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Another German bank is hit by US subprime-sparked woes

AFP · 22 Apr 2008, 14:59

Published: 22 Apr 2008 14:59 GMT+02:00

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The small bank's owners have temporarily transferred it to the BdB's depositor guarantee fund, after which it was to be sold to a third party.

"This will help overcome difficulties into which the company ran in the current tense market environment," the BdB said in a statement.

Düsseldorfer Hypothekenbank finances public projects and real-estate development with funds it raises on the German market for mortgage-backed bonds, or Pfandbriefe.

Repayment of its Pfandbriefe was secured, the association said.

Both the German financial watchdog BaFin and central bank have been informed of the transaction and welcomed the measures because they contributed to strengthening the Pfandbriefe market, the BdB said.

In 2006, Düsseldorfer Hypothekenbank posted interest income of €49 million ($78 million) and net profit of €22 million ($35 million).

Last year, net profit fell to €100,000 ($159,000) owing to writedowns on the value of its assets and losses in its trading activities.

The bank is owned by the Schuppli family, which earlier this year injected €100 million into it.

Story continues below…

Düsseldorfer Hypothekenbank joins public institutions like the business lender IKB and regional banks SachsenLB and WestLB among German financial institutions that have taken heavy losses in connection with the US subprime mortgage debacle.

Securities backed by high-risk US home loans were repackaged and sold to banks which then got slammed when borrowers defaulted on the loans in large numbers.

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