Our new business planning for 2018 is based on overall conditions that do not significantly differ from those noted in the year under review. High demand for property financing is expected to continue in view of the favourable economic conditions and low interest rates. Our planning anticipates a moderate increase in interest rates that will still leave them very attractive. Competition will intensify as the number of finance providers will increase thereby putting further pressure on margins. This situation applies to both private residential and commercial property financing. Against this background we plan to slightly expand our new business compared to figures posted for the year under review. This is because the prevailing competitive conditions and the level reached in the interim do not permit a dynamic increase.
The emphasis of our new business planning remains on financing residential property in Germany. The banks within the Cooperative Financial Network are our key partners in this area of business as they have pronounced sales power and close customer relationships. These attributes have enabled them to steadily expand their share of market over the past years. We anticipate that they will also grow stronger than the market in the residential property financing sector in 2018.
In January 2018 we introduced a new loan product to expand our combined market position: the MünchenerHyp Family Loan. The product offers a sustainable financing solution to families with children and is an innovative offer that favourably distinguishes our Bank from other providers of financial services. In addition, we take a major step toward digitalising the entire lending process by upgrading the Bank’s system for disbursements and other portfolio processes. The objective of our efforts in this area is to strengthen perception of our partner banks as modern and very capable property financers thereby expanding the brokered business.
We plan to moderately expand our new business in collaboration with independent providers of financial services. The negative interest rates in Switzerland will lead to a further intensification of competition in the private property financing business. Working together with PostFinance we therefore anticipate that the volume of new business will be at the previous year’s level.
We also expect that our new commercial property financing business will be at the 2017 level. Germany will be the focus of our new business activities. In addition we want to step up our business with foreign investors and accompany their investment activities in Germany with attractive financing offers.
Plans for our international business foresee moderate growth in all of the markets served by the Bank. In this context we will accompany domestic customers outside of Germany as well as foreign clients in their respective target markets. Our activities in the USA will continue to be limited to participating in other banks US financing arrangements.
We anticipate that syndication markets will see lively growth in 2018 as there is a clear trend towards ever larger financing deals. Only few banks, however, are willing to completely carry larger lending volumes of € 100 million or more on their balance sheet. For this reason, we expect that the number of club deals will expand in 2018 along with growing volumes in the secondary market. This is why we are planning to intensify our syndication business. On the one hand we will significantly participate in third-party financing deals, and on the other we will again pass on bigger volumes of loans we generated to other banks. The objective of these efforts is to attain a good diversification of risk. In achieving this we will also expand our successful syndication programme with the Cooperative Financial Network.
Our lending business with the public-sector and banks will remain unchanged and primarily serve to control liquidity and cover pools. For this reason, we will strive to further reduce our capital market business portfolio in 2018, which is anticipated to be smaller than in the previous years.
Our refinancing needs in 2018 are planned to be between € 6 billion and € 7 billion, of which we expect to obtain € 5.5 billion from the capital market, with the remaining volume sourced via the money market. As in the previous year, we anticipate that we will float two large volume issues and have additional potential to tap existing bonds. MünchenerHyp will continue to need Swiss francs due to its collaboration with Swiss PostFinance. Beyond these activities we will take advantage of attractive opportunities offered by other foreign currencies to further diversify our investor base.
We developed a deposit product for private customers in 2017 to broaden our refinancing mix. This product meets the requirements of the Cooperative Financial Network and will be sold by cooperative partner banks. The product’s procedures and marketability were successfully tested during pilot phases. As a result, we plan to offer this deposit product on a permanent basis in the future.
We will also expand our sustainability activities in 2018. As part of these efforts we are pursuing the goal of successfully launching the MünchenerHyp Family Loan into the market, thereby expanding our portfolio of sustainable financing. Furthermore, we are working on obtaining the required volume of mortgages eligible to serve as cover to enable us to issue another Sustainable Pfandbrief.
We are striving to achieve a moderate increase in net interest income from business operations in 2018. The stable development in our core markets continues to offer us opportunities to once again expand our new business and thus our portfolio of mortgage loans.
This will continue to have an increasingly favourable impact on the Bank’s performance. As a result, we anticipate that our earnings will improve again in 2018.
We anticipate that our administrative expenses will increase anew in 2018. Nevertheless, we currently expect that our cost-income ratio will decline slightly.
Based on the currently available information, we expect that provisions for lending risks will develop stably.
In view of the anticipated favourable market conditions, we are confident that we will achieve our targets for the 2018 business year and further expand our market position. We expect that our net income will exceed the previous year’s level.