EN: Geschäftsbericht 2020

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Annual Report
2020
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The Management Board of DZ HYP
From left to right: Sabine Barthauer, Dr Georg Reutter (Chief Executive Officer), Jörg Hermes

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Dear business associates,
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The COVID-19 pandemic is the biggest challenge to have faced the international community in decades. The impact of the pandemic is also leaving its mark in the real estate and financial sectors. This makes us all the more pleased to be able to draw a positive conclusion from the extraordinary year under review – despite a drop in our new business. Developments within our Bank varied from segment to segment. We achieved an increase of around 12 per cent in the private home loan financing business, which is largely intermediated via cooperative banks. Demand remained high, testimony to the fact that the COVID-19 pandemic is not having any direct impact on the residential property market. We are also satisfied with the development of our business with corporate and public-sector clients.

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In order to cushion the blow that the COVID-19 pandemic has dealt the economy and the capital markets, central banks provided support in the form of an expansionary monetary policy in 2020, and stabilised interest rates at a low level. In addition to its ongoing purchase measures, the European Central Bank (ECB) launched another programme, the Pandemic Emergency Purchase Programme (PEPP), in March, the volume of which had been increased to almost €1,850 billion by the end of the year. At the same time, the international community is pursuing expansive fiscal policy measures on a large scale. The European Union (EU) adopted an extra budget worth €750 billion in light of the slump in economic output. €360 billion of this amount will be granted as loans and, for the first time, €390 billion has been earmarked to be paid out as grants that need not be repaid. Another positive aspect is the fact that no-deal Brexit was averted, although it is important not to disregard the impact of non-tariff barriers to trade. Following the US elections last November, there is now the prospect of US economic and trade policy being readjusted, with increased deficit spending in the US also potentially on the cards. This could provide a reliable basis for an improvement in international economic relations and supply fresh impetus for growth.

 

Despite extensive public-sector support, the German economy entered a recession last year, following a ten-year period of growth, due to the effects of the COVID-19 pandemic. The last recession on this scale was witnessed during the financial and economic crisis of 2008/2009. This time, however, the impact of the recession is very different, because it is hitting almost all sectors of the economy. Industrial segments are less affected, whereas the slump is most pronounced in the service sector, which comprises areas such as hospitality, culture or personal services.

 

Investments in German real estate proved to be stable investments in 2020. The volume of commercial real estate transactions, including residential investments, amounted to €81.6 billion. While this is around 11 per cent lower than the figure reported in the “record year” of 2019, it is still the second-highest volume achieved over the last decade, up slightly on the 2018 level. This means that, despite the prevailing circumstances, 2020 was an outstanding year that bears testimony to the strength of the German real estate market. The main driver was the commercial residential investment market, which compensated for moderate decline in other segments. Favourable financing conditions are fuelling rising demand for private home loan financing. The COVID-19 pandemic would appear to have made “housing” an even more valuable asset for private individuals. The outlook for the office property market in view of the increase in working from home is currently the subject of much debate. Although transaction volumes dipped in 2020, we are confident that offices are anything but obsolete and will experience a renaissance in the near future, albeit with structural changes in terms of equipment and layout concepts. All in all, we expect to see solid development on the real estate markets in 2021 in an environment of sustained liquidity levels.

DZ HYP’s new business amounted to approximately €10.7 billion last year, reflecting developments on the real estate markets. Business with retail customers rose by 12 per cent year-on-year to €2.1 billion. Around €8 billion was generated in business with corporate clients. Although this is down on the previous year’s figure of €12.2 billion overall, we can nevertheless be proud of what we have achieved. Our performance underlines DZ HYP’s importance for the Cooperative Financial Network and the joint lending business with German cooperative banks, which we will continue to pursue reliably as usual in the current year.

Despite the COVID-19 pandemic, DZ HYP’s economic situation is positive and has stabilised further overall, as in previous years. The Bank's robust financial performance is the result of a rigorously pursued business and risk strategy, whereby an accelerated build-up of hidden reserves and general risk provisions, combined with an absence of any obvious risks, provide the basis for a sound financial position and performance based on a viable business model.

