The mood should become rather more sober this month. For one thing, the mortgage banks will face more competition after the July 19 enactment of Germany’s new Pfandbrief law. The law gives all banks active in Germany the right to issue Pfandbriefe.
All the celebrations cannot disguise the fact that, apart from the likes of Eurohypo and Hypo Real Estate, the mortgage banks are highly exposed to the weak German real estate market. This market has often undermined their profitability, even if their Pfandbriefe are among the world’s safest and most popular investment-grade bonds.
