KMunicipalities and municipal companies are relying on building savings again. The CEO of LBS Süd, Stefan Siebert, said in Stuttgart when presenting the balance sheet that the cities had discovered the building savings contract in order to finance public services projects or the energy transition. Municipal building savings contracts accounted for a total of around 460 million euros in the last financial year. As a result of the increased interest rates, they would be used by the municipalities as an interest rate hedging instrument. In times of low interest rates, the contracts were less in demand. The building savings sums could amount to several million euros, as a spokesman said.
Various projects can be financed through building savings contracts: This ranges from the construction of apartments and kindergartens to schools and the development of building areas. Municipalities usually have unrestricted creditworthiness. The prerequisite for a municipal building savings contract is usually that the budget has been approved by the supervisory authority.
LBS Süd is the largest of the five state building societies. It is the only institution subject to the supervision of the European Central Bank (ECB). LBS Süd is the building society of the savings banks in Baden-Württemberg, Bavaria and Rhineland-Palatinate. They were created through the merger of the two predecessor institutions LBS Südwest and LBS Bayern.
Merger in 2023
The merger was completed retroactively to January 1, 2023. The larger of the two partners was LBS Südwest, into which the previously independent companies from Baden-Württemberg and Rhineland-Palatinate merged in 2016. Unlike the cooperative banks, the public savings banks had not yet set up a large nationwide building society based on the Schwäbisch Hall model. Landesbausparkasse Süd has its headquarters in Stuttgart and Munich, a location in Mainz with a Rhineland-Palatinate state directorate and a location in Karlsruhe. There should be no layoffs among employees as a result of the merger. At the end of 2023, there were 1,189 employees and 807 full-time field staff.
Setback in new business
After the revival of business, the institute had to record a decline in new business last year. The number of new contracts fell by around 11 percent to 218,000. Their building savings sum fell by around a fifth compared to the previous year – from 20.5 to 16.4 billion euros. In the long term, this is a high level, said Siebert. Despite the decline, the values for new business are still above those in 2020 and 2021, but slightly lower than in 2019.
According to the information, the reluctance to engage in construction projects also slowed down new business in construction financing. It fell by 25 percent to around 2.8 billion euros last year. It was said that the loss was lower than the overall market, which shrank by a good 37 percent.
Last year, the new building society had total assets of around 38.1 billion euros and almost 2.7 million customers. According to preliminary information, the operating result was 63.5 million euros. Despite the housing construction crisis, LBS Süd is confident about the current year. The years of the expensive real estate boom are over and are unlikely to come back, Siebert continued. Inflation and interest rate changes are also currently leaving their mark on the construction sector. However, the conditions for the building society system are good in the medium and long term.
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