In the summer of 2020, we restructured our segments in order to provide our partners with even more targeted and focused support. Since then, we have concentrated our market activities on three segments: Corporate Clients, Retail Customers and the Public Sector. In Commercial Real Estate Investors and the Housing Sector, which were previously set up as separate segments, we are working even more intensively with the Cooperative Financial Network within the Corporate Clients segment. In the Retail Customers segment, we have merged the front and back-office units so as to bundle loan processing. We also laid the foundation for the Customer Dialogue Centre, which was launched in January of this year. This allows us to provide the cooperative banks with fast and competent support in all areas of private home loan financing. We also repositioned ourselves in view of the mounting requirements and expectations of external stakeholders with regard to sustainability, launching a bank-wide project to address this topic. We are currently revising our sustainability strategy and aim to put conditions in place that will allow us to issue a sustainable refinancing product (“Green Pfandbrief”) as the next step.

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There were also changes within the Management Board in 2020. Mr Jörg Hermes joined DZ HYP’s Management Board back in April as a replacement for Dr Carsten Düerkop. At the end of the year, our colleague Mr Manfred Salber retired after almost 14 years of successful work on DZ HYP’s Management Board. Ms Sabine Barthauer has been appointed as his successor. We will be working in this new structure to continue on the successful path we have carved out for ourselves and to position the Bank to make it fit for the future.

Admittedly, the COVID-19 pandemic is still having a negative impact on economic development in Germany. Despite the considerable uncertainty, however, a popular adage holds true for 2021 as well: every crisis is followed by a boom. The real estate market is likely to continue to show varied development. In view of moderate growth prospects, which became particularly evident in the second half of 2020, the tried-and-tested partnership in the Cooperative Financial Network and the decentralised nature of our business, we expect 2021 to be a stable year that is supported by the upward trend.

The Management Board

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10.736 € mn
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Development of new business
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8.039 € mn
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Corporate Clients
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2.066 € mn
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Retail Customers
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631 € mn
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Public Sector Clients
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There were also changes within the Management Board in 2020. Mr Jörg Hermes joined DZ HYP’s Management Board back in April as a replacement for Dr Carsten Düerkop. At the end of the year, our colleague Mr Manfred Salber retired after almost 14 years of successful work on DZ HYP’s Management Board. Ms Sabine Barthauer has been appointed as his successor. We will be working in this new structure to continue on the successful path we have carved out for ourselves and to position the Bank to make it fit for the future.

Admittedly, the COVID-19 pandemic is still having a negative impact on economic development in Germany. Despite the considerable uncertainty, however, a popular adage holds true for 2021 as well: every crisis is followed by a boom. The real estate market is likely to continue to show varied development. In view of moderate growth prospects, which became particularly evident in the second half of 2020, the tried-and-tested partnership in the Cooperative Financial Network and the decentralised nature of our business, we expect 2021 to be a stable year that is supported by the upward trend.

The Management Board

Statistikwerte
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10.736 € mn
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Development of new business
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8.039 € mn
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Corporate Clients
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2.066 € mn
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Retail Customers
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631 € mn
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Public Sector Clients
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The year 2020 at DZ HYP
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The coronavirus pandemic determined – and changed – all our lives in the past year. We could not have imagined that the way we work, the way we spend our free time, and our social behaviour would undergo such transformations – transformations that are still underway.

Nevertheless, 2020 was about much more than a virus. We at DZ HYP launched and successfully implemented numerous projects. The following pages will give you an overview of the many different topics we engaged in during the last year: from our own studio to a new employer branding, from our “Sustainability” project to successful campaigns for the cooperative banks. Despite all the restrictions and lack of personal contact with colleagues, we look back proudly upon 2020 as a successful year.

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“Digital formats are informative, sustainable, and modern. Our aim is to complete the range of in-person events, rather than replace them. The studio will play an important role for future seminars and talks, particularly for specialist topics. In the medium and long term, we envisage an optimal mix of digital and analogue events.”

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Kristina Neumann, Head of the Events department
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Informative and oriented towards the future
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Digital events are en vogue – and not just since the coronavirus pandemic. With its own studio at the Hamburg head office, DZ HYP is optimally set up for the digital event future. High-quality technical equipment allows for professional and modern communication with our customers, business partners and employees.

We successfully launched our studio with the “DZ HYP ImmoTalk” series in autumn 2020, which consisted of expert discussions on the housing, retail, and office segments, developed in cooperation with the renowned real estate conference provider Heuer Dialog. The series will be continued in 2021.

