Dublin-based Depfa to be bought by Austria’s Bawag

Dublin-based Depfa Bank is set to be bought by Austrian lender Bawag from a German State bad bank for an undisclosed sum and will continue the orderly winddown of the business.

Bawag 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, according to industry observers.

“The acquisition of Depfa represents an attractive and capital accretive investment opportunity,” said Anas Abuzaakouk, chief executive of Bawag. “This allows us to acquire high-quality low-risk assets, leverage our balance sheet, and draw upon on our existing infrastructure and operational capabilities.”

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 fresh attempt to sell Depfa last year. Depfa had 94 employees at the end of last June, mainly in Dublin.

Depfa’s balance sheet has contracted at an accelerated pace under the German bad bank, with total assets falling to €6.9 billion at the end of June from €48.5 billion 5½ years earlier. Its remaining portfolio mainly consists of loans and bonds to German and other western European borrowers from the public sector

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 more than €630 million in rainy-day capital reserves, some 15 times its minimum regulatory requirement.

The planned purchase is subject to customary closing conditions and regulatory approvals. The parties involved have agreed not to disclose the purchase price or any details of the agreement, Bawag said. Depfa plans to publish year-end financials on March 29th.

Bawag is Austria's third-largest listed lender by market value. It was previously owned by private equity firm Cerberus, which sold the last of its stake in 2019.

FMS-WM executive board spokesman Christoph Mueller said that the sale "marks what is a successful conclusion to the winding-up of Depfa, also from the perspective of the German taxpayer".

"The result achieved now once again emphasises that the decision made at the time not to sell Depfa to an external bidder [in 2014] but instead wind it up under the direction of FMS-WM was undoubtedly the right one," said the chairman of the FMS-WM supervisory board, Michael Kemmer.