This report analyses the housing lending in the Czech Republic for the 1Q2013. You will find all the necessary details regarding volume growth (for both, the mortgage as well as Building Society lending), market share, margin and asset quality development in the mortgage segment. Also, based on the example of Hypotecni Banka, we calculate profitability of the mortgage busines for each bank.
This report focuses specifically on development in Ceska Sporitelna in the 1Q2013. The key highlights are:
Housing lending momentum deteriorates...
Česká Spořitelna’s mortgage loans increased 1.9% qoq and 8.4% yoy in 1Q13, slightly more than the overall market. On the other hand, the loans provided by Spořitelna’s building society dropped further 1.7% qoq and 4.5% yoy.
...but Spořitelna gains market share
Following the relatively weak years 2008-2010, Česká Spořitelna started gaining market share in 2011. In 2012, the bank grabbed nearly 28% of the annual increase in the mortgage loan book. The positive trend continued in 1Q13 and Spořitelna crossed 20% threshold in March in terms of market share, according to our calculations.
The bank is clearly benefiting from its superior funding and capital position when compared to the smaller players. In terms of new production, Spořitelna was nearly as aggressive as ČSOB in the last two quarters, selling 28% of all new loans.
In addition, Spořitelna has been beating ČSOB for the second quarter in a row in terms of new mortgage contracts signed. The bank sold 15% more loans in the last six months than ČSOB, what demonstrates the appetite Spořitelna has been getting in the mortgage lending:
Mortgage lending – 12% of Spořitelna’s profit?
Mortgage loans represented 30.1% of Spořitelna’s total loans at the end of March 2013. That is up from the figure of 9% seen a decade ago and at a very similar level compared to Komerční Banka, for example.
The massive growth in volumes made a difference to the bottom line of the bank. When Hypoteční banka’s financials are taken as a benchmark (for more details see page 9), we believe the mortgage lending business generates around 12-13% of Česká Spořitelna’s overall profitability now.
This is less than the 24% of Raiffeisenbank and 20% of ČSOB and also less than the 14% we estimate for Komerční Banka.
Apart from the relatively stronger position of ČSOB in mortgage lending (with a 26% share of the market versus the 20% share of Spořitelna), Česká Spořitelna is benefiting from stronger profitability elsewhere (such as on its cheaper deposit base).