dz hyp – investor presentation · » the merger of dg hyp and wl bank into dz hyp ... investor...

DZ HYP – Investor Presentation

Hamburg/Muenster (Westphalia), October 2018

A G E N D A

1. Company Profile and Business Strategy

2. Facts & Figures

3. Funding

4. Sustainability

1. Company Profile and Business Strategy

10/15/2018 DZ HYP - Investor Presentation

» The merger of DG HYP and WL BANK into DZ HYP

became legally effective (retroactive effect from 1 January

2018) with the Commercial Register entries on 27 July

2018.

» The strategic goals are:» to combine existing skills and competences

» to offer clients a one-stop shop

» to enhance the benefits for German cooperative banks

» DZ HYP is a leading provider of real estate finance and a

major Pfandbrief issuer in Germany, as well as a centre of

competence for public-sector clients within the Cooperative

Financial Network.

» Strong financing partner in four business divisions:» Commercial Real Estate Investors

» Housing Sector

» Public-Sector Clients

» Retail Customers/Private Investors

» ~€75 billion total assets

» ~€60 billion client business volume

» ~€45 billion in Pfandbriefe outstanding

» ~860 employees

» Two Head Offices (Hamburg and Munster), plus Regional

Centres and Regional Offices across Germany

» DZ HYP's owners

DZ HYP – Overview

Merger DZ HYP in figures1

1as at 30 Jun 2018

DZ BANK AG

Foundation 'Stiftung Westfälische Landschaft'

Cooperative banks

96.37%

1.85% 1.78%


DZ HYP history

1949Hamburg is the

new Head Office

2001Acquisition of DZ

BANK's

commercial real

estate finance

business

1921Foundation of

institute as

Deutsche

Genossenschafts-

Hypothekenbank

AG in Berlin

2008Strategic

realignment:

commercial real

estate finance as

the new core

business area

1877Foundation of the

institution as

Landschaft der

Provinz Westfalen

for the financing of

agricultural and

forestry operations

1987Transformation into

WL Bank AG and

integration into the

Cooperative

Financial Network,

with WGZ Bank AG

as main

shareholder

1973Business extension,

to include housing

loans and

commercial real

estate financing

2010Strategic focus

on mainly

residential real

estate lending

and local

authority lending

business in

Germany

2010Focus of business

activities on the

German market

2018Merger of both

institutions to

become DZ HYP

AG

2017Signing of a joint

Memorandum of

Understanding

following the

decision to merge

both banks to

become

DZ HYP AG


DZ HYP as part of a strong group – the Cooperative Financial Network

Ratings (S&P and Fitch)

(long-term)AA-

outlook: stable

2017 2016

Consolidated net income before taxes (€ mn) 8,916 8,308

Cost/income ratio (%) 65.3 67.0

Consolidated total assets (€ mn) 1,243,316 1,215,780

Reported equity (€ mn) 104,438 98,569

Common equity tier 1 ratio (%)2 15.4 15.2

Leverage Ratio

(full application of the CRR; %)7.7 7.3

Employees 146,400 151,050

The network in figures1Key facts and figures for the

Cooperative Financial Network

> 30

million customers

18.5 million “shareholders”

915 cooperative banks

1National Association of German Cooperative Banks (BVR); 2including reserves pursuant to section 340f of the German Commercial Code (HGB)


DZ HYP as part of a strong group – the DZ BANK Group

DZ BANK Group in figures2DZ BANK Group

1 Jan -

30 Jun 20183

1 Jan -

30 Jun 2017

Total assets (€ bn) 538 513

Profit before taxes (€ mn) 1,034 939

Common equity tier 1

(CET1) ratio1 13.7% 13.1%

Leverage Ratio1 4.2% 4.1%

1Full application of the CRR; 2In accordance with IFRS; 3Report available under: http://www.halbjahresfinanzbericht.dzbank.de/


Guiding principle and mission statement: DZ HYP as a partner, driving force

and specialist within the Cooperative Financial Network

... the competent financing partner with a strong

funding base, and a broad, decentralised structure

AmbitionDZ HYP as a leading real estate finance house, centre of competence for public-sector clients

in the Cooperative Financial Network, and a major issuer of Pfandbriefe in Germany

