The European Commission has instructed Commerzbank, Germany's second-largest bank, to sell its property finance unit, Eurohypo, as a condition for EC approval of the EUR 10 bn in state aid it has received.
The European Commission has instructed Commerzbank, Germany's second-largest bank, to sell its property finance unit, Eurohypo, as a condition for EC approval of the EUR 10 bn in state aid it has received.
Eurohypo is an international specialist in real estate and public financing in Germany and Europe, the US and Asia. The property financier posted a pre-tax loss of EUR 1.4 bn last year. Commerzbank has been given until 2014 to divest Eurohypo.
In the meantime, Commerzbank has embarked on a major restructuring, entitled Roadmap 2012, to help it deal with the global financial crisis and the integration of Dresdner Bank, which it acquired last year. The sale of Eurohypo is part of Commerzbank's renewed focus on Germany-related client business and reduction of portfolios not fitting the core business.
Commerzbank said risk-weighted assets will be reduced and activities refocused in Commercial Real Estate, Public Finance and Shipping. In commercial real estate financing, Commerzbank will reduce its portfolio from EUR 80 bn at end-2008 to about EUR 60 bn by the end of 2012.
Eurohypo will focus on core clients in 10 markets worldwide. From the end of 2011 onwards one-third of the current cost base - equalling around EUR 110 mln annually - will be cut. As part of the restructuring, 390 full-time positions will be reduced by the end of 2011.
By 2012 the risk-weighted assets of the bank will be reduced to EUR 290 bn, Commerzbank said.
