Hypo Real Estate to shed nearly half its workforce

Troubled German property lender Hypo Real Estate is to slash its work force by almost half in three years, it announced on Saturday. Several board members and managers are also being sacked.

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"The number of employees will go from some 1,800 to about 1,000 over the next three years," the bank said in an early-morning communique.

Spiegel Online also reports that executive board members Frank Lamby and Markus Fell are being fired without notice, as are former board members Georg Funke und Bo Heide-Ottosen. Funke had already resigned from the board on 7th October as a result of the current crisis. He is now being dismissed from the company amid accusations that he deceived the public and shareholders for over a year about the dire state the bank was in.

"Two-thirds of the jobs which are to go will be outside Germany," the bank said, adding that it intended to sell some of its activities. The services being cut include infrastructure financing. The Munich-based bank, Germany's biggest victim of the global banking crisis, stressed that it would do what it could to avoid further redundancies.

Hypo Real Estate and its Irish subsidiary Depfa got caught up in the global credit crunch, and were severely affected when the US investment bank Lehman Brothers declared bankruptcy in September. According to reports, Depfa, a bank Hypo Real Estate took over in 2007, have not been able to obtain any short-term loans in the crisis-ridden financial markets.

Hypo Real Estate has already benefited from tens of billions of euros in a rescue plan worked out by the government and the German central bank in October. The restructuring of Hypo Real Estate announced today was a condition of the federal bail-out.

The transition to the new business model will cost an estimated €400 million, and will lower the cost of running the company by €200 million a year by 2011.