2020
ANNUAL REPORT
SOLIDARITY.
OUR STRENGTH.
Overview
BUSINESS DEVELOPMENT
IN MILLIONS OF € *
2020 2019 Change %
Lending business
a) Mortgage loans 6,395 6,478 – 1
aa) Residential property financing 4,019 3,716 8
ab) Commercial property financing 2,376 2,762 – 14
b) Loans to public sector and banks 97 45 116
Total 6,492 6,523 0
OVERVIEW OF PORTFOLIOS
IN MILLIONS OF € *
2020 2019 Change %
Total assets 48,558 42,872 13
Mortgage loans 38,411 35,498 8
Public sector and banks 3,704 4,075 – 9
Pfandbriefe and other bonds 39,576 36,398 9
Liable equity capital 1,676 1,573 7
INCOME STATEMENT
IN MILLIONS OF € *
2020 2019 Change %
Net interest income and net commission income 238 205 17
Administrative expenses 128 131 – 2
Results from ordinary business activities 95 74 29
Transfer to the Fund for General Banking Risks 20 0 –
Net income 38 36 6
EMPLOYEES
NUMBER
2020 2019 Change %
Average number of employees per year 611 573 7
Apprentices 15 15 0
Employees participating in parental leave, early retirement and partial retirement (non-working phase) 35 36 – 3
* Amounts have been rounded.
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Content
6 Letter from the Board of Management
8 Management Report
9 Economic report
9 General economic conditions
15 Business development
18 Financial performance, financial position and net assets
21 Ratings, sustainability and regulatory conditions
24 Registered office, executive bodies, committees and employees
25 Risk, outlook and opportunities report
25 Risk report
32 Corporate planning
33 Outlook – opportunities and risks
36 Annual Statement of Accounts
37 Balance sheet
41 Income statement
42 Statement of development in equity capital and cash flow statement
44 Notes
45 General information on accounting policies
47 Notes to the balance sheet income statement
56 Publication in accordance with Section 28 Pfandbrief Act
65 Other disclosures
67 Bodies
68 Auditing Association
68 Other financial obligations
69 Contigent liability
70 Independent Auditor’s Report
75 Affirmation by the Legal Representatives
76 Annex to Annual Financial Statements pursuant to Section 26a Para. 1
Sentence 2 of the German Banking Act (KWG)
77 Report of the Supervisory Board
80 Further Information
81 The members of the Delegates Meeting
82 Agenda – General (Delegates) Meeting
83 Executive management and bodies
84 Contact
87 Imprint
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IN CONVERSATION: THE KEY ISSUES FOR US IN 2020
ARE COVERED IN OUR ONLINE ANNUAL REPORT:
SOLIDARITY.
OUR STRENGTH.
www.muenchenerhyp.de/geschaeftsbericht2020/en/
Digitalisation gathering pace
What digital processes have proved to be essential
during the COVID-19 pandemic, and how will things
progress in terms of digitalisation? General Executive
Manager Ulrich Scheer looks back and into the future.
Working from home
How did the sudden switch to working from home
pan out at MünchenerHyp? Dr Phil Zundel, Head of
Central Services, talks about working from home
during the COVID-19 crisis, and tells us which
changes are here to stay.
The future of the property markets
The crisis saw uncertainty return to the property market.
Jan Polland, Thomas Hügler, Heads of Commercial and
Private Real-Estate Finance, explain the developments and
reveal whether the opportunities for investors lie.
4
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Letter from the Board of Management
2020 was marked by two crises triggered by the COVID-19
pandemic: an international health emergency and a global
economic crisis. In particular, the measures taken to combat
the pandemic had a huge impact on society and business, and
thus also to some extent on MünchenerHyp.
When the first lockdown was imposed back in March 2020,
we focused our efforts on two goals: first of all, protecting
the health of our employees and second, maintaining business
operations that were as close to normal as possible despite all
of the restrictions required to contain the virus.
To this end, we put extensive measures in place to ensure the
safety of our employees, adapted our business plans and
lending criteria to reflect the situation caused by the pandemic
and took flexible action in response to ever-changing chal-
lenges. Thanks to these measures, overall we got through
well through the COVID-19 pandemic in financial year 2020.
So far, only a handful of our colleagues have contracted
COVID-19 – all of them were infected outside the Bank and
have since recovered. Business-wise, 2020 was a satisfactory
year despite all of the adversities we faced.
Strong new business – further growth in residential
property financing
With new mortgage business of EUR 6.4 billion, we only just
fell short, by around EUR 100 million, of the record result
achieved in the previous year.
New private residential property financing business rose by
8 percent to over EUR 4 billion. On the one hand, this develop-
ment was thanks to a very stable German residential property
market, which is still considered a safe haven during the crisis,
especially among professional investors. On the other, the
sustained low interest rates bolstered demand for residential
properties. New business brokered by banks in the Cooperative
Financial Network rose by 10 percent to EUR 3.1 billion. We
are also satisfied with the development of new business in
our partnerships with independent financial service providers
and PostFinance in Switzerland.
By contrast, the economic consequences of the COVID-19
pandemic left their mark on the commercial property financ-
ing business. New business fell by 14 percent to EUR 2.4 billion.
This is slightly less pronounced than the drop in transaction
volume on the German commercial property market, but also
shows that we were not able to escape the overall develop-
ments unscathed. Nevertheless, we consider this to be a posi-
tive result, as we were able to exceed our new business target,
which had been adjusted to reflect the economic uncertainty.
All in all, we were able to expand our mortgage portfolios
again. Thanks to the encouraging level of new business, they
grew by 8 percent to EUR 38.4 billion.
Risk situation remains moderate
Our mortgage portfolios have remained largely untouched so
far by the economic implications of the COVID-19 pandemic.
Very few of our customers have made use of the statutory
moratorium on debt repayments for private individuals. The
same applies to the voluntary amortisation moratorium for
commercial property financing developed by the Association
of German Pfandbrief Banks (vdp). Those segments of the
commercial property market that have been hit particularly
hard, such as hotels, only account for a very small share of
our overall portfolio. We have analysed our entire portfolio of
commercial property financing without identifying any sig-
nificant risks from today‘s perspective.
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Higher earnings – dividend for financial year 2020
Net interest income improved by 16 percent to EUR 347.8 mil-
lion, allowing us to continue the successful performance seen
over the last few years. This means that net interest income
has trebled within the last ten years, largely due to the steady
increase in new business. In line with the successful brokered
new business, commission paid rose again in the year under
review, although this was more than offset by the stronger
growth in net interest income. As a result, net interest and
commission income increased by 16.5 percent to EUR 238.3 mil-
lion. We were able to reduce administrative expenses by 2 per-
cent to EUR 128.4 million despite a renewed increase in reg-
ulatory costs and levies. This results in income from ordinary
business activities of EUR 95.3 million, up by 29 percent
year-on-year.
With a Common Equity Tier 1 ratio of 20.6 percent, the Bank
continues to have good capital resources. It is very encour-
aging to see that members’ capital contributions grew by
EUR 80.6 million and totalled EUR 1,153.1 million at the end
of the year. This valuable vote of confidence by our members
is to be appreciated all the more given that we were unfortu-
nately not allowed to pay a dividend for the 2019 financial
year in the year under review in line with ECB stipulations.
The 2020 Delegates Meeting therefore decided to carry for-
ward the retained earnings for 2019 of approximately
EUR 24 million to the 2020 financial year. This year, the ECB
is now allowing limited dividend payments to be made for
the 2020 financial year. At MünchenerHyp, the limit has been
calculated at 1.25 percent per share. The Supervisory Board
and the Board of Management have proposed a corresponding
resolution regarding the appropriation of distributable
income to the Delegates Meeting.
Pfandbrief proves its value yet again during the crisis
The Pfandbrief once again proved itself to be a crisis-proof
funding instrument in the environment created by the pan-
demic. Although the issue volume on the primary market fell
significantly and investors also adopted a more cautious
stance, we were still able to raise funding at good conditions
throughout the year. Demand was exceptionally strong for
our two issues of benchmark Mortgage Pfandbriefe with a
volume of EUR 500 million each and long maturities of 15
and 20 years. This allowed us to ensure that long loan terms
in private residential property financing could be refinanced
with matching maturities. On the Swiss capital market, we
were very successful in issuing several large-volume uncov-
ered bonds.
Success through solidarity
The business success stories written in the reporting year are
based to an even greater degree than usual on cooperation
with our partners, customers and investors based on trust. In
the face of the stresses resulting from the COVID-19 pandemic,
our members showed considerable solidarity, in line with the
very spirit of the cooperative banking system, and helped
MünchenerHyp to stay on track. We would like to thank our
employees for the tremendous commitment and high degree
of flexibility they have shown despite the pressures and con-
cerns facing them outside of work. This allowed us to maintain
business operations that were as close to normal as possible,
even under stringent lockdown conditions.
Looking ahead to the 2021 financial year, we have set our-
selves the objective of expanding our new business to the
extent that the pandemic allows. We will also continue to
focus on boosting the efficiency and customer centricity of
our processes in order to increase both the Bank’s profita-
bility and levels of satisfaction among our business partners
and customers.
Yours sincerely,
Dr. Louis Hagen
Chairman of the Board
of Management
Dr. Holger Horn
Member of the Board
of Management
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MANAGEMENT REPORT
9 ECONOMIC REPORT
9 General economic conditions
9 Economic development
9 Financial markets
11 Property markets and property financing markets
15 Business development
15 New mortgage business
16 Capital markets business
16 Refinancing
18 Financial performance, financial position
and net assets
18 Development of earnings
19 Balance sheet structure
21 Ratings, sustainability and regulatory conditions
21 Ratings
21 Sustainability
22 Separate non-financial report
22 Regulatory conditions
24 Registered office, executive bodies,
committees and employees
24 Registered office
24 Executive bodies and committees
24 Employees
24 Corporate governance statement in accordance
with Section 289f HGB
25 RISK, OUTLOOK AND OPPORTUNITIES
REPORT
25 Risk report
25 Counterparty risk
28 Market price risks
29 Liquidity risks
31 Investment risk
31 Operational risks
31 Risk-bearing capacity
31 Use of financial instruments for hedging purposes
31 Accounting-related internal control and
risk management processes
32 Corporate planning
33 Outlook – opportunities and risks
33 Economic development and financial markets
33 Property markets and property financing markets
34 Business development at
Münchener Hypothekenbank
35 Disclaimer regarding forward-looking statements
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Economic report
GENERAL ECONOMIC
CONDITIONS
Economic development
The spread of the COVID-19 pandemic sent huge shock waves
through the global economy. The large-scale lockdown im-
posed in the spring of 2020 to combat the pandemic triggered
a massive drop in production and sent global trade plum-
meting. While the global economy was able to bounce back
somewhat in the third quarter as the number of infections
started to slow, by the end of the year the onset of the second
wave of infections had once again slammed the brakes on
the economic recovery. The global economy experienced a
deep recession in 2020, with a 3.5 percent drop in global
gross domestic product according to the IMF’s latest estimate.
The European economy was hit extremely hard by the lock-
down as well. In addition, the second wave of the pandemic
had a significant impact on Europe in particular, hindering
the economic recovery. Economic researchers therefore expect
economic output to have dipped again in the fourth quarter
of 2020. According to preliminary data from Eurostat, the
COVID-19 pandemic was responsible for an economic slump
of 6.8 percent in the eurozone looking at the year as a whole.
In Germany, gross domestic product was down by 5.0 percent
in a year-on-year comparison – only the financial market
crisis of 2009 resulted in a more marked decline in economic
output. Almost all sectors of the economy were affected.
However, the construction industry in particular was able to
hold its own with a 1.4 percent increase in gross value added.
Positive contributions to growth were also made by public
consumption, which rose by 3.4 percent, and by construction
investment, which was up by 1.5 percent.
The average inflation rate of 0.5 percent was significantly
lower than in the previous year, largely due to the move to
cut VAT rates until the end of 2020 as part of the German
government’s economic stimulus package. Heating oil and
fuel, in particular, as well as consumer goods, became cheaper.
The COVID-19 pandemic also put an end to the prolonged
upswing on the employment market. The number of people
out of work increased by an annual average of more than
400,000 to 2.7 million. This pushed the unemployment rate
up by 0.9 percentage points to 5.9 percent. The lockdown
also led to a very marked expansion in the use of furlough
(Kurzarbeit). According to the German Federal Employment
Agency, more people were on furlough in 2020 than ever
before.
Financial markets
The global COVID-19 pandemic also shook the financial mar-
kets, with the stock markets suffering massive losses as a
result of the lockdown. Liquidity bottlenecks also triggered a
substantial sell-off of liquid government and corporate bonds
in the short term, leading to higher yields and also lower
prices. In a quest to stabilise the markets, a large number of
countries launched large-scale aid programmes and the
central banks reacted by adopting monetary policy measures.
The US Federal Reserve (“Fed”) lowered the key interest rate
by 50 basis points to a range of between 1.0 percent and
1.25 percent at the beginning of March. Less than two weeks
later, it decided to lower the interest rate by 100 basis points
to within a range of 0.0 percent to 0.25 percent. In addition,
the Fed announced plans to make large-scale purchases of
Treasury securities, mortgage-backed securities (MBS) and
corporate bonds.
In mid-March, the ECB increased its pre-existing Asset Purchase
Programme (APP) by EUR 120 billion before launching an
additional Pandemic Emergency Purchase Programme (PEPP)
worth EUR 750 billion only shortly afterwards.
While the markets calmed down slightly as a result of these
measures, liquidity shortages were still pushing money market
rates up. This prompted the ECB to take additional action at
the beginning of June, including the decision to increase the
PEPP by EUR 600 billion to a total of EUR 1.35 trillion and to
launch new TLTRO tenders for banks, offering particularly
favourable financing conditions. In December, the PEPP was
increased by another EUR 500 billion and its term was ex-
tended until the end of March 2022. In addition, maturing
securities were reinvested until at least the end of 2023 and
the favourable TLTRO conditions for banks were extended for
another year, subject to certain conditions. The ECB opted not
to alter its key interest rates in 2020. The main refinancing
rate remains unchanged at 0.0 percent.
Other central banks, including the Bank of England, Bank of
Japan and Swiss National Bank, also took monetary policy
measures to make additional liquidity available on the financial
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YIELD ON TEN-YEAR BUNDS 2020
IN %
January February March April May June July August September October November December
– 0.3
– 0.4
– 0.5
– 0.6
– 0.7
– 0.8
– 0.9
– 1.0
– 0.1
– 0.2
0.0
0.1
Source: Bloomberg (closing rate)
markets. The Bank of England slashed the key interest rate
twice, from 0.75 percent to 0.15 percent, in the space of one
week in March.
On the bond market, the pandemic and considerable uncer-
tainty surrounding economic development first of all sent the
fixed income markets tumbling to new record lows. The yield
on ten-year German government bonds, for example, fell from
minus 0.19 percent at the beginning of the year to minus
0.9 percent at the beginning of March 2020. Liquidity bottle-
necks then triggered a significant short-term rise in yields on
German government bonds to minus 0.19 percent. The ECB’s
measures in March and June calmed the financial markets
again and yields mostly ranged between minus 0.4 percent
and minus 0.6 percent in the second half of the year.
On the foreign exchange market, the US dollar was still able
to gain ground against the euro at the beginning of the pan-
demic, reaching a high of USD 1.06 in March. The temporary
economic recovery in the summer, low new infection figures
in Europe and the EU’s large-scale pandemic aid package
reversed this trend and sent the US dollar on a marked down-
ward trajectory. Joe Biden’s victory in the US presidential
election provided further support to this development, as it is
now expected that US policymakers will provide larger aid
packages and rack up higher government deficits. At the end
of the year, the US dollar was trading close to its low for the
year at USD 1.22 to the euro.
The Swiss franc fluctuated within a much narrower range
against the euro last year. Compared to the 2019 year-end
rate of CHF 1.085, there was hardly any change at the end of
2020, with a rate of CHF 1.082. Sterling was much more
volatile, largely due to the news flow surrounding Brexit. The
pound initially started the year even firmer and reached a
high for the year of just under GBP 0.83 in February, only to
fall to GBP 0.95 within the space of a month in the midst of
market turbulence associated with the outbreak of the pan-
demic. In the second half of the year, the exchange rate set-
tled down and the pound was mostly trading at around GBP
0.90 against the euro.
On the covered bond market, the pandemic created an envi-
ronment of considerable uncertainty and a reluctance to buy
among investors. While fears of large-scale loan defaults at
banks put pressure on unsecured bank bonds in particular,
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DEVELOPMENT OF PROPERTY PRICES IN GERMANY
YE 2010 = 100
2005 20062004 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
90
100
110
120
130
140
150
160
170
Owner-occupied housing
Condominiums
Single family houses
Source: vdp Research property price index, Q3 2020
As of November 2020
spreads also widened considerably for covered bonds. The
ECB’s decisions on its purchase programmes played a signifi-
cant role in stabilising funding spreads for banks. Pfandbriefe,
in particular, were at a similarly favourable level at the end of
the year as they had been at the beginning. Due to the further
drop in interest rates, almost all Pfandbriefe were trading with
negative yields at times. This development was encouraged by
the ECB’s monetary policy, which continues to force traditional
Pfandbrief investors to invest in other asset classes.
Issuing activities on the primary market for covered bonds
were significantly more restrained than they had been a year
earlier due to the COVID-19 pandemic and the resulting
favourable funding offers from central banks. All in all, the
euro-denominated issue volume of benchmark covered bonds
came to around EUR 92 billion in 2020, down by around
30 percent year-on-year.
Property markets and property financing markets
Residential property – Germany
The COVID-19 pandemic did not have any negative impact
on the German residential property market in the year under
review, other than temporary restrictions on supply and
demand during the lockdown in the spring of 2020. Analyses
conducted by the Association of German Pfandbrief Banks
(vdp) show that demand for residential property, as well as
prices, actually increased during the pandemic. By the third
quarter of 2020, the vdp price index for residential properties
was up by 7.1 percent compared to the same period of the
previous year. Prices of single and two-family houses were up
by 7.4 percent, with condominium prices rising by 6.7 percent.
Multi-family house prices rose by 7 percent compared to the
prior-year period, because investors expect the risk of rent
default in this segment to be lower than for commercial prop-
erties. Average year-on-year rental price growth came to
3.4 percent at the end of the third quarter. In Germany’s seven
largest cities, rents rose by an average of 1.8 percent. In Berlin,
the introduction of the rent cap and the rent freeze led to
significantly slower rental price growth of 0.7 percent.
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RESIDENTIAL BUILDING PERMITS IN GERMANY 2009–2020
FIGURES IN 000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
150
200
250
300
350
400
178
188
228
241
272
285
313
375
348
347
361
370*
* Estimated. Source: German Federal Statistical Office
The trend towards stronger price developments for residential
properties outside the country’s major cities continued. The
lockdown has led many private households to reconsider their
housing situation. Residential properties on the outskirts of
major cities offering attractive recreational opportunities and,
in particular, more space to live and work under one roof,
were in even greater demand than prior to the pandemic.
While the price index for owner-occupied housing rose by
5.2 percent in the top seven cities, an increase of 7.3 percent
was measured nationwide in the same period.
Despite the increase in construction investment, construction
activity continues to lag behind demand. Compared to 2019,
the number of new housing units approved increased by
3.9 percent to 332,000 between January and November. Al-
though the number of approved housing units is expected to
have risen to around 370,000 units by the end of the year, this
is still not enough to meet the demand for housing. This is
evident if we look at the construction backlog, which includes
all construction projects that have not yet been started or
completed. With around 740,000 housing units, the current
backlog is at the highest level witnessed since 1998. This cor-
responds to around two and a half years’ worth of housing
construction.
Despite the lockdown restrictions, institutional investors were
very active in the German residential property market in 2020,
investing EUR 20.3 billion in German residential property
portfolios, based on data evaluated by Ernst & Young. This
equates to a year-on-year increase of 8 percent. The institu-
tional housing market was dominated by domestic investors
with a share of 75 percent, a trend assumed to be due pri-
marily to the travel restrictions for international investors in
2020. Overall, the German residential property market remained
a safe investment target compared with other countries.
Data collected by the vdp indicate that loans amounting to
EUR 194 billion were granted in Germany for the purchase of
residential property in the first three quarters of 2020, up by
7.7 percent compared to the prior-year period.
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DEVELOPMENT OF COMMERCIAL PROPERTY TRANSACTIONS
IN GERMANY 2016–2020
IN € BILLION
13.2
15.6
17.6
18.8
20.3
52.5
57.2
60.5
70.7
58.6
2016
2017
2018
2019
2020
Residential (only portfolio)
Commercial
Source: EY Research
As of January 2021
TRANSACTION VOLUME BY TYPE OF USE
IN %
11
15
41
3
30
47
8
14
6
25
2019
2020
Office
Logistics
Retail
Hotel
Residential
Source: Real Capital Analytics
As of 11 January 2021
Residential property – international
In Germany’s neighbouring European countries, too, the pan-
demic has not yet had any negative impact on the residential
property markets. Eurostat‘s house price index shows a year-
on-year increase in residential property prices of 3.7 percent
in the first half of the year. In those European residential
property markets that are relevant to MünchenerHyp, prices
rose by 4.1 percent in Austria and in the Netherlands in the
first six months of the year.
Due to excess supply, the Swiss residential market has experi-
enced falling asking rents on the residential market since
2015 as well as falling condominium prices since 2017. This
trend continued for asking rents in 2020, with a decline of
1.8 percent year-on-year. Condominiums saw a turnaround
with price increases of 5.1 percent against the previous year.
The price of owner-occupied homes rose by 3.0 percent dur-
ing the same period. A trend towards stronger price growth
outside the major cities was also observed in Switzerland,
although prices in the major cities, particularly in Lausanne
and Geneva, also continued to increase nonetheless.
Commercial property – Germany
In 2020, EUR 58.6 billion was invested in German commer-
cial properties, down by 17 percent compared to the previous
year. Nevertheless, the investment volume came to around
EUR 5 billion, outstripping the average for the last 15 years.
