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Hypo looks to outsource problem loans

Hypo Real Estate Group, the newly-nationalised German bank, said today it is examining ways of separating its problem loans into a ‘wind down’ bank. The lender is also reducing its global headcount by 1,000.

Newly-nationalised Hypo Real Estate Group is considering outsourcing its bad loans into a “wind down” or “consolidation bank”, the firm said today.

The German lender also said its employee headcount would be reduced by approximately 1,000 in two steps.

Hypo, which was taken over by the German state bail-out entity SoFFin earlier this month, revealed the plan in a statement about its second quarter position.

It said it would take a hit of “at least the high three-digit million [€3 million] region” owing to the financial crisis and economic downturn. It added its second quarter results would be released on 7 August.

Hypo is now examining possibilities for outsourcing significant portions of its problem loans as well as its non-strategic value portfolio into a “wind-down institute.” This will be known as a “consolidation bank”.

The bank said this model could improve its balance sheet and free up the heathier, strategic, elements of the bank.