Hypo Real Estate, the second largest property lender in Germany, plans to ask the government for a further bailout on top of the EUR 50 bn lifeline agreed in early October. ICEO Axel Wieandt said the bank is preparing an application to Soffin, the German bank rescue fund, 'seeking further extensive support intended to cover immediate liquidity and medium-term capital requirements'.
Hypo Real Estate, the second largest property lender in Germany, plans to ask the government for a further bailout on top of the EUR 50 bn lifeline agreed in early October. ICEO Axel Wieandt said the bank is preparing an application to Soffin, the German bank rescue fund, 'seeking further extensive support intended to cover immediate liquidity and medium-term capital requirements'.
The bank confirmed on Monday that it suffered a massive EUR 3.1 bn pre-tax loss for the third quarter of 2008, compared to a pre-tax profit of EUR 237 mln in the same period last year. It added that it will only resume lending on a selective basis as it restructures in order to survive.
Announcing its interim results, Hypo Real Estate said the dramatic quarterly losses were largely due to EUR 2.4 bn in impairments resulting from the consolidation of the group's Dublin-based infrastructure financing unit Depfa.
Other factors in the loss were directly related to the credit crisis: the collapse of Lehman Brothers and the Icelandic saving bank Icesave; equity write-downs relating to Babcock & Brown and further losses on its CDO holdings.
The management of the listed bank sketched a gloomy picture of Hypo Real Estate's expected performance in the months ahead and revealed it plans for a major restructuring of the business. Chief financial officer Markus Fell said: 'We are predicting an extremely negative consolidated result for the whole of 2008. The necessary restructuring of the Hypo Real Estate Group and the costs of the agreed or planned liquidity lines and capital assistance will continue to pose a major strain on consolidated result in 2009,' Fell said.
Axel Wieandt - who replaced Georg Funke as CEO in October - said management was devoting maximum priority to revising the bank's business model 'in order to bring it in line with the fundamentally changed conditions'.
He said assistance from the German financial industry, the Deutsche Bundesbank, the German federal government and the Financial Markets Stabilisation Fund was essential. ‘For the time being, the Hypo Real Estate group will not be able to adequately refinance the company via the money and capital markets alone, even if this is of course our objective in the medium term.'
Dirk Becker, a banking analyst with Kelper Equities, said the bank's decision to only undertake 'selective' new lending was stating the obvious. 'Hypo can't do any new business even though I am sure it would love to at the margins available today.' Becker added that Hypo would have to continue to rely on state aid to survive as long as the global credit crisis persists. 'It will be another couple of quarters at least,' he said.
The bank also announced several members of the supervisory board are stepping down in a move relating to the EUR 50bn liquidity lifeline the bank has received from a public-private consortium of Deutsche Bundesbank, the German Federal Government and financial institutions. The resignations relate to all members of the supervisory board who were not associated with the JC Flowers-led consortium, which built up a 20% stake in Hypo Real Estate earlier this year.
The members leaving the supervisory board are current chairman Klaus Pohle, Gerhard Casper, Johan van der Ende, Frank Heintzeler, Thomas Kolbeck, Pieter Korteweg, Thomas Quinn, and Hans Tietmeyer. Hypo Real Estate has moved to appoint Michael Endres, Bernd Knobloch, Edgar Meister, Sigmar Mosdorf, Hans-Jörg Vetter, Bernhard Walter and Manfred Zaß to replace them. Bernd Knoblach recently retired from the position of CEO at Eurohypo, the largest real estate lender in Germany.
Endres has been named the new chairman of Hypo Real Estate's supervisory board. The other remaining members are US investor Christopher Flowers; Renate Krummer, managing director of JC Flower's German operations; and Richard Mully, a founding partner of property investor Grove International Partners, which joined Flowers to obtain the stake in Hypo Real Estate.
Hypo Real Estate said the new members of the supervisory board are all experts with longstanding experience in the banking sector, including corporate restructuring. 'Moreover, they represent the spectrum of institutions which have agreed to commit supporting the continued existence of Hypo Real Estate Group as a going concern, and the group's restructuring.'