This means that, even against the backdrop of the COVID-19
pandemic, professional investors continued to see the German
commercial property market as a safe investment target in an
environment dominated by low interest rates and a lack of
investment alternatives.
Measures to combat the COVID-19 pandemic resulted in a
shift in investor preferences with regard to property use types.
After residential portfolios, the biggest winner when it came
to attracting investor attention was the segment for logistics
properties, whose market share rose to 11 percent. The retail
sector remained virtually unchanged compared to 2019, with
a 15 percent share of the total transaction volume. Within
this segment, however, investors tended to prefer specialist
stores and retail parks over shopping centres and commercial
buildings. 41 percent of the transaction volume was attribut-
able to office properties, which remained the most popular
type of use despite a fall in market share. Investors were very
cautious with regard to hotel properties in 2020, which ac-
counted for only 3 percent of the investment volume.
In Germany’s top property markets, office prime yields fell by
around ten basis points over the course of the year. Office
buildings in Berlin and Munich generated the lowest prime
yields, at 2.6 percent in each case.
In the first three quarters of 2020, around 2.7 million square
metres of office space was let in the top seven office cities,
down by 27 percent compared to the prior-year period. The
uncertain economic outlook prompted many market players
to postpone their expansion plans for the time being, with a
knock-on effect on lease turnover. At the beginning of the
pandemic, all Germany‘s top property markets were reporting
low vacancy rates and high demand, combined with low lev-
els of speculative new construction. Although vacancy rates
increased in tandem with the lockdown measures, they re-
mained at relatively low levels in the country’s major office
locations after the end of the third quarter. Prime rents for
office properties remained stable in all major German cities
in 2020.
As a result of the lockdown measures and the associated loss
of sales in bricks-and-mortar retailing, commercial buildings
and shopping centres have been particularly hard hit by the
recession. The net initial yield for commercial properties in the
prime segment of the country’s major cities rose by 40 basis
points over the course of the year and averaged 3.5 percent.
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Prime rents fell by around 3 percent in the year under review,
but only very few spaces were let in shopping streets during
this uncertain period. Shopping centre yields rose on a net
basis from 4.3 percent to 5.0 percent over the course of the
year. Both prime and average rents fell by 12 percent for
shopping centres over the year as a result of the COVID-19
pandemic.
Commercial property – international
The investment volume for commercial property and residen-
tial portfolios in Europe fell by 30 percent year-on-year in
2020 to EUR 197 billion. Considering the uncertain economic
development caused by the pandemic, the investment market
nevertheless remained very active, a trend that can be ex-
plained primarily by the lack of alternative investment oppor-
tunities. 29 percent of the European transaction volume was
invested in Germany, which is currently the most sought- after
property market for investors. 40 percent of the invested capi-
tal went into office properties across Europe.
Office rents fell by around 1 percent in the European prime
segment over the course of 2020, triggered by dwindling
demand for space and increasing vacancy rates in all major
European cities.
The property investment market in the UK has seen lower
transaction volumes since the Brexit referendum of 2015,
when investors started to adopt a more cautious stance. In
2020, EUR 42 billion was invested in commercial property and
residential portfolios in the UK, down by 17 percent compared
to the previous year. The net initial yield for office property in
London remained stable over the year, although prime rents
for new lettings have fallen by around 1 percent. Compared
with office properties, the impact of the recession was much
more pronounced for retail properties and, in particular, for
shopping centres. Prime rents for commercial buildings fell by
9 percent over the year, with prime rents for shopping centres
losing as much as 15 percent. Even before the outbreak of the
COVID-19 pandemic, a wave of insolvencies in the UK retail
sector led to shop closures and rising vacancy rates in regional
markets. This process of transformation within the UK retail
sector has been accelerated by the COVID-19 pandemic, par-
ticularly due to the considerable popularity of online shop-
ping. Net initial yields for commercial properties in prime
locations rose to 3.9 percent during the year, with yields for
shopping centres rising to 7.0 percent.
In France, EUR 32 billion was invested in commercial property
and residential portfolios in 2020, down by 29 percent com-
pared to the previous year. Net initial yields for office property
located in the heart of Paris remained constant at 2.8 percent
in 2020, meaning that, looking at Europe as a whole, only
Munich and Berlin had more expensive prices than Paris.
Long-term infrastructure projects have accelerated neigh-
bourhood development on the outskirts of the city, putting
attractive office locations outside the city centre into the
spotlight. In central Paris, the vacancy rate increased from
1.7 percent to 2.9 percent over the course of the year. This
means that vacancy rates were still so low that prime rents in
Paris continued to rise by 2 percent year-on-year despite the
recession. As in other major European cities, commercial
buildings in retail locations have so far been impacted less by
the recession than shopping centres have. As a result, there
has been no downward trend in rents for commercial build-
ings, whereas shopping centre rents dropped by 11 percent.
In the Netherlands, transaction activity was down by 27 per-
cent year-on-year to an investment volume of EUR 15 billion.
The vacancy rate in Amsterdam, the leading property market
in the Netherlands, has so far risen only marginally to 6.0 per-
cent. Office rents remained stable in the country’s main
markets. Retail rents in the Netherlands were comparatively
firmer than in other European markets, with rents dropping
by 2 percent for commercial buildings and by 8 percent for
shopping centres.
In Spain, the transaction volume was sliced in half to just
under EUR 8 billion. Nevertheless, net initial yields for office
properties remained on a par with the prior-year level of
3.2 percent in Madrid and 3.3 percent in Barcelona. The let-
ting volume was around one third lower than in the previous
year, pushing vacancy rates up slightly and prime rents down
by around 1 percent over the course of the year. Prior to the
outbreak of the COVID-19 pandemic, the Spanish retail prop-
erty market was considered to be one of the fastest growing
markets in Europe, with rising household incomes as well as a
flourishing tourism sector fuelling higher sales and, as a result,
rental price growth. The impact of the pandemic resulted in a
12 percent drop in retail rents in shopping centres in Spain.
Net initial yields increased by 20 basis points for commercial
properties and by 50 basis points for shopping centres.
In the US, commercial property and residential portfolios
worth USD 400 billion had changed hands by the end of
the third quarter of 2020, down by around 30 percent year-
on-year. Multi-family apartments were the most sought-
after asset class, as these were expected to offer compara-
tively stable cash flows. Logistics properties were also very
popular with investors. The major cities that are relevant to
MünchenerHyp (New York, Washington DC, Boston, Chicago,
Los Angeles, San Francisco, Seattle) continued to show high
levels of liquidity in the property market.
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MÜNCHENERHYP NEW MORTGAGE BUSINESS 2016–2020
COMMITMENTS IN € MILLION
3,271
3,185
3,142
3,717
4,019
172
240
21
72
229
1,487
1,629
2,477
2,690
2,147
2016
2017
2018
2019
2020
Residential housing
Housing companies
Commercial property
BUSINESS DEVELOPMENT
New mortgage business
The COVID-19 pandemic and the economic turbulence that it
triggered made it considerably harder at times to come up
with any reliable assessment of market conditions and devel-
opments. As a result, we adjusted our new business plans and
lending criteria during the year to reflect the new circum-
stances.
Our new business showed positive development, even under
the strain of the COVID-19 crisis. All in all, we issued around
EUR 6.4 billion in new mortgage financing commitments in
2020, down only slightly on the previous year‘s record result
of EUR 6.5 billion.
In private residential property financing, we were even able
to expand our new business further thanks to the stability of
the German residential property market and high demand
for property and property financing in Germany throughout
the year. 2020 became the first financial year in which we
granted just over EUR 4 billion in private residential property
financing (2019: EUR 3.7 billion), up by 8 percent year-on-year.
The increase is due primarily to brokerage business with our
partner banks from the Cooperative Financial Network. With
a commitment volume of EUR 3.1 billion, new business ex-
ceeded the EUR 3 billion threshold for the first time. Com-
pared to the previous year, this corresponds to an increase of
around EUR 300 million or 10 percent. There are several reasons
behind this success story. Above all, our three sales campaigns
were very well received by customers of our partner banks.
Improved processes in our collaboration with the cooperative
banks also translated into higher brokerage volumes. Demand
for loans via the expanded “simplified procedure” (Verein-
fachtes Verfahren) in loan processing, for example, increased
by around 25 percent. Ultimately, the overall conditions for
high demand remained positive in spite of the COVID-19
pandemic. This is especially true of the low interest rates. In
this environment, there was high demand among customers
for financing structures featuring long-term fixed interest
rates and flexibility.
Sales of private property finance generated via independent
financial service providers in Germany increased by 2 percent
year-on-year, to EUR 670 million.
In our partnership with PostFinance in Switzerland, new busi-
ness was more or less on a par with the previous year at
EUR 278 million (2019: EUR 290 million). In the highly com-
petitive Swiss market, special efforts were needed to stand
out from the competition. This prompted us to launch a sales
campaign hand in hand with PostFinance in the autumn of
2020, which allowed us to catch up in terms of new business.
New business in Austria was still in the trial phase following
our market entry in the previous year and amounted to
EUR 16 million (2019: EUR 8 million).
The impact of the COVID-19 pandemic on the property mar-
kets was more visible in the commercial property financing
segment. Given these overall conditions, we achieved a satis-
factory new business result. The volume of commitments ex-
ceeded the EUR 2 billion mark for the third time in succession
since the financial market crisis. In total, we granted commer-
cial financing to the tune of EUR 2.4 billion, down by 14 per-
cent on the prior-year result of EUR 2.8 billion. This means
that we were able to exceed our new business target, which
we had adjusted in the course of the year, an achievement
that we consider to be positive in view of the economic im-
pact of the COVID-19 pandemic.
This result was driven largely by our domestic business, which
contributed the lion‘s share with a new business volume of
EUR 1.5 billion. At almost EUR 0.9 billion, we maintained our
international business at the level achieved in the previous
year. Three countries once again accounted for the majority
of this business: the US (syndicated business only) with
35 percent, the Netherlands with 26 percent and Spain with
22 percent.
The development of earnings in the commercial financing
business was particularly worthy of note. Despite adjustments
to our new business plans, we were able to achieve our origi-
nal earnings target. In our international business in particular,
we were able to boost our earnings power without increasing
the risks involved. We were able to maintain the average loan
15
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MORTGAGE RATES MÜNCHENERHYP
TEN YEAR FIXED RATE | IN %
1990 1992 201620142012201020082006200420022000199819961994 2018 2020
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 rate 4.94
8.64
■
■
0.52
As of: 04.01.2021
volumes achieved in 2019, a year in which they increased
considerably. In addition, we were also able to conduct a
number of large-volume underwriting transactions with
subsequent syndication in 2020.
From a risk perspective, we maintained our conservative financ-
ing approach with a focus on conventional financing at com-
pletion, giving due consideration to adequate, sustainable
minimum cash flows and property locations. We consider the
high equity ratios in the financing structures, which averaged
over 40 percent and increased slightly compared to the previ-
ous year, to be a positive aspect.
Capital markets business
Stringent regulatory requirements and low asset spreads con-
tinued to dictate our strategy for investing in securities issued
by the public sector and banks in 2020. Due to the substantial
ECB purchases, LCR-eligible securities are still trading at very
expensive spread levels. In this environment, purchasing sov-
ereign and bank securities with strong credit ratings was not
a lucrative option and also resulted in high total asset costs. As
a result, securities purchases were kept to the bare minimum.
On a net basis, the portfolio volume was reduced by
EUR 0.4 billion to EUR 3.7 billion. New business in 2020
totalled EUR 97.0 million, compared with EUR 44.5 million
in 2019.
Refinancing
MünchenerHyp consistently enjoyed access to funding at
good conditions during the reporting year, even during the
first peak of the COVID-19 pandemic in March and April.
During this period, we mainly issued private placements of
covered and uncovered bonds in euros and Swiss francs. The
Cooperative Financial Network in particular showed a keen
interest in these products. In addition, the ECB’s current open
market operations presented an opportunity for meeting cov-
ered funding needs at very attractive conditions.
We also issued several large-volume bonds in the reporting
year. Our focus in terms of large-volume funding transactions
in the first six months of the year was on uncovered bond
issues.
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We started by issuing a green senior non-preferred bond worth
CHF 240 million in January. The first green security issued in
this asset class on the Swiss capital market; it met with very
high demand. The bond has a term of five years and eleven
months and a coupon of 0.1 percent. The issue was placed at
a price of 51 basis points above the mid-swap rate and received
a total of 39 orders.
In the same month, we issued another senior non-pre-
ferred bond, this time in euros. With an issue volume of
EUR 250 million, the bond achieved an issue spread of
54 basis points above the mid-swap rate.
We also tapped a Swiss franc Mortgage Pfandbrief maturing
in November 2032 by a further CHF 60 million.
We started the second half of the year by issuing a CHF 200 mil-
lion green senior preferred bond. This was also the first green
security issued in this asset class on the Swiss capital market
for us, with very high investor demand for this issue as well.
Incoming orders had already reached CHF 150 million after
only just under half an hour. The bond has a term of eight
years and a coupon of 0.25 percent. The issue was placed at a
price of 55 basis points above the mid-swap rate and received
a total of 50 orders.
This was followed in September by the issue of the first of
two long-dated benchmark Mortgage Pfandbriefe in the re-
porting year. The issue volume amounts to EUR 500 million
and the term is 15 years. Investor demand was exceptionally
strong. After one and a half hours, the order book was closed
at over EUR 1.8 billion. The coupon is 0.125 percent. The issue
was placed at a price of 7 basis points above the mid-swap
rate.
We issued the second benchmark Mortgage Pfandbrief in
October with a volume of EUR 500 million, a term of 20 years
and a coupon of 0.01 percent. This was the lowest coupon
that a Mortgage Pfandbrief with this term has ever achieved.
Investor demand was also very high for this issue, meaning
that the order book was closed at EUR 1.4 billion after only a
short time. The Mortgage Pfandbrief was placed at a price of
2 basis points above the mid-swap rate.
Due to their long terms, both Mortgage Pfandbriefe will allow
us to ensure that long loan terms in private residential prop-
erty financing can be refinanced to a great extent with
matching maturities.
The high-volume funding activities were concluded in De-
cember with the tap of an existing covered bond by a further
CHF 115 million, maturing in 2031. The coupon is 0.20 per-
cent. The issue was placed at a price of 9 basis points above
the mid-swap rate.
MünchenerHyp’s total issue volume on the capital market in
the year under review was around EUR 7.5 billion. In covered
funding, Mortgage Pfandbriefe accounted for EUR 4.9 billion,
including our own Pfandbriefe deposited with the ECB, with a
volume of EUR 2.6 billion for uncovered funding. Once again,
no Public Pfandbriefe were issued, in keeping with the Bank’s
business strategy.
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FINANCIAL PERFORMANCE,
FINANCIAL POSITION AND
NET ASSETS
Development of earnings
Net interest income
1
increased once again in the year under
review, rising by EUR 48.0 million, or 16.0 percent, to
EUR 347.8 million. The increase was driven primarily by suc-
cessful new business in the year under review and in particu-
lar in previous years. This means that the Bank has trebled its
net interest income within the last ten years. The mortgage
loan portfolio has doubled in the same period.
Commission paid totalled EUR 122.5 million, up by EUR 11.8 mil-
lion or 11 percent on the prior-year level thanks to very success-
ful new business. Commission received fell to EUR 13.0 million,
resulting in net commission income
2
of minus EUR 109.5 mil-
lion, compared with minus EUR 95.3 million in the previous year.
This resulted in net interest and commission income
3
of
EUR 238.3 million, which corresponds to an increase of
EUR 33.8 million, or 16.5 percent.
General administrative expenses fell by EUR 7.0 million to
EUR 118.2 million. This included an increase in personnel costs
of EUR 1.7 million, or 3.0 percent. In addition to increases un-
der collective agreements, this was primarily due to necessary
expansion of the workforce.
Other administrative expenses fell by EUR 8.7 million, or
12.6 percent. This reduction, which was largely the result of
cost discipline, was achieved despite a renewed increase in
regulatory costs. Expenses for the banking levy and various
regulatory authorities alone increased by 15 percent to
around EUR 18 million.
Depreciation, amortisation and write-downs of intangible
assets and fixed assets rose by EUR 4.0 million year-on-year,
to EUR 10.2 million.
Total administrative expenses
4
amounted to EUR 128.4 mil-
lion compared with EUR 131.3 million in the previous year.
The cost-income ratio
5
was 53.9 percent, as against 64.2 per-
cent a year earlier.
The net result of other operating expenses and income
amounted to minus EUR 3.6 million.
The operating result before risk provisions
6
increased by
54.4 percent year-on-year, to EUR 106.4 million.
The item “Write-downs of and valuation allowances of loans
and advances and specific securities, as well as additions to
loan loss provisions” amounted to minus EUR 10.6 million. The
credit risk situation was satisfactory despite the ongoing
COVID-19 pandemic. The net result of changes in loan loss
provisions (including direct write-downs) amounted to minus
EUR 10.1 million (previous year: plus EUR 18.2 million).
Net expenses from the sale of promissory note loans and the
redemption of registered securities and debt securities
amounted to EUR 0.5 million.
The item “Depreciation, amortisation and write-downs of
participating interests, shares in affiliated companies and
securities treated as fixed assets” amounted to minus
EUR 0.4 million.
Income from ordinary business activities amounted to
EUR 95.3 million. After tax expenses of EUR 37.6 million and
an allocation of EUR 20 million to the “fund for general bank-
ing risks” (Section 340g of the German Commercial Code
(Handelsgesetzbuch – HGB)), net income for the financial year
comes to EUR 37.7 million, which is 5.6 percent higher year-
on-year.
The return on equity (RoE) before tax amounted to 6.2 per-
cent
7
. After tax, the Bank achieved an RoE of 3.7 percent
8
.
1
Net interest income is calculated by adding item 1 ‘Interest income’ plus item 3 ‘Current
income’ plus item 4 ‘Income from profit-pooling, profit transfer or partial profit transfer agree-
ments’ minus item 2 ‘Interest expenses’ as shown in the income statement.
2
Net commission income is calculated by offsetting item 5 ‘Commission received’ and item 6
‘Commission paid’ as shown in the income statement.
3
The net interest and commission result is the sum of net interest income and net commission
income.
4
Total administrative expenses are the sum total of item 8 ‘General administrative expenses’ and
item 9 ‘Depreciation, amortisation and write-downs of intangible assets and fixed assets’ as
shown in the income statement.
5
Ratio of total administrative expenses to net interest and net commission income.
6
Net result of items 1 to 10 in the income statement.
7
RoE before tax is calculated as the ratio of income statement item 14 Income from ordinary
activities to balance sheet liability item 10 Fund for general banking risks (previous year) plus
liability item 11a Members’ capital contributions (current year) plus item 11b Revenue reserves
(previous year) plus income statement item 19 Retained earnings brought forward from previ-
ous year.
8
RoE after tax is calculated as the ratio of income statement item 17 Allocation to fund for
general banking risks plus item 18 Net income to balance sheet liability item 10 Fund for gen-
eral banking risks (previous year) plus liability item 11a Members’ capital contributions (current
year) plus item 11b Revenue reserves (previous year) plus income statement item 19 Retained
earnings brought forward from previous year.
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PORTFOLIO DEVELOPMENT MÜNCHENERHYP 2016–2020
IN € MILLION
27,817
29,227
31,956
35,498
38,411
2016
2017
2018
2019
2020
Residential housing Germany
Residential housing Switzerland and Austria
Commercial property Germany
Commercial property abroad
Balance sheet structure
Total assets increased to EUR 48.6 billion at the end of the
2020 financial year, compared with EUR 42.9 billion at
31 December 2019.
This 13 percent increase is due partly to growth in the mort-
gage loan business portfolio and partly to a EUR 3.1 billion
increase in the own bonds portfolio.
During the course of the year, the mortgage loan portfolio
grew by EUR 2.9 billion, to EUR 38.4 billion. Private residential
property financing in Germany was once again the fastest
growing segment, with growth of EUR 1.8 billion.
The private residential property financing portfolio is struc-
tured as follows: domestic – EUR 21.5 billion (previous year:
EUR 19.7 billion); foreign – EUR 4.7 billion (previous year:
EUR 4.7 billion). In addition to the financing business in Swit-
zerland, this portfolio also includes financing in Austria. The
commercial property financing portfolio totals EUR 12.2 bil-
lion (previous year: EUR 11.1 billion). Of this amount,
EUR 3.2 billion (previous year: EUR 3.0 billion) is attributable
to financing outside Germany. The most important interna-
tional market is the USA with 23 percent (previous year:
21 percent), followed by the Netherlands with 21 percent
(previous year: 17 percent), Spain with 19 percent (previous
year: 15 percent) and the UK with 17 percent (previous year:
18 percent).
In line with our business and risk strategy, the portfolio of
public-sector and bank loans and securities decreased from
EUR 4.1 billion to EUR 3.7 billion, EUR 1.9 billion of which was
made up of securities and bonds.
At the end of 2020, the net sum of hidden charges and
hidden reserves in the securities portfolio amounted to
EUR 43 million (previous year: EUR 47 million). These figures
include hidden charges of EUR 1 million (previous year:
EUR 0 million) arising from securities issued by countries
located on the periphery of the eurozone and banks domi-
ciled in these countries. These securities had a total volume
of EUR 0.2 billion at the end of 2019 (previous year:
EUR 0.2 billion).
A detailed examination of all securities indicated that there
are no permanent impairments. We have accounted for these
bonds on a held-to-maturity basis. Write-downs to a lower
fair value were not necessary.
The portfolio of long-term refinancing instruments increased
by EUR 3.2 billion to EUR 39.6 billion. Mortgage Pfandbriefe
accounted for EUR 28.9 billion of this amount, Public Pfand-
briefe for EUR 1.9 billion and uncovered bonds for EUR 8.8 bil-
lion. The total volume of refinancing instruments – including
money market funds and customer deposits – increased to
EUR 45.9 billion as of 31 December 2020.
