By Oliver Suess and Tony Czuczka
Jan. 21 (Bloomberg) -- Hypo Real Estate Holding AG, the
German lender taken over by the state following the credit
crunch, is applying to transfer as much as 210 billion euros
($296 billion) of assets into a so-called bad bank.
The Munich-based lender, wholly owned by the German
government’s Soffin bank-rescue fund, asked the German Financial
Markets Stabilization Agency, a unit of the country’s Finance
Ministry, for permission to separate the assets, it said in an
e-mailed statement today. The transfer will take place in the
second half if approval is given, the company said.
Hypo Real Estate, which doesn’t expect to return to profit
before 2012, plans to cut 1,000 jobs by the following year as
it focuses on real-estate and public-sector financing at its
Deutsche Pfandbriefbank unit. It needed a total of 102 billion
euros in credit lines and debt guarantees from the state and
financial institutions to save it from collapse in 2008.
“We will thus strengthen Deutsche Pfandbriefbank as
the group’s core bank by relieving it of nonstrategic or
sub-performing assets, significantly reducing the size of
its balance sheet,” Chief Executive Officer Axel Wieandt
said in the statement.
The assets to be transferred may include parts of the
public finance and real-estate funding portfolios of Deutsche
Pfandbriefbank and the Dublin-based Depfa Bank Plc unit,
the lender said.
‘Difficult Environment’
The public-finance portfolio “consists of highly-rated
government or government-related assets, which despite their
strong credit quality are currently suffering from lower market
valuations,” Hypo Real Estate said. “Parts of the real estate
financing portfolio are affected by the prevailing difficult
environment that continues to burden this segment.”
Soffin, which took full ownership of Hypo Real Estate in
October following a so-called squeeze-out, views Hypo Real
Estate’s bad bank as “an important part of restructuring,”
spokeswoman Silvia Marenow said in a phone interview from
Frankfurt. “The idea is to split off entire areas of the
business that aren’t needed for the overhaul.”
Shifting the assets will also help Hypo Real Estate meet
an expected demand from the European Union to reduce its balance
sheet, she said. The new institution would be “completely
separate from the core bank,” Marenow said.
Hypo Real Estate would become the second German lender to
transfer assets to a bad bank. Dusseldorf-based state-owned
WestLB AG agreed with Soffin in November to transfer about
85 billion euros of assets into a so-called work-out entity.
From there the assets can be run down or sold, and Soffin can
inject capital into the remaining entity.
