Hypo Real Estate Group 3Q loss 3.1 billion euros

Troubled German lender Hypo Real Estate reported Monday a net loss of 3.1 billion euros ($4 billion) in the third quarter as the financial crises worsened, with a unit in Ireland hit especially hard by write-downs on the values of its assets.

The Munich-based bank, which got a 50 billion euro ($63 billion) bailout from the government last month, said it wrote down 2.5 billion euros ($3.1 billion) in the third quarter and that it foresees "further negative impacts on earnings in the fourth quarter of 2008 and in 2009."

The Munich-based company had already said earlier this month that it expected to lose a total of 5.3 billion euros on its stake in the Irish bank Depfa Bank PLC, which it bought in 2007.

Hypo also said earlier this month that it had made another 600 million euros ($762 million) in write-downs related to the bankruptcy of Lehman Brothers Holdings Inc., Iceland's financial meltdown and a loss on its investment in Babcock & Brown Ltd.

The company did not provide a comparable net profit figure for the third quarter last year. The pretax loss in the third quarter 2008 amounted to 3.1 billion euros ($4 billion) compared with 233 million euros in pretax profit in the year ago quarter.

Hypo said it lost 345 million euros ($431 million) in the July-September period in operating revenues which includes net interest income, commission income and income from investments. The company had operating revenues of 412 million in the year ago quarter.

Net trading losses swelled to 349 million euros ($436 million) from a loss of 73 million euros last year. This was due largely to tighter credit conditions and write-downs on a number of financial instruments, such as derivatives and collateral debt obligations — complex financial instruments that have been linked to the collapse in the U.S. mortgage market.

"Management of the Hypo Real Estate Group is currently devoting maximum priority to revising the business model of the group in order to bring it into line with the fundamentally changed conditions," said Chief Executive Axel Wieandt in a statement.

"A restructuring and reorganization resulting from this will demand difficult decisions from all parties involved in the Hypo Real Estate Group," said Wieandt.

He said the company will need help from the wider German financial industry, the central bank, the government and the Financial Markets Stabilization Fund, which offers the bailout money.

"For the time being, the Hypo Real Estate Group will not be able to adequately refinance the company via the money and capital markets alone, even if this is of course our objective in the medium term," Wieandt said.

Shares of Hypo Real Estate Holding were up 3 percent at 3.33 euros ($4.16).

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http://www.hyporealestate.com

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