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The item “Other liabilities to customers” can be broken down
as follows:
OTHER LIABILITIES TO CUSTOMERS
IN € 000
Remaining term < one year Remaining term > one year Total
Other liabilities to customers as of 31 Dec. 20 1,769,426 2,112,200 3,881,626
Registered bonds 33,353 1,406,019 1,439,372
of which institutional investors 33,310 1,388,019 1,421,329
Promissory note loans on the liabilities side 707,649 681,181 1,388,830
of which institutional investors 102,555 520,181 622,736
Other 1,028,424 25,000 1,053,424
of which institutional investors 586,250 25,000 611,250
Members’ capital contributions grew by EUR 80.6 million, to
EUR 1,153.1 million. Together with the issue of the Additional
Tier 1 bond in the amount of CHF 125 million in 2019, regula-
tory equity capital totalled EUR 1,676.4 million (previous year:
EUR 1,573.2 million).
Common Equity Tier 1 capital rose from EUR 1,406.8 million
in the previous year to EUR 1,517 million. At 31 December 2020,
the Common Equity Tier 1 capital ratio was 20.6 percent
( previous year: 19.8 percent), the Tier 1 capital ratio was
22.2 percent (previous year: 21.4 percent) and the total capi-
tal ratio was 22.8 percent (previous year: 22.1 percent). The
leverage ratio at 31 December 2020 was 3.6 percent (previous
year: 3.6 percent).
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RATINGS, SUSTAINABILITY AND
REGULATORY CONDITIONS
Ratings
In October 2019, the rating agency Moody’s changed Germa-
ny’s Macro Profile from “Very Strong (-)” to “Strong (+)” in its
model. This led to it taking rating actions on nine German
banks, including MünchenerHyp: the deposit rating, the senior
unsecured and the issuer rating remained unchanged at Aa3,
but the outlook was changed to negative. So far, Moody’s has
not changed this assessment.
Moody’s remains positive about the fact that MünchenerHyp
has a strong reputation on the capital market as an issuer of
Pfandbriefe, noting that it has an accordingly high level of
refinancing strength, 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
Long-term deposits Aa3*
* Outlook: negative
MünchenerHyp has not issued any Public Pfandbriefe for
some years now, as these are only profitable through
cross-selling income. As a result, it withdrew its rating for
Public Pfandbriefe in 2020.
Even to achieve the highest Aaa rating for Pfandbriefe,
Moody‘s still only requires compliance with the legal require-
ment of 2 percent over-collateralisation. There is therefore no
requirement for voluntary over-collateralisation.
Our long-term unsecured liabilities are rated AA- by the two
other major rating agencies, Standard & Poor‘s and Fitch, via
the combined rating of the Cooperative Financial Network.
Sustainability
In the reporting year, we continued to pursue our existing
sustainability activities and launched a number of new
projects.
In the private residential property financing business, our
loans with a social and environmental focus (MünchenerHyp
Green Loan and MünchenerHyp Family Loan) accounted for
20 percent of new business. In order to further increase the
positive contribution made by the Green Loan in terms of
saving or avoiding CO
2
emissions, in May 2020 we lowered
the criterion for the annual maximum primary energy con-
sumption of financed properties from 70kWh / m² per year to
55 kWh / m².
In terms of sustainable securities, we issued ESG Pfandbriefe,
green bonds, commercial paper and term deposits with a
volume of around EUR 500 million. We also revised our Green
Bond Framework and re-certified it with a positive Second
Party Opinion (SPO) prepared by ISS ESG.
In terms of the Bank’s sustainability rating, ISS ESG awarded
MünchenerHyp a rating of C+ for sustainability management
in 2020. This is a slight downgrade compared to the B- rating
awarded in previous years and is mainly due to the fact that
the Bank did not prepare any GRI disclosures in 2018 and
2019. Nevertheless, the current rating still places us among
the top performers in the Financials / Mortgage & Public Sec-
tor rating peer group. As a result, ISS ESG has granted us
“Prime Status” again.
At the beginning of 2020, the agency imug raised
MünchenerHyp’s rating slightly in one rating category,
although this did not result in a higher rating classification.
The sustainability rating therefore remains “positive”, while
Mortgage Pfandbriefe are also assessed as “positive” and
Public Pfandbriefe as “very positive”.
The agency Sustainalytics has introduced a new rating meth-
odology. In addition to the management of sustainability
issues, the new approach also assesses the specific sustaina-
bility risks for the company concerned and the sector in
which it operates. A “risk score” (of 0 to 40+ points) replaces
the previous scoring system of 0 to 100 points. Whereas a
high number of points used to represent strong performance,
a low risk score now determines the strength of sustainabil-
ity management. MünchenerHyp’s current risk score is 17.4
(low risk).
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Development of sustainability ratings over the last two years
at a glance:
Separate non-financial report
MünchenerHyp has been reporting on the non-financial
aspects and the material economic, environmental and social
impacts of its business activities since 2012. We comply with
the requirements set out in the German CSR Directive Imple-
mentation Act (CSR-Richtlinie-Umsetzungsgesetz – CSR-
RUG) by publishing a non-financial report. The non-financial
report is published at the same time as the annual report on
the Bank‘s website and in the electronic Federal Gazette
(Bundesanzeiger).
Regulatory conditions
Capital
MünchenerHyp calculates its capital requirements largely
using the internal ratings based approach (IRBA). The ECB’s
Targeted Review of Internal Models (TRIM) confirmed the
correct application of these models and the suitability of the
systems.
The Liquidity Coverage Ratio (LCR) was maintained without
issue throughout the year, with values above 300 percent on
average. The minimum was 148 percent. The Net Stable Fund-
ing Ratio (NSFR), which the Bank did not yet have to meet in
2020, averaged 101.2 percent.
In 2020, as part of our efforts to further enhance our sus-
tainability management, we looked at the mounting social
and environmental challenges facing us, as well as the grow-
ing demands of our stakeholders. This prompted us to launch
projects aimed in particular at deepening the understanding
of sustainability issues within the Bank, consolidating our
management processes and further establishing sustainability
as a firm component of the Bank‘s strategy. For example, in
line with the expectations of the European Central Bank (ECB)
and the European Banking Authority (EBA), the Risk Controlling
department is working towards making sustainability aspects,
and most importantly environmental and climate risks, more
integral components of the risk management system.
THE DEVELOPMENT OF THE SUSTAINABILITY RATINGS SINCE 2019
2019 2020
ISS-ESG
B–(Prime Status)
C+(Prime Status)
imug Sustainability rating / Unsecured bonds: positive (BB) positive (BB)
Mortgage Pfandbriefe: positive (BBB) positive (BBB)
Public Pfandbriefe: very positive (A) very positive (A)
Sustainalytics 65 out of 100 points Risk score of 17.4 (low risk)
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Basel III also introduced a leverage ratio, which must be met.
At the end of financial year 2020, MünchenerHyp reached a
leverage ratio of 3.6 percent.
The “finalisation” of Basel III also includes a gradual introduc-
tion of an output floor of 72.5 percent 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 MünchenerHyp, will be adversely
affected by the changes. The introduction of this floor will
also impact MünchenerHyp’s capital ratios. Overall, we take a
critical view of this new regulation, because it will make lend-
ing more expensive. The Bank is monitoring developments
and, given the currently high Common Equity Tier 1 ratio of
20.6 percent, believes that this regulatory 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.
Single Supervisory Mechanism for EU banks
During the reporting year the ECB conducted the annual Su-
pervisory Review and Evaluation Process (SREP) only to very
reduced extent, comprising generally a detailed evaluation of
the business model, internal governance and capital and li-
quidity adequacy. Any additional capital and liquidity require-
ments may be derived from that process. In 2020, however,
the ECB has decided not to issue a new notice as a rule, but
generally to adopt the one from the previous year. As part of
the SREP, the additional capital requirement (P2R) remains
unchanged 1.5 percent of total capital; no additional require-
ments were set for liquidity.
Minimum requirements for risk management (MaRisk)
German minimum requirements for risk management under
MaRisk (Mindestanforderungen an das Risikomanagement)
remained unchanged in the year under review. The sixth
amendment is currently in the consultation phase.
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 compared with the previ-
ous year.
IBOR reform
IBOR interest reference rates came under heavy criticism in
the wake of the manipulation scandals a few years ago; at
the same time, the abolition of the submission obligation for
panel banks made it necessary to replace the LIBOR rates.
Alternative risk-free rates (RFRs) are currently being devel-
oped and established; existing IBOR reference rates are being
replaced based on the new RFR benchmarks.
MünchenerHyp is affected both by the announced changes in
relation to the interest rate benchmarks and by the Bench-
marks Regulation. However, due to the highly specialised
business model, there is much less of a need for change than
for most other banks directly supervised by the ECB. The nec-
essary adjustments are being undertaken as part of a project,
with everything going to plan so far.
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REGISTERED OFFICE, EXECUTIVE
BODIES, COMMITTEES AND
EMPLOYEES
Registered office
Münchener Hypothekenbank eG has its registered office in
Munich. The Bank also has a branch in Berlin and 10 regional
offices.
Executive bodies and committees
Ulrich Scheer (52) was appointed General Executive Manager
of MünchenerHyp effective 1 September 2020. The Supervi-
sory Board intends to appoint Ulrich Scheer to the Board of
Management of MünchenerHyp after a preparatory period
and once this has been approved by the banking supervisory
authorities.
Employees
The top priority of our human resources work last year was
the health of our employees. The Bank established a crisis
team early on after the outbreak of the COVID-19 pandemic
and it has met more than 30 times in the last twelve months.
The crisis team, whose work is based on professional business
continuity management, has taken all necessary measures to
protect the workforce depending on the prevailing situation.
As well as implementing hygiene regulations, the option for
employees to work from home, in particular, was expanded on
a large scale, meaning that a good half of the workforce was
able to work from home when use of this model was at its
peak. Since March 2020, a total of 14 colleagues have been
infected with the coronavirus. All of them have since recov-
ered. Moreover, there was not a single case in which an indi-
vidual was infected within the Bank.
Even in a year marked by the COVID-19 pandemic, recruitment
was at the forefront of our human resources work. A total of
94 new employees were recruited to fill vacancies. A key focus
of human resources work in the reporting year was therefore
once again on the integration of new employees. The number
of new hires necessary was also driven by 60 employees leav-
ing the Bank (excluding employees who retired). With an em-
ployee turnover rate of 9.2 percent – excluding employees
retiring – the Bank is slightly above the industry average.
Further human resources work focused on enhancing our em-
ployer brand, as well as on initial training and further profes-
sional development.
The Bank employed 611 employees
9
(previous year: 573) and
15 apprenticed trainees (previous year: 15) on average over
the year. The average length of service remains unchanged at
10.4 years.
Corporate governance statement in accordance with
Section 289f HGB
The proportion of women in the Bank as a whole was 50 per-
cent in the reporting year. At Board of Management level,
the proportion came to 0 percent, while the proportion at the
first management level below the Board was 16 percent, at the
second level 20 percent and at the third level 37 percent. The
proportion of women on the Supervisory Board was 17 per-
cent in 2020. MünchenerHyp has set itself the objective of
increasing the proportion of women in management positions.
For the Supervisory Board and the two management levels
below the Board of Management, the Bank is aiming for a
proportion of women of 20 percent, with a target quota for
the Board of Management of 33 percent. In December 2020,
the Nomination Committee of MünchenerHyp’s Supervisory
Board 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.
9
Number of employees in accordance with Section 267 (5) HGB; excludes trainees, employees on
parental leave, in early retirement or in partial retirement (non-working phase)
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Risk, outlook and opportunities report
RISK REPORT
Continuous risk control and monitoring is essential to manag-
ing business development at MünchenerHyp. 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 MünchenerHyp Board of
Management as a whole 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 the German
minimum requirements for risk management (MaRisk). The
Risk Committee also receives numerous detailed reports from
internal management, regarding funding and liquidity, for
example.
Risk management is based firstly on the analysis and pres-
entation of existing risks, and secondly on comparing these
risks with the available risk coverage potential (risk-bearing
capacity). There are also various other relevant analyses that
need to be viewed as a whole to enable adequate manage-
ment 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.
When analysing and presenting the existing risks, a distinction
is made between counterparty risks, market price risks, credit
spread risks, liquidity risks, participation risks, model risks and
operational risks. Additional risks, such as placement risk,
reputational risk, business risk, etc. are each seen as elements
of the above risks and are taken into account at the appropri-
ate point in the respective calculations.
Counterparty risk
Counterparty risk (credit risk) is of major importance for
MünchenerHyp. Counterparty risk is the risk that a counter-
party will fail to meet its payment obligations towards the
Bank, by paying late or by defaulting completely or in part.
The Credit Manual sets forth the credit approval procedures
and process regulations for those units involved in the lend-
ing business and the permissible credit products. The business
and risk strategy also contains more detailed explanations on
the sub-strategies for target customers and target markets,
as well as specifications for measuring and managing credit
risks at individual transaction and portfolio level. Individual
limits have been set for all types of lending, e.g. depending on
the rating. Another factor is regional diversification, which is
ensured by country limits.
In the mortgage business, we ensure that we grant senior
loans predominantly with moderate loan-to-value ratios; in
the commercial business, limits also apply with regard to
DSCR and LTV. The current loan-to-value ratios break down
as follows:
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TOTAL PORTFOLIO OF MORTGAGE AND OTHER LOANS
INCLUDING OPEN COMMITMENTS IN €
Mortgage lending value ratio 31 Dec. 2020 Relative 31 Dec. 2019 Relative
Up to 60% 16,401,392,390.88 39.6% 15,344,320,091.37 40.2%
> 60% and <= 70% 7,042,011,598.28 17.0% 6,786,576,426.70 17.8%
> 70% and <= 80% 7,619,966,869.31 18.4% 7,316,381,368.42 19.2%
> 80% and <= 90% 3,423,715,652.17 8.3% 3,041,601,499.12 8.0%
> 90% and <= 100% 2,918,027,657.66 7.1% 2,516,947,130.12 6.6%
Over 100% 3,921,580,700.76 9.5% 3,077,883,878.42 8.1%
Without 52,169,575.59 0.1% 41,166,896.66 0.1%
Total 41,378,864,444.65 100.0% 38,124,877,290.81
100.0%
The regional breakdown within Germany and internationally is summarised below:
TOTAL PORTFOLIO OF MORTGAGE AND OTHER LOANS
INCLUDING OPEN COMMITMENTS IN €
Region 31 Dec. 2020 Relative 31 Dec. 2019 Relative
Baden-Württemberg 3,459,145,234.81 8.4% 3,199,417,955.96 8.4%
Bavaria 7,698,948,641.11 18.6% 6,914,757,962.13 18.1%
Berlin 2,156,619,521.57 5.2% 2,026,546,575.41 5.3%
Brandenburg 614,702,291.86 1.5% 608,610,025.74 1.6%
Bremen 117,028,114.15 0.3% 105,422,601.78 0.3%
Hamburg 1,218,687,423.53 2.9% 1,096,427,567.45 2.9%
Hesse 3,015,553,722.32 7.3% 2,589,198,469.12 6.8%
Mecklenburg-West Pomerania 556,461,832.57 1.3% 449,022,966.46 1.2%
Lower Saxony 2,996,660,642.83 7.2% 2,626,151,276.25 6.9%
North Rhine-Westphalia 5,223,538,665.42 12.6% 5,056,691,558.58 13.3%
Rhineland-Palatinate 1,702,546,791.15 4.1% 1,568,178,520.40 4.1%
Saarland 424,211,558.98 1.0% 391,827,023.46 1.0%
Saxony 1,088,839,097.08 2.6% 993,549,792.56 2.6%
Saxony-Anhalt 634,003,054.63 1.5% 562,668,859.46 1.5%
Schleswig-Holstein 1,955,811,355.81 4.7% 1,841,943,276.68 4.8%
Thuringia 334,394,103.65 0.8% 324,158,194.28 0.9%
Total domestic 33,197,152,051.47 80.2% 30,354,572,625.72 79.6%
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The international breakdown is as follows:
TOTAL PORTFOLIO OF MORTGAGE AND OTHER LOANS
INCLUDING OPEN COMMITMENTS IN €
Country
31 Dec. 2020 Relative 31 Dec. 2019 Relative
Austria 181,484,755.12 0.4% 169,854,589.87 0.4%
France 441,156,481.80 1.1% 550,861,295.11 1.4%
United Kingdom 544,295,423.01 1.3% 543,299,669.17 1.4%
Spain 611,836,583.85 1.5% 462,348,572.71 1.2%
Luxembourg 64,900,000.00 0.2% 64,900,000.00 0.2%
Switzerland 4,803,985,406.13 11.6% 4,761,198,571.64 12.5%
Netherlands 701,825,145.19 1.7% 538,996,737.36 1.4%
Belgium 38,101,461.97 0.1% 38,141,763.09 0.1%
USA 794,127,136.11 1.9% 640,703,466.14 1.7%
Total foreign 8,181,712,393.18 19.8% 7,770,304,665.09 20.4%
Total domestic and foreign 41,378,864,444.65 100.0% 38,124,877,290.81 100.0%
Credit risk management starts when the target transaction is
selected with the drafting of loan terms and conditions. Regu-
larly reviewed risk cost functions are used for this purpose.
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 processes
that have been tried and tested for years are reflected in a
portfolio with a low credit risk. Our lending business with
public sector borrowers and banks is primarily 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
continue to be needed to a certain extent, in order to guaran-
tee compliance with CRR liquidity requirements.
Mortgage loans are checked for the need for a specific loan
loss provision based on their rating, any payment arrears or
other negative factors. Workout Management carries out
more extensive specific loan loss provision (SLLP) monitoring,
especially in non-retail business.
The Bank sets up a general loan loss provision as a precaution
to cover latent credit risks. As in the past, this general loan
loss provision is calculated based on the letter from the Ger-
man Federal Ministry of Finance dated 10 January 1994. Due
to the current situation, however, we no longer consider cer-
tain requirements imposed by the tax authorities to be appro-
priate. The flat-rate 40 percent reduction applied to average
defaults over the past few years was no longer used; instead,
a surcharge of 40 percent is applied to the average defaults
over the past few years. The calculation also included the off-
balance-sheet item “Irrevocable loan commitments”.
As the property markets remain, mainly, very stable despite
the COVID-19 pandemic, specific loan loss provisions continue
to be recognised at only a very low level for both the residen-
tial property financing business and the commercial property
financing business.
Business relations with financial institutions are based on
master agreements that allow the netting of receivables from
and liabilities to the other institution. Collateral agreements
exist with all derivative counterparties. Derivative transactions,
insofar as they are subject to clearing, are settled via a central
counterparty (CCP).
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Specific and general loan loss provisions changed as follows
in the year under review:
TOTAL LENDING BUSINESS
IN EUR MILLION
Opening balance Additions Reversals Utilisation
Exchange rate-
related and other
changes Closing balance
Specific provisions 20.5 13.3 – 3.5 – 0.9 0.1 29.5
General provisions 13.0 0.0 0.0 0.0 0.0 13.0
Market price risks
Market price risks include the risks to the value of positions
due to changes in market parameters, including interest rates,
volatility and exchange rates. They are quantified as a poten-
tial present value loss using a present value model. This dis-
tinguishes between interest rate, option and currency risks.
In the case of the interest rate risk, a distinction is made be-
tween general and specific interest rate risks. General interest
rate risk is the risk that the market value of investments or
liabilities that depend on general interest rates will be adversely
affected if interest rates change.
Specific interest rate risk, also known as the credit spread risk,
is also 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, among others: 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 change to the
value of the option if the risk-free interest rate changes) and
gamma risk (the risk of a change to the option delta if the
price of the underlying asset changes; the option delta de-
scribes the change in value of the option due to a change in
price of the underlying asset). Options in capital market busi-
ness are not contracted for the purposes of speculation. All
option positions arise implicitly as a result of borrower’s option
rights (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 carefully 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 MünchenerHyp are hedged to the maximum
possible extent against currency risks; only the margins in-
cluded in interest payments are not hedged.
Stock risk is low for MünchenerHyp; it results almost exclu-
sively 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 Investment), 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 risks, the present value of all
MünchenerHyp transactions is determined on a daily basis. All
transactions are valued using the ‘Summit’ application. Interest
rate risk is managed based on the BPV vector (Base 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 interest rate curve and
changes to the base spread and volatilities are also deter-
mined.
Market risks are recorded and limited at MünchenerHyp using
the value at risk (VaR) indicator. The VaR calculation takes
account of both linear and non-linear risks by means of an
historic simulation. The impact of extreme movements in risk
factors is also measured here and for other types of risks using
various stress scenarios.
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The daily stress scenarios (others are tested with less
frequency) are:
■
Supervisory requirements:
»
The yield curve is shifted up and down in parallel by
200 basis points for each currency separately. The
poorer of the two results is taken into account and is
limited.
»
In addition, six further stress tests (parallel shift
up / down, steepening / flattening, parallel shift
up / down in the short-term segment) are calculated.
The poorest result 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 poorer of the two results is taken into
account.
■
Sensitivities:
»
Exchange rates: all foreign currencies change by
10 percent.
»
Volatilities: all volatilities increase by 1 percentage
point.
»
Steepening / flattening: a moderate steepening / flatten-
ing 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, rotation around the 5-year grid
point
■
Historic simulation:
»
Terrorist attack in New York on 11 September 2001:
changes in market prices between 10 September 2001
and 24 September 2001, i. e. the direct market reaction
to the attack, are applied to the current level.
»
2008 financial market crisis: changes in interest rates
between 12 September 2008 (last banking day before
the collapse of investment bank Lehman Brothers) and
10 October 2008 are applied to the current level.
»
Brexit: change in interest rates and exchange rates due
to the Brexit referendum on 23 and 24 June 2016.
In the reporting year, the maximum VaR of the entire portfo-
lio (interest, currencies and volatilities) at a confidence level
of 99 percent with a ten-day holding period was EUR 56 mil-
lion. The average figure was approximately EUR 33 million.
