Westimmo doubles first half profit while awaiting sale outcome

Despite being embargoed from writing any new real estate financing business, the Mainz-based Westdeutsche Immobilienbank AG (WestImmo) posted profits for the first half-year double those of last year. The good figures will do no harm in helping Westimmo in its search for a buyer, with a sale of the bank out of ‘bad bank’ EAA Erste Abwicklungsanstalt still expected before the end of the year.

Net pre-tax profit jumped to €39.6m over the first six months, up from €19.7m in the same period last year. Net interest income and current earnings remained stable at around €65m. According to Claus-Jürgen Cohausz, chairman of the bank’s managing board, “We are very satisfied with how business has developed in the first half. The excellent results were achieved through a consistent reduction in costs and risks. The bank remains profitable despite the restriction on business activities.”

With its parent company WestLB being wound up, Westimmo has been quarantined within EAA, preventing it writing new business, which has seen its interest-bearing securities decline. However, provision for bad debts has also fallen sharply, while Westimmo said administrative costs continue to be pruned back, by 11% to €29.5m from €32.1m.

To help prime the bank for sale, Westimmo’s restructuring has seen the transfer of all assets that are not in conformity with its profile as a Pfandbrief bank into the EAA. This has left Westimmo’s equity reduced by €450m, but leaves it with a still-comfortable equity ratio. “WestImmo is now a lean and focused Pfandbrief bank with a core Tier I ratio of 13.4% and a very low risk potential”, said Cohausz earlier this month when presenting the half-year figures. He also said he expects the full-year figures to be strongly positive.

EAA board member Matthias Wargers said the sale process is proceeding ‘satisfactorily’, and he still expects a conclusion by the end of the year. In July, Reuters reported that German financiers Aareal Bank and Berlin Hyp and private equity investors Blackstone, KKR and Apollo are still among the bidders for WestImmo, with the bids exceeding €300m.

Westimmo is still allowed to service and process its existing loans as a specialist commercial real estate financier and Pfandbrief-issuing bank. It can renew or in some cases slightly increase existing commitments, and manage all its covered assets for its issued Pfandbriefs, while awaiting the outcome of the bidding process to become its new owner.