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Bad bank lost €10 billion last year, more to come

The Local · 3 Jul 2012, 14:53

Published: 03 Jul 2012 14:53 GMT+02:00

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Greek investment write-offs contributed most of the losses registered by the nationalised Hypo Real Estate “bad bank” last year, said Christian Bluhm, head of FMS Wertmanagement, which is managing the portfolio of HRE's toxic assets.

Further billions could be lost in Italy and Spain, he admitted. “The outcome of the euro crisis is the match-decider for us,” said Bluhm.

HRE losses will be picked up by the government's bank rescue fund Soffin – essentially the taxpayer. Autumn 2010 saw €175 billion in junk bonds and other loans pumped into the bank to stabilise it.

The purpose of the “bad bank” is to contain all the toxic assets and to manage them with as small a loss as possible. The investments should be sold as and when they can be, and the bank then closed down, but this is proving difficult to do.

Its Greek investments have already made a loss of nearly €8.9 billion. The portfolio was reduced by 8.5 percent to €160.7 billion by the end of last year.

A large share of the remaining bonds last until at least 2040, while some run until 2070 – which puts the original plan to wrap up the bank by 2020 in some serious doubt.

“Maximising value comes before pure liquidation,” said Bluhm, although he would not set a timetable for the end of the bank. It is feared that losses of around €21 billion are still lurking, as many of the bonds that have not yet been written off are worth considerably less than on the books of FMS Wertmanagement.

The HRE bank had nearly €30 billion invested in Italy, and around €10 billion in Spain. Bluhm said the current uncertainty in Europe meant he could not offer a prognosis for this year – which leaves open the question of how much money the HRE will need from the government.

“It would simply not be legitimate to put a figure on it,” he said, although he said it looked as if 2012 would not be as bad as 2011.

The former head of the bank Georg Funke, maintains his innocence in its collapse – in an interview with ZDF broadcaster’s “Frontal 21” show, he complained his reputation had been ruined, “on the basis of false allegations.”

He said even his resignation was, “not legally tenable”, and blamed the then finance minister, Peer Steinbrück. “Mr Steinbrück ruined the bank,” said Funke, speaking from his home on the Spanish holiday island of Majorca.

Story continues below…

Steinbrück spoke at the end of September 2008 of a looming HRE bankruptcy. It nearly collapsed that year, but was rescued with government cash injections.

DPA/DAPD/The Local/hc

The Local (news@thelocal.de)

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Your comments about this article

16:13 July 3, 2012 by smart2012
This is what Merkel has always hidden. Just pointing fingers to otrher countries, and not saying that the great german banks poured money in Greece until yestrday...

And now I (taxpayer in Germany) will have to pay the bill.. And if greece debt would have been payed out last year, the bill now would be much lower...

Well done Merkel...
21:26 July 3, 2012 by taxpayerrr
Local discovered the taxpayers in Germany.
21:35 July 3, 2012 by PNWDev
Hey @smartguy,

You forgot two things:

1) you are part of the 99%, you don't have to pay taxes remember? We will make up the shortfall by issuing Eurobonds so don't worry, and 2) you forgot your two signature talking points at the end of you post - (keep voting Merkel................keep reading Bild).

You are losing it brother, maybe time to hang it up and go invent something.
10:02 July 4, 2012 by smart2012

you r tracking me mate :-)

Yes, I'll keep repeating myself, as Europe has wasted one year plus nationalism has increased thanks to Merkozy great strategy...
18:44 July 4, 2012 by Anth2305
Don't panic Mr. Manwaring, the IMF predicts that the German economy will recover this year and lead the eurozone back to growth...
21:38 July 4, 2012 by PNWDev

Hitler's nationalism is not the only definition for nationalism. There are variances of nationalism all over the world. Some can be truly patriotic and respectful, and some can be truly radical and racist.

It is ok, you can go back to the garage and keep thinking of something to invent so you can make lots of money and pay lots of taxes.
12:28 July 5, 2012 by AlexR
"Germany is not bailing out Europe, it is rescuing itself"

"The ECB and eurozone governments, as well as bailing out other members states, have quietly been rescuing German banks and, by extension, German savers. Without these emergency operations, the eurozone would have broken up, German banks would have gone bust and the savings of many ordinary Germans might have been wiped out. More likely the German taxpayer would have had been forced to bail out those banks.

So, as the German people distribute blame for the situation in which they find themselves, they should not ignore their own bankers. If those institutions had not made these investments and financed the current account deficits of Germany's neighbours for so many years, their country would not be on the hook for hundreds of billions of euros of bad debts.

Yet this is something German politicians refuse to acknowledge."

15:23 July 9, 2012 by BR549
I would rather put my money into Currywurst than the Eurozone...
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