Eurohypo, the property and public finance lender, is to carry out a ‘fundamental realignment’ of its commercial real estate business in order to ‘fix the flaws’ in its business that have been exposed by the global financial crisis.
The lender, which is owned by Commerzbank and has its headquarters in Germany, said today it would focus on ‘those markets and financing solutions which generate stable returns at a reasonable risk level’.
It will decrease the size of its real estate financing portfolio as a contribution to the reduction of Commerzbank’s total assets. From E79bn to E60bn by the end of 2012.
Eurohypo is also to be sold by Commerzbank within the next five years as a condition of Commerzbank’s use of E18.2bn in aid from the German government.
'With the realignment of real estate financing we are showing that, in a situation which is difficult for all market participants, we have the courage to follow new paths and to make the necessary fundamental decisions,’ said Frank Pörschke, chairman of the board of managing directors.
‘We are convinced of the added value of a specialist bank for real estate financing. Eurohypo will continue to combine all of the strengths of this concept in future.
‘The clear focus on our core business and the resulting reduction in organisational and business complexity for real estate finance will pave the way out of the crisis for us and secure our future.’
Eurohypo will remain an international real estate bank, concentrating on 10 markets - Germany, France, Italy, Poland, Portugal, Spain, UK, the US, Russia and Turkey – but withdrawing from another 20 locations.
Eurohypo will no longer lend to German residential developers nor provide corporate loans or advisory. The minimum amount of financing for new business is to be increased from E2.5m to E10m in Germany.
Outside Germany, the minimum amount will be E20m, as before. The bank is also introducing more conservative upper limits for new business in order to further contain overall risk.
The adjustments to the new business model will lead to significant cost reductions. By the end of 2011, cost reductions of around E110m are to be realised.
The size of the organisation will be reduced by 34% by the end of 2011. This corresponds to the loss of around 390 full-time positions, of which around 260 will be in Germany.