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"In our view, equities have the best 'built-in inflation hedge'"

The insolvency of California's Silicon Valley Bank and the difficulties of Credit Suisse bring back memories of the beginning of the global financial market crisis in 2008.

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"In our view, equities have the best 'built-in inflation hedge'"

The insolvency of California's Silicon Valley Bank and the difficulties of Credit Suisse bring back memories of the beginning of the global financial market crisis in 2008. Harald Vogelsang, 64, head of Hamburger Sparkasse (Haspa) rejects such comparisons in an interview with WELT. Haspa itself can look back on a successful financial year: its credit volume rose to a new record of EUR 38 billion in 2022. Haspa is also showing increasing values ​​for the deposits of its private customers, for current accounts and for construction financing. The annual profit of the largest German savings bank rose from 20 million euros in 2021 to 45 million euros in 2022.

WORLD: Mr. Vogelsang, in the spring of 2008, after the US investment bank Bear Stearns almost went bankrupt, the European spokesman for the competitor Lehman Brothers told me that everything was fine at Lehman. Six months later, the insolvency of Lehman Brothers almost pulled the world financial markets into the abyss. Are we talking about the bankruptcy of the Silicon Valley Bank in the USA and the problems of Credit Suisse in Europe at the moment as well?

Harald Vogelsang: I think that parallels are being constructed for which there are no indications. The Silicon Valley Bank isn't nearly as big as Lehman Brothers was at the time, it has a very special business model and special structures. I can't even see any spillover effects to other, larger US banks, nor any effects to Europe. All banks in the US and Europe are much better capitalized today than they were just before the global financial market crisis, and the supervisory authorities are much better prepared than they were then. Perhaps the US Federal Reserve could have reacted to Silicon Valley Bank's problems a day or two earlier, but a stabilizing solution has now been found.

WORLD: Is it more of a coincidental individual case that Credit Suisse is now also in trouble and is supported by the Swiss National Bank?

Vogelsang: You can't compare the problems at Credit Suisse with the Silicon Valley Bank. Credit Suisse has been involved in some difficult issues over the past few years, resulting in a loss of confidence and share price. I don't see a risk of contagion for the German market here either. However, the case impressively shows how important it is for customers to be able to trust their bank.

WORLD: The Silicon Valley Bank had a problem specifically with corporate bonds. The German savings banks also had to write off around 7.8 billion euros on corporate bonds in their portfolios in 2022 as a result of the turnaround in interest rates on the financial market, because the value of these bonds fell relatively quickly in view of higher interest rates again.

Vogelsang: This is a normal process in connection with the extremely steep rise in interest rates. You also have to react to this in the valuation of bonds in your own books. The savings banks can cope well, they are still making considerable profits and are expanding their reserves. Apart from that, corporate bond valuations will rise again.

WORLD: What was the value of Haspa in terms of write-downs and revaluations of corporate bonds in 2022?

Vogelsang: In 2022 we had very moderate value adjustments in our own investments totaling 39.6 million euros. In 2021, this value was 34 million euros. This is comparatively little, even less than some other savings banks. The reason is that we have invested more cautiously over the past ten years, which is why we made less profit, but that is now benefiting us. The bonds we hold are also largely hedged against interest rate increases.

WORLD: For years, the financial industry has been hoping for a turnaround in interest rates, more precisely that the European Central Bank will pay interest on deposits again. In the end, did the turnaround in interest rates last year come too quickly?

Vogelsang: For years we wished that interest rates would rise again, and now they have risen. We must and can deal with this rapid increase now. Overall, however, we are happy that interest rates are back.

WORLD: Because trading in money will then have a value again.

Vogelsang: And because young people in particular can learn again that saving is worthwhile. We have just raised the interest on the mouse savings for the children from two to three percent. And the higher interest rates have the effect that the unhealthy pull of cheap money into forms of investment such as real estate or other tangible assets is at least dampened. We are now entering a healthy normalization, with an adjustment process that is a little more painful for some participants than for others. The less exposed you were before to take advantage of cheap money, the less hit you are now.

WORLD: Rising interest rates are added to the generally rising costs on the real estate market. Fewer new buildings are being built than a year ago. How do you see this market, which is also so important for Haspa?

