55 Cash Flow Hedges and Stand-alone Hedging Instruments

On the reporting date, the nominal volume of cash flow hedges held in euros, including a forward hedge, amounts to € 764.0 million (December 31, 2023: € 1,165.0 million). Interest rates on hedging instruments are between 1.505% and 3.513% with original swap periods of between 3.5 and 20 years.

In order to manage interest rate risk, Vonovia SE concluded three forward-starting interest rate swaps in the reporting year, two of which were already settled in cash in December 2024 in the amount of € 4.0 million. There is a contractual agreement that the third forward will be settled in cash on January 14, 2025.

In connection with the issue of foreign currency bonds, Vonovia SE also concluded five cross currency swaps (CCS) in 2024, four of which were added to hedge accounting. Two hedging transactions relate to CHF and two to GBP. The nominal value hedged corresponds to a volume of € 891.4 million as of 31 December 2024. The CCS for the nominal value hedged in Swedish krona of SEK 350.0 million, which corresponds to a volume of around € 30.5 million, remained a stand-alone swap. The main parameters of the cross currency swaps added to hedge accounting are set out in the table below.

The forward-starting interest rate swap discussed at this point in the report in the previous year was settled in cash in the amount of € 13.3 million in the reporting year.

With the exception of one transaction, the euro interest rate swaps with hedge accounting are reported with negative market values as of the reporting date.

For the hedging instruments that are maintained within a so-called passive hedge accounting, € 3.0 million was reclassified affecting net income in the reporting year in line with the expected cash flows from the underlying hedged items. This reduced the value recognized in other comprehensive income to € 12.2 million.

All derivatives are included in netting agreements with the issuing banks.

No economic or accounting offsetting was performed in the reporting year.

Key parameters of the interest rate swaps were as follows:

Key parameters of the cross currency swaps were as follows:

As of the reporting date, Deutsche Wohnen Group recognized 18 stand-alone interest rate swaps, eight with a floor. The nominal value hedged came to € 848.8 million as of December 31, 2024 (December 31, 2023: € 853.0 million); three transactions result in a negative market value of € 7.9 million (December 31, 2023: € 7.7 million), while the positive market values of the other interest rate swaps total € 24.1 million (December 31, 2023: € 39.4  million).

The hedged nominal volume of currently 13 stand-alone interest rate swaps of BUWOG amounted to € 559.5 million as of December 31, 2024 (December 31, 2023: € 335.0 million), while positive market values of € 11.5 million (December 31, 2023: € 16.6 million) were offset by negative market values totaling € 2.4 million (December 31, 2023: € 1.6 million).

On the reporting date, the Victoriahem Group recognized eight stand-alone interest rate swaps, two of which were portfolio hedges. The nominal value hedged in Swedish krona amounted to € 845.9 million as of December 31, 2024 (December 31, 2023: € 809.4 million), while positive market values of € 0.8 million (December 31, 2023: € 7.7 million) were offset by negative market values totaling € 9.1 million (December 31, 2023: € 1.2 million).

The designation of the cash flow hedges as hedging instruments is prospectively determined on the basis of a sensitivity analysis, retrospectively on the basis of the accumulated dollar offset method. The fair value changes of the hedged items are determined on the basis of the hypothetical derivative method. In the reporting year – as in the prior year – the impact of default risk on the fair values is negligible and did not result in any adjustments of the balance sheet item.

The derivatives in the form of long-term call options to buy back shares, which were recognized for the first time in the previous year in the amount of € 838.0 million, were adjusted, with recognition in profit and loss, to € 731.0 million in the reporting year. For details on the call options, please refer to the chapter entitled [D28] Financial Assets.

All in all, the positive market values of cash flow hedges from interest rate derivatives in the amount of € 3.4 million (December 31, 2023: € 4.4 million) were offset in the reporting year by negative market values of € 24.4 million (December 31, 2023: € 48.6 million).

In the case of the cross currency swaps, the positive market values of € 10.9 million were offset by negative market values of € 15.5 million.

At the same time, positive market values from stand-alone interest rate derivatives were recognized in the amount of € 36.4 million (December 31, 2023: € 63.8 million) and were offset in the reporting year by negative market values of € 19.8 million (December 31, 2023: € 10.6 million).

The positive deferred interest balance across the board came to € 5.5 million in the reporting year (December 31, 2023: € 4.4 million).

The impact of the cash flow hedges (after income taxes) on the development of other reserves is shown below:

The impact of the cash flow hedges (after income taxes) on total comprehensive income is shown below:

In the reporting year, after allowing for deferred taxes, positive cumulative ineffectiveness for cash flow hedges amounts to € 0.2 million (2023: € -0.3 million), improving net interest by € 0.5 million (2023: € -0.7 million).

On the basis of the valuation as of December 31, 2024, Vonovia used a sensitivity analysis for all swaps to determine the change in equity (after income taxes) given a parallel shift in the interest rate structure of 50 basis points in each case:

A further sensitivity analysis for the CCS showed that a change in the foreign currency level of -5% (+5%) would lead, after allowance for deferred taxes, to a change in the other reserves not affecting net income of € -2.7 million (or € 2.8 million), while ineffectiveness affecting net income in the amount of € 0.0 million (or € -0.6 million) would result at the same time.

A final sensitivity analysis revealed that, for a minority of variable-rate loans not designated as hedges, a parallel shift in the interest structure of 50 basis points in each case would have an effect in the income statement of € 15.9 million (or € -15.9 million), as against an effect of € 15.3 million (or € -15.3 million) in the previous year.