Troubled German property financier Hypo Real Estate plans to cut 800 of its 1,800 staff over the next three years to reduce costs and streamline its business structure. The sale of non-strategic activities is also being considered.
Troubled German property financier Hypo Real Estate plans to cut 800 of its 1,800 staff over the next three years to reduce costs and streamline its business structure. The sale of non-strategic activities is also being considered.
Two-thirds of positions earmarked for termination are located outside Germany. An additional 200 redundancies will occur until 2013 on the completion of an IT investment programme.
In a statement, Hypo Real Estate said the restructuring will enable it to adapt its business model to the 'profound changes' in the capital markets environment. The bank hopes to reduce annual costs by about EUR 200 mln by 2011. The bank's Depfa Deutsche Pfandbriefbank unit is to be fully integrated into the group.
The restructuring will involve expenditure of about EUR 400 mln, of which about two thirds will be accounted for in the fourth quarter of 2008. Hypo Real Estate said it expected to report a negative annual result for 2008.
The restructuring plan was drawn up after the bank received a EUR 50 bn lifeline in October from a public-private consortium to avoid a credit squeeze. Hypo Real Estate said the strategic realignment was a prerequisite for the support measures provided by the federal government and for continuing support from the bank rescue fund SoFFin.
Under the plan approved by the board, the bank will reposition itself as a business partner to real estate investors in Germany, key European markets and the US. New business in this segment will be generated from the group's offices in Munich, London, New York and Paris.
In the area of public sector finance, Hypo Real Estate will concentrate on selective origination of business in Europe that is eligible for inclusion as cover assets for Pfandbriefe, and on managing the existing portfolio. No new business is planned in infrastructure finance. Capital markets and trading activities that are no longer in line with the business model will be discontinued, which may involve the sale of assets.
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