2021 Interim Financial Report

12 August 2021

The first half of 2021 was a time of extensive activity as we courageously continued along a path that we had embarked upon years earlier, and which we have consistently followed ever since. Indeed, anyone can set goals – but they can only be achieved through well-planned action.

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New member of the Board of Management of Berlin Hyp – the trio is complete again

On 1 May 2021, Maria Teresa Dreo-Tempsch succeeded Gero Bergmann on the Board of Management and assumed responsibility for the Real Estate Financing Sales, Portfolio Management, S-Group Business and Treasury departments. As a proven real estate and sales specialist, Dreo-Tempsch has outstanding market expertise and is well connected throughout the industry. With Maria Teresa Dreo-Tempsch, Berlin Hyp will continue to move forward with the Bank’s strategic development as a pioneer for green finance and climate finance among real estate banks.
Berlin Hyp’s Board of Management continues to consist of three members: Sascha Klaus as Chair of the Board of Management, Maria Teresa Dreo-Tempsch with responsibility for the market divisions and Alexander Stuwe as Chief Risk Officer.

Our construction project is picking up speed

The deconstruction of our old office building at Budapester Strasse 1 continues and can now also be seen from the outside. The old glass façade was removed piece by piece, and the upper floors are now gone as well. We are thus gradually getting closer to achieving our goal of bringing all employees together in a state-of-the-art, energy-efficient building.
Our neighbours and neighbourhood are important to us, and we can well imagine that such large-scale demolition and construction work is having an impact on the surrounding area. With this in mind, we handed out flyers on the construction project to our neighbours in order to ensure transparency – and also to share our excitement about the new building. We are available for dialogue and discussions at any time and we are also planning further communication measures in connection with the construction project.

Berlin Hyp received a Certificate in Platinum for Building Deconstruction from the German Sustainable Building Council (DGNB) for the deconstruction phase of the project, after having achieved an overall performance rating of 83.6 per cent in the pre-certification process in June 2021. Our project is the second project in Germany to receive the DGNB award. We were given high performance ratings in the categories of Ecology, Economy and Sociocultural and Functional Quality in particular. While demolishing the old building, Berlin Hyp has made sure to dispose of all materials in an environmentally friendly manner, and to recycle materials wherever possible. The majority of small office furniture, materials and equipment that were no longer needed were donated or auctioned off and were therefore put to further use. All proceeds from the auction were passed on to charitable organisations and associations.

As the deconstruction of the old building proceeded, we also expanded our internal communication activities. The central component here is a digital lunch format that allows for interaction with employees and thus ensures the greatest degree of transparency for staff members as well. These digital lunches are held at regular intervals, and each one focuses on a different topic. During the first half of 2021, for example, experts answered questions about the acoustic properties of open-plan offices, and employees talked about different ways to design workstations. Cross-divisional working groups have also been established in order to propose suitable concepts for the new working environments in line with the specific requirements of each division. Our goal here is to define and establish optimal conditions for ensuring that all employees, regardless of their field of work, will feel comfortable in the new building and will be able to work together effectively and with a focus on the future.

Digitisation

Berlin Hyp continues to systematically pursue its goal of becoming the most modern commercial real estate financier in Germany. The Bank is moving ahead with its digitisation and innovation activities in order to digitise and partially automate its key business processes and make them data-driven. In addition to introducing a state-of-the-art “Financial Services Data Platform” as a foundation for the entire core-banking system, the Bank plans to restructure the entire IT division in a manner that takes into account potential future developments. Among other things, we will change role definitions in order to ensure even more rapid and effective cooperation. The Digital Days events during the first half of the year gave all of our employees the opportunity to learn more about our digitisation initiatives, ask questions about them and contribute their ideas as well.

Description of the goals of our major projects:

KPO 4.0: The process that begins with the loan application and ends with the credit decision will become completely digitised, and data analysis, calculations and coordination measures will largely be conducted using electronic formats.

WE Digital: A software system for calculating property values using smart data is being developed.

KYC Digital: We are working with an external partner to develop a software solution for managing the “know your customer” process, whereby this solution might also be sold to third parties.

ImmoDigital Release 2.0: Further development the Immo Digital platform, which offers our complete range of products for German savings banks.

