Result from ordinary activities of EUR 373 million
Portfolio reduced by 10.7 % to EUR 106.3 billion
Total assets down 2.2 % to EUR 183.6 billion
FMS Wertmanagement today announced that it finished fiscal 2014 with strong growth in its result from ordinary activities, which amounted to EUR 373 million (previous year: EUR 146 million). The federal winding-up institution, which was established in 2010 to take over risk positions and operations of the HRE Group, has thus generated a profit for the third year in a row.
“Our portfolio managers were able to continue to use the favourable conditions in many market segments to unwind the portfolio more quickly, but yet profitably," said Executive Board Spokesman Dr. Christian Bluhm. “FMS Wertmanagement wound up numerous exposures, achieving very good results and enhancing earnings.”
In the past fiscal year, the portfolio decreased by 10.7 %, from EUR 119.1 billion to EUR 106.3 billion. Since the transfer, the federal winding-up institution has therefore wound up a total of EUR 69.4 billion, or 39.5 % of the original portfolio.
Total assets decreased by EUR 4.0 billion or 2.2 % to EUR 183.6 billion in 2014. This relatively small decline compared with the portfolio reduction was caused by two market effects: firstly, movement in exchange rates, and secondly, a sharp increase in collateral to be provided due to lower interest rates.
As expected, the net interest income of EUR 526 million (previous year: EUR 626 million) was 16.0 % lower than in the prior year because of the continued wind-up of the portfolio.
With an AAA rating by the three major rating agencies, FMS Wertmanagement was able to further utilise the low rates on money and capital markets. Capital market issues in the amount of EUR 11.6 billion were placed with investors. The yield spreads to issuers with comparable risk profiles were reduced further.
In the 2014 fiscal year, the net income from risk provisions (including net income from investments) was EUR 32 million (previous year: net expense of EUR 263 million). The change in this figure was mainly due to net reversals of specific loan loss provisions as well as profit from disposals.
Net commission income was EUR 56 million, down 44.0 % from the previous year’s figure of EUR 100 million.
General and administrative expenses were lowered by 26.6 % to EUR 245 million (previous year: EUR 334 million). The decline is largely the result of lower service and consulting fees, and the elimination of the need for IT transition costs.
The tendering process for privatisation of FMS Wertmanagement Service GmbH is at an advanced stage and is expected to be completed by the end of the second quarter.
In 2014, FMS Wertmanagement was tasked with winding up Dublin-based DEPFA Bank plc (DEPFA) and its subsidiaries. DEPFA will remain in existence as an independent banking group within the FMS Wertmanagement Group. Ownership was transferred on 19 December 2014. The newly installed management team is revising the business plan and will align DEPFA’s activities with the requirements of winding up the business while maximising value. “The objective here is to pull DEPFA out of the red in the medium term and enable a repayment of equity,” stated Executive Board Spokesman Dr. Bluhm.
In 2015, FMS Wertmanagement plans to wind up another approximately EUR 11 billion of the portfolio. The Executive Board of FMS Wertmanagement expects to break even, provided no unexpected risks materialise.
FMS Wertmanagement was founded in 2010 with the aim of winding up the risk positions and operations that were transferred to the company from the Hypo Real Estate Group (HRE Group) effective 1 October 2010. As a financially independent entity under public law, FMS Wertmanagement defines the best possible wind-up strategies in each case and implements them based on the following maxim: seize opportunities for generating income and minimise losses. FMS Wertmanagement is supervised by the Federal Agency for Financial Market Stabilisation (FMSA). The Financial Market Stabilisation Fund SoFFin is obligated without limitation to provide additional funds under Section 8a of the German Law Establishing a Financial Market Stabilisation Fund (Gesetz zur Errichtung eines Finanzmarktstabilisierungsfonds - FMStFG) for losses incurred in winding up the portfolio.