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Pfandbrief issues in 2012: Mortgage Pfandbrief continues to rise in importance

  • ECB tenders and regulatory developments have a dampening effect on aggregate sales
  • Decline in Public Pfandbriefe accelaerates; lagely stable developments for Morgage Pfandbriefe
  • Issue volume expected to increase in 2013
  • vdp President Bettink: attractiveness of the Pfandbrief undiminished

The structure of Pfandbrief sales experienced a further marked shift in 2012 in favor of the Mortgage Pfandbrief. By contrast, the Pubic Pfandbrief is – as expected – further losing in importance. These developments are described in the issuance statistics for last year, which have now been presented by the Association of German Pfandbrief Banks (vdp). The newly published figures reveal that total Pfandbrief sales in 2012 fell from €72.8 billion in the year before to €56.6 billion. This was due, above all, to a renewed perceptible decline in the new issuance of Public Pfandbriefe. The Mortgage Pfandbrief, on the other hand, proved to be largely stable in a challenging environment.

In the assessment of the vdp, issuance activity last year was affected substantially by the two large-volume tenders of the European Central Bank (ECB), which enabled banks to procure liquidity on considerably more favorable terms compared with the Pfandbrief. Moreover, the drop in issuance activity also reflects the reduced lending by many Pfandbrief Banks in the light of the heightened capital requirements. A further contributory factor is the ongoing decline in the strategic importance of public sector financing, which has ceased to be attractive for many banks due to changes in regulation. This is causing demand for refinancing through Public Pfandbriefe to drop. “Given the uncertainties that continued to prevail on the capital markets for a large part of 2012 and the long-term regulation-driven changes in the structure of Pfandbrief Banks’ lending operations, sales of Pfandbriefe last year posted a respectable result,” Jan Bettink, the vdp’s President, explained.

According to the vdp’s figures, the downward trend recorded for Public Pfandbriefe, which has gone on for several years now, continued at an accelerated pace in 2012. Gross new issuance dropped from €31.0 billion in the previous year to a mere €14.3 billion. With the volume of maturities still high, the volume of Public Pfandbriefe outstanding at end-2012 decreased to €301.1 billion compared with the end-2011 figure (€355.7 billion). In the case of Mortgage Pfandbriefe, by contrast, new issuance and the volume outstanding fell only slightly. In 2012, Mortgage Pfandbriefe with an aggregate volume of €38.5 billion were placed in 2012, after €40.9 billion one year before. The volume of Mortgage Pfandbriefe outstanding likewise contracted slightly, to €216.0 (223.7) billion. Moreover, Ship Pfandbriefe totaling €3.2 (0.9) billion were issued, so that the volume outstanding in this segment rose to €7.3 (6.6) billion. In addition, the year 2012 saw the debut issue of an Aircraft Pfandbrief; as a result, the newest Pfandbrief category shows a volume outstanding of €0.5 billion.

On balance, therefore, the development of total Pfandbrief sales is to a very great extent attributable to the structurally driven declines experienced by the Public Pfandbrief, whereas the aggregate issue volume of the other three Pfandbrief categories even posted a small increase. The decrease in the total volume of Pfandbriefe outstanding to €524.9 (586.0) billion is likewise largely due to the continued sharp fall recorded for Public Pfandbriefe.

Summing up, the vdp’s President Jan Bettink remarked: “The clear decline experienced by the Public Pfandbrief is the logical consequence of the regulation-driven withdrawal by many banks from public sector lending. This trend will continue. By contrast, 2012 was another good year on the whole for the Mortgage Pfandbrief, and its prospects for the future remain intact. The attractiveness of the product, for our member banks and for investors, is undiminished. This is borne out, not least, by the recent highly successful placements and the steadily growing interest shown by potential new issuers.”

Based on a survey conducted among its member banks, the vdp expects Pfandbrief sales to grow to €62.5 billion in the current year, with new issues both of Mortgage Pfandbriefe (€43.0 billion) and of Public Pfandbriefe (€18.1 billion) to increase slightly. With a large volume of Public Pfandbriefe due to mature in 2013, the total volume outstanding is likely to fall below the €500 billion mark.


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