FocusFully-fledged market presence as a centre of competence for the entire Cooperative

Financial Network, with strong commitment and efficient solutions

Values Security, reliability, attractiveness and continuity – for the Cooperative Financial Network,

clients, employees, and investors

DZ HYP provides added value to its partners and clients, through customised solutions instead

of standardised productsCustomisation

DZ HYP provides a comprehensive range of products and services in

real estate finance and local-authority lending


Clear set of skills and competences in four business divisions

Full market coverage and clear client segmentation as building blocks for a successful market presence

Consumers (as defined by section 13

of the German Civil Code) and other

customers (regardless of their legal

form or status) who invest in real estate

for their own use, or for investment

purposes

Clients (regardless of their legal form or

status) who create, operate, or trade

in real estate in a commercial

capacity

Municipal, cooperative, and church-

owned housing enterprises, as well

as members of the Federation of

German Housing and Real Estate

Enterprises (GdW)1 providing

affordable housing for a substantial

share of the population

German local authorities and their

legally dependent operations, special

public-law administrative unions, and

public-law institutions

"Real estate professionals whose

main business activity is in real

estate."

"The main focus is on providing

affordable housing for a substantial

share of the population."

"Municipal entities providing public

services."

"Retail customers primarily buy real

estate for their own use, or for

investment purposes."

Retail Customers/

Private InvestorsPublic-Sector ClientsHousing Sector

Commercial Real Estate

Investors

1GdW – Federation of German Housing and Real Estate Enterprises


Retail Customers/Private InvestorsPublic-Sector Clients

Commercial Real Estate Investors Housing Sector

Offering high-performance products to our clients, and to cooperative banks

(as an associated provider)

» Tailor-made financings for commercial real estate investors,

and for commercial or residential real estate developers

» Joint market coverage with the cooperative banks, via the

IMMO META / META REVERSE /

IMMO META REVERSE+ product family

» Core segments: office, residential, retail

Specialist segments: hotels, logistics, real estate for social

purposes

» Short-term public-sector loans, and municipal loans with

fixed-interest periods up to 30 years

» Municipal bonds, promissory note loans, Public/Private

Partnerships, plus additional products of the Cooperative

Financial Network

» Joint market coverage with the cooperative banks

» Participation of cooperative banks in local-authority loans,

plus guarantee credits for cooperative banks

» Customised financing solutions tailored to the target client

group, with a focus on residential real estate; fixed-interest

periods up to 30 years

» Joint market coverage with the cooperative banks

» Participation of cooperative banks in housing sector

financings (arranged by DZ HYP)

» Annuity and fixed-rate loans for retail customers – issued by

cooperative banks (HYPO I) or by DZ HYP (HYPO II); fixed-interest

periods of up to 30 years

» Deep IT integration enables efficient process chains for cooperative banks,

with automated 'traffic-light' procedures for exposures up to €1 million

» Tailor-made financings to private investors,

for housing and commercial real estate from €250k

» Fast process for cooperative banks or individually as intermediary

transaction, using the InvestorenBarometer and InvestorenExpress tools


» DZ HYP's nationwide presence

comprises two Head Offices (Hamburg

and Muenster), plus Regional Centres

and Regional Offices across Germany

» Covering all regions, with competent

local contacts across all business

divisions

» Local service to clients and partner

banks, with swift decision-making

processes

» Assisting mostly institutional clients to

move into selected foreign markets

Kassel

Hamburg

HannoverBerlin

Münster

München

Leipzig

Stuttgart

Nürnberg

Düsseldorf

Frankfurt

Heidelberg

Mannheim

Schwäbisch

Gmünd

Accompanying

German clients

into selected

foreign markets

(F, NL, UK, AT)

Head Office

Regional Centre

Regional Office

DZ HYP has a nationwide, local presence across its German core market

and in selected foreign markets


2. Facts & Figures


The German real estate market – commercial business

Volume (€ bn)