Although MünchenerHyp is a trading book institution (for
futures only), it has not concluded any trading transactions
since 2012.
In order to manage credit spread risks, the present value of
asset-side capital market transactions of MünchenerHyp is
calculated and the credit spread risks determined on a daily
basis. The credit spread VaR, credit spread sensitivities and
various credit spread stress scenarios are calculated in the
Summit valuation system.
Credit spread risks are recorded and limited at MünchenerHyp
using the VaR indicator. The VaR is calculated based on an
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 poorer 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 measured
in the period from one banking day before the collapse of
Lehman Brothers to four weeks after this 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 tighten.
■
Euro crisis: this scenario replicates the change in spreads
during the euro crisis between 1 October 2010 and 8
November 2011. During that period, in particular the
spreads of poorly rated sovereign bonds increased sharply.
The credit spread VaR for the entire portfolio using a 99.9 per-
cent confidence level and a holding period of one year stood
at a maximum of EUR 207 million in the reporting year, while
the average figure was about EUR 170 million.
Liquidity risk
Liquidity risk includes the following risks:
■
Inability to honour payment obligations on time (liquidity
risk in the narrower sense).
■
Inability to procure sufficient liquidity when needed at
anticipated conditions (funding risk).
■
Inability to close out, extend or settle transactions without
incurring a loss due to insufficient market depth or market
disruptions (market liquidity risk).
MünchenerHyp distinguishes between short-term solvency
measures and medium-term structural liquidity planning.
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Short-term solvency measures
The purpose of short-term solvency measures is to ensure
that the Bank is able on a daily basis to honour payment obli-
gations in due form, in time and in full, even during stress
situations (willingness to pay). Current supervisory require-
ments (MaRisk and CRD IV) regarding banks’ liquidity reserves
have been implemented.
MünchenerHyp classes itself as a capital market-oriented in-
stitution 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) Base case: 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 or 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 require-
ments 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. In all cases
statutory 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
liquidity 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. Due to the longer observation period,
however, additional modelling is taken into account that is
not critical to short-term liquidity management, such as new
business planning or 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, includ-
ing planned new business and extensions in accordance
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. As the supervisory authority will not
impose the mandatory minimum level of 100 percent for
compliance with the NSFR until 30 June 2021, active man-
agement of this ratio has not yet been necessary.
In order to reduce refinancing risks, MünchenerHyp strives to
refinance loans with matching maturities where possible. The
Bank continuously checks if its relevant refinancing sources
(above all, those within the Cooperative Financial Network)
are still available. In order to limit market liquidity risk, in its
business with governments and banks the Bank predomi-
nantly acquires ECB-eligible securities that can be used as
collateral for ECB open market operations at any time.
In order to diversify its refinancing sources, the Bank has built
up a modest deposit business. At the end of 2020, the portfolio
volume was EUR 364 million.
MünchenerHyp does not have any illiquid bonds, such as
mortgage-backed securities (MBS) or similar securities, in its
portfolio.
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Investment risk
This describes the risk of potential losses if the price of invest-
ments falls below their carrying amount. This applies to long-
term participations held by MünchenerHyp for strategic rea-
sons in companies of the Cooperative Financial Network and,
to a small extent, positions within its special mixed fund.
Operational risks
Operational risks are the risk of potential losses caused by
human error, process or project management weaknesses,
technical failures or negative external factors. Human error
includes unlawful action, inappropriate selling practices, un-
authorised actions, transactional errors and information and
communication risks.
We minimise our operational risks by using skilled staff, trans-
parent processes, automated standard workflows, written
work instructions, comprehensive IT system function tests,
appropriate contingency plans and preventive measures. In-
surable risks are covered by insurance policies to the normal
extent required by banks.
The materiality of all services outsourced by MünchenerHyp
in connection with banking transactions and financial ser-
vices or other standard banking services has been examined in
a risk analysis. All outsourced services are monitored in ac-
cordance with ECB guidelines and included in the risk man-
agement process.
Risk-bearing capacity
The technical concepts and models used to calculate risk-
bearing capacity, known as ICAAP, are continually updated in
accordance with supervisory requirements. MünchenerHyp
calculates its risk-bearing capacity in accordance with the
requirements of the ECB, based on both the normative and
the economic perspective.
Market risks, loan default risks, operational risks, spread and
migration risks, refinancing risks, investment risks, property
risks and model risks, which include other risks not specifically
listed, are deducted. Risks are allocated to risk-coverage po-
tential conservatively, disregarding any diversification effects
between different types of risks.
The Bank maintained its risk-bearing capacity at all times
throughout the year under review.
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 derivatives. Asset
swaps are used as micro-hedges at the level of larger indi-
vidual transactions. Structured underlying transactions, such
as callable securities, are hedged accordingly with structured
swaps. Exchange rate risks for commitments in foreign cur-
rency 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 prefer to 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 manage-
ment processes
The accounting-related internal control system is documented
in organisational guidelines, process descriptions, accounting
manuals and operating instructions. It comprises organisational
security measures and ongoing automatic measures and con-
trols that are integrated into work processes. The main controls
are segregation of functions, the dual control principle, access
restrictions, payment guidelines, the new product and new
structure processes 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 MünchenerHyp, such as performance
development. Aspects of all types of risks are included in this
assessment.
At MünchenerHyp there is close coordination between the
risk control and financial reporting units. This process is
monitored by the entire Board of Management.
The output from the risk management system is used as a basis
for multi-year planning calculations, year-end projections and
reconciliation procedures for the accounting ratios calculated
in the Bank’s financial reporting process.
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CORPORATE PLANNING
MünchenerHyp regularly analyses its business model based
on the challenges that will face the Bank in future, and
further develops its business and risk strategy on this basis.
In order to achieve its strategic objectives, numerous meas-
ures have been defined across various areas of activity, some
of which have already been implemented and which we will
continue to implement consistently in the years ahead. The
MaRisk-compliant strategic process, which also sets the
parameters for the annual planning process, will play a crucial
role in this. As part of this annual planning process, sales tar-
gets and centralised and decentralised components of admin-
istrative expenses are reconciled with the projected rolling
multi-year income statement. All earnings and cost compo-
nents and our risk-bearing capacity are monitored continually
or projected on a rolling basis, so that the Bank can react
promptly and appropriately to fluctuations in earnings or costs.
Planning also includes matters in relation to capital adequacy,
to ensure the Bank complies with supervisory requirements.
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OUTLOOK –
OPPORTUNITIES AND RISKS
Economic development and financial markets
The lockdown imposed in the winter of 2020 / 2021 has led
to heightened concerns about the economy. At the end of
January 2021, the IMF warned in its latest World Economic
Outlook of the considerable uncertainty associated with eco-
nomic forecasts and of diverging recovery paths, as the
economic recovery is proceeding differently from country to
country. At the same time, the IMF sees opportunities for the
economy as a result of the vaccination programmes and the
prospect of further stimulus packages in the world’s major
economies. All in all, the IMF expects the global economy to
grow by 5.5 percent in 2021.
The economic forecast for the eurozone, however, is more
subdued. The lockdown measures imposed to contain the cur-
rent wave of the pandemic are putting more of a brake on
the economic recovery than initially expected. As a result, the
IMF has lowered its forecast for eurozone GDP growth in 2021
by one percentage point to 4.2 percent.
Increased risks are forecast for the German economy as a
result of the lockdown. In its Annual Economic Report pub-
lished at the end of January 2021, the German government
now expects the economy to recover by only 3.0 percent in
2021, down from 4.4 percent previously. Industry is predicted
to show robust development, whereas the service industry
will continue to be hit very hard by the pandemic. The devel-
opment of construction investment is seen in a more positive
light, as this sector is not influenced quite as much by trends
in other sectors of the economy. The German government
expects construction investment to increase by a total of
1.9 percent in 2021 thanks to financing conditions that
remain favourable, as well as high demand for homes. Resi-
dential construction is expected to grow by 2.7 percent as
a result. The German government still expects to see more
significant adverse effects on the labour market, predicting
an unemployment rate of 5.8 percent for 2021 (2020:
5.9 percent).
Inflation rates are also predicted to rise in 2021. The IMF
expects global consumer prices to increase by 1.3 percent
(2020: 0.7 percent). Nevertheless, central banks across the
globe will stick to their expansionary monetary policy. This
should lend support to an economic recovery and underpin
the low interest rate environment on the bond markets. As a
result, the extremely low interest rate level may continue to
lead to investors reallocating their assets, favouring the eq-
uity and property markets, especially in the first half of 2021.
On the foreign exchange market, bank economists are fore-
casting a slightly positive development in the euro and more
of a downward trend for the US dollar, as the latter tends to
suffer in the event of an economic recovery worldwide. Brexit
could continue to weigh somewhat on the pound in 2021, as
many of the effects on the British economy will only start to
come to the fore as the year progresses. As far as the Swiss
franc is concerned, we still expect to see minor fluctuations
and more or less stable exchange rates, as in 2020.
Funding spreads for banks are likely to remain very attractive.
The new TLTRO tenders will continue to provide banks with
plenty of liquidity at favourable interest rates for the time
being. Accordingly, the volume for bank funding on the market
should decrease overall and at least not exert any upward
pressure on funding spreads. In the event that discussions
within central banks about a potential withdrawal of monetary
policy measures intensify in the second half of the year, this
could result in spreads widening slightly.
For covered bond markets, experts predict weaker issuing ac-
tivity in 2021 as a result of the ongoing COVID-19 pandemic.
The covered bond market will remain affected by the impact
of the global COVID-19 pandemic in the coming year, too. A
new issue volume for benchmark covered bonds denominated
in euros of EUR 90 billion is forecast for 2021, which will be
offset by maturities of around EUR 130 billion. It is expected
that these maturing bonds will not be replaced in full by new
issues and that the cheap central bank money provided via
the TLTRO tender, in particular, will have an impact.
Property markets and property financing markets
As far as the property markets are concerned, experts increas-
ingly expect the consequences of the recession to spill over. In
particular, there are fears that the economic recovery will not
reach the commercial property markets in full and that de-
mand will not bounce back to pre-pandemic levels.
The German residential property market is expected to con-
tinue its solid, positive performance. Demand for housing –
both owner-occupied and rented – is likely to remain at a
high level, not only because of low interest rates and a lack of
investment alternatives, but also because people are generally
seeking to upgrade their housing situation due to the increased
use of working from home arrangements. We can therefore
expect that professional investors, too, will continue to see
German residential properties as a safe haven. The high demand
will also fuel a further increase in purchase prices and rents,
albeit most likely at a slightly slower pace due to a gradual
improvement in the supply situation and slower population
growth in metropolitan areas.
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The residential property market in Switzerland is predicted to
follow a similar trend to its German counterpart – with keen
interest in purchases of owner-occupied residential property.
The demand for residential property is also being supported
by sustained low interest rates. Vacancy rates are rising in the
rental housing market. The market is expected to ease slightly
as a result, also in light of weaker demand.
The commercial property markets in which MünchenerHyp
operates are still being affected by lockdown measures. Inves-
tors nevertheless continue to see Germany, in particular, as a
safe haven due to its economic strength. In terms of asset
classes, investors have returned to focusing more on core
properties due to the recession. All in all, the transaction vol-
ume for the German commercial property market is expected
to remain on a par with the previous year due to its stability.
While the COVID-19 pandemic might be impacting the com-
mercial property markets in Europe and the USA in different
ways, its consequences are similar as far as the individual
segments are concerned. As a result, it makes more sense to
consider the outlook regarding opportunities and risks in the
main commercial property segments than it does to focus on
a country-specific analysis.
Office markets typically react to economic developments with
a six to twelve-month lag, meaning that it is likely a downward
trajectory in rents and yields still lies ahead. This sort of decline
will be more marked in large US cities and in London, as prop-
erty cycles here are more pronounced than in other markets.
It remains to be seen how much the increase in working from
home will affect the demand for office space. While many
experts do not expect to see any major upheaval on the office
property markets, they also predict weaker demand overall.
It is probable that this would translate into lower rents and
rising vacancy rates.
The retail sector was already undergoing radical change before
the COVID-19 crisis. The pandemic and the associated business
closures will continue to drive this process of transformation.
We therefore predict that insolvencies of retail chains are on
the cards for 2021, putting pressure on the rental and invest-
ment market. Falling rents and rising vacancy rates are to be
expected as a result. By contrast, supermarkets, specialist
stores and retail parks, which are allowed to remain open due
to the range of essential everyday goods that they offer, will
show stable development. It is still impossible to reliably predict
the extent to which the strong growth in online shopping will
continue once the pandemic is over. Travel restrictions have
left a particular mark in areas of major European cities that
are popular with tourists, with both falling rent levels and
rising yields emerging. In the future, shopping centres will be
faced with the question of what form the retail concepts of
the future will take.
Logistics properties will continue to benefit from the increas-
ing importance of online shopping in 2021. Additional demand
is coming from the relocation of industrial production and
warehouse capacities back to Europe to compensate for the
weak points in global supply chains that emerged in the
course of the pandemic.
As long as lockdown measures still have to be imposed in 2021,
hotel properties will remain the hardest hit by the COVID-19
pandemic. As a result, the recovery of the hotel industry will
depend largely on the extent to which infection rates can be
reduced, opening up opportunities for leisure and business
travel again.
Business development at Münchener Hypothekenbank
Due to the consequences of the COVID-19 pandemic and the
opportunities and risks described in the previous section,
MünchenerHyp’s new business plans are generally associated
with a number of uncertainties.
In particular, good overall conditions and high demand on the
German residential property market present opportunities.
As a result, we plan to slightly increase our new business in
private residential property financing overall, where we expect
the favourable interest rate level to lend further support. At
the same time, however, competition remains fierce as resi-
dential property financing becomes an increasingly appealing
business segment for banks and insurers. With this in mind,
we will continue to optimise and expand our processes and
services and to strengthen the partnership with our financial
intermediaries.
In our cooperation with independent financial service provid-
ers, we see good opportunities to continue our growth trend
in this business segment due to the favourable conditions
currently underpinning our funding on the capital market.
In our partnership with PostFinance, we are planning new
business at the previous year’s level. We will expand the
financing business in Austria following completion of the
trial phase by entering into partnerships with additional
Austrian financial service providers.
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Commercial property financing remains a focal point of our
business strategy alongside financing for private customers.
We consider the downturn in commercial property markets
triggered by the COVID-19 pandemic to be pronounced, but
also see it as a temporary influencing factor. As a result, when
it comes to planning our new business, it is important for us
to assess the risks associated with the pandemic appropriately.
In this respect, when making financing decisions we will con-
tinue to prioritise the criteria we have established for a posi-
tive assessment, being a viable location and the sustainability
of individual cash flows, in line with our business and risk
strategy.
Risks for our financing business are linked primarily with the
duration of the pandemic and the associated economic impli-
cations. On the other hand, the low interest rate level, which
is unlikely to change to any considerable degree, and contin-
ued high inflow of capital into property from investors and
institutional buyers due to the lack of alternative, more prof-
itable forms of investment, present us with opportunities. In
our view, this should give rise to a sufficient level of financing
opportunities overall. Against this backdrop, we plan to
slightly expand our domestic and international business in
2021.
We anticipate a high level of transaction activity on the
national and international syndication markets in 2021 as
well, as the trend towards very large volumes of financing
continues. We therefore expect the trend witnessed in 2020
to continue in 2021. On the one hand, we are prepared to
participate to a significant extent in third-party financing
and, on the other, to surrender portions of our own financ-
ing to other banks or institutional investors. In this regard
we will also continue to use our established syndication pro-
gramme with the Cooperative Financial Network.
The objective of our lending business with the public sector
and banks continues to be primarily to manage liquidity. For
2021, we expect stable development of our portfolio volume,
as maturing securities will have to be replaced to manage
liquidity.
For 2021, we forecast a refinancing requirement of between
EUR 8.5 billion and EUR 9.5 billion, of which EUR 6.5 billion to
EUR 7.0 billion is expected to be raised on the capital market
and the remainder on the money market. Similar to the previ-
ous year, we plan to issue two to three large-scale issues, with
the additional potential to tap existing bonds. Due to its part-
nership with PostFinance in Switzerland, MünchenerHyp will
continue to have a funding requirement in Swiss francs.
Two large-volume bonds will mature and fall due for repay-
ment in the 2021 financial year: a Mortgage Pfandbrief with
a volume of EUR 750 million in April and a Mortgage Pfand-
brief with a volume of EUR 500 million in November.
We will further expand our sustainability business activities in
2021. In particular, we want to give our sustainable financing
solutions an even stronger foothold in the market and expand
our sustainable issuing activities. We also plan to refine our
sustainability strategy further.
We are aiming to achieve a moderate increase in net interest
income generated from business operations in 2021. Stable
trends in our key markets will again provide opportunities to
expand our new business and thus our mortgage portfolios.
This will continue to have a positive impact on the Bank’s
earnings. On the other hand, mounting competition and on-
going high regulatory pressure will have the opposite effect.
Loan loss provisions will depend primarily on how the COVID-19
pandemic develops going forward. In our planning we have
assumed that these will increase compared to 2020.
In the current market environment, we are nevertheless con-
fident that we will attain our targets for the 2021 financial
year and succeed in further expanding our market position.
We expect net income to be in line with the previous year’s
level.
Disclaimer regarding forward-looking statements
This annual report contains statements concerning our expec-
tations and forecasts for the future. These forward-looking
statements, in particular those regarding MünchenerHyp’s
business development and earnings performance, are based
on planning assumptions and estimates and are subject to
risks and uncertainties. Our business is exposed to a plethora
of factors, most of which are beyond our control. These
mainly include economic developments, the state and further
development of financial and capital markets in general and
our funding conditions in particular, as well as unexpected
defaults on the part of our borrowers. Actual results and de-
velopments may therefore differ from the assumptions that
have been made today. Such statements are therefore only
valid at the time this report was prepared.
