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 GE Money Bank CR in the 1Q2013. The key highlights are:
GE Money continues to retreat from mortgages
As part of its global strategy, the Czech Republic’s GE Money Bank continues to retreat from mortgage lending. In 1Q13, mortgage loans dropped a further 3.4% qoq, while the annual reduction deepened to 9.9% yoy. That is compared to a market which grew 1% qoq and 6.3% yoy
...as part of its global strategy
GE Money Bank remains one of the few banks on the Czech market which continues not only to lose market share, but also to reduce its mortgage loan portfolio. From having 5.7% of the mortgage market in March 2007, the bank was holding only 2.7% of the total at the end of March 2013. In addition, GE Money’s mortgage loan book has dropped nearly 25% since the end of 2008, while the market has grown 45% during the same period.
In terms of new production, the bank sold 1.6% of the new mortgages generated on the market in 2012. The momentum continues to deteriorate as 1Q13 sales imply a further reduction to only 1.0% of the total number of mortgage loans sold.
When compared to its nearest peers, Raiffeisenbank and UniCredit, GE Money Bank has been selling at less then 20% of their level in recent quarters.
Mortgages – 6% of GE Money Bank’s profit?
Residential mortgage loans represented still more than a fifth of GE Money’s total loans at the end of March 2013. Although this is 7% lower than five years ago, it is still a third higher than at UniCredit Bank in relative terms, for example.
When Hypoteční banka’s financials are taken as a benchmark (for more details see page 9), we believe mortgage lending business generates around 6% of GE Money’s overall profitability now.
This is less than the 24% of Raiffeisenbank and 20% of ČSOB, the two universal banks most exposed to the mortgage business. This is also less than the 10-15% we calculated for UniCredit Bank