Transaction Volume

100

120

140

160

180

200

220

240

260

280

300

320

8

10

12

14

16

18

20

22

24

26

28

30

32

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18e

20

19e

Top rents offices and retail in € per sqm

Average residential rent of first-time lease in € per sqm

Rent in Top Cities

Residential portfolios Commercial real estate Office (lhs) Residential (lhs) Retail (rhs)

Source: DZ BANK Research; EY Research, JLL, vdp


10 125 3 4 6

11 14 13

23

14 1611

44

53

21

10

19 23

25

31 40

55

53 57

26

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1. HJ2018

43.7

53.3

21.1

10.119.1

23.0

25.0

30.539.9

55.1

52.956.8

25.6

9.512.0

4.8 3.3 3.8 6.011.0 13.7 12.8

23.013.7 15.7

11.3

The German real estate market – residential property

2010 = 100 Compared to previous year (%2)

Property Prices1 Property Prices1

80

100

120

140

160

180

200

220

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018-2

0

2

4

6

8

10

12

14

16

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Owner occupied housing total Owner occupied housing top 7Multi family housing Germany Multi family housing top 7

1Single-family houses or multiple-family dwellings; 2 average across two quarters; Source: DZ BANK Research; vdp


The German real estate market – international comparison

Residential property prices 1990 = 100 Change (%) Q1/2017 on Q1/2018

International Residential Property Price Indices Current Residential Property Prices

Source: Oxford Economics; Case-Shiller, EZB, Halifax/Lloyds, Ministerio de Fomento, Nationale Statistikämter, Nationale Zentralbanken, Quotable Value, Teranet-Nationalbank; DZ BANK Research

-1,1-0,4

1,62,2 2,5 2,7

3,13,8

4,4

6,6 6,6 6,77,3 7,4

8,7

12,6

No

rwe

gen

Ita

lien

Sch

weiz

Austr

alie

n

Belg

ien

Span

ien

Fra

nkre

ich

UK

Sch

wede

n

Ne

useela

nd

Kana

da

US

A

Öste

rreic

h

De

uts

ch

land

Nie

de

rlan

de

Irla

nd

No

rwa

y

Ita

ly

Sw

itze

rlan

d

Au

str

alia

Be

lgiu

m

Sp

ain

Fra

nce

Ne

w Z

ea

land

Ca

na

da

US

Au

str

ia

Ge

rma

ny

Ne

the

rla

nd

s

Ire

land

UK

Sw

ede

n50

100

150

200

250

300

350

400

450

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Deutschland Frankreich Großbritannien Niederlande Spanien USAGermany France UK Netherlands Spain US


-1.1-0.4

2.2 2.5 2.73.1

3.84.4

6.6 6.6 6.77.3 7.4

8.7

12.6

1.6

DZ HYP's business development

Development of new business

1 Jan-30 Jun

2018 (€ mn)

1 Jan-30 Jun

2017 (€ mn)

Former DG HYP

1 Jan-30 Jun

2017 (€ mn)

Real Estate Finance

• Commercial Real Estate Investors (former DG HYP)

• Retail Customers, Housing Sector, Funds, Investors (former WL BANK)

2,568

2,140

2,703

1,835

Treasury

• Originated local authority loans business

• Pfandbrief sales and other refinancing Sources

374

4,422

405

5,349

71

2,038

Portfolio Development

30 Jun 2018

(€ mn)

1 Jan 2018

(€ mn)

31 Dec 2017

(€ mn)

Total equity and liabilities 74,595 75,156 36,826

Mortgage loans 43,314 42,510 20,505

Originated loans to local authorities 12,168 12,479 5,530

Public-sector lending1 13,013 12,992 5,604

Bank bonds 560 723 723

Mortgage-backed securities (MBS) 588 745 745

1Lending transactions with national governments and sub-sovereign entities, as well as state-guaranteed corporate bonds


Profit and Loss Account

1 Jan-30 Jun

2018 (€ mn)

1 Jan-30 Jun

2017 (€ mn)

Former DG HYP

1 Jan-30 Jun

2017 (€ mn)

