Hypo Real Estate bank is facing the possibility of damages claims from shareholders after it shocked the market with unexpected news of significant losses caused by the subprime mortgage crisis in the US.
Hypo Real Estate bank is facing the possibility of damages claims from shareholders after it shocked the market with unexpected news of significant losses caused by the subprime mortgage crisis in the US.
Two law firms said on Wednesday they have been hired to investigate whether the German bank mislead its shareholders.
Hypo Real Estate lost a third of its market value on Tuesday as investors reacted to the unexpected news of a EUR 390 mln writedown on EUR 1.5 bn of collateralised debt obligations (CDOs).
Presenting its preliminary full-year figures for 2007, the Germany property lender said its exposure to asset-backed CDOs - which have come in for a lot of bad press since the onset on the subprime mortgage crisis in the US - is now less than EUR 1 bn.
Investors were not reassured however and dumped Hypo stock. The bank’s shares closed down just over 35% at EUR 21.64. Commerzbank and other German lenders saw their shares dragged down on Hypo’s disclosure. The news was all the more surprising as the Munich bank had indicated several times recently that the subprime crisis had not affected it in a significant way.
In a decidedly upbeat statement on its 2007 results Hypo said the adjusted pre-tax profit would come to EUR 1.24 bn, almost mirroring the amount in 2006. However the result for last year includes the results of Dublin-based lender Depfa which Hypo acquired in October.
Hypo further angered shareholders by announcing the board will recommend cutting the dividend payment for 2007 to 50 cents from EUR 1.50 the year before.