We use the studio for employee communications as well as for external events. An internal sustainability event on the topic “climate risks for financial markets” was among the successful formats we hosted in 2020, as was the emotional farewell for Management Board member Manfred Salber.

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Modernised buildings for new ways of working
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Flexible rooms inviting employees to network, whilst also allowing concentrated work – that is what the world of our new offices looks like.

Following the renovation, both of DZ HYP’s head offices are now shining with new splendour. Modern co-working spaces are placed side by side with areas for quiet retreat. In Hamburg, we extended the fifth floor, converting it into a full storey with a high-quality conference and Management Board area; in Munster, all floors of the tower have been completely refurbished. Resource-conserving climate concepts and health-promoting office furniture convert the Bank into a place where people work well and work happily.

In Munster, the specific room concept for office space used by the Bank is designed by the employees working there together with an external consultant, and in Hamburg the results of a cross-departmental project also contributed to the design of the premises. With the significantly improved environmental performance, we are striving to obtain certification by the German Sustainable Building Council (DGNB): the Hamburg office is aiming for a DGNB “silver” certificate, while “Cube1” in Munster could achieve “gold” certification.  

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Construction work at the Münster site 

  • structural renovation and conversion from a single- into a multi-tenant property;
    self-sufficient office units with flexible expansion opportunities and user-specific billing;
  • new outer façade with vent/circulation openings, windows which can be opened, and external sun protection;
  • new electrical infrastructure;
  • new ventilation system;
  • refurbishment of drainage pipes (rainwater pipes as well as foul);
  • decommissioning and dismantling of the air conditioning system, and a switch to circulating air cooling units;
  • toilet and plumbing refurbishment;
  • new bicycle access road and bicycle stands, changing rooms and showers;
  • relocation of the main entrance to Sentmaringer Weg, with new access via a set of broad and impressive steps, including a barrier-free ramp to provide access for the disabled into the ground floor;
  • reception area with a coffee bar, together with assembly and seminar rooms, located centrally on the ground floor;
  • relocation of the canteen from the first floor to the ground floor.
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Construction work at the Hamburg site

  • energy-efficient renovation of the inner and outer façades;
  • installation of high-quality windows with opaque smart glass;
  • extension of the fourth floor into a full storey;
  • extension of the fifth floor by 1,800 sqm into a state-of-the-art full storey with a Management Board area, digitally equipped conference rooms, and retreat areas:
  • modernised and expanded elevator systems;
  • our own cogeneration unit; and
  • photovoltaic installations on a green roof.
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“Our job postings in video format in different lengths are just one of our new features. In combination with the podcasts, in which our employees talk about their day-to-day work, we thus offer a convincing customer journey, leading to real interest for a job at DZ HYP.”

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André Jahn, Senior Officer, Human Resources
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“When are you joining?“
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Competition for young talent and experienced specialists and managers is becoming increasingly intense. Strong employer branding is essential to reach these groups, which is why we started to revamp DZ HYP’s employer branding in 2020.

Especially graduates are often unaware of the vast range of different jobs at a bank. Areas such as “central data management” or “information risk and security management” offer job opportunities beyond the apparent core business. To enhance visibility and to highlight the Bank’s attractiveness as an employer for people from outside the industry, our first step included a comprehensive redesign of our career portal (LINK), where potential applicants can find the relevant information on a specific position, on the working environment, and on further occupational matters – at a glance. Videos and podcasts from DZ HYP employees top off the information.

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The “EDGE Grand Central” office project in Berlin, financed by DZ HYP, is one of the most sustainable properties in the country, receiving the highest DGNB award, a “Platinum” certificate. Picture: Robert Herrmann

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Actively shaping the future
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Sustainability is an essential part of today’s world. This also applies to the entire financial sector. We, as DZ HYP, aim to actively participate in this development. After all, we see sustainability as an opportunity to take part in shaping the future.

What does that mean for us? Stefan Heckerodt has served as DZ HYP’s Sustainability Officer since 1 September 2020. In this interview, he shares what sustainability management means at DZ HYP. Why do we, as a real estate finance provider, bear particular responsibility to act in a sustainable manner? How do we make sure that sustainability at DZ HYP is more than just a buzzword? Which opportunities does holistic sustainability management hold for us as a Bank? Read for yourself and accompany us on our journey.