Net interest income 266.2 232.1 138.6

Net commission result -16.0 -9.3 16.7

Administrative expenses 158.1 124.3 71.9

Other net operating income 2.5 -2.5 -3.0

Loss allowance -48.6 -43.6 -11.9

Net financial result 34.3 54.3 1.8

Operating profit 80.3 106.7 70.3

Allocation to the fund for general banking risks 27.0 40.2 20.0

Taxes 18.2 36.7 22.6

Partial profit transfer 8.1 7.7 7.7

Profits to be transferred under a profit and loss transfer agreement 27.0 22.1 20.0


Capital

DZ HYP

1 Jan-

30 Jun 2018

(€ mn)

DZ BANK

Group

1 Jan-

30 Jun 2018

(€ mn)

DZ BANK Group

1 Jan-

31 Dec 2017

(€ mn)

DZ BANK Group

1 Jan-

31 Dec 2016

(€ mn)

Equity (€ mn) 1,7621 23,825 23,505 22,836

Total capital ratio (%)

Covered by

equity waiver

16.8 17.4 18.6

Tier 1 ratio (%) 15.0 15.3 16.0

Common equity tier 1 ratio2 (%) 13.7 13.8 14.5

Leverage Ratio2 (%) 4.2 4.1 4.4

Profitability

Cost/income ratio (%) 63.9 67.1 59,0 58.9

Liquidity requirements

LCR3 (%) 858 143.8 161.7 151.0

DZ HYP's key financial indicators

Integration into DZ BANK

Group» DZ BANK has entered into a control and profit

and loss transfer agreement with DZ HYP. In

return, DZ BANK AG has undertaken to neutralise

any annual losses incurred by DZ HYP.

» On this basis, DZ HYP uses the so-called 'waiver

option' provided under section 2a of the German

Banking Act (KWG; old version). DZ HYP's

regulatory capital requirements are therefore

fulfilled at the level of DZ BANK Group.

» Accordingly, equity is allocated to DZ HYP as part

of Group management, and in line with

requirements.

» At the same time, DZ BANK AG has issued an

unrestricted letter of comfort for DG HYP, which

continues to be valid following the merger to form

DZ HYP AG. DZ BANK AG has undertaken to

ensure – for the consolidated entity DZ HYP in its

entirety – that DZ HYP is able to meet its

contractual obligations4.

1Capital increase entered into the Commercial Register on 27 July 2018; 2 Full application of the CRR; 3Reporting date: 31 July; 4As part of the Cooperative Finance Network, DZ HYP and DZ BANK are both integrated into the

BVR Deposit Insurance Scheme


Foreign

markets

2.0%

DZ HYP's operating segments: Overview1

<= 5%

> 05% <= 10%

> 10% <= 15%

> 15%

By business volume By federal states(%) as at 30 Jun 2018Volume (€ mn) as at 30 Jun 2018

1Including irrevocable commitments; interim reporting


B

12.2%

BA

11.4%BAWÜ

7.6%

NRW

26.4%

HE

9.7%

SH

2.9%

RP

4.0%

BB

2.2%

NI

7.5%

S

3.3%TH

0.8%

SA

1.6%

MV

1.3%HB

0.6%

SAR

0.7%

Foreign

markets

4.9%

DZ HYP's operating segments: Commercial Real Estate Investors1

HH

10.0%

B

18.4%

BA

15.6%BAWÜ

7.9%

NRW

13.3%

HE

11.6%

SH

1.6%

RP

2.0%

BB

2.2%

NI

3.2%

S

4.9%TH

0.9%

SA

2.2%

MV

0.6%HB

0.5%

SAR

0.2%

<= 5%

> 05% <= 10%

> 10% <= 15%

> 15%

By federal states By type of property use(%) as at 30 Jun 2018(%) as at 30 Jun 2018



DZ HYP's operating segments: Commercial Real Estate Investors1

By NPL2 By rating3

Volume (€ mn) as at 30 Jun 2018Volume (€ mn) as at 30 Jun 2018

1Including irrevocable commitments; 2Non-Performing Loans; 3BVR Rating; interim reporting