Comprehensive ESG project launched

Sustainability has been a central aspect of our business approach for many years now and is therefore a firm component of our corporate strategy and system of corporate values. Our strategic goal of becoming the most modern commercial real estate financier in Germany also involves the achievement of certain sustainability objectives. We intentionally utilise a broad definition of sustainability here: For us, sustainability means not only reducing our own carbon footprint, as we also believe we need to promote, simplify and finance the transition to a sustainable economy and in this manner contribute to the transformation that is currently under way – not only in terms of ecology but also with regard to the economy and society as a whole.

In order to move ahead even further with this approach, we have refined our ESG targets within the framework of a comprehensive ESG project.

1. Sustainability in business operations

We plan to continuously reduce the adverse environmental effects of our business operations and thus reduce our carbon footprint as much as possible.

2. Sustainable business portfolio

We believe that focusing on sustainability in our business portfolio is the key to achieving our sustainability targets. A large number of our customers are already adopting measures to make their business activities more sustainable. We plan ahead and have set ourselves the goal of helping our customers transform buildings into more energy-efficient and sustainable properties.

3. ESG risk management

The increasing importance of sustainability presents both opportunities and risks with regard to our business operations. For this reason, we are integrating ESG risks into our risk management systems and processes.

4. Transparency and ESG capabilities

We also seek to promote sustainability in society in general, which is why we support the introduction of appropriate standards for sustainability reporting. In addition, we are maintaining and expanding networks dedicated to sustainable urban development and climate protection and have established clear lines of responsibility within our organisational structure and process organisation.

Sustainability-Linked Bonds – courageously breaking new ground

In April 2021, Berlin Hyp became the first commercial bank in the world to issue a senior preferred bond that was designed as a Sustainability-Linked Bond (SLB). This issue directly links the Bank’s climate targets to its refinancing. The bond with a term of 10 years has a volume of €[500] million and has been rated Aa2 (by the rating agency Moody’s) and or AA (by Fitch).

Industrial companies, utilities and consumer goods manufacturers have been the main issuers of SLBs since they were launched on the market in the autumn of 2019. SLBs create a direct link between the achievement of sustainability targets on the corporate level and the coupon amount paid to investors: If a target is not reached, a premium has to be paid. Berlin Hyp’s SLB is linked to the Bank’s climate protection target of reducing the carbon footprint of the entire loan portfolio by 40 per cent between 2020 and 2030. If this target is not met, the bond’s coupon will increase by 25 basis points in its final year.

Successful with our customers

Despite all the negative effects of the pandemic, real estate markets have once again proven to be an anchor of stability in a time of crisis. Although transaction volume of €33.2 billion was lower than in the first half of 2020 due to the third wave of the pandemic, office real estate and commercially traded residential real estate were nevertheless the most sought-after real estate categories in the first half of 2021. Logistics properties are now third in terms of demand, ahead of retail properties, which were particularly hard hit by the lockdowns.

In this environment, we succeeded in increasing new lending in the real estate financing business to approximately €2.9 billion in the first six months of the year.

With our steadily growing product portfolio, we were also able to further expand our networking activities within the Sparkassen-Finanzgruppe. This was made possible by the ImmoDigital platform and the new ImmoNachrang product that was developed and launched in 2021. At the end of the first half of the year, Berlin Hyp maintained active business relationships with 161 German savings banks.

We view this positive development as confirmation of our partnership-based approach, which we expanded further during the COVID-19 pandemic. Contact with our customers is very important to us, which is why we have been making increasing use of digital communication formats and generating additional momentum with new services for customers, such as market briefings and livestream events. We will continue along this path in future and will also further expand our networking activities.

The “Management” section gives an overview of the composition of the Supervisory Board, the Board of Management and the Supervisory Board Committees of Berlin Hyp for the first half of 2021. In addition, the Cover Pool Monitor and the Deputy Cover Pool Monitors shall be named.

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The “Interim Management Report” section provides a detailed presentation of Berlin Hyp’s business performance, results of operations and position until 30.06.2021. This includes information on the principals of the Bank (business model, objectives and strategies, management system) and statements on possible further developments in the form of an “Opportunities, Forecast and Risk Report”.

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The “Annual Financial Statements” section presents all of Berlin Hyp’s key figures for the 2021 first financial half-year – including the annual balance sheet and a profit and loss account. The annual financial statements thus give a reliable picture of Berlin Hyp’s financial situation and success until 30.06.2021.

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In the “Service” section, a list of the most important abbreviations can be found, to make reading Berlin Hyp’s Interim Report 2021 easier. In addition, there is a directory of Berlin Hyp addresses as well as contact persons at the Bank.

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2021 Interim Financial Report

New member of the Board of Management of Berlin Hyp – the trio is complete again