Eurohypo, one of the largest lenders to commercial property in Europe, is to be wound down.
Parent company Commerzbank last night announced the surprise move after deciding it did not want to continue the business.
The decision means that Eurohypo, which has a €56bn property loan book, will stop all new lending following an eight-month temporary lending freeze which was set to be lifted next month.
In March, the future of Eurohypo’s UK business looked to be secure when Commerzbank said that although most of Eurohypo’s property activities would be wound down, a core real estate lending business would continue through a new real estate and ship finance division.
This would have given the real estate team €5bn a year to lend in four countries: Germany, the UK, Poland and France. In the UK, Eurohypo historically undertook between €1bn to €1.5bn of new business per year.
A statement from Eurohypo said: “The Commerzbank press release of June 26, 2012 announced its intention to wind up the commercial real estate and ship finance business area, which includes Eurohypo UK. The winding up decision means that no new business lending will now take place.
“The decision will have no immediate effect on any existing UK business or clients. Contractual obligations and commitments will continue to be honoured and business in the UK will continue to be serviced with no changes. The UK book of business will be reduced in an orderly process and there is no defined timetable for this windup process.”
Martin Blessing, Commerzbank’s chairman of the board of managing directors, said: “Against the background of the ongoing financial and sovereign debt crisis, an end to which is not foreseeable, and of the uncertain regulatory environment, we are subjecting all the business areas to a rigorous review in the framework of our strategic planning process.
“The strategic objective is that of consistently focusing Commerzbank on customer-centric and sustainably profitable core business and further minimising risks and capital lockup.
“In the course of this process we have as an initial move, therefore, decided to reduce the business areas originally planned for the new real estate and ship finance segment in the course of time or transfer them to the core bank.”
bridget.oconnell@estatesgazette.com