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Balance sheet
31 DECEMBER 2020
ASSETS
IN €
31 Dec. 20
€ 000
31 Dec. 19
1. Cash reserve
a) Cash on hand 9,816.27 6
b) Balances with central banks 151,900,630.89 11,893
of which: with Deutsche Bundesbank € 151,900,630.89
151,910,447.16 11,899
2. Claims on banks
a) Mortgage loans 1,804,261.36 4,269
b) Public-sector loans 100,575,557.53 117,709
c) Other claims 1,833,316,194.11 1,932,302
of which: payable on demand € 1,029,650,237.56
1,935,696,013.00 2,054,280
3. Claims on customers
a) Mortgage loans 38,319,054,400.38 35,415,250
b) Public-sector loans 1,754,449,332.40 2,022,889
c) Other claims 191,434,421.41 188,968
40,264,938,154.19 37,627,107
4. Bonds and other fixed-income securities
a) Bonds and notes 1,906,375,758.41 1,995,516
aa) Public-sector issuers € 1,116,468,273.04 (1,166,826)
of which: eligible as collateral for Deutsche Bundesbank advance € 1,028,562,753.17
ab) Other issuers € 789,907,485.37 (828,690)
of which: eligible as collateral for Deutsche Bundesbank advance € 647,830,141.39
b) Own bonds and notes 3,750,170,105.55 650,003
Nominal value € 3,750,000,000.00
5,656,545,863.96 2,645,519
Carried forward 48,009,090,478.31 42,338,805
Assets continued on page 38
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Balance Sheet
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ASSETS
IN €
31 Dec. 20
€ 000
31 Dec. 19
Brought forward 48,009,090,478.31 42,338,805
5. Equities and other variable-yield securities 147,000,000.00 147,000
6. Participations and shares in cooperatives
a) Participations 104,535,198.49 104,535
of which: credit institutions € 22,955,936.29
b) Shares in cooperatives 18,500.00 19
of which: in credit cooperatives € 15,500.00
104,553,698.49 104,554
7. Shares in affiliated companies 12,351,601.64 13,152
8. Intangible assets
a) Internally generated commercial property rights and similar rights and assets 0.00 2,491
b) Concessions acquired for consideration, commercial rights and
similar rights and values, as well as licenses to these rights and values 4,202,739.96 5,435
4,202,739.96 7,926
9. Tangible assets 67,104,932.98 68,040
10. Other assets 144,640,674.40 133,985
11. Deferred items
a) From issuing and lending business 68,762,011.53 58,528
b) Other 711,383.16 248
69,473,394.69 58,776
Total assets 48,558,417,520.47 42,872,238
Assets continued from page 37
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Balance Sheet
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LIABILITIES, CAPITAL AND RESERVES
IN €
31 Dec. 20
€ 000
31 Dec. 19
1. Liabilities to banks
a) Registered Mortgage Pfandbriefe issued 704,383,205.75 688,592
b) Registered Public Pfandbriefe issued 85,918,967.51 57,415
c) Other liabilities 6,828,228,277.62 4,051,556
of which: payable on demand € 1,538,640,957.23
7,618,530,450.88 4,797,563
2. Liabilities to customers
a) Registered Mortgage Pfandbriefe issued 9,157,494,958.12 9,812,321
b) Registered Public Pfandbriefe issued 1,808,582,157.62 2,041,017
c) Other liabilities 3,881,625,825.13 3,871,388
of which: payable on demand € 22,930,560.44
14,847,702,940.87 15,724,726
3. Certificated liabilities
a) Bonds issued 23,887,921,117.25 20,020,288
aa) Mortgage Pfandbriefe € 19,174,300,025.72 (16,299,480)
ab) Public Pfandbriefe € 96,098,095.09 (178,609)
ac) Other bonds and fixed-income securities € 4,617,522,996.44 (3,542,199)
b) Other certificated liabilities 164,058,324.25 299,724
of which: money market paper € 164,058,324.25
24,051,979,441.50 20,320,012
4. Other liabilities 140,378,616.31 259,302
Carried forward 46,658,591,449.56 41,101,603
Liabilities continued on page 40
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LIABILITIES, CAPITAL AND RESERVES
IN €
31 Dec. 20
€ 000
31 Dec. 19
Brought forward: 46,658,591,449.56 41,101,603
5. Deferred items
From issuing and lending business 60,323,163.99 46,340
60,323,163.99 46,340
6. Provisions
a) Provisions for pensions and similar obligations 34,922,006.00 32,483
b) Provisions for taxes 595,000.00 0
c) Other provisions 36,810,121.00 38,990
72,327,127.00 71,473
7. Subordinated liabilities 49,700,000.00 74,200
8. Instruments of the additional regulatory core capital 115,719,311.24 115,165
9. Fund for general banking risks 55,000,000.00 35,000
10. Capital and reserves
a) Subscribed capital 1,153,051,340.00 1,072,453
aa) Members’ capital contributions € 1,153,051,340.00 (1,072,453)
b) Revenue reserves 347,000,000.00 332,000
ba) Legal reserve € 341,000,000.00 (326,000)
bb) Other revenue reserves € 6,000,000.00 (6,000)
c) Unappropriated profit 46,705,128.68 24,004
1,546,756,468.68 1,428,457
Total liabilities, capital and reserves 48,558,417,520.47 42,872,238
1. Contingent liabilities
Contingent liability on guarantees and indemnities 766.94 1
2. Other commitments
Irrevocable loan commitments 4,750,651,675.17 4,186,243
Liabilities continued from page 39
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Balance Sheet
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Income statement
FOR THE YEAR ENDED 31 DECEMBER 2020
INCOME STATEMENT
IN €
1 Jan. to 31 Dec. 20
€ 000
1 Jan. to 31 Dec. 19
1. Interest income from 958,385,530.66 951,036
a) Lending and money market operations 916,362,988.25 906,387
b) Fixed-income securities and government debt register claims 42,022,542.41 44,649
2. Interest expenses 612,035,802.16 654,117
3. Current income from 1,419,092.14 2,843
a) Shares and other non-fixed income securities 0.00 0
b) Participating interests and shares in cooperatives 519,092.14 2,143
c) Investments in affiliated companies 900,000.00 700
4. Income from profit-pooling, profit transfer or partial profit transfer agreements 31,304.95 50
5. Commission received 13,006,544.57 15,396
6. Commission paid 122,470,465.83 110,705
7. Other operating income 2,560,576.58 1,710
8. General administrative expenses 118,171,817.73 125,154
a) Personnel expenses 58,001,658.62 56,329
aa) Wages and salaries 47,123,063.52 47,792
ab) Social security contributions and cost of pensions and other benefits 10,878,595.10 8,537
of which: for pensions € 3,333,953.67 1,583
b) Other administrative expenses 60,170,159.11 68,825
9. Depreciation, amortisation and write-downs of intangible and tangible assets 10,212,892.95 6,172
10. Other operating expenses 6,156,508.87 6,022
11. Write-downs on and valuation allowances of loans and advances and specific securities, as well as
additions to loan loss provisions 10,603,226.96 0
12. Income from reversals of write-downs to claims and certain securities,
as well as from reversals of provisions for possible loan losses 0.00 4,626
13. Depreciation, amortisation and write-downs of participating interests, shares in affiliated companies
and securities treated as fixed assets 411,730.22 0
14. Income from reversals of write-downs on participating interests, shares in affiliated companies
and securities treated as fixed assets 0.00 149
15. Results from ordinary business activities 95,340,604.18 73,640
16. Taxes on revenue and income 37,639,246.35 37,943
17. Allocation to fund for general banking risks 20,000,000.00 0
18. Net income 37,701,357.83 35,697
19. Retained earnings brought forward from previous year 24,003,770.85 307
20. Allocation to revenue reserves 15,000,000.00 12,000
a) Legal reserve 15,000,000.00 12,000
b) Other revenue reserves 0.00 0
21. Unappropriated profit 46,705,128.68 24,004
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Income statement
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Statement of development in equity capital
and cash flow statement
STATEMENT OF DEVELOPMENT IN EQUITY CAPITAL FOR 2020
IN € 000
Subscribed capital
Revenue
reserves
Unappropriated
profit
Total capital
and reserves
Members‘ capital
contributions
Silent
participations
Capital and reserves as of 1 Jan. 2019 1,032,630 2,000 320,000 33,462 1,388,092
Net change in capital 39,823 -2,000 37,823
Dividends paid 33,155 33,155
Net income 12,000 23,697 35,697
Capital and reserves as of 31 Dec. 2019 1,072,453 332,000 24,004 1,428,457
Net change in capital 80,598 80,598
Dividends paid 0 0
Net income 15,000 22,701 37,701
Capital and reserves as of 31 Dec. 2020 1,153,051 347,000 46,705 1,546,756
42
MÜNCHENER HYPOTHEKENBANK EG
MANAGEMENT REPORT
ANNUAL STATEMENT
OF ACCOUNTS
NOTES FURTHER INFORMATIONFOREWORD
ANNUAL REPORT 2020
Statement of development in equity
capital and cash flow statement
CONTENT
SEARCH
CASH FLOW STATEMENT 2020
IN € MILLION
31 Dec. 20
1. Profit for the period 37.7
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 40.3
3. Increase / decrease in provisions 0.9
4. Other non-cash expenses / income 4.2
5. Gain / loss on disposal of fixed assets 0.3
6. Other adjustments (net) 0.0
7. Increase / decrease in receivables from credit institutions 106.5
8. Increase / decrease in receivables from customers -2,651.6
9. Increase / decrease in securities (unless classified as long term financial assets) -3,100.5
10. Increase / decrease in other assets relating to operating activities 25.0
11. Increase / decrease in liabilities to credit institutions 2,841.6
12. Increase / decrease in liabilities to customers -857.0
13. Increase / decrease in securitised liabilities 3,730.6
14. Increase / decrease in other liabilities relating operating activities -502.4
15. Interest expense / interest income -216.0
16. Income tax expense / income -1.2
17. Interest and dividend payments received 584.9
18. Interest paid -20.9
19. Income taxes paid -36.7
20. Cash flows from operating activities (total of lines 1 to 19) -14.4
21. Proceeds from disposal of long-term financial assets 176.6
22. Payments to acquire long-term financial assets -97.3
23. Proceeds from disposal of tangible fixed assets 0.0
24. Payments to acquire tangible fixed assets -2.1
25. Proceeds from disposal of intangible fixed assets 0.0
26. Payments to acquire intangible fixed assets -3.4
27. Cash flows from investing activities (total of lines 21 to 26) 73.8
28. Proceeds from capital contributions 80.6
29. Dividends paid to shareholders 0.0
30. Changes in cash funds relating to other capital (net) 0.0
31. Cash flows from financing activities (total of lines 28 to 30) 80.6
32. Net change in cash funds 140.0
33. Effect on cash funds of exchange rate movements and remeasurements 0.0
34. Cash funds at beginning of period 11.9
35. Cash funds at end of period (total of lines 32 to 34) 151.9
43
MÜNCHENER HYPOTHEKENBANK EG
MANAGEMENT REPORT
ANNUAL STATEMENT
OF ACCOUNTS
NOTES FURTHER INFORMATIONFOREWORD
ANNUAL REPORT 2020
Statement of development in equity
capital and cash flow statement
CONTENT
SEARCH
NOTES
45 GENERAL INFORMATION ON
ACCOUNTING POLICIES
47 NOTES TO THE BALANCE SHEET
INCOME STATEMENT
47 Maturity analysis by residual term
48 Claims on | liabilities
48 Securities
49 Separate funds
49 Subordinated assets
49 Trading book
50 Fixed assets
51 Shareholdings
51 Tangible assets
51 Other assets
51 Deferred items
51 Deferred taxes
52 Assets pledged to secure liabilities
52 Other liabilities
52 Subordinated liabilities
52 Additional Tier 1 Capital Instruments
53 Members’ capital contributions
53 Details of revenue reserves
53 Foreign currency items
53 Other commitments
53 Interest income
53 Interest expenses
53 Other operating expenses
53 Forward trades and derivatives
55 Cover statement for Pfandbriefe
56 PUBLICATION IN ACCORDANCE
WITH SECTION 28 PFANDBRIEF ACT
56 Mortgage Pfandbriefe
56 Mortgage Pfandbriefe outstanding and their cover
58 Key figures for Pfandbriefe outstanding and their
cover
58 Mortgage loans used as cover for Mortgage
Pfandbriefe
60 Payments in arrears on covering mortgages
60 Public Pfandbriefe
60 Public Pfandbriefe outstanding and their cover
62 Key figures on Pfandbriefe outstanding and their
cover
62 Mortgage loans used as cover for Public Pfand-
briefe
64 Overdue interest
64 Foreclosures and receiverships of mortgages used
as cover
65 OTHER DISCLOSURES
65 Membership data
65 Personnel statistics
66 Special disclosure requirements
66 Proposed appropriation of distributable income
66 Report on events after the balance sheet date
66 Company
67 BODIES
67 Supervisory Board
67 Board of Management
68 AUDITING ASSOCIATION
68 OTHER FINANCIAL OBLIGATIONS
69 CONTINGENT LIABILITY
70 INDEPENDENT AUDITOR’S REPORT
75 AFFIRMATION BY THE LEGAL
REPRESENTATIVES
76 ANNEX TO ANNUAL FINANCIAL
STATEMENTS
77 REPORT OF THE SUPERVISORY BOARD
44
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
CONTENT
SEARCH
General information on accounting policies
The Münchener Hypothekenbank eG annual financial state-
ment as of 31 December 2020 was prepared in accordance
with the provisions of the German Commercial Code (HGB), in
conjunction with the accounting regulation for banks and
financial service institutions (RechKredV), and in accordance
with the rules contained in the Cooperatives Act (GenG) and
the Pfandbrief Act (PfandBG).
All claims are stated at nominal amounts in accordance with
Section 340e (2) of the German Commercial Code. The differ-
ence 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. Contingent risks are covered by general value ad-
justments. The basis for calculating general adjustments to
value are the terms contained in the Federal Ministry of Finance
notice dated 10 January 1994. Instead of applying an overall
reduction of 40 percent on the average volume of defaults over
the past five years, a greater weighting of these average de-
faults is applied on account of the favourable past period in
order to be better prepared for possible future negative devel-
opments. Furthermore, off-balance-sheet “Irrevocable loan
commitments” are included in the calculation of the volume of
loans at risk. In addition, contingency reserves were formed
pursuant to Section 340f of the German Commercial Code.
Securities held in the liquidity portfolio are strictly valued at
the lower of cost or market principle. The present value corre-
sponds to the current exchange or market price.
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 residual
life of the securities. Securities associated with swap agree-
ments 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, secu-
rities 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 princi-
ple. In cases involving securities treated as fixed assets where
a permanent decrease in value is anticipated, the write-down
to the fair value takes place on the balance sheet date.
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 companies
are valued at their cost of purchase. Depreciation is taken on
those assets where the reduction in value is expected to be
long-term. Participations of current assets are shown under
the item “Other assets”.
Intangible assets and tangible assets are valued at cost or
production costs less accumulated depreciation. Planned de-
preciation was taken in accordance with normal useful life-
times. Minor value assets were treated in accordance with tax
rules. Unscheduled depreciation is taken in the event the
original useful lifetime is shortened.
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 car-
ried in the accounts at the issuing price plus earned interest
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 un-
der deferred items. Based on the principles of prudent busi-
ness practice, provisions have been made for uncertain liabili-
ties 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.
45
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
General information on
accounting policies
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
CONTENT
SEARCH
Provisions made for pension obligations are calculated based
on the projected unit credit method a discount rate of 2.30
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 “Guideline tables 2019 G” prepared by Prof. Dr.
Klaus Heubeck. In accordance with the terms of Section 253
(2) of the German Commercial Code the average market rate
of interest of the last 10 business years is used for discount
purposes with an assumed remaining term to maturity of 15
years.
Per the terms of Section 256a of the German Commercial
Code, 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 carried under net interest income. Results realised
from the conversion of specific value adjustments denomi-
nated in foreign currencies are shown under the item “Income
from reversals of write-downs to claims and certain securities
as well as reversals of provisions for possible loan losses”. Costs
and income are valued at the individual daily exchange 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.
46
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
General information on
accounting policies
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
CONTENT
SEARCH
Notes to the balance sheet
income statement
Maturity analysis by residual term
ASSETS
IN € 000
31 Dec. 20 31 Dec. 19
Claims on banks 1,935,696 2,054,280
– Three months 1,833,349 1,932,540
– Three months – one year 67 17,238
– One year – five years 312 1,285
– Five years 101,968 103,217
Claims on customers 40,264,938 37,627,107
– Three months 798,783 637,667
– Three months – one year 1,524,926 1,542,065
– One year – five years 11,272,022 9,765,520
– Five years 26,669,207 25,681,855
Bonds and other fixed-income securities ≤ one year 335,009 184,352
LIABILITIES, CAPITAL AND RESERVES
IN € 000
31 Dec. 20 31 Dec. 19
Liabilities to banks 7,618,530 4,797,563
– Three months 1,880,534 1,933,848
– Three months – one year 282,129 509,425
– One year – five years 4,036,414 1,109,328
– Five years 1,419,453 1,244,963
Liabilities to customers 14,847,703 15,724,726
– Three months 963,929 1,359,192
– Three months – one year 1,111,891 1,005,534
– One year – five years 986,402 1,253,045
– Five years 11,785,481 12,106,955
Certificated liabilities 24,051,979 20,320,012
Bonds issued
– Three months 559,029 102,584
– Three months – one year 2,394,972 2,329,064
– One year – five years 8,440,760 8,688,188
– Five years 12,493,160 8,900,451
Other certificated liabilities
– Three months 164,058 245,209
– Three months – one year 0 54,516
47
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Notes to the balance sheet
income statement
CONTENT
SEARCH
Claims on | Liabilities
CLAIMS ON AND LIABILITIES TO AFFILIATED COMPANIES AND COMPANIES, IN WHICH PARTICIPATING INTERESTS ARE HELD
IN € 000
31 Dec. 20 31 Dec. 19
Affiliated
companies
Companies in which
participating interests are held
Affiliated
companies
Companies in which
participating interests are held
certificated non-certificated certificated non-certificated certificated non-certificated certificated non-certificated
Claims on banks 0 0 0 840,621 0 0 0 877,423
Claims on customers 0 0 0 0 0 0 0 0
Bonds and other fixed-income securities 0 0 104,407 0 0 0 66,900 0
Liabilities to banks 0 0 0 686,454 0 0 0 812,900
Liabilities to customers 0 2,943 0 0 0 3,194 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. 20 31 Dec. 19
Asset category Listed Unlisted Listed Unlisted
Bonds and other fixed-income securities 1,624,446 259,762 1,691,600 210,062
Shares and other non-fixed-income securities 0 0 0 0
Participations 0 0 0 0
48
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Notes to the balance sheet
income statement
CONTENT
SEARCH
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 159,841 12,841 0
Subordinated assets
SUBORDINATED ASSETS
IN € 000
31 Dec. 20 31 Dec. 19
Bonds and other fixed-income securities 92,076 66,900
Trading book
As of 31 December 2020, 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.
49
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Notes to the balance sheet
income statement
CONTENT
SEARCH
Fixed assets
DEVELOPMENT OF FIXED ASSETS
IN € 000
Acquisition and
production
costs
Changes total + / –
1
Net book value on
31 Dec. 20 31 Dec. 19
Bonds and other
fixed-income securi-
ties 1,995,516 -89,140 1,906,376 1,995,516
Shares and other
non fixed-income
securities 0 0 0
Participations
and shares in
cooperatives 104,554 104,554 104,554
Shares in affiliated
companies 13,151 -800 12,351 13,151
Acquisition
and produc-
tion costs at
start of busi-
ness year
Additions
during
business
year
Disposals
during
business
year
Transfers
during
business
year
Acquisition
and produc-
tion costs at
end of busi-
ness year
Accumulated
depreciation
at start of
business year
Depreciation
during
business
year
Additions
during
business
year
Changes in legal depreciation
taken related to Accumulated
depreciation
at end of
business year
Net book value on
Additions Disposals Transfers 31 Dec. 20 31 Dec. 19
Intangible assets 37,160 3,432 40,592 29,234 7,155 36,389 4,203 7,926
a) Internally
generated
commercial
property rights
and similar rights
and assets 2,622 2,619 5,241 131 5,110 5,241 2,491
b) Concessions
acquired for
consideration,
commercial rights
and similar rights
and values, as
well as licenses
to these rights
and values 34,538 813 35,351 29,103 2,045 31,148 4,203 5,435
Tangible assets 101,124 2,122 3,018 100,228 33,084 3,057 3,018 33,123 67,105 68,041
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.
50
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Notes to the balance sheet
income statement
CONTENT
SEARCH
During the year under review a write-down of € 800 thou-
sand to the lower fair value of € 1,200 thousand was taken in
the investment in the wholly owned subsidiary M-4tec GmbH.
No information was available on the other participations on
the balance sheet date that the present value of the Bank’s
participations and capital 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 € 620,404 thousand (previous
year: € 526,927 thousand) exceeding the present value of
€ 618,483 thousand (previous year: € 525,271 thousand). To
the extent that these securities are associated with a swap
transaction, they are valued together with the transaction as
a single item.
Securities held as fixed assets, which are separately identified
in the portfolio management system and are not expected to
be subject to a permanent impairment in value, are valued in
accordance with the moderated lower of cost or market prin-
ciple. 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 at matu-
rity. Of the securities that are not valued in accordance with
the moderated lower of cost or market principle € 1,884,209
thousand (previous year: € 1,901,663 thousand) are marketa-
ble securities.
Shareholdings
SHAREHOLDINGS
IN € 000
Percentage
of capital
held Equity Profit / loss
M-Wert GmbH, Munich
1
100.00 674 302
Immobilienservice GmbH
der Münchener
Hypothekenbank eG
(M-Service), Munich (profit
transfer agreement)
2
100.00 509 31
Nußbaumstraße GmbH &
Co. KG, Munich
2
100.00 11,486 414
M-4tec GmbH, Munich
1
100.00 2,000 -81
1
Annual financial statements 2019.
2
Annual financial statements 2020.
Tangible assets
The portion of the total value attributable to the land and
buildings used by the Bank is € 54,941 thousand (previous
year: € 55,898 thousand), and of plant and office equipment
€ 2,947 thousand (previous year: € 2,735 thousand).
Other assets
The item “Other assets” includes deferred items of € 47,063
thousand related to the derivative business, and € 77,675
thousand in commissions for mortgage loans that will be paid
after the balance sheet date. In addition, this item also includes
tax claims of € 1,325 thousand. Furthermore, this item also
includes € 15,013 thousand in cash collateral pledged within
the framework of the banking levy.
Deferred items
DEFERRED ITEMS FROM THE ISSUING AND LOAN BUSINESS
IN € 000
31 Dec. 20 31 Dec. 19
Assets side 12.
Discount from liabilities 49,781 52,310
Premium from claims 4,810 5,909
Other deferred charges 14,882 557
Liabilities side 6.
Premium from liabilities 51,776 45,168
Discount from claims 674 997
Other deferred income 7,873 175
The remaining deferred items include compensatory pay-
ments by the Bank to derivative counterparties due to a
change in the collateralization agreements or agreements
arising from the transition from EONIA to €STR. These com-
pensatory payments are shown on a proportionate basis in
the income statement.
Deferred taxes
Deferred tax liabilities mainly result from the low valuation of
bank buildings taken for tax purposes.
Deferred tax assets arise from provisions made for pensions,
and the different methods used to value premiums from swap
options that were exercised. The remaining backlog of deferred
tax assets arising after clearing is not recorded in the balance
sheet.
51
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Notes to the balance sheet
income statement
CONTENT
SEARCH
Assets pledged to secure liabilities
Within the framework of open market deals with the Euro-
pean Central Bank, securities valued at € 3,400,000 thousand
(previous year: € 500,000 thousand) were pledged as collat-
eral to secure the same amount of liabilities. The book value
of the pledged assets (genuine repurchase agreements) was
€ 0 (previous year: € 0). Within the framework of security
arrangements for derivative transactions, cash collateral of
€ 1,691,470 thousand (previous year: € 1,789,500 thousand)
was provided. Securities valued at € 14,202 thousand (previ-
ous year: € 13,862 thousand) were pledged to secure pension
obligations and requirements of the partial retirement model
for older employees. Securities valued at € 18,000 thousand
(previous year: € 18,000 thousand) were pledged to secure
financial aid obligations within the framework of a Contrac-
tual Trust Arrangement (CTA). Claims in respect of loans valued
at € 473,603 thousand (previous year: € 437,441 thousand)
were assigned to secure loans obtained from credit institutions.
Pursuant to Section 12 Para. 5 of the Restructuring Fund Act
(Restrukturierungsfondsgesetz – RStruktFG) € 15,013 thou-
sand in cash collateral has been pledged.
Other liabilities
The item “Other liabilities” consists of € 99,783 thousand for
deferred items and adjustment items for valuation of foreign
currency items, and € 36,203 thousand related to derivative
transactions, as well as interest deferrals for an Additional Tier
1 (AT1) bond of € 2,099 thousand.
Subordinated liabilities
Subordinated liabilities incurred interest expenses of € 3,663
thousand (previous year: € 4,958 thousand). Subordinated
liabilities which individually exceed 10 percent of the overall
statement amount to:
Nominal amount Currency Interest rate Maturity date
9,000,000.00 Euro 6.71 05.07.2021
10,000,000.00 Euro 6.01 01.12.2022
10,000,000.00 Euro 5.67 19.01.2021
10,000,000.00 Euro 5.67 19.01.2021
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 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
CHF 125 million, or a book value of € 116 million valued at
the exchange rate on the balance sheet date, is reported un-
der the item Additional Tier 1 (AT1) Instruments. Interest ex-
penses amounted to € 3,626 thousand on the balance sheet
date, of which € 2,099 thousand was attributable to accrued
interest. The bond was issued on 12 December 2019 in de-
nominations of CHF 50,000, carries a coupon of 3.125% and
is a perpetual bond. The bond is callable by MünchenerHyp
for the first time after 5.5 years.
