Deutsche Hypothekenbank Frankfurt AG
ots Ad hoc-Service: Deutsche Hyp Ffm.-Ham. <DE0008076001>Additional Provisioning Required Following Portfolio Realignment at Deutsche Hyp
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Additional Provisioning Required Following Portfolio Realignment at Deutsche Hyp
On 26 July 2000 Deutsche Hypothekenbank Frankfurt-Hamburg AG disclosed an additional provisioning requirement which, at the time, was estimated at approximately Euro 200 million.
Dresdner Bank's Group Audit Division had uncovered particular risks associated with property finance in East Germany.
The bank's loan portfolio has subsequently been screened according to the risk criteria established by Dresdner Bank Group.
Deutsche Hyp does not envisage any sustained improvement in the unfavourable development in, and outlook for, the property market in various East German regions. It is the view of the Board of Managing Directors of Deutsche Hyp and Mr. Heinz-Jörg Platzek, who will take charge as its new Chairman on 1 January 2001, that these circumstances require that the value of the collateral be adjusted, in line with the valuations applied by Dresdner Bank AG.
These changes in valuation, in conjunction with additional exposure revealed in the course of the audit, have led to an increase in additional provisioning requirements from Euro 200 million, as originally indicated, to Euro 350 million.
Furthermore, Deutsche Hyp will set aside a general loan loss allowance amounting to Euro 150 million, which is not yet linked to any specific risks.
With additional provisioning, now at Euro 500 million, in addition to the Euro 115 million in budgeted provisions, total provisioning volume for the year 2000 is expected to amount to Euro 615 million.
Mr. Heinz-Jörg Platzek, the new Chairman of the Board of Managing Directors of Deutsche Hyp, has taken an active role in the valuation of the portfolio. Following these extensive provisioning measures, Mr. Platzek believes that there is now a sound basis for Deutsche Hyp to regain a leading position in property financing, in Germany and beyond.
Given the excess coverage provided by the mortgage collateral backing Dresdner Bank's mortgage bond issues, the effect of revaluation on these issues is neutral.
From today's point of view, Deutsche Hyp expects to achieve a moderate positive net income, due to the realisation of hidden reserves and a waiver of claims by Dresdner Bank AG, its parent company.
As the majority shareholder, Dresdner Bank AG will waive its entitlement to a distribution of dividends for the 2000 business year in 2001.
Once the 2000 business year has been completed, a proposal will be submitted to Deutsche Hyp's corporate bodies for the distribution of an unchanged dividend of Euro 0.62 per unit share to minority shareholders.
Board of Managing Directors Deutsche Hyp Deutsche Hypothekenbank Frankfurt-Hamburg AG
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