“I have yet to find a good explanation as to why major banks around the world all failed about the same time; especially those tied to real estate lending (like Duesseldorfer Hypothekenbank AG)…
…These non-U.S. banks weren’t originating American subprime and Alt-A home loans, so their national real estate bubbles and busts (and banking collapses) must have been triggered by something else? And if there bubbles and busts were triggered by something else, wouldn’t it be logical that the U.S.’s was also (as I have so thoroughly described/discussed on this blog)?”, Mike Perry, former Chairman and CEO, IndyMac Bank
German Banking Association Bails Out Real-Estate Lender
Decision Follows Austria’s Move to Halt Debt Repayments from Heta
By Eyk Henning
FRANKFURT—Germany’s private-banking association has jumped in to save real-estate lender Duesseldorfer Hypothekenbank AG from collapse, in the latest sign of how Austria’s decision to halt debt repayments from Heta Asset Resolution is reverberating through Europe’s financial system.
“The private bank association’s deposit insurance is providing a guarantee and shields [the bank from losses on] Heta bonds in order to remove acute risks. The goal is to take over Duesseldorfer Hypothekenbank,” the association, known as BdB, said.
BdB’s move means the planned sale of the real-estate lender, known as Duesselhyp, by U.S. financial investor Lone Star to a consortium of investors won’t go through.
It also represents the second time the BdB is rescuing Duesselhyp, after a first bailout in 2008.
Ratings firm Fitch last week said such an event could occur after Austria’s Financial Market Authority announced it would halt debt repayments from nationalized Heta, the wind-down vehicle established to sort out the unwanted assets of defunct lender Hypo Alpe Adria.
The regulator previously discovered a €7.6 billion ($7.98 billion) capital gap on €18 billion in assets.
Fitch said the German banking sector stands to lose up to 10% of its net profit this year following Austria’s decision, adding that Duesselhyp will need fresh capital to avoid failure.
The German finance ministry said Monday it welcomes the Duesseldorfer Hypothekenbank decision but doesn’t expect problems relating to Heta to spill over to other German banks.
“We don’t see such a development….I think this concerns an isolated case, which was solved over the weekend by private banks in Germany in a convincing manner,” ministry spokesman Martin Jaeger said.
Other German lenders affected by Heta are regionally owned lender NordLB, which last Friday said it has a total €380 million outstanding to Heta.
Another regionally owned bank, Bayerische Landesbank, has €2.35 billion in unsecured credit lines outstanding to Heta—the largest exposure of all German banks.
Although these aren’t directly affected by the moratorium for bond payments, officials have said BayernLB will have to write down some of its exposure to Heta, denting last year’s results.
State-owned real-estate lender Deutsche Pfandbriefbank said this month that it had to book €120 million in provisions to cover potential losses from its exposure to Heta, reducing its preliminary 2014 pretax profit by about 70% to €54 million.