypothekenbank publishes information it is required to dis-
close in a separate disclosure report in the Federal Gazette
(Bundesanzeiger), as well as on the Bank’s homepage.
Pursuant to Section 26a (1) (4) of the German Banking Act
(KWG), the quotient of net income and total assets is equal
to 0.201 percent.
Proposed appropriation of
distributable income
Net income for the year comes to EUR 102,120,896.28. These
annual financial statements show an advance allocation of
EUR 51,000,000.
The remaining unappropriated profit for the year – including
profit carried forward from the previous year – amounting to
€ 51,393,021.39 should therefore be allocated as follows:
4.00% dividend EUR 50,703,000.00
Carried forward to new year EUR 690.021,39
Company
Münchener Hypothekenbank eG
Karl-Scharnagl-Ring 10 | 80539 München
Register of cooperatives of the District Court of Munich
Gen.-Reg 396
76
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
OTHER DISCLOSURES
BODIES
Supervisory Board
Dr Hermann Starnecker
Spokesman of the Board of Management
VR Bank Augsburg-Ostallgäu eG
Chairman of the Supervisory Board
Gregor Scheller
President and Chairman of the Board of
Genossenschaftsverbands Bayern e. V.
Deputy Chairman of the Supervisory Board
HRH Anna Duchess in Bavaria
Entrepreneur
Thomas Höbel
Spokesman of the Board of Management
Volksbank Raiffeisenbank Dachau eG (until 31.12.2023)
Retirement (as of 01.01.2024)
Josef Hodrus
Spokesman of the Board of Management
Volksbank Allgäu-Oberschwaben eG
Jürgen Hölscher
Member of the Board of Management
Emsländische Volksbank eG
Rainer Jenniches
Chairman of the Board of Management
VR-Bank Bonn Rhein-Sieg eG
Reimund Käsbauer
Employee representative
Michael Schäffler
Employee representative
Claudia Schirsch
Employee representative
Kai Schubert
Member of the Board of Management
Raiffeisenbank Südstormarn Mölln eG
Frank Wolf-Kunz
Employee representative
Board of Management
Dr Holger Horn
CEO
Ulrich Scheer
CFO
Markus Wirsen
CRO
Mandates
Dr Holger Horn
FMS Wertmanagement AöR
Member of the Board of Supervisory Directors (until 31.03.2023)
Chairman of the Supervisory Board of M.M.Warburg & CO
Hypothekenbank AG (01.06.2023 to 23.06.2023)
Ulrich Scheer
Member of the Supervisory Board of M.M.Warburg & CO
Hypothekenbank AG (01.06.2023 to 23.06.2023)
Markus Wirsen
Deputy Chairman of the Supervisory Board of M.M.Warburg
& CO Hypothekenbank AG (01.06.2023 to 23.06.2023)
As of the balance sheet date, loans to members of the Super-
visory Board amounted to € 459 thousand (previous year:
€ 546 thousand). As in the previous year, the lending portfo-
lio did not include any loans made to members of the Board
of Management. Pension provisions of € 20,825 thousand
(previous year: € 19,782 thousand) were made for former
members of the Board of Management and their surviving
dependants. Total remuneration received by the members of
the Board of Management during the year under review
amounted to € 1,921 thousand (previous year: € 2,907 thou-
sand), for members of the Supervisory Board € 489 thousand
(previous year: € 476 thousand). Total compensation received
by the members of the Advisory Committee amounted to
€ 41 thousand (previous year: € 46 thousand). Total compen-
sation received by former members of the Board of Manage-
ment and their surviving dependants amounted to
€ 2,101 thousand (previous year: € 1,515 thousand).
77
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
BODIES
DGRV – Deutscher Genossenschafts- und Raiffeisenverband e. V.,
Berlin, Linkstraße 12
The audit was conducted on behalf of DGRV by
Baden- Württembergischer Genossenschaftsverband e. V.,
Am Rüppurrer Schloss 40, Karlsruhe, (BWGV).
The total fee charged by the auditor was € 855 thousand
(previous year € 647 thousand) excluding value-added tax.
The individual charges are as follows:
TOTAL AUDITOR FEE
IN € 000
BWGV
31 Dec. 2023
DGRV
31 Dec. 2023
DGRV
31 Dec. 2022
For audit services
1
811 29
1
616
Other assurance services 44 0 31
Tax advisory services 0 0 0
Other services 0 0 0
1
of which reversal of provisions from 2022 of EUR 13 thousand
AUDITING ASSOCIATION
78
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
AUDITING ASSOCIATION
CONTINGENT LIABILITY
Our Bank is a member of the protection scheme of the
National Association of German Cooperative Banks
(Sicherungseinrichtung des Bundesverbandes der Deutschen
Volksbanken und Raiffeisenbanken e.V.). Per the statutes
ofthe protection scheme, we have issued a guarantee to
theNational Association of German Cooperative Banks. As
aresult, we have a contingent liability of € 33,326 thousand.
In addition, pursuant to Article 7 of the Accession and
Declaration of Commitment to the bank-related protection
scheme of the BVR Institutssicherung GmbH (BVR-ISG), a
premium guarantee is in force. This pertains to special contri-
butions and special payments in the event of insufficient
financial resources in order to pay for losses of depositors of
one of the CRR credit institutions belonging to the protection
scheme in the event of a compensation case, as well as to
meet refunding obligations pursuant to cover measures.
Munich, 23 February 2024
Münchener Hypothekenbank eG
The Board of Management
Dr Holger Horn Ulrich Scheer Markus Wirsen
CEO CFO CRO
79
Münchener Hypothekenbank
Annual Report 2023
1 Foreword 3 Annual statement
of accounts
2 Management report 5 Further information4 Notes
CONTINGENT LIABILITY