WestImmo delivers record profits prior to new life under Aareal
The Mainz-based real estate lender WestImmo, in the process of being taken over by near-neighbour Aareal Bank down the road in Wiesbaden, has reported a record net profit of €64m for full-year 2014, a rise of 22% on the previous year's figure of €50.3m.
Profit from ordinary activities rose to €70.9m from €57.4m in the year 2013. In a statement the bank said, “The very good results were lifted not least by the continuing high quality of the loan portfolio and the associated low allowance for losses on loans and advances.”
WestImmo, currently held by 'bad bank' Erste Abwicklungsanstalt (EAA), was required to cease new business activities more than two years ago due to restrictions imposed by the European Commission following a bailout of Westimmo's parent group, the former WestLB. WestImmo has since focused exclusively on managing its cover pools and on renewing existing loan commitments. It has been prevented from writing any new business while being held by EAA pending its sale, but as the bank noted, “WestImmo is profitable despite its limited business activities and the associated decline in its interest-bearing portfolios.” The sale to Aareal Bank for €350m is expected to be completed by mid-year.
As part of plans to sell the unit, the commercial property lender transferred all the assets that were inconsistent with its strategy as a traditional Pfandbrief bank to EAA via a carve-out transaction, reducing its equity by €450m. What has emerged is “a focused Pfandbrief bank with a low risk profile”, according to WestImmo chairman Claus-Jürgen Cohausz. “The sale of WestImmo means that its ultimate winding-up will be avoided, and that a good solution has been found for the bank, its customers and its employees”, he added. WestImmo still has 269 employees, about half the number it had six years ago.
Net interest income, including current income, amounted to €108.2m at the end of the financial year, down on the prior-year figure of €136.6m due to a €28.4m decrease in the loan portfolio. The primary allowance for losses on loans and advances amounted to €19.5m, as against €33.3m the year before. Risk provisions were positive, amounting to €9.8m due to income from financial assets and investments. Administrative expenses declined by around 15.7% to €55.1m from €65.4m in 2013.
WestImmo extended real estate loans totalling €0.8bn in 2014, compared with €1.2bn in the year-earlier period. The bank’s total assets declined by €3.7bn year-on-year to €10.1bn as at 31 December 2014 (after €13.8bn in 2013). Given its imminent absorption into Aareal, the bank said it would establish a short financial year for the first half of 2015 and to transfer any portfolios inconsistent with the non-Pfandbrief strategy, amounting to about €400 million, to EAA. Cohausz said that he expects WestImmo will break even in the planned short financial year 2015.
In February this year, EAA agreed to sell its WestImmo shares to rival real estate lender WestImmo for an all-equity amount of €350 mln. The transaction is expected to close by mid-2015.