FMS Wertmanagement increases profit from winding up activities substantially in the first half of 2014
Positive result from ordinary activities of EUR 376 million for the first half year.
Nominal value of the portfolio reduced by 7.1 percent to EUR 110.7 billion.
Total assets down 3.5 percent to EUR 181.1 billion.
DEPFA takeover proceeding according to plan
In the first six months of 2014, FMS Wertmanagement was faster and more successful than expected in unwinding the portfolio transferred from the HRE Group in a manner that maximises its value. The federal government’s winding-up institution generated a positive result from ordinary activities of EUR 376 million (H1 2013: EUR 75 million). After tax, the profit for the first half year was EUR 331 million.
The nominal value of the portfolio was reduced by 7.1 percent to EUR 110.7 billion since the beginning of the year. Since its takeover effective 1 October 2010, an aggregate amount of EUR 65.0 billion (37.0 percent) of the portfolio has been wound up.
"Our portfolio managers continued utilising the favourable conditions in a number of market segments to wind up the portfolio more quickly. Even where a sale maximising the value of the portfolio was impossible, in many cases they were able to restructure exposures favourably, improving the prospects for the sale of such assets substantially in some cases," said Dr. Christian Bluhm, Executive Board spokesman of FMS Wertmanagement.
Total assets of FMS Wertmanagement decreased by 3.5 percent since the beginning of the year to EUR 181.1 billion.
Net interest income of EUR 277 million was down 13.5 percent year on year due in particular to the continued unwinding of the portfolio.
Net commission income, which largely comprises commission income from the lending and derivatives business, amounted to EUR 31 million (H1 2013: EUR 43 million).
General and administrative expenses totalled EUR 119 million in the first half of 2014 (previous year: EUR 173 million). This figure includes expenses of EUR 64 million paid for services provided by FMS Wertmanagement's service entity and external service providers.
In the first six months of 2014, the balance of the items dominated by valuations and sales (risk provisions and net income from investments) was positive at EUR 198 million (H1 2013: EUR -122 million). The year-on-year improvement is primarily attributable to favourable market trends and associated reversals of specific loan loss provisions as well as sales successes.
Hidden losses on the securities in the investment portfolio were reduced from EUR 9.9 billion at the end of 2013 to EUR 6.4 billion as at 30 June 2014.
On the funding side, the total issuance volume across all capital market instruments in the first half of 2014 amounted to EUR 7.0 billion (H1 2013: EUR 5.4 billion).
FMS Wertmanagement had 146 permanent employees at the end of June. Around 353 employees are employed at FMS Wertmanagement's service entity.
"In the second half of the year, we will continue to work hard on two major projects," said Executive Board spokesman Bluhm, "first, the ongoing selling process for the service entity, which is to be privatised by the end of the year and, second, the takeover of DEPFA, which in accordance with a decision by the Inter-Ministerial Steering Committee in May is to be wound up by FMS Wertmanagement."
For 2014 as a whole, the Executive Board of FMS Wertmanagement expects a positive result from ordinary activities.
FMS Wertmanagement was established in July 2010 for the purpose of taking over and unwinding the HRE Group’s risk positions and non-strategic operations in ways aimed at minimising losses. Favourable funding conditions in the capital markets are key to this endeavour. The Federal Republic of Germany is the sole owner of FMS Wertmanagement via the Financial Market Stabilisation Fund (SoFFin).
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