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Remediation from bank crises: Depfa for sale

DDepfa Bank put the FMS Wertmanagement, which was founded in 2010 as a bad bank of Bank Hypo Real Estate, which became so famous in the financial crisis. Depfa (originally Deutsche Pfandbriefanstalt) was taken over by Hypo Real Estate in 2007 and had contributed to its downfall by investing heavily in American mortgage paper.

Depfa, based in Ireland, is primarily designed as a public finance institution. After the takeover of Depfa in 2014, FMS reduced its total assets from EUR 48.5 billion to EUR 8.9 billion. The portfolio mainly consists of loans and government bonds from Western European debtors, especially Germany. (Dec-2019). The so-called CET1 rate is 152.3 percent.

All overseas branches have been closed and all other “non-strategic” branches are currently being closed. The bank still has 111 employees. Offers can be submitted to the advisory Barclays Bank until August 3.

The Depfa was originally founded in 1922 as the Prussian State Pfandbrief Institution to finance the construction of small houses and was given the name Deutsche Pfandbriefanstalt in 1951. From 1954 the bank was owned by the federal government, which privatized it in 1991 through an IPO for the equivalent of around 275 million euros. 10 years later, Depfa split off real estate financier Aareal Bank. The remaining Depfa mainly did business through term transformation, i.e. taking out short-term loans and providing long-term financing.

In 2007 Hypo Real Estate took over Depfa for a total of 5.2 billion euros. Depfa’s refinancing difficulties contributed significantly to the difficulties of Hypo Real Estate in September 2008. At that time, Depfa Bank alone required around 10 billion euros in financial aid.

For its part, Hypo Real Estate (HRE) had been spun off from Hypovereinsbank (HVB), which was in need of bad real estate loans, as a real estate bank. For this purpose, HVB used a large part of a capital increase (around EUR 900 million) to provide HRE with sufficient capital. At that time, Hypo Real Estate Bank Germany was in dire need of restructuring. Bundled German portfolio, for which HRE received a guarantee of 590 million euros from HVB for 2003 and 2004.

In turn, HVB was created in 1997 through the merger of Bayerische Hypotheken- und Wechselbank (Hypobank) and Bayerische Vereinsbank. Not a year after the merger, the former Hypobank opened a hole of 3.5 billion Deutschmarks from real estate transactions, especially in the new federal states.

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