Financial Services

Austrian lender Bawag emerging as frontrunner to acquire Dublin-based Depfa

Depfa is former unit of Hypo Real Estate, which was bailed out in Germany

Bawag is Austria’s third-largest listed lender by market value. Photograph: iStock

Thu Feb 11 2021 - 16:58

Austrian lender Bawag Group is emerging as the frontrunner to acquire Depfa Bank, the public sector financier being sold by Germany, people with knowledge of the matter said.

FMS Wertmanagement, the state-owned bad bank that controls Dublin-based Depfa, is negotiating terms of a deal with Bawag, according to the sources. No final agreements have been reached, and another winner could still emerge, the people said, asking not to be identified because the information is private.

Kommunalkredit Austria and German regional lender LBBW had earlier been studying the business, the people said. Representatives for FMS, Bawag, Kommunalkredit and LBBW declined to comment.

Depfa is the former Irish unit of Hypo Real Estate Holding , which acquired the business in 2007 for more than €5 billion. When the financial crisis hit, Depfa was unable to secure short-term funding, forcing Hypo into a taxpayer-funded bailout.

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Banks have become more careful on lending after their asset quality was hit by the coronavirus pandemic. Vienna-based Bawag’s pursuit of Depfa would bring it a lender with low credit risk and a safe run-off portfolio after FMS spent years scaling back its balance sheet. The transaction could prove lucrative for Bawag, which would gain access to the excess capital Depfa has been holding.

Total assets

Depfa had €6.9 billion of total assets at the end of June last year, down from €8.9 billion at the end of 2019, according to its its interim report. Its tier 1 capital ratio stood at about 153 per cent as of June 30th.

Germany decided in 2014 to abandon an effort to sell Depfa, deciding instead to wind down the business. The state then transferred its Depfa stake to FMS.

Bawag is Austria's third-largest listed lender by market value. It was previously owned by private equity firm Cerberus, which sold the last of its stake in 2019. The bank reported fourth-quarter earnings this week that beat expectations and said it plans to pay €460 million of dividends this year, pending ECB approval. – Bloomberg

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