Eurohypo

Hypothekenbank Frankfurt AG, previously Eurohypo AG, was wound down in 2016. Its portfolios were transferred to Commerzbank AG. The banking and pfandbrief licenses were returned and Hypothekenbank Frankfurt AG was transformed into a service company LSF Loan Solutions Frankfurt GmbH.[1]

Hypothekenbank Frankfurt AG was a European real estate bank based in Eschborn, Frankfurt. Eurohypo was 100% owned by Commerzbank. It was the eleventh-largest bank in Germany with a balance sheet of € 214.2 billion in 2007.[2]

Hypothekenbank Frankfurt AG (previously Eurohypo AG) is a leading international specialist bank for real estate and public finance. The bank is also the Pfandbrief issuer within the Commerzbank Group. Eurohypo’s business model is based on a common platform of real estate and public finance. Bloomberg News termed Eurohypo "problematic" and that it might be transferred to a "bad bank" within Germany's bank rescue fund SoFFin in an effort to help repair Commerzbank's capital deficit.[3]

The Real Estate division of the company includes commercial real estate financing in Germany as well as numerous countries in Europe, the USA and Asia.

The Public Finance division covers

The business division Treasury is in particular responsible for:

Commercial Real Estate Lending through the credit crisis. Eurohypo has had a mixed performance during the recession.[4]

• Conventional public sector lending, i.e. central governments, federal states and municipalities or borrowers guaranteed by these
• Financing and consulting for public private partnership projects, as a "Centre of Competence" within the Commerzbank Group
• Pfandbrief refinancing and covered pool management

• Fulfilment of guidelines in regards to covered pool management
• Refinance of the commercial real estate portfolio

Background

Eurohypo was formed in 2003 as a subsidiary of Deutsche Bank, Dresdner Bank and Commerzbank,[5] which agreed with each other to combine all of their real estate lending operations globally into a new bank. It was formed after all three German banks suffering years of writedowns on their real estate lending books, and having to hold greater amounts of regulatory capital against such exposures. By combining their three exposures, Eurohypo became an off-balance sheet subsidiary for all three banks, as no one shareholder had a dominant stake. It also created a bank with greater headcount and administrative overhead than any of its competitors, with none of its three main shareholders directly responsible for its strategic direction. The original intention was for Eurohypo to be listed as an independent bank on the Deutsche Boerse. In the summer of 2005, with equity markets buoyant and Dresdner Bank and Deutsche Bank keen to float Eurohypo, Commerzbank was concerned about the proposed flotation. Commerzbank's own revenues, which were largely linked to the German mid-cap corporate sector, had not recovered at the rate of the rest of the German economy, and more than 40% of its earnings came from its stake in Eurohypo. If Eurohypo would become an independent bank, Commerzbank would become a relatively easy takeover target.

Commerzbank did not wish to face being acquired by a larger bank (with the risk which that would have posed to the jobs of its own board members) - they blocked the flotation of Eurohypo and offered to buy out the stakes of Deutsche Bank and Dresdner Bank. This move, whilst certainly making Commerzbank a larger and more difficult target, was a strange one from a strategic perspective: for years Commerzbank had wanted to rid itself of its exposure to real estate lending, all of its staff who understood real estate now worked for Eurohypo, and it had lost any ability within Commerzbank to understand the direction of the real estate markets or the risks of that business.

See also

• List of banks in Germany

External links