Dublin-based Depha bank posted €79.4m loss before sale deal

Dublin-based Depfa Bank posted a net loss of €79.4 million last year ahead of a deal by its owners, a German state bad bank, to sell the business to Austrian lender Bawag, which will continue the orderly wind down of the business.

The loss compared to a €94.9 million loss for 2019, with the outcome for both years heavily influenced by transactions to speed up the running down of its assets and liabilities.

“As a consequence of the wind-down strategy of the Depfa Group and the continued reduction in portfolios, the Depfa Group continues to be loss-making as revenues are not sufficient to cover the operating costs,” the bank said in its latest annual report.

Depfa, a former high-flying German public sector finance bank that moved its headquarters to Dublin in 2002, was bought by Munich-based Hypo Real Estate in 2007, a year before the Irish bank ran into funding problems in the wake of the collapse of Lehman Brothers.

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While Hypo Real Estate agreed to sell Depfa under a restructuring plan tied to its own bailout during the financial crisis, the German government pulled the transaction in 2014 and transferred the business to state-owned bad bank FMS Wertmanagement (FMS-WM).

FMS-WM hired investment bankers in Barclays to launch a fresh attempt to sell Depfa last year, resulting in Bawag agreeing to buy the business in February for an undisclosed price.

While Depfa’s balance sheet has shrunk by 95 per cent since it was taken by FMS-WM to €2.5 billion as of last December, even after paying over a €150 million dividend late last year to FMS-WM, Depfa’s latest set of financial figures show that it continues to have €621.4 million of capital in reserve, a multiple of what it is required to hold for regulatory capital purposes.

Bawag has said that it will be able to make money from continuing to run down the former public-sector lender’s low-risk assets. It would also give the Vienna-headquartered bank access to Depfa’s excess capital reserves.

Depfa, led by chief executive Fiona Flannery, had 91 employees at the end of last year, down from 108 a year earlier.