On 19 December 2014, following a decision by the Federal Republic of Germany’s inter-ministerial steering committee, FMS-WM acquired 100% of the shares in Ireland’s DEPFA BANK plc. which mainly holds the shares in two Pfandbrief banks, DEPFA ACS Bank in Dublin and DEPFA Pfandbrief Bank International S.A. in Luxembourg.
At the end of 2014, i. e. immediately after it was acquired by FMS-WM, the DEPFA Group had consolidated total assets of EUR 48.5 billion and capital of just under EUR 2 billion. By the end of 2016, its total assets were reduced to less than EUR 28 billion and thus far below the planned maximum of EUR 30 billion. The DEPFA Group’s capital amounts to approximately EUR 2 billion.
FMS-WM has been tasked with winding up the DEPFA Group in a way that maximises its value. This first required a strategic realignment, as prior to its transfer to FMS-WM, the bank had been preparing to be re-privatised and resume new business rather than be wound up.
Three key levers were identified for winding up the DEPFA Group in a way that maximises its value:
- Funding advantages enjoyed by FMS-WM as a result of its excellent rating and the explicit guarantee from the Federal Republic of Germany are also used by DEPFA Group where and as quickly as possible.
- Potential synergies emerging between FMS-WM, DEPFA and FMS-SG are identified and leveraged with a view to winding up these institutions as efficiently as possible.
- Buying DEPFA bonds and promissory notes (DEPFA liabilities) enables the cover pools of DEPFA Pfandbrief securities to be scaled down and thus the balance sheet to be trimmed. Significant progress was achieved on all three fronts in 2016.
In total, FMS-WM purchased DEPFA liabilities with a nominal value of EUR 6.0 billion from various investors in 2016. On 4 November, FMS-WM sold the repurchased DEPFA liabilities to DEPFA and in return acquired assets from DEPFA’s cover pools. The transaction was a significant contribution in trimming DEPFA’s total assets to less than EUR 30 billion in 2016 as planned. At the same time, DEPFA’s risk exposure was reduced, as the total amount of risk-weighted assets at DEPFA decreased significantly. As a result, the regulatory capital ratios rose sharply.
FMS-WM holds ongoing talks with other investors with the intent of purchasing more DEPFA liabilities. In addition, the Executive Board is always looking at different ways of speeding up the wind-up of the DEPFA Group. The options range from a sale through to dissolving or reorganising it.
Further information on DEPFA Bank plc is available on the website: http://www.depfa.com/