(%) as at 30 Jun 2018

DZ HYP's operating segments: Housing Sector1

By federal states

<= 5%

> 05% <= 10%

> 10% <= 15%

> 15%

1

* BA

9.7%BAWÜ

2.9%

NRW

29.6%

HE

5.1%

SH

4.1%

RP

2.2%

BB

4.8%

NI

5.6%

S

3.2%TH

1.4%

SA

1.8%

MV

3.8%HB

1.3%

SAR

0.3%

HH

6.9%

B

17.3%

By NPL2

Volume (€ mn) as at 30 Jun 2018

By rating3




19%

DZ HYP's operating segments: Retail Customers1

<= 5%

> 05% <= 10%

> 10% <= 15%

> 15%

Foreign

markets

<0.1%

1

*

B

9.0%

BA

7.3%BAWÜ

5.0%

NRW

44.7%

HE

5.5%

SH

4.2%

RP

3.5%

BB

2.2%

NI

9.9%

S

2.5%TH

0.5%

SA

0.9%

MV

1.4%HB

0.4%

SAR

0.1%

(%) as at 30 Jun 2018

By federal states By NPL2


By rating3



19%

HH

2.9%


1

* BA

9.1%BAWÜ

13.9%

NRW

27.8%

HE

14.4%

SH

3.1%

RP

10.2%

BB

0.3%

NI

14.7%

S

0.9%TH

0.4%

SA

0.7%

MV

0.8%

HB

0.5%

SAR

3.0%

(%) as at 30 Jun 2018

DZ HYP's operating segments: Public-Sector Clients1

By federal states

HH

0.1%

<= 5%

> 05% <= 10%

> 10% <= 15%

> 15%

B

0.0%

By rating2



1Including irrevocable commitments; 2BVR Rating; interim reporting

3. DZ HYP's funding


Funding strategy

» To ensure that DZ HYP has sufficient liquidity at its disposal, at all times

» To provide a stable asset-/liability profile

» To realise attractive funding levels

» Important Pfandbrief issuer within DZ BANK Group

» Unsecured funding requirements mainly generated within DZ BANK Group

» Balanced funding mix

» Broad investor base, built on long-term business relationships

» Regular publication of data concerning the Bank and cover pools

» Reliable issuance behaviour of DZ HYP

» First-class rating history preserved: AA- bank rating by Standard & Poor's (S&P) and Fitch

Ratings – both cover pools rated AAA by S&P

» Professional management of the cover pools

Objectives

Products

Investors

Ratings


Stable ratings. Strong funding base.

DZ HYP DG HYP WL BANK

S&P Fitch S&P Fitch S&P Fitch

Bank rating AA- AA- AA- AA- AA- AA-

Mortgage Pfandbriefe AAA - AAA - AAA -

Public Sector Pfandbriefe AAA - AAA - AAA -

Unsecured bonds

Senior Preferred

Senior Non-Preferred

AA-

A+

-

-

AA-

A+

-

-

AA-

A+

-

-

Sustainability Ratings imug oekom imug oekom imug oekom

Mortgage Pfandbriefeimug rating for

DZ HYP in

progress

Very positive

Prime

Positive

PrimePublic Sector Pfandbriefe Positive Positive

Unsecured bonds Positive Neutral


3,431

2,69413,716

Benchmark issues2

14,625

Bearer bonds 5,115

Registered bonds 9,006

Benchmark issues2

750

Bearer bonds 2,872

Registered bonds 12,597

Total volume

44,964

Total volume3

19,842

Mortgage Pfandbriefe

Public-Sector Pfandbriefe

Bearer bonds

Registered bonds

Promissory note loans (SSD)

Long-term funding – as of 30 Jun 20181

Covered fundingPortfolio analysis (€ mn) as at 30 Jun 2018

Unsecured fundingPortfolio analysis (€ mn) as at 30 Jun 2018

1Nominal value; 2Syndicated emissionens incl. Sub-Benchmarks and increases 3In addition, subordinated loans in the portfolio amount to €83 mn.


