Hypo Real Estate reports $1.08 billion 2Q loss

[August 07, 2009]  BERLIN (AP) -- Nationalized German lender Hypo Real Estate Holding AG said Friday that it lost euro750 million ($1.08 billion) in the second quarter as hefty loan loss provisions weighed down its performance.

The net loss for the April-June period compared with a profit of euro12 million a year earlier. Provisions for losses on loans and advances grew to euro881 million from euro37 million.

This year's first half "was characterized by considerable impairments recognized in relation to our real estate credit portfolio," chief executive Axel Wieandt said.

"We continue to anticipate significant charges on results which will lead to a continuing loss situation," he added. "From today's perspective, we do not envisage a return to profitability before 2012."

Hypo Real Estate is the most prominent German victim of the financial crisis. It ran into trouble last September after its Dublin, Ireland-based unit Depfa Bank PLC failed to find short-term funding amid the widening credit crunch.

The government moved to nationalize the lender after shoring it up with hefty loan guarantees. It currently holds about 90 percent of Hypo Real Estate and is expected to complete nationalization this fall.

It has not nationalized any other banks, although it has taken a 25 percent stake in Commerzbank AG.

Munich-based Hypo Real Estate, which lost euro382 million in this year's first quarter, had warned in June that risk provisions would again lead to a "significant" burden on earnings in the second quarter.

The bank said its operating results also were hit by costs of euro257 million in the first half related to liquidity support provided to it by the government's financial-sector rescue fund.

Operating revenues improved to euro348 million in the second quarter from euro236 million a year earlier. However, they were lower over the year's first half, dropping to euro268 million from euro420 million.

Net commission income slipped into the red, showing a second-quarter loss of euro99 million and a first-half loss of euro207 million. Last year, Hypo Real Estate earned euro34 million on commissions in the second quarter and euro69 million in the first half.

For the January-June period, Hypo Real Estate's net loss was euro1.13 billion. In last year's first half, it had a net profit of euro160 million.

First-half loan loss provisions ballooned to nearly euro1.08 billion from euro70 million a year earlier.

The bank said nearly all of those provisions -- some euro1.05 billion -- were related to real-estate loans, with infrastructure and public-sector financing accounting for the rest.

It blamed "the further deterioration in regional economic conditions, particularly in the markets of North America, Southern Europe and Great Britain ... as well as in some segments in Germany."

Hypo Real Estate said its core capital ratio -- a key measure of a bank's health -- improved to 6.9 percent at the end of June from 3.4 percent on Dec. 31.

Its total assets declined by 8 percent during the first half, falling to euro386.4 billion from euro419.7 billion.

[Associated Press; By GEIR MOULSON]

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