Commerzbank to wind down property lending business

Germany's Commerzbank plans to pull out of commercial real estate financing altogether as part of an accelerated shift towards more profitable core activities. The move marks a reversal of the state-backed bank's original plan to group its real estate and ship finance activities in a new unit and integrate it within its core business.

Commerzbank cited high capital and liquidity requirements under the Basel III bank regulations, especially for long-term financing, as a reason for the U-turn. The bank will continue to offer real estate financing for private and corporate customers.

'Against the background of the ongoing financial and sovereign debt crisis, an end to which is not foreseeable, and of the uncertain regulatory environment, we are subjecting all the business areas to a rigorous review,' managing board chairman Martin Blessing said in a statement.

'In the course of this process we have as an initial move, therefore, decided to reduce the business areas originally planned for the new Real Estate and Ship Finance segment in the course of time or transfer them to the Core Bank,' he added.

Eurohypo, Commerzbank's real estate lending arm, is to be renamed Hypothekenbank Frankfurt after a former predecessor institute, with its European loan portfolio set to dismantled in due course to meet European Commission requirements to wind up the lender. The rebranding is likely to take effect from 31 August 2012.

Eurohypo recently sold a $760 mln (EUR 605 mln) performing loan portfolio in the US to US Bancorp, Wells Fargo Bank and Blackstone Group. The package, consisting of 13 loans backed by office, retail, industrial and multifamily assets across the country, was divested for an average 5% discount to par value.