Benchmark issues1,500

Bearer bonds315

Registered bonds

455

Bearer bonds100

Registered bonds

30

1,372

546

24

Long-term funding – funding activities in the first half of 20181

Total volume2

2,400

Total volume3

1,941

Covered fundingPortfolio analysis (€ mn) as at 30 Jun 2018

Unsecured fundingPortfolio analysis (€ mn) as at 30 Jun 2018

Mortgage Pfandbriefe

Public-Sector Pfandbriefe

Bearer bonds

Registered bonds

Promissory note loans (SSD)

1Nominal value; 2Excluding 500€ mn short-term emissions for participation in TLTRO; 3Excluding own debt amounting to 80.7€ mn


DZ HYP secondary market curve – Mortgage Pfandbrief issues

Volume: €500 mn

Volume: €750 mn

Volume: €875 mn

Market spreads1 for outstanding benchmark issuesAs at 4 Sep 2018

1Reference: mid-swaps against 6-month-EURIBOR; Source: Bloomberg

Term (years)

Spreads in bps


0

2

4

6

8

10

12

14

16

18

1 2 3 4 5 6 7 8 9 10 11 12

-2

-4

-6

-8

-10

-12

-14

-16

-18

-20

12,402

19,215

Commercial

Housing30,782

835

Domestic

Foreign

Total volume:

31,616

Total volume:

31,616

Composition of domestic mortgage cover pool1,2

– ordinary cover assets

By type of property use By domestic/international propertyVolume (€ mn) as at 1 Sep 2018 Volume (€ mn) as at 1 Sep 2018

1Evaluations pursuant to section 28 of the PfandBG; 2In addition to the ordinary cover pool further cover assets pursuant to §19 (1) Nr. 3 amounting to €1,041bn are part of the mortgage cover pool. The issuer of these cover

assets is a German development bank with a state guarantee


Composition of domestic mortgage cover pool1,2


By type of property useVolume (€ mn) as at 1 Sep 2018

Total volume: 30,782

By federal statesVolume (€ mn) as at 1 Sep 2018




Multi family housing One and two-family homes Office property

Retail property Other commercial property Apartments

Unfinished new buildings Industrial property Building plots

303

207

180

54 44 37

110,1

0

50

100

150

200

250

300

350

Netherlands France UnitedKingdom

Sweden Hungary Poland Austria Belgium

Other commercial property

Retail property

Office property

One- and two-family homes

Apartments

Total volume: 835

Composition of foreign mortgage cover pool1,2


By type of property useVolume (€ mn) as at 1 Sep 2018




0.1

Further key financial indicators of the mortgage cover pool1,2

1,1652,096

3,412

24,052

>20- ≤30 >30- ≤40 >40- ≤50 >50- ≤60

(€ mn) as at 1 Sep 2018

Loan to Value Ratio (LTV) Seasoning3

(€ mn) as at 1 Sep 2018



assets is a German development bank with a state guarantee; 3Age of a claim

(1,00)

-

1,00

2,00

3,00

4,00

5,00

-

5,00

10,00

15,00

20,00

25,00

30,00

35,00

Aktiva Passiva Überdeckung (rechts)

Further key financial indicators of the mortgage cover pool

Indicator Value

Total cover pool (€ mn) 32,657

Pfandbriefe total volume outstanding (€ mn) 29,090

Overcollateralization (OC) (%) 12.26

Share of fixed-rate cover assets (%) 89.62

Share of fixed-rate Pfandbriefe (%) 93.42

Weighted average LTV (%) 53.67

NPL (%) 0.00

Weighted average Seasoning (Years) 4.61

As at 1 Sep 2018(€ bn) as at 1 Sep 2018


Assets Liabilities Overcollateralization (OC)

Maturity profile1,2 Other financial indicators3

1Nominal value; 2Maturity profile shown for a period of 30 years; 3Evaluations pursuant to section 28 of the PfandBG

11,542

1,978

956235

Local authorities

Regional authorities

Other

Sovereigns

Domestic total:

14,711

Foreign total: 4,249

Composition of the public-sector cover pool1

Domestic: by client group International: by country and borrower groupVolume (€ mn) as at 1 Sep 2018 Volume (€ mn) as at 1 Sep 2018


1Evaluations pursuant to section 28 of the PfandBG

0

200

400

600

800

1.000

1.200

1.400

Sovereigns Regional authorities Local authorities Others

1,400

1,200

1,000

-

1,00

2,00

3,00

4,00

-

2,00

4,00

6,00

8,00

10,00

12,00

14,00

16,00

18,00

20,00

Aktiva Passiva Überdeckung (rechts)