The interest rate will be adjusted to the current 5-year CHF
mid-swap rate for the first time on 2 June 2025 and every 5
years after that date, as well as an additional margin of
3.656% per year.
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 bond will be written down in the event MünchenerHyp’s
Common Equity Tier 1 capital ratio (CET1 ratio) falls below a
minimum level of 7 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 contravene any statutory or official
prohibition on distribution.
Pursuant to the terms of commercial law, this is a liability and
not equity.
52
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Notes to the balance sheet
income statement
CONTENT
SEARCH
Members’ capital contributions
Members’ capital contributions disclosed under capital and
reserves item 10aa) consisted of:
MEMBERS’ CAPITAL CONTRIBUTIONS
IN €
31 Dec. 20 31 Dec. 19
Capital contributions 1,153,051,340.00 1,072,452,850.00
a) of remaining mem-
bers 1,150,101,680.00 1,069,775,210.00
b) of former members 2,715,160.00 2,461,620.00
c) in respect of shares
under notice 234,500.00 216,020.00
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. 2020 326,000 6,000
Transfer from 2019
retained earnings 0
Transfer from 2020 net income 15,000 0
31 Dec. 2020 341,000 6,000
The increase in the assessment period used for defining the
average discount rate from 7 to 10 years resulted in a positive
contribution to income of € 3,178 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. 20 31 Dec. 19
Assets side 6,139,207 5,967,570
Liabilities side 4,434,524 4,572,391
Contingent liabilities and other
obligations 384,874 410,057
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 com-
mitments 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.
Interest income
This item includes € 3,221 thousand (previous year:
€ 2,644 thousand) in negative interest.
Interest expenses
This item includes the premium for targeted longer-term
refinancing operations (TLTRO II Programme) shown as a
negative interest expense of € 9,992 thousand (previous year:
€ 3,511 thousand).
In total, negative interest expenses of € 18,712 thousand
( previous year: € 10,184 thousand) are included in interest
expenses.
Other operating expenses
This item contains expenses arising from adding interest
effects of € 3,553 thousand (previous year: € 3,545 thousand)
for established provisions.
Forward trades and 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 underly-
ing basic transactions stated on the balance sheet.
53
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Notes to the balance sheet
income statement
CONTENT
SEARCH
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 7,462 22,376 46,833 76,671 -152
Interest rate options
– Calls 12 46 860 918 87
– Puts 138 106 16 260 0
Other interest rate contracts 92 253 2,218 2,563 -30
Currency-related transactions
Cross-currency swaps 1,396 2,243 710 4,349 -58
Currency swaps 328 0 0 328 -4
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 € 39.1 million
(previous year: € 39.2 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 € 299.9 million
(previous year: € 311.1 million) and “Liabilities to banks” with
€ 304.9 million (previous year: € 323.7 million) or “Claims on
customers”, which amounted to € 10.3 million (previous year:
€ 11.9 million) while “Liabilities to customers” were € 15.5
million (previous year: € 17.4 million). The accrual of compen-
satory payments made is entered under “Other assets” with
€7.9 million (previous year: € 5.4 million); the accrual of
compensatory payments received is entered under “Other
liabilities” with € 36.2 million (previous year: € 46.0 million).
Compensatory items in the amount of € 99.8 million (previ-
ous year: € 207.5 million) related to the valuation of foreign
currency swaps are carried under the balance sheet item
“Other liabilities”.
The counterparties are banks and providers of financial services,
located in OECD countries, and separate funds under public
law in Germany.
Hedging arrangements were made to reduce credit risks
associated with these contracts. Within the framework of
these arrangements collateral was provided for the net
claims / liabilities arising after the positions were netted.
In the context of the Bank’s hedging positions, € 1,643 million
(previous year: € 1,732 million) in balance sheet hedging po-
sitions 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 positions will
remain unchanged over the entire term of the transaction 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; uncov-
ered risks are treated in accordance with standard valuation
principles. The total amount of offsetting value changes for
all valuation units amounted to € 157 million.
Interest-based finance instruments carried in the banking
book are valued without losses within the framework of an
overall valuation, whereby the interest rate driven present
values are compared to the book values and then deducted
from the positive surplus of the risk and portfolio manage-
ment expenses. In the event of a negative result a provision
for contingent risks has to be made. A related provision did
not have to be made based on the results of the calculation
made on 31 December 2020.
As on the date of record the portfolio contained no deriva-
tives used in the trading book.
54
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Notes to the balance sheet
income statement
CONTENT
SEARCH
Cover statement for Pfandbriefe
A. MORTGAGE PFANDBRIEFE
IN € 000
31 Dec. 20 31 Dec. 19
Ordinary cover assets 29,509,670 27,332,972
1. Claims on banks (mortgage loans) 1,796 4,253
2. Claims on customers (mortgage loans) 29,455,410 27,276,255
3. Tangible assets (charges on land owned by the Bank) 52,464 52,464
Substitute cover assets 600,414 671,414
1. Other claims on banks 0 0
2. Bonds and other fixed-income securities 600,414 671,414
Total cover 30,110,084 28,004,386
Total Mortgage Pfandbriefe requiring cover 28,846,300 26,603,828
Surplus cover 1,263,784 1,400,558
B. PUBLIC PFANDBRIEFE
IN € 000
31 Dec. 20 31 Dec. 19
Ordinary cover assets 1,958,141 2,251,579
1. Claims on banks (public-sector loans) 100,564 115,565
2. Claims on customers (public-sector loans) 1,712,577 1,976,213
3. Bonds and other fixed-income securities 145,000 159,801
Substitute cover assets 0 70,000
1. Other claims on banks 0 0
2. Bonds and other fixed-income securities 0 70,000
Total cover 1,958,141 2,321,579
Total public-sector Pfandbriefe requiring cover 1,945,094 2,227,229
Surplus cover 13,047 94,350
55
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Notes to the balance sheet
income statement
CONTENT
SEARCH
Publication in Accordance with Section 28 Pfandbrief Act
MORTGAGE PFANDBRIEFE
Mortgage Pfandbriefe outstanding and their cover
ORDINARY COVER ASSETS
IN € 000
Nominal value Net present value Risk-adjusted net present value
1
31 Dec. 20 31 Dec. 19 31 Dec. 20 31 Dec. 19 31 Dec. 20 31 Dec. 19
Mortgage Pfandbriefe 28,846,300 26,603,828 32,919,871 29,735,522 30,295,939 39,786,603
Cover pool 30,110,084 28,004,386 36,066,459 32,652,074 33,084,816 43,071,497
of which further cover assets 600,414 671,414 699,138 767,601 668,546 881,710
Over-collateralisation 1,263,784 1,400,558 3,146,588 2,916,552 2,788,877 3,284,894
1
Pursuant to Section. 5 (1) No 1 of the Pfandbrief-Net Present Value Directive (PfandBarwertV), the dynamic approach was used to calculate the present value of risk.
MATURITY STRUCTURE
IN € 000
31 Dec. 20 31 Dec. 19
Residual term
Mortgage
Pfandbriefe Cover pool
Mortgage
Pfandbriefe Cover pool
≤ 0.5 year 1,258,120 827,004 545,127 832,624
> 0.5 year and ≤ 1 year 1,237,079 1,038,094 1,449,260 919,806
> 1 year and ≤ 1.5 years 1,250,335 1,075,649 1,273,192 865,776
> 1.5 years and ≤ 2 years 550,349 1,348,741 1,070,221 1,064,240
> 2 years and ≤ 3 years 1,900,130 2,642,447 1,842,412 2,440,420
> 3 years and ≤ 4 years 990,322 3,047,510 1,997,039 2,589,509
> 4 years and ≤ 5 years 1,352,787 2,555,621 964,051 2,730,431
> 5 years and ≤ 10 years 8,936,315 8,867,721 6,751,199 8,857,450
> 10 years 11,370,863 8,707,297 10,711,327 7,704,130
56
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Publication in Accordance
with Section 28 Pfandbrief Act
CONTENT
SEARCH
FURTHER COVER ASSETS IN ACCORDANCE WITH SECTION 19 (1) NO 2 AND 3 PFANDBRIEF ACT
IN € 000
31 Dec. 20 31 Dec. 19
Total
thereof
Total
thereof
in accordance with Section 19 (1) No 2
Bonds in
accordance with
Section 19 (1) No 3
in accordance with Section 19 (1) No 2
Bonds in
accordance with
Section 19 (1) No 3Overall
thereof covered
bonds from banks
in accordance
with Article 129
Regulation (EU)
No 575 / 2013 Overall
thereof covered
bonds from banks in
accordance
with Article 129
Regulation (EU)
No 575 / 2013
Germany 442,000 0 0 442,000 513,000 0 0 513,000
Belgium 38,000 0 0 38,000 38,000 0 0 38,000
Finland 50,000 0 0 50,000 50,000 0 0 50,000
France 60,000 0 0 60,000 60,000 0 0 60,000
Austria 10,414 0 0 10,414 10,414 0 0 10,414
Total – all states 600,414 0 0 600,414 671,414 0 0 671,414
57
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Publication in Accordance
with Section 28 Pfandbrief Act
CONTENT
SEARCH
Key figures for Pfandbriefe outstanding and their cover
OUTSTANDING MORTGAGE PFANDBRIEFE
Figures in 31 Dec. 20 31 Dec. 19
Outstanding Mortgage Pfandbriefe € 000 28,846,300 26,603,828
thereof share of fixed-rate Pfandbriefe, Section 28 (1) No 9 % 86 95
ORDINARY COVER ASSETS
Figures in 31 Dec. 20 31 Dec. 19
Cover pool € 000 30,110,084 28,004,386
thereof total amount of claims which exceed the limits laid down in Section 13 (1) Section 28 (1) No 7 € 000 0 0
thereof total amount of claims which exceed the limits laid down in Section 19 (1) No 2 Section 28 (1) No 8 € 000 0 0
thereof total amount of claims which exceed the limits laid down in Section 19 (1) No 3 Section 28 (1) No 8 € 000 0 0
thereof share of fixed-rate cover pool, Section 28 (1) No 9 % 96 96
Net present value pursuant to Section 6 Pfandbrief-Net Present Value Regulation
for each foreign currency in EUR, Section 28 (1) No 10 (net total)
USD (€ 000) 34,397 -177,631
GBP (€ 000) 19,213 41,374
CHF (€ 000) 1,267,450 1,063,334
Volume-weighted average of the maturity that has passed since the loan was granted (seasoning), Section 28 (1) No 11 Years 5 5
Average loan-to-value ratio using the mortgage lending value, Section 28 (2) No 3 % 52 52
Mortgage loans used as cover for Mortgage Pfandbriefe
A. ACCORDING TO THEIR AMOUNTS IN TRANCHES
IN € 000
31 Dec. 20 31 Dec. 19
Up to € 300,000 17,958,015 16,974,300
More than € 300,000 up to € 1,000,000 3,392,161 3,088,982
More than € 1,000,000 up to € 10,000,000 2,284,506 2,219,896
More than € 10,000,000 5,874,988 5,049,794
Total 29,509,670 27,332,972
58
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Publication in Accordance
with Section 28 Pfandbrief Act
CONTENT
SEARCH
B. ACCORDING TO STATES IN WHICH THE REAL PROPERTY IS LOCATED AND TO PROPERTY TYPE
IN € 000
Total Residential Commercial
Total Overall
Condo-
miniums
Single and
two-family
houses
Multifamily
houses
Buildings
under con-
struction
Building
land Overall
Office
buildings
Retail
buildings
Industrial
buildings
Other
commer-
cially used
buildings
Buildings
under con-
struction
Building
land
Germany
31 Dec. 20 23,614,141 20,307,232 2,847,751 12,785,205 4,662,111 11,583 582 3,306,909 2,180,280 870,059 8,002 248,568 0 0
31 Dec. 19 21,858,095 18,971,944 2,623,388 11,731,220 4,603,311 13,443 582 2,886,151 1,851,650 809,715 9,422 215,364 0 0
Belgium
31 Dec. 20 29,640 0 0 0 0 0 0 29,640 29,640 0 0 0 0 0
31 Dec. 19 29,640 0 0 0 0 0 0 29,640 29,640 0 0 0 0 0
France
31 Dec. 20 286,098 19,260 0 0 19,260 0 0 266,838 204,272 62,566 0 0 0 0
31 Dec. 19 326,724 7,440 0 0 7,440 0 0 319,284 277,220 42,064 0 0 0 0
United
Kingdom
31 Dec. 20 337,991 0 0 0 0 0 0 337,991 270,044 45,209 0 22,738 0 0
31 Dec. 19 382,475 0 0 0 0 0 0 382,475 288,686 86,264 0 7,525 0 0
Luxembourg
31 Dec. 20 64,900 0 0 0 0 0 0 64,900 64,900 0 0 0 0 0
31 Dec. 19 64,900 0 0 0 0 0 0 64,900 64,900 0 0 0 0 0
The
Netherlands
31 Dec. 20 478,082 224,791 0 0 224,791 0 0 253,291 133,236 115,906 0 4,149 0 0
31 Dec. 19 320,062 182,065 0 0 182,065 0 0 137,997 62,748 71,100 0 4,149 0 0
Austria
31 Dec. 20 140,778 1 0 1 0 0 0 140,777 36,240 104,537 0 0 0 0
31 Dec. 19 122,920 4 0 4 0 0 0 122,916 17,280 105,636 0 0 0 0
Spain
31 Dec. 20 396,009 0 0 0 0 0 0 396,009 119,906 276,103 0 0 0 0
31 Dec. 19 214,731 0 0 0 0 0 0 214,731 89,455 125,276 0 0 0 0
Switzerland
31 Dec. 20 3,672,445 3,672,445 1,317,509 2,354,936 0 0 0 0 0 0 0 0 0 0
31 Dec. 19 3,685,833 3,685,833 1,307,837 2,377,996 0 0 0 0 0 0 0 0 0 0
USA
31 Dec. 20 489,586 72,179 0 0 72,179 0 0 417,407 332,560 19,848 0 64,999 0 0
31 Dec. 19 327,592 53,932 0 0 53,932 0 0 273,660 179,716 21,681 0 72,263 0 0
Total –
all states
31 Dec. 20 29,509,670 24,295,908 4,165,260 15,140,142 4,978,341 11,583 582 5,213,762 3,371,078 1,494,228 8,002 340,454 0 0
31 Dec. 19 27,332,972 22,901,218 3,931,225 14,109,220 4,846,748 13,443 582 4,431,754 2,861,295 1,261,736 9,422 299,301 0 0
59
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Publication in Accordance
with Section 28 Pfandbrief Act
CONTENT
SEARCH
Payments in arrears on covering mortgages
PAYMENTS IN ARREARS ON COVERING MORTGAGES
IN € 000
31 Dec. 20 31 Dec. 19
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 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
Germany 8,603 10,168 11,148 12,254
Switzerland 1,323 1,339 1,233 1,246
Total – all states 9,926 11,507 12,381 13,500
PUBLIC PFANDBRIEFE
Public Pfandbriefe outstanding and their cover
Discounts based on the vdp credit quality differentiation model were taken into consideration in calculating the cover pool.
ORDINARY COVER ASSETS
IN € 000
Nominal value Net present value Risk-adjusted net present value
1
31 Dec. 20 31 Dec. 19 31 Dec. 20 31 Dec. 19 31 Dec. 20 31 Dec. 19
Public Pfandbriefe 1,945,094 2,227,229 2,666,974 2,957,230 2,480,155 2,413,871
Cover pool 1,958,141 2,321,579 2,992,645 3,277,171 2,656,239 2,515,342
of which further cover assets 0 0 0 0 0 0
of which derivatives 0 0 45,373 43,122 34,910 7,662
Over-collateralisation 13,047 94,350 325,671 319,941 176,084 101,471
1
Pursuant to Section 5 (1) No 1 of the Pfandbrief-Net Present Value Directive (PfandBarwertV), the dynamic approach was used to calculate the present value of risk.
60
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Publication in Accordance
with Section 28 Pfandbrief Act
CONTENT
SEARCH
MATURITY STRUCTURE
IN € 000
31 Dec. 20 31 Dec. 19
Residual term
Public
Pfandbriefe Cover pool
Public
Pfandbriefe Cover pool
≤ 0.5 year 32,457 15,755 70,744 118,140
> 0.5 year and ≤ 1 year 79,984 25,719 85,135 23,244
> 1 year and ≤ 1.5 years 50,721 20,592 31,471 41,038
> 1.5 years and ≤ 2 years 9,778 28,176 77,826 63,236
> 2 years and ≤ 3 years 100,590 20,985 57,775 48,784
> 3 years and ≤ 4 years 149,664 9,875 117,729 20,989
> 4 years and ≤ 5 years 84,219 6,813 146,660 9,879
> 5 years and ≤ 10 years 492,707 514,312 517,805 558,788
> 10 years 944,974 1,315,914 1,122,084 1,437,481
FURTHER COVER ASSETS FOR PUBLIC PFANDBRIEFE IN ACCORDANCE WITH SECTION 20 (2) NO 2 PFANDBRIEF ACT
IN € 000
31 Dec. 20 31 Dec. 19
money claims in accordance with Section 20 (2) No 2 money claims in accordance with Section 20 (2) No 2
Overall
thereof covered bonds from banks
in accordance with Article 129
Regulation (EU) No 575 / 2013 Overall
thereof covered bonds from banks
in accordance with Article 129
Regulation (EU) No 575 / 2013
Germany 0 0 0 0
Total 0 0 0 0
61
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Publication in Accordance
with Section 28 Pfandbrief Act
CONTENT
SEARCH
Key figures on Pfandbriefe outstanding and their cover
OUTSTANDING PUBLIC PFANDBRIEFE
Figures in 31 Dec. 20 31 Dec. 19
Outstanding Mortgage Pfandbriefe € 000 1,945,094 2,227,229
thereof share of fixed-rate Pfandbriefe, Section 28 (1) No 9 % 91 92
COVER ASSETS
Figures in 31 Dec. 20 31 Dec. 19
Cover pool € 000 1,958,141 2,321,579
thereof total amount of claims which exceed the limits of Section 20 (2) Section 28 (1) No 8 € 000 0 0
thereof percentage share of fixed-rate cover pool, Section 28 (1) No 9 % 92 91
Net present value pursuant to Section 6 Pfandbrief-Net Present Value Regulation for each foreign currency in EUR, Section 28 (1) No 10 (net total)
CHF (€ 000) 0 28,487
JPY (€ 000) 0 -69,637
Mortgage loans used as cover for Public Pfandbriefe
A. ACCORDING TO THEIR AMOUNTS IN TRANCHES
IN € 000
31 Dec. 20 31 Dec. 19
Up to € 10,000,000 131,241 179,331
More than € 10,000,000 up to € 100,000,000 446,787 515,781
More than € 100,000,000 1,380,113 1,626,467
Total 1,958,141 2,321,579
62
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Publication in Accordance
with Section 28 Pfandbrief Act
CONTENT
SEARCH
B. ACCORDING TO GROUP OF BORROWERS AND REGIONS
IN € 000
Total Of which owed by Of which guaranteed by
All states Total State
Regional
authorities
Local
authorities Other debtors Total State
Regional
authorities
Local
authorities Other debtors
Germany
31 Dec. 20 1,803,141 1,795,973 0 1,510,112 135,296 150,565 7,168 0 0 7,168 0
31 Dec. 19 2,061,439 2,045,862 0 1,707,032 175,964 162,866 15,577 0 0 15,577 0
Belgium
31 Dec. 20 0 0 0 0 0 0 0 0 0 0 0
31 Dec. 19 50,000 50,000 0 50,000 0 0 0 0 0 0 0
Austria
31 Dec. 20 155,000 155,000 120,000 35,000 0 0 0 0 0 0 0
31 Dec. 19 170,000 155,000 120,000 35,000 0 0 15,000 0 15,000 0 0
Switzerland
31 Dec. 20 0 0 0 0 0 0 0 0 0 0 0
31 Dec. 19 27,640 27,640 0 27,640 0 0 0 0 0 0 0
Other
institutions
31 Dec. 20 0 0 0 0 0 0 0 0 0 0 0
31 Dec. 19 12,500 12,500 0 0 0 12,500 0 0 0 0 0
Total –
all states
31 Dec. 20 1,958,141 1,950,973 120,000 1,545,112 135,296 150,565 7,168 0 0 7,168 0
31 Dec. 19 2,321,579 2,291,002 120,000 1,819,672 175,964 175,366 30,577 0 15,000 15,577 0
63
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Publication in Accordance
with Section 28 Pfandbrief Act
CONTENT
SEARCH
Overdue interest
COVERING MORTGAGES WITH OVERDUE INTEREST
IN € 000
Total Thereof residential Thereof commercial
2020 2019 2020 2019 2020 2019
Overdue interest 210 242 205 242 5 0
Foreclosures and receiverships of mortgages used as cover
FORECLOSURES AND RECEIVERSHIPS
Total Thereof residential Thereof commercial
2020 2019 2020 2019 2020 2019
Pending on balance sheet date
– Foreclosure proceedings 95 96 93 95 2 1
– Receivership proceedings 28 22 27 22 1 0
26
1
20
1
25
1
20
1
1
1
0
1
Foreclosures completed during business year 27 48 26 46 1 2
1
Thereof included in pending Foreclosure proceedings.
During the year under review no property had to be taken over to salvage our claims.
64
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Publication in Accordance
with Section 28 Pfandbrief Act
CONTENT
SEARCH
Other Disclosures
Membership data
MEMBERSHIP CHANGES
Number of members
Beginning of 2020 65,048
Additions in 2020 758
Reductions in 2020 1,552
End of 2020 64,254
CAPITAL CONTRIBUTIONS
IN €
31 Dec. 20
Increase in remaining members’ capital
contributions 80,326,470.00
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 292 181 473
Part-time employees 23 115 138
Total number of employees 315 296 611
These figures do not include:
Apprenticed trainees 4 11 15
Employees participating in parental leave, early retirement, partial
retirement (non-working phase), or employees suspended with pay 10 25 35
65
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
Other Disclosures
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
CONTENT
SEARCH
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
0.0776 percent.
