This report analyses the housing lending in the Czech Republic for the 4Q2012. 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 CSOB in the 4Q2012. The key highlights are:
The bank still grows faster than the market...
The bank is still growing faster than the market... ČSOB’s mortgage loans increased 2.9% qoq in 4Q (and 12.6% yoy in 2012 overall), a third more than the overall market. On the other hand, the loans provided by ČMSS (ČSOB’s building society) dropped a further 0.14% qoq or 2.6% yoy.
...but the market is slowing down and the competition is biting.
The bank has been gaining market share in mortgage loans since the middle of 2006, when it held only a 18.4% share. Thanks partly to the conservative approach of Komerční and the resignation of Spořitelna from mortgage lending in 2008-2010, ČSOB increased its market share to 26.2% as of the end of 2012!
In 2012, the bank grabbed nearly half of the market’s net mortgage loan book increase and sold nearly 30% of the new mortgage loans provided that year.
However great the year 2012 was, there are a few clouds gathering on the horizon, in our view. First, the number of new mortgage loans and the number of mortgage contracts sold by ČSOB in 4Q12 was lower than in the same period in 2011. Second, Česká Spořitelna outperformed ČSOB in mortgage sales in 4Q (for the second quarter that year), so competitive pressure from ČSOB’s largest enemy is clearly rising after a few years of hibernation.
Mortgage lending – 20% of ČSOB’s profit?
Mortgage loans represented nearly 39% of ČSOB’s total loans at the end of 2012. That is three times more than a decade ago. Together with its building society ČMSS, housing loans represented a half of ČSOB’s total loans at the end of 2012.
The massive growth in mortgage volumes made a difference to the bottom line of the bank. When Hypoteční banka’s financials are compared with the consolidated ones for ČSOB, the mortgage lending business seems to generate more than 20% of ČSOB’s overall profitability now.
This is less than the 24% we calculated for Raiffeisen, but much more than the 14% of Komerční Banka and the 12% we estimate for Česká Spořitelna.
ČSOB’s strategic focus on housing lending, Hypoteční Banka’s impressive performance and the good prospects of Czech housing lending make ČSOB’s housing lending business the crown jewel of KBC’s CEE operations.