Further key financial indicators of the public-sector cover pool

Maturity profile1,2

(€ bn) as at 1 Sep 2018

Indicator Value

Total cover assets (€ mn) 18,960

Pfandbrief total volume outstanding (€ mn) 15,983

Overcollateralization (OC) (%) 18.63

Share of fixed-rate cover assets (%) 94.84

Share of fixed-rate Pfandbriefe (%) 95.71

Other financial indicators3

As at 1 Sep 2018


Assets Liabilities Overcollateralization (OC)

1Nominal value; 2Maturity profile shown for a period of 30 years; 3Evaluations pursuant to section 28 of the PfandBG

4. Sustainability


imug rating for DZ HYP in

progress

DZ HYP Sustainability Ratings

ISS-oekom rating imug rating

D- D D+ C- C C+ B- B B+ A- A A+

Poor Medium Good Excellent

D DD DDD C CC CCC B BB BBB A AA AAA

Negative Neutral Positive Very positive

» Sector-specific rating

based on sustainability

regarding

environmental, social

and governance

commitment

» Prime as an award for

leading companies in

the relevant sector

» DZ HYP continues the

predecessor banks'

track record of Prime

ratings

C+

C

C

» Rating of covered issued

regarding sustainability of

the cover pool1

» Sustainability Rating

based on indicators for

embedding social

responsibility in business

processes2 and their risk

management

DG HYP

WL BANK

DZ HYP

1Sustainability Rating of governments in the public-sector cover pool, social and environmental aspects, lending business for the mortgage cover pool; 2 Indicators include, e.g., promoting health and safety at the workplace,

improving energy efficiency in company buildings, fighting corruption and money laundering, as well as considering ecological and social factors in the supply chain; Sources: oekom, imug

DG HYP

WL BANK

DZ HYP

RatingRating


Sustainability strategy as an important management instrument for

sustainable development

Topics

» The sustainability strategy introduced at DG HYP is the foundation

for the future course of action

» Introduced in 2013, with last adjustment made in September 2017

» Based on the National Sustainable Development Strategy of the

Federal Government and the Sustainable Development Goals of

the United Nations

» Integral part of the business strategy and instrument for the

strategic implementation of DZ HYP's sustainable development

» Equal weighting of all sustainability dimensions

» Strengthens the understanding of sustainabilityon the management

and employee levels

» Exploits opportunities and assesses risks – pre-emptive long-term

orientation

Sustainability Strategy

Sustainable

banking

Commitment

to society

Employees

Ecological

responsibility

Sustainability

at DZ HYP

Stakeholder

dialogue

Sustainable corporate governance and strategy

Continuous improvement of our sustainability performance

Stakeholder

dialogue

Environment (economic, social, ecological, political, technical)


5. Appendix


DZ HYP's capital markets portfolio1

By domestic debtors By foreign sovereigns and debtors

1,406

5,554

35

Domestic total volume:

6,996


Foreign total volume: 6,505

Sovereign states

Banks

Sub-sovereign entities


» Securities: 4,850

» Promissory note loans (SSD): 2,146



1Volume: nominal values, promotional and development banks with government funding guarantees, categorised as "governments“; 2Including Canada, Austria, France, USA, Belgium


DZ HYP's capital markets portfolio1

By ratingVolume (€ mn) as at 30 Jun 2018



1Volume: nominal values


DZ HYP's operating segments: foreign markets1

UK

0.0%

France

80.9%

Netherlands

7.3%

Austria

4.6%

RetailAs at 30 Jun 2018

Other

7.2%

UK

23.3%

France

21.7%

Netherlands

38.0%

Austria

1.0%

Commercial real estateAs at 30 Jun 2018

Other

15.97%

<= 20%

> 20% <= 40%

> 40% <= 60%

> 60%

<= 20%

> 20% <= 40%

> 40% <= 60%

> 60%

Indicator Value

Foreign market volume (€ mn) 1,214,05

Share of segment (%) 4.87

Share of all segments (%) 1.98

Indicator Value

Foreign market volume (€ mn) 3.45

Share of segment (%) 0.02

Share of all segments (%) 0.01



The three pillars of the German banking industry

Regional focus

Market share (GER)1

Banking sector

<<10% (respectively) 24% 36%

Private banks and foreign

banks

Cooperative banks1 central bank: DZ BANK

Gruppe, 972 cooperative banks2

Public-Sector banks6 State banks, DekaBank, 393

Sparkassen3

1Private household deposits as of 12/31/2016; 2As of 12/31/2016; 3As of 06/15/2017; Source: DZ BANK Gruppe


