Profitable unwinding continued successfully in fiscal year 2024
Portfolio wound down by EUR 4.8 billion with targets to reduce complexity and risks achieved
Profit from ordinary activities of EUR 41 million for the year
Measures to further develop the operating model defined and implemented
FMS Wertmanagement (FMS-WM), the German federal government’s winding-up institution, today announced that it generated a result from ordinary activities of EUR 41 million for 2024, thereby achieving a positive result for the year for the thirteenth time in succession and meeting its own prior-year expectations for at least a breakeven result from ordinary activities.
The positive result for the year was driven mainly by net interest income of EUR 554 million, which continued to rise compared with the previous year (EUR 528 million). This is due to positive effects of the higher average levels of interest rates in 2024 and improved funding terms from borrowing through the German Financial Market Stabilisation Fund (FMS), although these effects were partly offset by the progressive unwinding of the portfolio.
In a challenging market environment, FMS-WM was able to reduce the portfolio by EUR 4.8 billion in fiscal year 2024, not including countervailing currency effects. The main drivers were scheduled and actively initiated repayments and sales, mainly in the Public Sector and Structured Products segments. Since the portfolio was transferred from the HRE Group on 1 October 2010, its original nominal value of EUR 175.7 billion has been reduced to EUR 40.8 billion as at 31 December 2024.
Christoph Müller, Spokesman of the Executive Board, comments on the portfolio reduction in fiscal year 2024:
“We have successfully implemented our strategy to reduce complexity and risks in the portfolio, thereby creating the foundation for further developing our operating model.”
The balance of risk provisions and net income from investments in the amount of EUR -413 million (previous year: EUR -322 million) reflects valuation and wind-up measures for the portfolio and derivatives. As in the previous year, risk provisions were significantly impacted by the allocation to the fund for general banking risks in accordance with Section 340g German Commercial Code (HGB). Together with equity, risk provisions and the fund for general banking risks serve as a buffer for any losses that might still arise during the further unwinding of the portfolio.
In fiscal year 2024, general and administrative expenses amounted to EUR 96 million, down EUR 6 million from the prior-year figure of EUR 102 million. This decrease is due predominantly to a further reduction in expenses related to portfolio servicing. Since 2019, general and administrative expenses have been reduced by EUR 42 million or 30%.
FMS-WM continued to work together with FMS Wertmanagement Service GmbH (FMS-SG) on achieving its objectives. In fiscal year 2024, the strategic options available to a future organisational and operational structure were evaluated taking into account qualitative and quantitative decision criteria. Measures identified for the further development of the operating model include a planned merger between FMS-WM and FMS-SG as well as structure and process optimisation aimed at consolidating and standardising the IT landscape. In line with the objectives for the future, outsourcing of significant activities and tasks is to be limited to IT services. Portfolio servicing and all related services are to be provided by FMS-WM as of 2027.
Christoph Müller, Spokesman of the Executive Board, comments on further developing the operating model:
“By taking these measures, we ensure that as income from the portfolio declines as a result of its unwinding, portfolio management expenses can also be reduced while at the same time maintaining a stable and high standard of quality.”
Carola Falkner, the Executive Board member in charge of Treasury and Asset Management, points out that FMS-WM continued to systematically optimise its funding in fiscal year 2024:
“By the end of the year, EUR 55.9 billion of the EUR 60 billion funding facility available through the FMS had been utilised. In total, new funding of EUR 11.0 billion was raised in the fiscal year. In combination with foreign exchange derivatives, FMS-WM once again used the euro-denominated funding obtained through the FMS for funding in British pounds and US dollars in fiscal year 2024.”
This strategy helps to significantly reduce funding costs both for the long-dated portfolio in British pounds and for fund raising in US dollars.
Subject to further geopolitical developments and other unforeseen macroeconomic events, FMS-WM anticipates at least a breakeven result from ordinary activities for fiscal year 2025.
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.
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