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Interview with Stefan Heckerodt, Sustainability Officer at DZ HYP

Stefan Heckerodt has served as DZ HYP’s Sustainability Officer since 1 September 2020. In this interview, he shares what sustainability management means at DZ HYP and explains what motivates him to drive sustainability forwards.

Mr Heckerodt, you have served as DZ HYP’s Sustainability Officer since last September, but you are not new to the topic. In fact, you began the process of anchoring sustainability in the Bank several years ago. What motivated you to now make sustainability your prime focus?

DZ BANK and oekom research, the rating agency that is now ISS ESG, prompted me in 2012 to look into sustainability at DZ HYP. At that time, my portfolio of responsibilities at the Bank included investor relations. My new role as Sustainability Officer was a conscious decision to fully dedicate myself to the issue. In autumn of 2020, we launched a Bank-wide project at DZ HYP to sharpen our sustainability activities. Heading this project and actively working on it is a job I very much enjoy, because this project is crucial for our Bank. I am convinced that sustainability will become a major part of German banking.

How have the requirements and expectations of external stakeholders – politicians, clients, regulators – changed since 2012, and how have they changed within the Bank?

Rating agencies have gradually stepped up their requirements. Not least because of Greta Thunberg we have seen politics and society galvanised around the sustainability issue in the past two years. In addition, investors have also raised their voices in asking for green financing products. In order to build the sustainability activities we have pursued over the past years on a stronger basis, our Management Board put together a team in early 2020, comprising colleagues from the Finance, Treasury, Risk Controlling and Sustainability Management units, laying the groundwork for the current sustainability project.

What are the next steps in this project?

The global framework for our actions is set by DZ HYP’s strategic orientation. Regulation calls for sustainability aspects to be included not only in the sustainability strategy, but in all other relevant strategies and policies. To be credible, and to be able to measure our performance, we need to set ambitious thresholds – but this requires data that needs to be collected to begin with.

What are the goals that DZ HYP has set for itself for the current year?

We want to be ready for a green financing product. This means that we must satisfy all requirements that come with such an issue. The Bank-wide project is quite complex, and there are dependencies on various other projects and processes. In a first step, we are focusing on our commercial real estate customers, with the remaining portfolios following suit at a later point in time. Above all, however, we want to take our employees along on the sustainability journey, because if we don’t pull together, we can hardly expect to be successful.

There is a lot of talk about sustainability risks. But where there is risk, there is also opportunity. What are the opportunities you are expecting from a holistic sustainability management at DZ HYP?

Each year, real estate accounts for more than 30 per cent of carbon emissions. With this in mind, the real estate sector bears a special responsibility for achieving the climate target of 1.5 degrees. We have the chance to actively shape our future. At the same time, we will generate competitive advantages through an orientation towards sustainability.

Let us close with a small projection: Where will DZ HYP be in five years’ time?

I would hope that issuance of Green Bonds will have outstripped that of their conventional counterparts. Our product portfolio will include sustainable products on the assets side as well, and we will again rank among the top three best-rated real estate finance houses in Germany.

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“Joint market coverage with the cooperative banks is of utmost importance for us. By restructuring our segments, we achieved our goal of becoming an even better financing partner, providing the cooperative banks with even more targeted and focused support in all our segments.”

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Dr. Georg Reutter, Chief Executive Officer of the Management Board
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Focused client approach
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Comprehensive expertise, a sustainable partnership, and reliable and competent advice – that is what DZ HYP stands for. In order to operate our real estate financing business in an even more targeted and focused manner, we restructured our market activities in the summer of 2020. Since then, we have been focusing on the three segments: Corporate Clients, Retail Customers and the Public Sector. In the areas comprising Commercial Real Estate Investors and the Housing Sector, which were previously set up as separate segments, we are now working even more intensively with the Cooperative Financial Network within the Corporate Clients segment.

To bundle expertise and resources in our financing business with corporate clients, we have established a central unit in Munster, which deals with financing requests of up to €12.5 million made by existing cooperative bank clients. We are continuing to operate the business with housing customers as usual, and are further expanding it where possible.