Proposed appropriation of distributable income
Net income for the year amounted to € 37,701,357.83. An
advance allocation of € 15,000,000 to legal reserves is pre-
sented in the current annual financial statements.
A dividend distribution of 1.25 percent will be proposed at the
Delegates Meeting. The remaining unappropriated profit for
the year – including profit carried forward from the previous
year – amounting to € 46,705,128.68 should therefore be al-
located as follows:
ALLOCATION OF RETAINED EARNINGS
IN €
31 Dec. 20
1.25 percent dividend 13,668,000.00
Carried forward to new year 33,037,128.68
Report on events after the balance sheet date
In the first quarter of 2020, there was an epidemic outbreak
of a new strain of coronavirus that increasingly affected pub-
lic and commercial life around the world. At the start of
March 2020, therefore, policymakers and economic research-
ers expected the effects on the economy to be considerable
for a period of time. When this annual report was written, it
was impossible to predict how significantly the epidemic
might affect economic growth and thus the development of
the property and property financing markets.
Company
Münchener Hypothekenbank eG
Karl-Scharnagl-Ring 10
80539 Munich
Register of cooperatives of the District Court of Munich
Gen.-Reg 396
66
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
Other Disclosures
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
CONTENT
SEARCH
Bodies
Supervisory Board
Dr. Hermann Starnecker » Kaufbeuren
Spokesman of the Board of Management of
VR Bank Augsburg-Ostallgäu eG
Chairman of the Supervisory Board
Gregor Scheller » Hallerndorf
Chairman of the Board of Management
VR Bank Bamberg-Forchheim eG
Deputy Chairman of the Supervisory Board
HRH Anna Duchess in Bavaria » Tegernsee
Entrepreneur
Barbara von Grafenstein » Munich
Employee representative
Thomas Höbel » Dachau
Spokesman of the Board of Management
Volksbank Raiffeisenbank Dachau eG
Josef Hodrus » Leutkirch im Allgäu
Spokesman of the Board of Management of
Volksbank Allgäu-Oberschwaben eG
Jürgen Hölscher » Lingen
Member of the Board of Management of
Volksbank Lingen eG
Rainer Jenniches » Bonn
Spokesman of the Board of Management of
VR-Bank Bonn eG
Reimund Käsbauer » Munich
Employee representative
Michael Schäffler » Munich
Employee representative
Kai Schubert » Trittau
Member of the Board of Management of
Raiffeisenbank Südstormarn Mölln eG
Frank Wolf-Kunz » Munich
Employee representative
Board of Management
Dr. Louis Hagen
Chairman of the Board of Management
Dr. Holger Horn
Member of the Board of Management
Mandates
Dr. Louis Hagen
KfW
Member of the Board of Supervisory Directors
Dr. Holger Horn
FMS Wertmanagement AöR
Member of the Board of Supervisory Directors (from
01.02.2020)
As of the balance sheet date loans to members of the Super-
visory Board amounted to € 750 thousand (previous year:
€ 856 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 € 18,460 thousand
(previous year: € 17,565 thousand) were made for former
members of the Board of Management. Total remuneration
received by the mem bers of the Board of Management during
the year under review amounted to € 1,438 thousand
(previous year: € 2,039 thousand), for members of the Super-
visory Board € 589 thousand (previous year: € 568 thousand).
Total compensation received by the members of Advisory
Committee amounted to € 14 thousand (previous year:
€ 63 thousand). Total compensation received by former
members of the Board of Management and their surviving
dependants amounted to € 1,369 thousand (previous year:
€ 1,200 thousand).
67
MÜNCHENER HYPOTHEKENBANK EGANNUAL REPORT 2020
NOTESMANAGEMENT REPORT FURTHER INFORMATION
ANNUAL STATEMENT
OF ACCOUNTS
FOREWORD
Bodies
CONTENT
SEARCH
Other Financial
Obligations
Auditing
Association
DGRV – Deutscher Genossenschafts- und
Raiffeisenverband e. V.,
Linkstraße 12, 10785 Berlin
During the year under review total costs of € 757 thousand
(previous year: € 746 thousand), including value-added tax,
were incurred for auditing the annual financial statements,
and € 26 thousand (previous year: € 42 thousand) in charges
were incurred for other assurance services. As in the previous
year, no costs were incurred for either tax advisory services or
other services during the year under review.
Pursuant to Section 12 Para. 5 of the Restructuring Fund Act
(Restrukturierungsfondsgesetz – RStruktFG) irrevocable
payment obligations of € 15,013 thousand were recorded at
the balance sheet date.
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Auditing Association
Other Financial Obligations
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Contingent Liability
Our Bank is a member of the protection scheme of the National
Association of German Cooperative Banks (Sicherungseinrich-
tung des Bundesverbandes der Deutschen Volksbanken und
Raiffeisenbanken e. V.). Per the statutes of the protection
scheme we have issued a guarantee to the National Association
of German Cooperative Banks. As a result, we have a contin-
gent liability of € 22,263 thousand. In addition, pursuant to
Article 7 of the Accession and Declaration of Commitment to
the bank-related protection scheme of the BVR Instituts-
sicherung GmbH (BVR-ISG), a premium guarantee is in force.
This pertains to special contributions and special payments in
the event of insufficient financial resources in order to pay
for damages of depositors of one of the CRR credit institutions
belonging to the protection scheme in the event of a com-
pensation case, as well as to meet refunding obligations pur-
suant to cover measures.
Munich, 2 February 2021
Münchener Hypothekenbank eG
The Board of Management
Dr. Louis Hagen Dr. Holger Horn
Chairman Member
of the Board of Management of the Board of Management
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Independent Auditor’s Report
TO MÜNCHENER HYPOTHEKENBANK EG, MUNICH
In our opinion, on the basis of the knowledge obtained in
the audit:
■
the accompanying annual financial statements comply, in
all material respects, with the requirements of German
commercial law applicable to credit cooperatives with
publicly traded debt instruments and give a true and fair
view of the assets, liabilities and financial position of the
Cooperative as at 31 December 2020 and of its financial
performance for the financial year from 1 January 2020 to
31 December 2020 in compliance with German proper
accounting principles, and
■
the accompanying management report as a whole pro-
vides an appropriate view of the Cooperative’s position. In
all material respects, this management report is consistent
with the annual financial statements, complies with Ger-
man legal requirements and appropriately presents the
opportunities and risks of future development. Our audit
opinion on the management report does not cover the
content of the components of the management report
referred to in the section entitled “Other information”.
In accordance with section 322(3) sentence 1 of the HGB, we
declare that our audit has not led to any reservations relating
to the legal compliance of the annual financial statements
and the management report.
Basis for the audit opinions
We conducted our audit of the annual financial statements
and the management report in accordance with section 53(2)
of the GenG, sections 340k and 317 of the HGB, and the EU
Statutory Audit Regulation (No. 537/2014), and in compliance
with German Generally Accepted Standards for Financial
Statement Audits promulgated by the Institut der Wirtschaft-
sprüfer (Institute of Public Auditors in Germany – IDW). Our
responsibilities under those requirements and principles are
further described in the “Auditor’s responsibilities for the audit
of the annual financial statements and the management
report” section of our auditor’s report. We are independent of
the Cooperative in compliance with the requirements of Euro-
pean law and German commercial law and professional law,
and we have fulfilled our other German professional responsi-
bilities in accordance with these requirements. In addition, in
accordance with point (f) of Article 10(2) of the EU Statutory
Audit Regulation in conjunction with sections 55(2) and
REPORT ON THE AUDIT OF THE
ANNUAL FINANCIAL STATEMENTS
AND OF THE MANAGEMENT
REPORT
Audit opinions
We have audited the annual financial statements of
Münchener Hypothekenbank eG, Munich (the ‘Cooperative’),
comprising the balance sheet as at 31 December 2020, the
income statement, cash flow statement and statement of
changes in equity for the financial year from 1 January 2020
to 31 December 2020, as well as the notes to the annual finan-
cial statements, including the presentation of the accounting
policies. In addition, we audited the management report of
the Cooperative for the financial year from 1 January 2020 to
31 December 2020. In accordance with the German legal
requirements, we did not audit the content of the components
of the management report referred to in the section entitled
“Other information”.
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38(1a) of the GenG, we declare that none of the persons
employed by us who could influence the results of our audit
provided any non-audit services prohibited under Article 5(1)
of the EU Statutory Audit Regulation. We believe that the
audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinions on the annual financial
statements and the management report.
Key audit matters in the audit of the annual financial
statements
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
annual financial statements for the financial year from 1 Jan-
uary 2020 to 31 December 2020. These matters were addressed
in the context of our audit of the annual financial statements
as a whole and, in forming audit opinion thereon, we do not
provide a separate audit opinion on these matters.
In the following, we describe what we consider to be the key
audit matters:
Recoverability of loans and advances to customers
We have structured our presentation of these key audit
matters as follows:
a) Matter and issue
b) Audit approach and findings
c) Reference to further information
a) Claims on customers of EUR 40.3 billion are reported in the
annual financial statements of Münchener Hypothekenbank
eG as at 31 December 2020. Most of these claims on customers
are secured by mortgages. Total loan loss allowances ( specific
valuation allowances and global valuation allowances) of EUR
42.5 million were recognised as at 31 December 2020.
Münchener Hypothekenbank eG regularly reviews the market
and lending values of the properties on the basis of appraisals
and analyses the economic circumstances of the borrowers,
including on the basis of submitted annual financial state-
ments, business plans and management accounting reports,
among other documents. These results flow into the borrow-
ers’ ratings.
As a rule, the market and lending values of the properties are
determined by appraisers using the income approach or the
‘Sachwertverfahren’, which is a specifically German form of
the modified cost approach. The valuation parameters se-
lected for this purpose significantly influence the value of the
collateral and the recognition of any necessary loan loss al-
lowance. Recognition of the loan loss allowance is subject to
estimation uncertainty in this respect.
The risk exposure in the annual financial statements is that
the need to recognise loan loss allowances is not identified in
a timely manner or in an adequate amount.
b) Among other things, in the course of our audit we examined
the available documentation relating to the valuation of the
properties serving as collateral and the monitoring of the
economic circumstances in a sample of loan exposures, and
satisfied ourselves that the ratings were performed appropri-
ately and in a timely manner.
In particular, we assessed whether the valuation parameters
applied and the assumptions made in the appraisals are ap-
propriate and reasonable. Among other things, we relied on
publicly available market data to do this.
Based on our audit, the assumptions made by Münchener
Hypothekenbank eG in reviewing the recoverability of the
loans and advances are appropriate, taking into account the
available information.
c) For information on the measurement of loans and advances
to customers and the recognition of loan loss allowances,
please refer to the section entitled ‘General information on
accounting policies’ in the notes to the annual financial
statements. For information on the process of counterparty
credit risk management, please refer to the section entitled
‘Counterparty credit risk’ in the risk report, which is part of
the management report.
Other information
The Board of Management is responsible for the other infor-
mation. The other information comprises the following docu-
ments obtained by us prior to the date of this auditor’s report:
■
the corporate governance statement in accordance with
section 289f(4) of the HGB contained in the management
report (disclosures on the percentage of women in govern-
ing bodies). We did not examine the content of this com-
ponent of the management report.
■
the separate non-financial report in accordance with sec-
tion 289b(3) of the HGB.
The other information also comprises
■
all the other parts of the annual report – excluding other
cross-references to external information – with the excep-
tion of the audited annual financial statements and man-
agement report, as well as our auditor’s report.
Those other parts of the annual report are expected to be
made available to us after the date of this auditor’s report.
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Our audit opinions on the annual financial statements and on
the management report do not cover the other information,
and consequently we do not express an audit opinion or any
other form of assurance conclusion thereon. In connection
with our audit, our responsibility is to read the other informa-
tion and, in so doing, to consider whether the other information
■
is materially inconsistent with the annual financial state-
ments, with the management report or our knowledge
obtained in the audit, or
■
otherwise appears to be materially misstated.
Responsibilities of the Board of Management and the
Supervisory Board for the annual financial statements
and the management report
The Board of Management of the Cooperative is responsible
for the preparation of the annual financial statements that
comply, in all material respects, with the requirements of Ger-
man commercial law applicable to credit cooperatives with
publicly traded debt instruments, and for ensuring that the
annual financial statements give a true and fair view of the
assets, liabilities, financial position and financial performance of
the Cooperative in compliance with German proper accounting
principles. In addition, the Board of Management is responsible
for such internal control as it, in accordance with German
proper accounting principles, has determined necessary to
enable the preparation of annual financial statements that
are free from material misstatement, whether due to fraud or
error.
In preparing the annual financial statements, the Board of
Management is responsible for assessing the Cooperative’s
ability to continue as a going concern. It also has the respon-
sibility for disclosing, as applicable, matters relating to going
concern. In addition, it is responsible for financial reporting
based on the going concern basis of accounting, provided no
actual or legal circumstances conflict with this.
The Board of Management is additionally responsible for pre-
paring the management report that as a whole provides an
appropriate view of the Cooperative’s position and is, in all
material respects, consistent with the annual financial state-
ments, complies with German legal requirements and appro-
priately presents the opportunities and risks of future devel-
opment. In addition, the Board of Management is responsible
for such arrangements and measures (systems) as it has con-
sidered necessary to enable the preparation of a management
report that complies with the German legal requirements, and
to be able to provide sufficient, appropriate evidence for the
assertions in the management report.
The Supervisory Board is responsible for overseeing the Coop-
erative’s financial reporting process for the preparation of the
annual financial statements and of the management report.
Auditor’s responsibilities for the audit of the annual
financial statements and the management report
Our objectives are to obtain reasonable assurance about
whether the annual financial statements as a whole are free
from material misstatement, whether due to fraud or error,
and whether the management report as a whole provides an
appropriate view of the Cooperative’s position and, in all ma-
terial respects, is consistent with the annual financial state-
ments and the knowledge obtained in the audit, complies
with the German legal requirements and appropriately pre-
sents the opportunities and risks of future development, as
well as to issue an auditor’s report that includes our audit
opinions on the annual financial statements and the manage-
ment report.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with
section 53(2) of the GenG, sections 340k and 317 of the HGB,
and the EU Statutory Audit Regulation in compliance with
German Generally Accepted Standards for Financial Statement
Audits promulgated by the IDW will always detect a material
misstatement. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these annual financial
statements and this management report.
We exercise professional judgement and maintain profes-
sional scepticism throughout the audit. We also:
■
identify and assess the risks of material misstatement of
the annual financial statements and the management
report, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide
a basis for our audit opinions. The risk of not detecting a
material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations or the
override of internal controls.
■
obtain an understanding of internal control relevant to the
audit of the annual financial statements and of arrange-
ments and measures (systems) relevant to the audit of the
management report in order to design audit procedures
that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of
these systems.
■
evaluate the appropriateness of accounting policies used
by the Board of Management and the reasonableness of
estimates made by the Board of Management and related
disclosures.
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conclude on the appropriateness of the Board of Manage-
ment’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may
cast significant doubt on the Company’s ability to con-
tinue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in the
auditor’s report to the related disclosures in the annual
financial statements and the management report or, if
such disclosures are inadequate, to modify our opinions.
Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future
events or conditions may cause the Cooperative to cease
to be able to continue as a going concern.
■
evaluate the overall presentation, structure and content of
the annual financial statements, including the disclosures,
and whether the annual financial statements present the
underlying transactions and events in a manner that the
annual financial statements give a true and fair view of
the assets, liabilities, financial position and financial per-
formance of the Cooperative in compliance with German
proper accounting principles.
■
evaluate the consistency of the management report with
the annual financial statements, its conformity with German
law and the view of the Cooperative’s position it provides.
■
perform audit procedures on the prospective information
presented by the Board of Management in the manage-
ment report. On the basis of sufficient appropriate audit
evidence we evaluate, in particular, the significant
assumptions used by the Board of Management as a basis
for the prospective information, and evaluate the proper
derivation of the prospective information from these
assumptions. We do not express a separate audit opinion
on the prospective information and on the assumptions
used as a basis. There is a substantial unavoidable risk that
future events will differ materially from the prospective
information.
We communicate with those charged with governance regard-
ing, among other matters, the planned scope and timing of the
audit, and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a state-
ment that we have complied with the relevant independence
requirements, and communicate with them all relationships
and other matters that may reasonably be thought to bear on
our independence, and where applicable, the related safe-
guards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the annual financial statements of
the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law
or regulation precludes public disclosure about the matter.
OTHER LEGAL AND REGULATORY
REQUIREMENTS
Assurance report in accordance with section 53(4) of the
German Cooperatives Act (Genossenschaftsgesetz –
GenG) and section 317(3b) of the German Commercial
Code (Handelsgesetzbuch – HGB) on the electronic
reproduction of the annual financial statements and the
management report prepared for publication purposes
Reasonable assurance conclusion
We have performed an assurance engagement in accordance
with section 53(4) of the GenG and section 317(3b) of the
HGB to obtain reasonable assurance about whether the repro-
duction of the annual financial statements and of the man-
agement report contained in the attached electronic file
muenchenerhyp_annual_report_2020_esef.xhtml and pre-
pared for publication purposes (the ‘ESEF documents’) com-
plies, in all material respects, with the requirements of section
328(1) of the HGB for the electronic reporting format (‘ESEF
format’). In accordance with German legal requirements, this
assurance engagement only extends to the conversion of the
information contained in the annual financial statements and
the management report into the ESEF format and therefore
relates neither to the information contained within this re-
production nor to any other information contained in the
above-mentioned electronic file.
In our opinion, the reproduction of the annual financial state-
ments and the management report contained in the
above-mentioned attached electronic file and prepared for
publication purposes complies, in all material respects, with
the requirements of section 328(1) of the HGB for the elec-
tronic reporting format. We do not express any opinion on
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In addition, the Board of Management of the Cooperative is
responsible for such internal control as it has considered nec-
essary to enable the preparation of ESEF documents that are
free from material non-compliance with the requirements of
section 328(1) of the HGB for the electronic reporting format,
whether due to fraud or errors.
The Board of Management of the Cooperative is also respon-
sible for the submission of the ESEF documents together with
the auditor’s report and the attached audited annual financial
statements and audited management report, as well as other
documents to be published, to the operator of the German
Federal Gazette (Bundesanzeiger).
The Supervisory Board is responsible for overseeing the prepa-
ration of the ESEF documents as part of the financial report-
ing process.
Auditor’s responsibilities for the assurance engagement
on the ESEF documents
Our objective is to obtain reasonable assurance about
whether the ESEF documents are free from material
non-compliance with the requirements of section 328(1) of
the HGB, whether due to fraud or error. We exercise profes-
sional judgement and maintain professional scepticism
throughout the assurance engagement. We also:
■
identify and assess the risks of material non-compliance
with the requirements of section 328(1) of the HGB,
whether due to fraud or error, design and perform assur-
ance procedures responsive to those risks, and obtain
assurance evidence that is sufficient and appropriate to
provide a basis for our assurance conclusion.
the information contained in this reproduction nor on any
other information contained in the above-mentioned elec-
tronic file, beyond this reasonable assurance conclusion and
our audit opinion on the accompanying annual financial
statements and the accompanying management report for
the financial year from 1 January 2020 to 31 December 2020
contained in the ‘Report on the audit of the annual financial
statements and of the management report’ above.
Basis for the reasonable assurance conclusion
We conducted our assurance engagement on the reproduc-
tion of the annual financial statements and the management
report contained in the above-mentioned attached electronic
file in accordance with section 317(3b) of the HGB and the
Exposure Draft of IDW Assurance Standard: Assurance in ac-
cordance with section 317(3b) of the HGB on the electronic
reproduction of financial statements and management re-
ports prepared for publication purposes (ED IDW AsS 410).
Accordingly, our responsibilities are further described below
in the section entitled ‘Auditor’s responsibilities for the assur-
ance engagement on the ESEF documents’. Our auditing asso-
ciation has applied the IDW Standard on Quality Manage-
ment: Requirements for quality management in the audit
firm (IDW QS 1).
Responsibilities of the Board of Management and the
Supervisory Board for the ESEF documents
The Board of Management of the Cooperative is responsible
for the preparation of the ESEF documents, including the
electronic reproduction of the annual financial statements
and the management report in accordance with section
328(1) sentence 4 no. 1 of the HGB.
■
obtain an understanding of internal control relevant to the
assurance engagement on the ESEF documents in order to
design assurance procedures that are appropriate in the
circumstances, but not for the purpose of expressing an
assurance conclusion on the effectiveness of these controls.
■
evaluate the technical validity of the ESEF documents, i.e.
whether the electronic file containing the ESEF documents
meets the requirements of Delegated Regulation (EU)
2019/815, in the version applicable as at the reporting date,
governing the technical specification for this electronic file.
■
evaluate whether the ESEF documents enable a XHTML
reproduction whose content is identical to the audited
annual financial statements and the management report.
Further information in accordance with Article 10 of the
EU Statutory Audit Regulation
As the responsible auditing association, we are the statutory
auditor of the Cooperative.
We declare that the audit opinions expressed in this auditor’s
report are consistent with the additional report to the Super-
visory Board or the Audit Committee in accordance with
Article 11 of the EU Statutory Audit Regulation in conjunction
with section 58(3) of the GenG (long-term audit report).
Persons employed by us who could influence the results of
the audit have provided the following services, which were
not disclosed in the annual financial statements or in the
management report of the audited Cooperative, in addition to
the statutory financial statement audit for the audited Coop-
erative or for companies controlled by it:
■
other assurance services for banking supervision
■
other assurance services in connection with the deposit
guarantee scheme
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Affirmation by the Legal Representatives
To the best of our knowledge, and in accordance with appli-
cable reporting principles for annual financial reporting, the
annual financial statements give a true and fair view of the
assets, liabilities, financial position and earnings situation of
the company, and the management report of the company
includes a fair review of the development and performance of
the business and the position of the company, together with
a description of the principal opportunities and risks associ-
ated with the anticipated development of the company.
