Eurohypo to reposition real estate business in 2009

Eurohypo, the commercial real estate financing arm of Commerzbank Group, said it will seek to reposition its business this year with the launch of a new plan for its real estate activities. The bank, which unveiled a pre-tax loss of EUR 1.4 bn for 2008, said 'it will pay particular attention to which kind of real estate financing it will offer in which markets - and in which organisational form it will do so.'

'2009 is set to be a very challenging year. By swiftly implementing the project's findings within the first half of 2009, we aim to ensure the bank's sustainability,' said Board spokesman Frank Pörschke. The new business model will also be implemented in the Public Finance division.

According to preliminary figures, the company swung to a loss of EUR 1.4 bn this year from a profit of EUR 588 mln in 2007 mostly as a result of valuation corrections and the integration of Essen Hyp. The bank's net interest income came in at EUR 1.15 bn, just below the previous year's level of EUR 1.18 bn. The German bank said the crisis was mostly felt by its public finance business which closed with a loss of EUR -949 mln.

'Eurohypo's risk diversification was not able to help as much as planned, due to the global extent of the effects of the financial and economic crisis. Eurohypo's strong ties to its home market Germany had a positive impact,' the bank said in a statement.

As a result of the valuation adjustments on the US residential mortgage-backed securities portfolio (EUR -454 mln), the commercial real estate financing business recorded a negative performance last year, amounting to EUR -339 mln. At year-end 2008, Eurohypo had written down 80% of its subprime investment portfolio. New real estate business amounted to almost EUR 14 bn last year despite the crisis in the financial markets.