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RECESSION

Hypo Real Estate posts major first-quarter loss

German bank Hypo Real Estate (HRE) posted on Tuesday a first quarter loss of €382 million euros ($511 million) as the state pursued its bid to nationalise the troubled property lender.

Hypo Real Estate posts major first-quarter loss
Photo: DPA

“As was the case in the previous quarters, the first quarter of 2009 again posed a major challenge for the group and its employees in market conditions which continued to be difficult,” bank chief Axel Wieandt said in a statement.

In the first quarter of 2008, HRE had turned a profit of €148 million even though it was already suffering from the international financial crisis.

The German government has begun a process to take over the Munich-based bank, which plays a key role in financing infrastructure and providing credits to local governmental bodies.

Berlin has launched a public offer for all outstanding HRE shares that had a deadline of 2200 GMT (midnight) on Monday and which could result in the first full bank nationalisation since the republic’s birth in 1949.

As of late Thursday, the state had acquired a total stake of 23 percent, but the largest shareholder, US investment fund JC Flowers, has opposed the deal, and could be expropriated under a law recently passed by the German parliament.

Meanwhile, Wieandt stressed Tuesday that HRE was “making good progress with restructuring the group.”

For all of 2008, the bank had posted a loss of €5.461 billion, in large part owing to problems at its Irish unit DEPFA Bank, which suffered heavy losses on risky US investments.

HRE has already received more than €100 billion in private and public aid to keep it afloat.

Chancellor Angela Merkel’s government is concerned that a collapse of HRE would prompt the sort of financial market chaos that followed the failure of US investment bank Lehman Brothers in September.

In a positive development, Wieandt said Tuesday that HRE had drummed up €600 million in new real-estate financing business in the first three months of the year, mostly with existing clients.

Operating revenue nonetheless showed a loss of €80 million, compared with a profit of €184 million in the same period a year earlier.

The bank raised its provisions for losses on loans and advances to €196 million from €33 million “as a result of the considerable deterioration of the global economy and also the deterioration in the situation on the real estate markets.”

It pointed in particular to concerns over financing in the United States, and to a lesser extent also in Britain, Germany and Spain.

HRE’s workforce declined to 1,656 employees from 1,786 a year earlier, the statement said.

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BANKING

German online bank N26 shutters US service

German online bank N26 said Thursday it was closing its operation in the United States next year, as regulators in Europe place the "fintech" start-up under increased scrutiny.

The N26 logo on a bank card.
The N26 logo on a bank card. Photo: picture alliance/dpa | Christophe Gateau

N26’s 500,000 customers in the US would be able to use their services until January 11th, 2022, the bank said in a statement, after which it would cease to operate in a market it first entered in 2019.

Instead the Berlin-based operation would “sharpen its focus on its European business”, where it already operates in 24 countries and is exploring expansion into more eastern European markets.

N26 said it would also look to launch new “investment products in the coming year” to sit along side its current account service.

Founded in 2013, N26 offers free, online-only banking services to around seven million clients and is one of Germany’s most high-profile financial technology or “fintech” firms.

In October, the bank raised $900 million from private investors, and announced a plan to hire a further 1,000 employees to reinforce its product development, technology and cybersecurity teams.

READ ALSO: German online bank N26 to create 1,000 jobs

At home, N26 has been in the crosshairs of the German banking watchdog BaFin since 2018 after a local news media investigation found that it was possible to open account with forged IDs.

Earlier in the month, the regulator said it was upping its oversight operations at N26, appointing a special representative to monitor the bank’s progress towards solving issues in “risk management with regard to IT and outsourcing” identified by BaFin.

The regulator also limited the number of new customers N26 could take on to 50,000 a month until the shortcomings were addressed.

N26 was already being monitored by BaFin over failures in the start-up’s anti-money laundering system.

BaFin issued N26 with a 4.25-million-euro ($4.8-million) penalty earlier this year in connection with around 50 “suspicious transactions” the bank failed to report promptly enough.

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