Munich, 2 February 2021
Münchener Hypothekenbank eG
The Board of Management
Dr. Louis Hagen Dr. Holger Horn
Chairman of the Member of the
Board of Management Board of Management
■
review of the condensed half-yearly financial state-
ments and of the interim management report
■
review of the separate non-financial report
■
issuance of comfort letters.
German Public Auditor responsible for the engagement
The German Public Auditor responsible for the engagement
is Dorothee Mende.
Bonn, 15 March 2021
DGRV – Deutscher Genossenschafts-
und Raiffeisenverband e.V.
Peter Krüper Dorothee Mende
(German Public Auditor) (German Public Auditor)
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the Legal Representatives
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Annex to Annual Financial Statements
PURSUANT TO SECTION 26A PARA. 1 SENTENCE 2 OF THE
GERMAN BANKING ACT (KWG) FOR THE PERIOD ENDING
31 DECEMBER 2020 (“COUNTRY BY COUNTRY REPORTING”)
The number of full-time equivalent salaried employees is
567.09.
Profit before tax amounts to € 95,341 thousand.
Taxes on income amount to € 37,639 thousand and refer to
current taxes.
Münchener Hypothekenbank eG did not receive any public
assistance during the current business year.
Münchener Hypothekenbank eG is a Pfandbrief Bank operat-
ing in the legal format of a registered cooperative. The Bank’s
core areas of business are granting mortgage loans for resi-
dential and commercial property, as well as issuing Mortgage
Pfandbriefe. The Bank’s most important market is Germany.
Furthermore, business relationships are also maintained with
clients in other European countries, in particular. All of the
Bank’s business is processed at its head office in Munich. The
Bank does not maintain any branch offices outside of Germany.
Münchener Hypothekenbank eG defines its revenues as the
sum of the following components of the income statement
pursuant to the rules of the German Commercial Code (HGB):
interest income, interest expenses, current income from par-
ticipating interests and shares in cooperatives and investments
in affiliated companies, income from profit-pooling, profit
transfer or partial profit transfer agreements, commission
received, commission paid and other operating income. Reve-
nues for the period 1 January to 31 December 2020 were €
240,897 thousand.
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Report of the Supervisory Board
and the risk situation. These topics were also the focus of
the other Supervisory Board meetings held during the first
lockdown.
The Board of Management kept the Supervisory Board up to
date with regular, detailed verbal and written reports about
key matters at the Bank. The Board of Management reported
on the position of the Bank, the development of business, key
financial indicators and adjustments to the Bank’s business
and risk strategy. In addition, the current liquidity situation
and measures to control liquidity were explained to the Super-
visory Board, and it was provided with detailed reports on the
risk situation, measures to control risks and the Bank’s risk
management system. The Supervisory Board also obtained
comprehensive reports on the status of strategic and opera-
tional planning. It was involved in all important decisions. A
focal point of the work of the Supervisory Board and the
reporting was current developments on the property market
and in private and commercial property financing. The Super-
visory Board also extensively discussed the increasing regu-
latory requirements and their implementation.
Annual meetings were once again held between the Joint
Supervisory Team and the Chairman of the Supervisory Board
and the Chairs of the various Supervisory Board committees.
Evaluation of the Supervisory Board
The Supervisory Board conducted the evaluation of the Board
of Management and the Supervisory Board based on the
guidance for carrying out the suitability assessment and on
conflicts of interest that was adopted in 2019. This evaluation
process was conducted by the Nomination Committee in
accordance with the regulations of Section 25d of the German
Banking Act (Kreditwesengesetz – KWG). The results were
discussed within the Supervisory Board at the beginning of
2020 and documented in a report on the suitability assessment
and the efficiency review. It was found that the structure,
size, composition and performance of the Supervisory Board,
as well as the knowledge, skills and experience of both the
individual members of the Supervisory Board and the Super-
visory Board as a whole, comply with legal requirements and
those defined in the Bank’s Articles of Association.
Succession plans for the Board of Management and the Super-
visory Board were drawn up based on the suitability assess-
ment and efficiency review, and improvements were devised
to make the Supervisory Board more efficient in its activities.
An onboarding and training concept for the Supervisory
Board was adopted during the reporting year. The Supervisory
Board attended training sessions on current regulatory topics
and legal developments. Training sessions were also planned
and conducted for the Supervisory Board committees.
During the financial year under review, the Supervisory Board
carried out its supervisory function as required by law, the
Bank’s Articles of Association and rules of procedure. The Board
of Management reported in a timely manner to the Super-
visory Board regarding the Bank’s corporate planning, its busi-
ness and financial situation, and further strategic development.
The Supervisory Board thereby supported the work of the
Board of Management in an advisory capacity and monitored
its management of business. The Supervisory Board’s decisions
on actions requiring its approval were taken on the basis of
reports and materials submitted by the Board of Management.
Topics reviewed during Supervisory Board meetings
During the past financial year, the Supervisory Board held
one constituent meeting, four regular meetings and eight
further meetings in order to continuously advise and monitor
the management of MünchenerHyp in accordance with the
requirements incumbent upon it by law and under the Bank’s
Articles of Association. The main topics and focus of its
deliberations included business development and planning,
business and risk strategy, the risk situation, regulatory issues,
operationalisation of the IT strategy, governance issues and
the search for another member of the Board of Management.
In addition, the Supervisory Board’s work was marked pri-
marily by MünchenerHyp’s handling of the impact of the
COVID-19 pandemic on banking operations, core business
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Collaboration with the Board of Management
The Chairman of the Supervisory Board was in regular close
contact with the Chairman of the Board of Management,
discussing important matters and decisions in face-to-face
meetings.
In addition, the Chairman of the Board of Management contin-
uously and regularly reported to the Chairman of the Super-
visory Board between the individual meetings, verbally and in
writing, about all major developments within the Bank.
Activities of the Supervisory Board committees
The Supervisory Board has established four committees. These
are the Nomination Committee, the Audit Committee, the
Risk Committee and the Remuneration Control Committee.
The committees regularly reported on their activities during
the Supervisory Board meetings.
Six meetings of the Nomination Committee were held in the
reporting year. In addition to the regular Board of Management
and Supervisory Board matters, it also addressed, in particular,
the suitability assessment of the management bodies and the
preparation of succession planning for the Board of Manage-
ment and the Supervisory Board.
The Audit Committee held three meetings, during which it
discussed the results of the audit of the annual financial
statements and of the management report. Other topics
included the Bank’s internal control system, reports prepared
by the Internal Audit department and by the Compliance
Officer, and results of the on-site inspection (OSI) of the
commercial lending business, as well as issues and require-
ments discussed during meetings with banking supervisory
authorities.
The Risk Committee convened at 15 meetings. The Board of
Management provided the committee with detailed reports
on the development of markets in which the Bank provides
property financing. The Committee also addressed the regula-
tory environment, risk strategy, risk governance, legal risks, IT
risks and information security, including data protection.
Furthermore, it considered and authorised loans requiring
approval and took note of any reportable transactions. The
Board of Management presented individual exposures of
significance for the Bank to the Committee and discussed
them with the Committee. Detailed reports were also provided
on the provision and management of liquidity and on refi-
nancing. As part of this process, the risk types associated with
the Bank’s business were discussed and examined in detail.
In addition to credit risks, these include in particular market,
liquidity, sales and operational risks, taking into account
risk-bearing capacity in accordance with the Minimum Require-
ments for Risk Management (MaRisk). Reports on the Bank’s
risk situation were regularly submitted to the Committee and
explained in detail by the Board of Management and Chief
Risk Officer (CRO). In particular, the revised limit system was
discussed. Members of the Committee took note of the con-
tents of the reports and discussed them with the Board of
Management. The Committee also reviewed the sales report
and the report prepared by the Chief Information Security
Officer (CISO).
The five meetings of the Remuneration Control Committee
primarily addressed the Bank’s remuneration systems and all
related issues. The Committee determined the appropriateness
of MünchenerHyp’s remuneration systems and recommended
that the Supervisory Board take note of the results of the ap-
propriateness test.
Annual financial statements
The DGRV – Deutscher Genossenschafts- und Raiffeisenver-
band e. V., Berlin, audited the accounting records, annual
financial statements and management report for financial
year 2020 in accordance with their mandate and issued an
unqualified audit opinion. No reservations were raised. The
auditors reported extensively on the key findings of the audit
during a meeting of the Audit Committee. They were also
available to provide additional information. Each member of
the Supervisory Board was provided in good time with the
auditing association’s audit report on the statutory audit
pursuant to Section 53 of the Cooperatives Act (Genossen-
schaftsgesetz – GenG) including the audit of Münchener
Hypothekenbank eG’s financial statements for 2020, for their
information. The results of the audit were discussed during a
joint meeting of the Board of Management and the Super-
visory Board, which was attended by the auditor. The results
of the audit are also reported at the Delegates Meeting.
The annual financial statements, the management report, the
ESEF-documents, the Board of Management’s proposal for
the allocation of distributable income, and the non-financial
report were examined by the Supervisory Board and approved.
The Supervisory Board recommends that the Delegates Meet-
ing approve the annual financial statements for 2020 – as
explained – and endorse the Board of Management’s proposal
for the allocation of net income. The proposal complies with
the provisions of the Bank’s Articles of Association.
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Development of MünchenerHyp during the year
under review
For MünchenerHyp, too, the 2020 financial year was a year
dominated by the COVID-19 pandemic. The Bank has coped
well with the effects of the lockdown and the ensuing reces-
sion. It was very successful in writing new business and
almost matched the record result achieved in the previous
year, expanding mortgage business in the private residential
property financing segment in the process. On the funding
side, the Bank’s large-volume issues, especially Pfandbriefe,
once again met with strong demand.
MünchenerHyp dealt in a highly responsible manner with the
negative impact that the measures taken to contain the
COVID-19 pandemic had on banking operations. It very quickly
adopted all of the measures necessary to protect its employees
to the best of its ability while maintaining normal operations.
The Bank’s employees showed great commitment during this
process, testimony to the team spirit within the Bank in this
extraordinary year. The Supervisory Board would like to ex-
press its sincere thanks to all employees for this commitment
and dedication.
Munich, April 2021
Münchener Hypothekenbank eG
Dr. Hermann Starnecker
Chairman of the Supervisory Board
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FURTHER INFORMATION
81 THE MEMBERS OF
THE DELEGATES MEETING
82 AGENDA –
GENERAL (DELEGATES) MEETING
83 EXECUTIVE MANAGEMENT AND BODIES
84 CONTACT
84 Headquarters
85 Contacts in the federal states
86 Cooperation partners
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THE MEMBERS OF
THE DELEGATES MEETING
AS OF 31 DECEMBER 2020
Dr. Wolfgang Baecker » Bank director
Peter Bahlmann » Bank director
Michael Becky » Management consultant
Heinrich Beerenwinkel » Bank director
Gunnar Bertram » Bank director
Thomas Bierfreund » Bank director
Dietmar Bock » Management consultant
Dr. Christine Bortenlänger » Executive member
of the Board of Management
Dr. Michael Brandt » Bank director
Ralf Daase » Bank director
Eva Irina Doyé » Attorney, tax consultant
Clemens Fritz » Bank director
Johann Fuhlendorf » Bank director
Rainer Geis » Bank director
Josef Geserer » Bank director
Peter Geuß » Bank director
Klaus Graniki » Managing director
Markus Gschwandtner » Bank director
Eberhard Heim » Bank director (ret.)
Dr. Harald Heker » Chairman of the Board of Management
Henning Henke » Bank director
Joachim Hettler » Bank director
Dr. Michael Hies » Managing director
Michael Hohmann » Bank director
Konrad Irtel » Bank director (ret.)
Thomas Jakoby » Bank director
Michael Joop » Bank director
Carsten Jung » Bank director
Hubert Kamml » Bank director (ret.)
Norbert Kaufmann » Bank director
Herbert Kellner » Bank director
Manfred Klaar » Bank director
Dr. Carsten Krauß » Bank director
Marcus Wilfried Leiendecker » Bank director
Martin Leis » Bank director
Dr. Ursula Lipowsky » Attorney
Thomas Ludwig » Bank director
Helmuth Lutz » Bank director (ret.)
Sabine Mack » Bank director
Karl Magenau » Bank director
Bernd Mayer » Bank director
Franz-Josef Mayer » Bank director
Gregor Mersmann » Bank director
Klaus Merz » Bank director
Markus Merz » Bank director
Franz Dierk Meurers » Bank director
Jens Ulrich Meyer » Bank director
Prof. Dr. Peter Otto Mülbert » University professor
Michael Müller » Attorney
Dr. Hans-Wolfgang Neumann » General Manager
HSH Albrecht Prince of Oettingen-Spielberg » Managing
director and owner
Armin Pabst » Bank director
Markus Pavlasek » Bank director
Claus Preiss » Bank director
Richard Riedmaier » Bank director
Harald Rösler » Bank director
Kay Schäding » Bank director
Georg Schäfer » Bank director
Dr. Martin Schilling » Bank director
Michael Schlagenhaufer » Bank director
Dr. Eckhard Schmid » Attorney
Franz Schmid » Bank director
Andreas Schmidt » Certified property specialist
Klaus Otmar Schneider » Bank director (ret.)
Thorsten Schwengels » Bank director
Wolfgang Siemers » Managing director
Hermann-Josef Simonis » Bank director
Jörg Stahl » Bank director
Thomas Stolper » Bank director
Stefan Terveer » Bank director
Werner Thomann » Bank director
Ulrich Tolksdorf » Bank director
Martin Trahe » Bank director
Wolfram Trinks » Bank director (ret.)
Florian Uhl » Managing director
Peter Voggenreiter » Bank director
Dr. Gerhard Walther » Bank director
Ulrich Weßeler » Bank director
Silke Wolf » Managing director
Michael Zaigler » Managing director
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AGENDA –
GENERAL (DELEGATES) MEETING
17 APRIL 2021 AT 10:30 AM
1. Report of the Board of Management about the 2020
business year
2. Report of the Supervisory Board on its activities
3. Report on the results of the statutory auditor’s report
4. Consultation of the auditor’s report and resolution
regarding the extent of disclosure of the auditor’s
report
5. Resolutions to ratify
a) the annual financial statements for 2020
b) the proposed appropriation of distributable income
c) ratification of the acts of the Board of Management and
the Supervisory Board
6. Elections to the Supervisory Board:
Re-election of Dr Hermann Starnecker
7. Resolution on the adaptation of the electoral
regulations
8. Resolution on the amount of the attendance fees of
the of the delegates
9. Other issues
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Supervisory Board
Dr. Hermann Starnecker » Kaufbeuren
Chairman of the Supervisory Board
Gregor Scheller » Bamberg
Deputy Chairman of the Supervisory Board
HRH Anna Duchess in Bavaria » Tegernsee
Barbara von Grafenstein » Munich
Thomas Höbel » Dachau
Josef Hodrus » Leutkirch im Allgäu
Jürgen Hölscher » Lingen
Rainer Jenniches » Bonn
Reimund Käsbauer » Munich
Michael Schäffler » Munich
Kai Schubert » Trittau
Frank Wolf-Kunz » Munich
Board of Management
Dr. Louis Hagen
Chairman
Dr. Holger Horn
General Executive Manager
Ulrich Scheer (as of 01.09.2020)
Ingo Schramm
Trustees
Dr. Joseph Köpfer » Munich
Senior Ministerial Counsellor (ret.)
Dr. Günter Graf » Egmating
Ministry director
Deputy
Cooperative Advisory Committee (as of 01.01.2021)
Frank Ostertag » Wildeshausen
Chairman
Herbert Kellner » Ismaning
Deputy Chairman
Hans-Jörg Meier » Bühl
Deputy Chairman
Manfred Asenbauer » Passau
Matthias Berkessel » Diez
Frank Buchheit » Lebach
Dietmar Dertwinkel » Münster
Jürgen Edel » Giengen
Bernhard Failer » Grafing
Josef Frauenlob » Bad Reichenhall
Steffen Fromm » Neu-Ulm
Herbert Hermes » Vechta
Johannes Hofmann » Erlangen
Carsten Jung » Berlin
Thomas Lange » Ingolstadt
Tobias Meurer » Mainz
Stefan Rinsch » Krefeld
Michael Schneider » Tauberbischofsheim
Remo Teichert » Dresden
Martin Traub » Ehingen
Karsten Voß » Hamburg
Thorsten Wolff » Salzkotten
EXECUTIVE MANAGEMENT AND BODIES
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CONTACT
HEADQUARTERS
Main Office
Münchener Hypothekenbank eG
Karl-Scharnagl-Ring 10 | 80539 Munich
PO Box 22 13 51 | 80503 Munich
Phone +49 89 5387-0 | Fax +49 89 5387-770
E-mail: info@muenchenerhyp.de
Internet: www.muenchenerhyp.de
Accounting | Taxes
Johann Götz » Phone +49 89 5387-2701
Business Process Optimisation
Florian Lang » Phone +49 89 5387-1602
Central Services
Dr. Phil Zundel » Phone +49 89 5387-2000
Commercial Real Estate Finance
Jan Polland » Phone +49 89 5387-2200
Compliance
Nathalie Wagemanns » Phone +49 89 5387-1301
Internal Audit
Gisela Conrads » Phone +49 89 5387-3701
International Debt Investments
Guido Zeitler » Phone +49 89 5387-2260
IT
Hans-Georg Klinkenberg » Phone +49 89 5387-4201
Legal
Günther Schwarz » Phone +49 89 5387-5402
Office of The General Executive Manager
Ulrich Scheer » Phone +49 89 5387-1021
Offices of The Board of Management
Dr. Louis Hagen (Chairman) » Phone +49 89 5387-1011
Dr. Holger Horn » Phone +49 89 5387-1021
Private Customers | Private Housing Business
Brokers
Dr. Peter Knorr » Phone +49 89 5387-3010
Verbund
Thomas Hügler » Phone +49 89 5387-3308
Risk Controlling | Regulation
Hannsjörg Eisenreich » Phone +49 89 5387-3200
Transaction Management Capital Markets | Treasury
Ingeborg Eitler » Phone +49 89 5387-7327
Transaction Management Property Finance
Commercial Real Estate Customers
Susanne Falkenberg » Phone +49 89 5387-1701
Private Customers
Ingo Schramm » Phone +49 89 5387-6001
Treasury
Rafael Scholz » Phone +49 89 5387-5500
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CONTACTS
IN THE FEDERAL STATES
Regional Office Augsburg
Regional director: Peter Birgmeier
Münchener Hypothekenbank eG
Von-der-Tann-Straße 45
86159 Augsburg
Phone +49 821 25763-0
Fax +49 821 25763-20
Regional Office Berlin
Regional director: Stefan Polter
Münchener Hypothekenbank eG
Kurfürstendamm 151
10709 Berlin
Phone +49 30 329007-0
Fax +49 30 329007-20
Regional Office Cologne
Regional director: Daniel Probstfeld
Münchener Hypothekenbank eG
Herwarthstraße 1
50672 Cologne
Phone +49 221 500616-0
Fax +49 221 500616-20
Regional Office Dresden
Regional director: Cornelius Dachsel
Münchener Hypothekenbank eG
Cossebauder Straße 20
01157 Dresden
Phone +49 351 427971-0
Fax +49 351 427971-20
Regional Office Frankfurt
Regional director: Michael Hohmann
Münchener Hypothekenbank eG
Mainluststraße 12
60329 Frankfurt am Main
Phone +49 69 743465-0
Fax +49 69 743465-20
Regional Office Hamburg
Regional director: Olaf Kaspereit
Münchener Hypothekenbank eG
Brooktorkai 20
20457 Hamburg
Phone +49 40 355430-0
Fax +49 40 355430-35
Regional Office Hanover
Regional director: Karl-Heinz Meyer
Münchener Hypothekenbank eG
Berliner Allee 5
30175 Hanover
Phone +49 511 856144-0
Fax +49 511 856144-20
Regional Office Muenster
Regional director: Ingo Haut
Münchener Hypothekenbank eG
Hafenweg 46–48
48155 Muenster
Phone +49 251 91997-0
Fax +49 251 91997-20
Regional Office Munich
Regional director: Barbara von Grafenstein
Münchener Hypothekenbank eG
Karl-Scharnagl-Ring 10
80539 Munich
Phone +49 89 5387-521
Fax +49 89 5387-566
Regional Office Nuremberg
Regional director: Klaus Böhmer
Münchener Hypothekenbank eG
Wallensteinstraße 61–63
90431 Nuremberg
Phone +49 911 214675-0
Fax +49 911 214675-20
Regional Office Stuttgart
Regional director: Wolfgang Bronner
Münchener Hypothekenbank eG
Lange Straße 6
70173 Stuttgart
Phone +49 711 222962-0
Fax +49 711 222962-22
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COOPERATION PARTNERS
Paris
ARP CONSEIL S.A.R.L.
Pascal Roth
1 Rue François 1er
F-75008 Paris
Phone + 33 1 456262-50
E-mail: Pascal.Roth@groupe-arp.fr
Madrid
VP Investment & Finance Advisory
Peter von Puttkamer
Paseo de la Castellana, 45 – 1º Dcha
E-28046 Madrid
Phone + 34 645 988 291
E-mail: pvp@vpadvisory.eu
86
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Imprint
Published by
© Münchener Hypothekenbank eG
Karl-Scharnagl-Ring 10
80539 Munich
Register of cooperatives of the District Court
of Munich Gen.-Reg 396
Coordination
Central Services – Communication and Marketing
Münchener Hypothekenbank eG
Concept | Design
MPM Corporate Communication Solutions
Mainz
www.mpm.de
Translation
BBi (Scotland) Ltd
Suite 4.1.A, 290 Bath Street
Glasgow G2 4JR
United Kingdom
Photo credits
Page 5:
Fotostudio Black BOX
Tommy Lösch
Munich
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