Bad Bank FMS successfully shrinks

Bad Bank FMS successfully shrinks

The FMS Wertmanagement logo at the company headquarters in Munich. photo

© Andreas Gebert/dpa

In 2010, the federal government nationalized the scandalous Hypo Real Estate (HRE) bank. The “bad bank FMS” covered the billions in costs. So far, she has managed to achieve her ever-increasing shrinkage goal.

The Munich bad bank FMS, responsible for settling the legacy of the scandalous Hypo Real Estate (HRE) bank, is seeing its profits decline. Last year, the state-owned company reduced its portfolio of former HRE securities by five billion euros and made an annual profit of 36 million euros. “Once again, a very successful exercise,” board spokesman Christoph Müller said on Tuesday. The increase in interest rates was beneficial for the FMS – as for normal banks: net interest income increased by 35 percent to 528 million euros.

In October 2010, the FMS took over a total of risky securities worth almost 176 billion euros from HRE. More than three-quarters of these have now been reduced, partly through disposals, and some securities have simply expired. At the end of 2023, there were still 44.4 billion euros left, this year the council wants to reduce another four to six billion.

The mission of the FMS is self-dissolution, but this may take longer than initially expected. The longest-lasting security in the FMS portfolio has a term until 2078. The FMS hopes to be able to sell this and other “long-term securities” before then. But it is unclear how long the FMS will continue to exist. “We don’t have a specific end date at the moment,” Müller said. “We're currently working on further developing the operating model and then really deciding over the course of the year how we're going to do that.”

However, the reduction in business ordered by the federal government is currently proceeding as planned. “We had no defaults last year and we didn't have to issue any deferrals,” said Chief Financial Officer Carola Falkner. The FMS is therefore not affected by the crisis in the office real estate market because the public company has already reduced this part of the portfolio.

“The portfolio challenges are different and they still exist,” Falkner said. On the one hand, she spoke about long-terms and, on the other hand, about the numerous complex financial products from the years before the international financial crisis of 2008, for which there are no buyers yet on the financial market .


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