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.
This report focuses specifically on development in UniCredit Bank Czech Republic in the 4Q2012. The key highlights are:
Mortgage loans represented nearly 30% of all bank loans in 4Q12. The mortgage business generates around 15% of banks’ profits.
UniCredit outperforms the market...
UniCredit’s mortgage loans increased by an impressive 5.2% qoq in 4Q (and 15.6% yoy in 2012 overall), more than twice as fast as the overall market. The bank has been expanding its mortgage loan book by 15% a year over the last three years and has been clearly outperforming the market since the end of 2008:
...as well as its closest peers
Following the completion of the triple merger in 2007 (UniCredit/HVB/Živnobanka), UniCredit bank has been increasingly focusing on business, at least when judged by numbers. The bank has increased its market share of mortgage loans from around 3% in 2007 to 4.2% at the end of 2012.
In terms of new production, the bank sold 7.1% of the new mortgages generated on the market in 2012. The bank’s engine seems to have been speeding up as UniCredit’s market share in new production has exceeded 8% in the last two quarters.
Apart from its own more aggressive strategy, the bank seems to be benefiting from the strategic re-direction of a few market players.
When we look at the new production sold in 2012, UniCredit has been taking over some of the market share from its peers, such as Raiffeisenbank or GE Money Bank.
Mortgages – 10-15% of UniCredit’s profit?
Residential mortgage loans represented 16.4% of UniCredit’s total loans at the end of 2012. That is twice as much in relative terms as of the end of 2007; on the other hand, it is only a half of the level seen at the three largest banks in the country.
This is also significantly less than at UniCredit’s closest peers, Raiffeisenbank (with 35% in September 2012) and GE Money Bank (nearly 22%). Apart from the mergers, UniCredit’s overall conservative approach towards mortgage lending in CEE and relatively smaller focus on the retail area could be blamed for that.
When Hypoteční banka’s financials are taken as a benchmark (for more details see page 9), we believe mortgage lending business generates around 10-15% of UniCredit’s overall profitability now.
This is less than the 24% of Raiffeisenbank and 20% of ČSOB but roughly in line with the numbers we calculated for Komerční Banka and Česká Spořitelna.
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