FMS Wertmanagement closes first half of 2013 with a profit of EUR 75 million
Total assets down 19.6 percent to EUR 198.2 billion – Nominal volume of the portfolio reduced by 6.1 percent to EUR 128.5 billion – Positive outlook
FMS Wertmanagement, the Federal government’s winding-up institution, which is tasked with winding-up the risk positions and non-strategic operations of the HRE Group, is making more progress than expected with unwinding the portfolio in a manner that maximises its value. FMS Wertmanagement generated a positive result from ordinary activities of EUR 75 million in the first half of 2013 (H1 2012: EUR -50 million). The nominal volume of the acquired portfolio was reduced by 6.1 percent in the first six months of 2013 to EUR 128.5 billion. Since its takeover effective 1 October 2010, an aggregate amount of EUR 47.2 billion (26.9 percent) of the portfolio has been wound up.
"This means that we have substantially exceeded our planned target for the wind-up. FMS Wertmanagement's portfolio management intends to continue utilising the favourable conditions in a number of markets so that we can part with loan exposures, bonds and other financial products more quickly and in a manner that maximises their value," said Dr. Christian Bluhm, Executive Board spokesman of FMS Wertmanagement.
FMS Wertmanagement's total assets have also been substantially reduced once again since the beginning of the year, contracting by 19.6 percent in six months to EUR 198.2 billion. Apart from sales as well as extraordinary and contractual repayments as part of the unwinding of the portfolio, factors that contributed to the sharp drop in total assets include a continued substantial reduction of own issuances bought back that are held to hedge funding transactions and a decrease in collateral to be furnished in derivatives transactions.
Net interest income of EUR 320 million, which was down 16.0 percent year on year, remained the main driver of the positive result for the first half of the year. This decrease is attributable in particular to the continued portfolio wind-up.
Net commission income, which largely comprises fee and commission income from lending and derivatives transactions, amounted to EUR 43 million (H1 2012: EUR 25 million).
General and administrative expenses totalled EUR 174 million in the first half of 2013. This figure includes expenses of EUR 104 million for service fees. The highly complex transfer of servicing activities from the HRE Group to a separate service entity as required by the European Commission will be completed on time. "Servicing expenses are expected to decrease noticeably as the portfolio wind-up progresses in the coming years," Bluhm explained. "Overall, administrative expenses are already much lower than the sum of net interest income, commissions and other operating income. The efforts being made in portfolio management, together with a balanced funding structure, are thus paying off because with the assets entrusted to us we are not only generating revenue to cover the costs FMS Wertmanagement incurs for its operations, but also making a substantial contribution to earnings."
In the first six months of 2013, net expenses for risk provisions and net income from investments totalled EUR 122 million (H1 2012: EUR 280 million). This is primarily due to additions to special and general loan loss provisions as well as to reversals of previously written-down securities.
Hidden losses on the securities in the investment portfolio were reduced from EUR 12.5 billion at the end of 2012 to EUR 11.8 billion as at 30 June 2013.
One focus of FMS Wertmanagement's capital market activities in the first half of 2013 was the United States, given that just under one quarter of the asset portfolio is US dollar denominated. FMS Wertmanagement successfully completed several US dollar denominated issuances including its second benchmark bond under its SEC-registered issuance programme. It also placed euro denominated bonds and foreign-currency bonds denominated in sterling and Canadian dollars with international investors to be able to refinance these portfolios directly in their foreign currencies. On account of the accelerated portfolio wind-up, total issuance volume across all capital market instruments in the first half of 2013 amounted to EUR 5.4 billion (2012: EUR 19.7 billion). As an institution of the Federal government, FMS Wertmanagement's activities are underpinned by top ratings from all leading rating agencies.
FMS Wertmanagement had 139 permanent employees at the end of June. "We have completed staff recruitment at FMS Wertmanagement and are well below the limit of 170 permanent employees approved by our boards in the target model," said Executive Board spokesman Bluhm. "Recently, given that the unwinding of our portfolio is progressing so fast, we have tended to hire temporary staff to ensure that FMS Wertmanagement remains highly flexible on the workforce front."
For 2013 as a whole, Bluhm expects a positive result – similar to in 2012, when the result from ordinary activities was EUR 37 million. "Provided there are no negative surprises in the coming months as a result of significant market movements, we will close 2013 on a positive note as expected and continue to push the unwinding of the portfolio in a manner that maximises its value.”
Die FMS Wertmanagement war im Juli 2010 gegründet worden, um Risikopositionen und nicht strategienotwendige Geschäftsbereiche der HRE-Gruppe zu übernehmen und verlustminimierend abzuwickeln. Die günstige Refinanzierung an den Kapitalmärkten spielt dabei eine entscheidende Rolle. Eigentümer der FMS Wertmanagement ist über den Sonderfonds für Finanzmarktstabilisierung (SoFFin) zu 100 Prozent die Bundesrepublik Deutschland.
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