German HRE's 'bad bank' posts 3 bn euros loss

24th May 2011, Comments 0 comments

The 'bad bank' set up to help restructure German lender Hypo Real Estate (HRE) said Tuesday it suffered a loss of three billion euros ($4.2 billion) in its first half year, almost all the capital it began with.

FMS Wertmanagement, an entity granted 3.9 billion euros in funds by the German federal banking stabilisation fund SoFFin, might need more taxpayer backing after taking almost three billion euros in provisions against possible future losses.

In October, HRE, a specialist in property lending and municipal financing, transferred almost 176 billion euros worth of toxic assets to the entity, which was set up in July 2010 to dispose of the bad assets over time.

It has sold very few in its first six months of operation however and at the end of last year it still held assets worth a nominal 174 billion euros.

FMS Wertmanagement was created to either hold until maturity or sell around 70 percent of the risky assets in its portfolio through 2020 and unload the rest at that point.

"It is much too early now to said if we will reach this target; it will depend on how things evolve in financial markets," a company spokesman told AFP.

The 'bad bank' is holding 10.8 billion euros worth of Greek assets, including 7.4 billion euros worth of government bonds, according to its website.

HRE, which has no legal ties with the 'bad bank,' reported Friday a pre-tax profit of 163 million euros in the first quarter of its current fiscal year, compared with a loss of 324 million euros in the same period a year ago.

© 2011 AFP

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