BVR's cooperative Deposit Guarantee Scheme

A 'dual-level' institutional protection scheme

BVR-Institutssicherung GmbH

as a

direct deposit guarantee scheme

BVR Deposit Guarantee Scheme1

as an

institutional protection scheme and an

indirect deposit guarantee scheme

Wholly-owned subsidiary of BVR

BV

R-S

EB

VR

-IS

G

» Additional voluntary institutional protection

scheme, established 1934

» Measures to avert imminent or existing financial

difficulties incurred by member institutions

» Deposit guarantee scheme officially recognised as an

institutional protection scheme since 3 July 2015

» Compensation for deposits facilitated

by providing cover for customer deposits of

up to €100,000 per person, per institution

1BVR-ISG exclusively liable in the event of a pay-out


Key parameters of BVR's Deposit Guarantee Schemes

Members

915 cooperative banks,1 specialist bank, plus

specialist banks within the Network

Surveillance

German Federal Financial Supervisory

Authority (BaFin)

Administration institution

National Association of German Cooperative Banks

("BVR")

Deposit guarantee

(BVR-SE or BVR-ISG GmbH)

Comprehensive protection of non-bank

customer deposits, including bearer bonds

and certificates issued by cooperative banks

(indirectly through BVR-SE)

Direct deposit guarantee via BVR-ISG GmbH,

up to €100,000 per person, per institution

Institutional protection

Extensive institutional protection for all

members; no member insolvency since

1934

Institutional protection

(BVR-SE)

Avert or remedy imminent or existing economic

difficulties faced by member institutions of the

deposit guarantee schemes, BVR-ISG and

BVR-SE


Contacts

Patrick Ernst

Head of Treasury

Phone: +49 (0)40 3334-2600

E-mail: [email protected]

Nicole John

Head of Strategic Funding

Phone: +49 (0)40 3334-2779

E-mail: [email protected]


Disclaimer

This document has been prepared by DZ HYP, exclusively for informational purposes. The investments and investment services referred to are not available to private

customers, nor for persons who are subject to US securities laws, and should not be distributed in the US or to any US person nor in any jurisdiction in which its

distribution would be prohibited.

This document does not constitute a public offer or the solicitation of an offer to buy any securities or financial instruments. It is not a substitute for investors' own,

independent examination opportunities and risks inherent in the product described, taking investors' investment objectives into account. Under no circumstances

should this document be taken as a basis for any investment decision with regard to any securities or other financial instruments; such decision should be based on a

prospectus or information memorandum. In particular, DZ HYP does not act in the capacity of an investment advisor, or in fulfilment of fiduciary duties. This document

does not constitute financial analysis.

Data, facts or information provided in this document do not purport to be complete, accurate, or appropriate; they were taken from Sources the author considered to be

reliable, without however verifying such information. Information and statements contained herein are as at the date of this document. They can change at any time or

may become obsolete as a result of future developments. DZ HYP is under no obligation to correct or update such information or statements, or to provide information

about this. Accordingly, no representation or warranty as to the accuracy or completeness of the information or expressions of opinion contained herein is made by DZ

HYP. DZ HYP shall not be liable for direct or indirect losses caused by the distribution and/or use of this document, or any losses in connection with the distribution

and/or use of this document.

This document includes expectations and forecasts that relate to the future. These forward-looking statements, in particular those regarding DZ HYP´s business and

earnings developments, are based on forecasts and assumptions, and are subject to risks and uncertainty. As a result, the actual results may differ materially from

those currently forecast.

The information in this document is proprietary to DZ HYP; neither this document nor any of its contents may be disclosed to or referred to any third party, or used for

any other purpose, without DZ HYP's prior written consent.


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