Press release of FMS Wertmanagement on the 2012 annual report
FMS Wertmanagement generates profit in 2012
FMS Wertmanagement today announced that it finished the 2012 fiscal year with positive earnings of EUR 37 million. The winding-up institution, which was established in 2010 to take over the risk positions and non-strategic operations of the HRE Group, has thus produced its first profit.
"In the previous year, the write-downs of Greek bonds resulted in a large loss, while in the short 2010 fiscal year, it was the required risk provisions for the transferred portfolio," states Executive Board spokesman Dr. Christian Bluhm. "2012 was a year without macroeconomic pressure on the portfolio of FMS Wertmanagement. The positive result underscores the fact that, in years without extraordinary pressures, FMS Wertmanagement's portfolio can be managed without a loss, and at
the same time wound up further."
In the fiscal year ended, the portfolio was reduced by 14.8% to EUR 136.9 billion. Since the transfer, EUR 38.8 billion has been unwound. In addition to the wind-up, FMS was able to restructure a large part of the portfolio, which reduced complexity and substantially improved the risk-return profile. "Often we do not sell individual exposures immediately when the opportunity arises, because we are not prepared to accept the price markdowns demanded by the market. In the case of such assets, the portfolio managers work on improving the portfolio’s quality through restructuring. In this way, we will generate better results over time," says Executive Board member Bluhm.
Contributing substantially to the net income for the year was the increased net interest income, which amounted to EUR 729 million and was 32.1% higher than in the first full fiscal year 2011. FMS Wertmanagement has gained a foothold in the market with its funding programmes and was able to further improve its funding structure. The favourable circumstances on capital markets were used to raise EUR 34.9 billion, around EUR 10 billion more than planned for 2012.
Net commission income, which largely comprises income and expenses from credit and derivatives transactions, was EUR 89 million, up approximately 50.8% on the prior-year figure. The elimination of expenses for guarantees of the Financial Market Stabilisation Fund (SoFFin) and one-off effects resulting from the restructuring of derivatives played a key role here.
General and administrative expenses were lowered slightly by 2.6% to EUR 338 million. This figure includes expenses of EUR 214 million for services provided by the HRE Group to FMS Wertmanagement.
In the case of income from risk provisions, FMS Wertmanagement benefited from the macroeconomic conditions and generated income of EUR 32 million, particularly from reversals of general loan loss provisions. Expenses in the net income/loss from investments totalled EUR 465 million. The majority of this figure resulted from FMS Wertmanagement's participation in the exchange of Greek government bonds and the associated necessary closing out of derivatives positions. In addition, write-downs of securities and the recognition of provisions for expected losses for derivatives led to the net loss from investments.
Total assets decreased year-on-year by 27.9% to EUR 246.4 billion. In addition to portfolio wind-up, the decline is mainly due to the reduction of own issues by 49.5% to EUR 65.2 billion; these were held to hedge funding transactions. By the end of the first quarter of 2013, the loss compensation claim in respect of SoFFin was satisfied completely by SoFFin payments totalling EUR 9.3 billion and with a share of the net retained profits. The share of the net retained profits remaining thereafter
was EUR 17.0 million and will accrue to SoFFin.
The hallmark project for FMS Wertmanagement in 2013 is the termination of the service provider relationship with the HRE Group, which still provides an extensive range of services to FMS Wertmanagement under a cooperation agreement. This cooperation agreement must be terminated at the end of September 2013 according to an EU requirement. FMS Wertmanagement established its own service entity in April 2012 which will perform these services and to which employees of the
HRE Group can transfer. At the same time, a project group has been tasked with investigating options for the planned privatisation of the service entity.
"We are cautiously optimistic about the 2013 fiscal year," says Executive Board spokesman Bluhm, “if 2013 – as 2012 – develops without any material macro risks."
FMS Wertmanagement was founded in 2010 with the aim of winding up the risk positions and non-strategic 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 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.
If you have any questions, please do not hesitate to contact Andreas Henry, Head of Communications, at +49 89 954 7627 250 or by email at