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 business for each bank.
Mortgage loan book drops 9% in 2012...
Raiffeisenbank’s mortgage loans increased 0.3% qoq in 4Q but they are down more than 9% yoy when compared to the 2011 year-end. The loans provided by Raiffeisen’s building society showed some signs of stabilisation, rising 2% yoy.
...but 4Q12 signals the worst might be over
Following the aggressive period in 2005-2008, when Raiffeisenbank increased its market share in mortgage lending from 2.6% to 9.3%, the bank has been backing off from its conquered positions. At the end of 2012, the bank held 7.26% of the market, losing a further 125 bp during the year.
Relatively weak capitalisation, funding constraints, already high exposure to the housing market and the expiry of a large part of the portfolio seem to be among the reasons for the retreat.
The second half of 2012 suggests, however, that the bank is coming back to the business. From its lows in 1Q, Raiffeisenbank sold 7.5% of the total number of new loans in 3Q and over 9% in 4Q, regaining some of its old positions.
With a capital adequacy ratio over 13% and loans to deposits at 101% at the end of September, Raiffeisenbank is well positioned to continue in its aggressive approach in the coming quarters.
Mortgage lending – 24% of Raiffeisen’s profit?
Mortgage loans represented 35% of Raiffeisenbank’s total loans at the end of 3Q12. That is up from the 13% seen at the end of 2004. Together with its 10% stake in Raiffeisen Building Society, Raiffeisenbank’s housing loans represent 38% of its total loan book, the second highest figure on the market among universal banks, just behind ČSOB.
When Hypoteční banka’s financials are taken as a benchmark (for more details see page 9), we believe the mortgage lending business generates around 20-25% of Raiffeisenbank’s overall profitability now.
This is the highest share on the market (with the exception of the specialised mortgage players such as Hypoteční and Wustenrot. ČSOB follows with a 20% share, while mortgage business seems to form 10-15% of the total profits at Komerční Banka, Česká Spořitelna or UniCredit according to our calculations.