Result from ordinary activities of EUR 46 million
Nominal volume of the portfolio reduced to EUR 65.6 billion
FMS Wertmanagement (FMS-WM), the German federal government’s winding-up institution, today announced that it generated a positive result from operating activities of EUR 46 million in the first half of 2020 (H1 2019: EUR 70 million).
The nominal volume of the portfolio was reduced by EUR 2.7 billion compared with the beginning of the year. Taking into account foreign currency effects of EUR -1.0 billion, the portfolio’s nominal volume contracted to EUR 65.6 billion as at 30 June 2020. The cumulative wind-up of the portfolio since 2010 amounts to EUR 110.1 billion, or 62.7 percent.
Total assets of FMS-WM as at 30 June 2020 increased to EUR 163.4 billion (31 December 2019: EUR 146.5 billion). This increase is mainly attributable to the higher liquidity reserve and the increase in collateral provided for derivatives.
The balance of risk provisions and net income from investments of EUR -72 million is lower than in the same period of the previous year (H1 2019: EUR -2 million). Due to the existing market uncertainty in connection with the coronavirus pandemic, FMS-WM has accounted for potential effects on its portfolio by increasing risk provisions.
General and administrative expenses decreased to EUR 66 million in the first half of 2020 (H1 2019: EUR 68 million) and thus remain well below the balance of net interest and net commission income of EUR 155 million (H1 2019: EUR 144 million).
“Despite the challenging market environment, we continued our successful winding-up activities in the first half of 2020 and delivered a positive result,” said Spokesman of the Executive Board Christoph Müller. FMS-WM expects the coronavirus pandemic to have a sustained, significant effect on macroeconomic developments in the second half of 2020 as well. It is therefore still not possible to issue a reliable earnings forecast for 2020 as a whole.
On the funding side, FMS-WM raised a further EUR 5 billion in long-term funds via the Financial Market Stabilisation Fund (FMS) in the first half of 2020 as planned, which means that it has fully utilised the maximum volume of EUR 30 billion. In addition, FMS-WM raised the equivalent of EUR 2.3 billion in funds on the capital market in the reporting period.
Given the progress achieved since taking over the DEPFA Group and irrespective of the further wind-up strategy, FMS-WM continues to assume that winding up the DEPFA Group remains the favourable option compared with the sale that was not carried out in 2014. By publishing a sales announcement, FMS-WM launched an open, transparent, competitive and non-discriminatory auction process for the possible sale of 100% of the shares in DEPFA BANK plc in July 2020. In this context, the potential proceeds from selling the DEPFA Group are compared against the benefits to be gained from FMS-WM continuing to wind up the DEPFA Group.
FMS-WM 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. FMS-WM is supervised by the Federal Agency for Financial Market Stabilisation. The Financial Market Stabilisation Fund is obligated without limitation to provide additional funds under Section 8a of the German Law Establishing a Financial Market and Economy Stabilisation Fund (Gesetz zur Errichtung eines Finanzmarkt- und Witschaftsstabilisierungsfonds - Stabilisierungsfondsgesetz) for losses incurred in winding up the portfolio.