At year-end 2020, we reached another milestone on the path towards more efficient customer communications in our retail customer business: the new Customer Dialogue Centre guarantees fast and direct response to customer requests on existing loans, thus increasing the efficiency of loan processing and optimising process quality for our customer service.

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Swift, secure, standardised
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DZ HYP is continuously working at actively shaping the digital transformation, expanding its range of products and services by an online offering in 2020, and optimising customer service.

In our Retail Customer segment, we introduced the VR-BaufiTop product which addresses real estate buyers who are particularly sensitive to specific terms and conditions, and who therefore are seeking favourable offers via home loan financing portals. To address their needs, we are providing cooperative banks with VR-BaufiTop, a highly standardised product with a streamlined process and short decision-making paths. Using the new product, the Cooperative Financial Network’s home loan financing business has found a prominent place in the online segment.

With the launch of IMMO Transfer, we are offering project and property developers a service free of charge, thereby optimising our service quality. The electronic payment instruction has quickly established itself as a secure and standardised way of transmitting data directly from the client’s financial software, which receives an electronic bank statement for download as soon as the lending reviews have been performed and the payment order has been executed, helping us to successfully make another step towards digitalisation.

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Cube Berlin
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cube berlin: smart, sustainable, and financed by DZ HYP
cube berlin | smart commercial building, awarded with a DGNB “Gold” certificate | picture: Adam Mork

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The multi-generational housing project “Eigene Scholle” in Halle (Saale) was awarded the German Design Award 2020 (“Deutscher Bauherrenpreis”) for its inclusive and high-quality approach
Multi-generational housing II “Eigene Scholle”, Halle | GWG “Eigene Scholle”, Halle | picture: Christian Richters

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In the heart of the city: attractive office and commercial building on the Avenue des Champs-Élysées, Paris
71-73 Av. des Champs-Élysées, Paris | picture: BMO Real Estate Partners Europe – Thierry Samuel

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Successful financing
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Axel Jordan, Head of Commercial Real Estate Investors – Corporates & Cooperative Banks:

“Accelerated by the coronavirus pandemic, individual asset classes are showing an increasingly differentiated development. Sustainable and future-proof concepts are generally gaining importance in all segments. We are proud of having accompanied several of these properties as a financing partner in 2020. In many cases, we have achieved good market coverage in the regions, together with the cooperative banks.”

Jürg Schönherr, Head of Housing Sector:

“Housing is always going to be a basic need. Therefore, the coronavirus pandemic has hardly impacted our housing business. What we do see is that demographic changes and climate protection are increasingly becoming the centre of attention, reflected by the financing projects for real estate and residential quarters which we are realising in cooperation with our clients.”

Steffen Günther, Head of Commercial Real Estate Investors Institutional & International Clients:

“Inner-city retail in prime locations within Europe’s largest cities will continue to play an important role. People will travel and go shopping. Nevertheless, changes are underway. Mixed-use properties with a combination of multiple asset classes are a possibility. Shopping, working, living, and leisure all in one building – that saves time and resources, and diversifies the risk.”

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“We see ourselves as a service provider and partner to the cooperative banks and are thus glad that our campaigns have boosted cooperative home loan financing in 2020 – also thanks to strong implementation at the banks involved. Together we managed to create effective impetus for the private customer business.”

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Markus Krampe, Head of Retail Customers & Relationship Manager Cooperative Banks
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Successful campaigns strengthen cooperation
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In 2020, DZ HYP continued to generate strong sales momentum in its retail customer business. We reached numerous banks and customers via two campaigns.

Triggered by the coronavirus pandemic, we launched the #gemeinsamfürdasehrenamt (“together for volunteers”) campaign during the first lockdown, to show our commitment – together with cooperative banks – to voluntary work. The campaign was connected with a donation commitment for every successfully intermediated home loan. Cooperative banks were free to assign the financial aid to a non-profit organisation of their choice. Almost 140 banks took advantage of the opportunity to present themselves to their environment as sponsors of civic action.

The Baufi Bonus Weeks also swept along noticeable tailwind for the home loan financing business at the Cooperative Financial Network. The sales incentive for large-sized loans was a welcome measure during the second lockdown at the end of the year. Both campaigns strengthened the presence of cooperative banks on the market and their positive perception in challenging times.