Report of the managing board
Introduction
In our 1980 annual report, we indicated that we expected net profit to
show a further decline in 1981This in fact has been the case due to
difficult market conditions which shall be discussed later.
However, it is encouraging to be able to report that our operational
profit has remained relatively steady. Gross profit (before taxes and
additions to the provision for general contingencies) did show a slight
decline from last year, but at 66.1 million guilders it was still relatively
high considering the general weakness in the real estate sector of the
economy. These results are satisfactory by any standards when one
considers that this is after a total reserve provision for the real estate
sector of 32.7 million guilders.
Our highly selective commitment policy in 1981 relative to our mort
gage portfolio led to a decline in portfolio value from 6,257.6 million
guilders at the end of 1980 to 6,212.3 million at the end of 1981.
Development in the real estate market such as operational losses by
some of our clients together with a sharp decline in real estate prices in
some areas, accentuated the risk element in our portfolio.
The conclusion to be drawn from the current economic situation is that
we still should not expect growth in our business or a reduction in the
current risks. Accordingly, we believe a substantial addition to our
general contingencies reserve provision of 32.5 million guilders,
compared with 14 million last year, is desirable. Taking taxes into
account, this will enable us to absorb losses by our clients of up to twice
the level of these reserves.
Also in last year's report we announced that it would be necessary to
lower our dividend if poor economic conditions persisted. Therefore,
we are recommending a dividend of 3.50 guilders per 10 guilder
nominal share compared with 4.30 guilders in 1980. This relatively
minor reduction reflects our belief that under the same set of circum
stances, the expected decline in profits in 1982 will remain limited.
We are confident that in the long run the real estate market will show a
recovery from its occasional overreaction which in turn will improve our
profitability.
We offer our special thanks to all employees for their effort on the
company's behalf.
Developments in the Dutch real estate market
In 1981, the demand for residential units showed a further decline.
The reasons forthe decline include difficulty in selling existing property,
the expectation that disposable incomes would fall because of lower
wages and rising costs (such as energy), continuing high interest rates
and the risk of a reduction in tax benefit disallowing the deduction of
interest although the political debate is continuing with regard to the
latter.
In the near future we expect that building in the unregulated sector will
be limited to houses for private individuals and that the market for
subsidized houses for sale will be limited to 'premium A' dwellings.
However, there are still problems here in that high interest rates make it
difficult for buyers with an average income to obtain 100 percent
financing.
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