Vogelsang: We are currently seeing a dent in the real estate market. But it is good if there is at least a pause in the price increases. We have extreme boom years behind us because of minimal interest rates, which is not healthy in the long run. For years, someone who is looking for a property has once again had the chance to seriously negotiate the price. At the same time, rents continue to rise. If this continues, real estate prices will automatically rise again. Due to the lower building activity at the moment, the chances of those who want to build to get craftsmen and materials at realistic prices are increasing. This is how the market settles down again.

WORLD: How is rent development on the Hamburg market currently looking?

Vogelsang: There are still big differences, with quite reasonable prices in parts of the city such as Hausbruch, Lurup, Hamm or Horn, and with oversubscribed prices in the city center or in the west. You can also still find cheap real estate in Hamburg. The question is then: Do I buy a new property built according to the latest energy standards, or an existing property and carry out an energy renovation there at a reasonable cost. It makes sense for the overall ecological balance to renovate as much as possible without having to bring everything up to an ecological super standard.

WORLD: What role does the enormous need for energy-related refurbishment in Hamburg play for your business?

Vogelsang: This will result in more credit being required for restructuring, which we would also like to cover. And there will probably be less demand for loans for new buildings. However, we still have too few apartments in Hamburg. This additional demand cannot be covered by renovation, so new buildings must continue to be built.

WORLD: Do savers have to rethink their investment strategies in view of the turnaround in interest rates?

Vogelsang: Basically, nothing will change. Interest-driven saving is added as an option to other forms of investment such as stock ownership, gold or even real estate. From our point of view, equities have the best "built-in protection against inflation", which is why you should definitely not do without equities in your own investment strategy. In 2022 we had 12.89 million shareholders in Germany. This surpassed the record of 2001, which was 12.85 million shareholders. Incidentally, the strongest increase last year was among the under-30s, which is really good news.

WORLD: How do you see the risks of owning shares?

Vogelsang: They can be minimized very easily. For a long time we have been advocating buying shares in funds or in index-driven form and not placing a large overweight on individual stocks. And it's important to invest long-term with a stock-savings strategy rather than on specific dates. You can do this in any branch or online. Incidentally, the savings in our securities savings plans increased by 25 percent last year compared to 2021.

WORLD: The world is changing rapidly, economically and technologically. What new business models or fields will this result in for Haspa?

Vogelsang: Of course we accompany these changes at our customers. However, Haspa is not a source of exposed venture capital; that simply does not correspond to our business model. We are conservative. We prefer to look at new developments a moment longer until we see there is a certain stability, and then we are happy to accompany them. As a regional savings bank, we try to be there for our customers with a good opportunity/risk profile. Especially when it comes to financing the transformation of the Hamburg economy into a sustainable future.

WORLD: The construction of energy-efficient buildings is part of this great transformation.

Vogelsang: I would say that our great expertise in the real estate market puts us at the forefront of this in Hamburg, for example with the financing of the first wooden high-rise in Hafencity or the first cradle-to-cradle building that will be completely recyclable .

WORLD: Your branch network is still the basis for all of this. Where big is it and how big is it staying?

Vogelsang: We reduced the number of our branches from 180 to 105 between 2008 and 2023. Despite this, we still have by far the largest branch network of all financial institutions in the city and the smallest decline in the number of branches compared to the same period. In addition, we have converted almost all of them into so-called "branches of the future". We want to continue working with this network in the coming years. Because each of our branches pays off and has an average of 15,000 customers, far more than any branch of our competitors in Hamburg.

WORLD: Haspa's workforce has also shrunk recently.

Vogelsang: We have already implemented two-thirds of the job cuts over the past three years. This corresponds to around 600 jobs. And without layoffs. The remaining job cuts are currently slowing down – on the one hand, we are seeing a growing need for employees again, especially in consulting and service in the branches and in private banking, but also for specialists in internal areas. Because we too are already experiencing a shortage of skilled workers. We are preparing for this and have, for example, also increased the number of apprenticeship positions from 60 to 90.

WORLD: How many employees does Haspa currently have?

Vogelsang: We employ almost exactly 4,400 people full-time and part-time. It is important for our future success that we remain attractive as an employer. In Altona we are currently building a dormitory with 140 places for trainees. And with the Haspa headquarters, we want to move to the newly built Deutschlandhaus on Gänsemarkt before Christmas if possible. From this very attractive property in one of the best locations in the city, we are expecting a significantly greater presence in the office. We need this enthusiasm for personal encounters for the teamwork, creativity and innovative strength of our employees and Haspa as a whole.

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