Germany's Hypo Real Estate to cut 1,000 jobs

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(Agencies)
Updated: 2008-12-20 19:04

BERLIN -- Troubled German lender Hypo Real Estate Holding AG on Saturday announced plans to cut about 1,000 jobs, more than half its current work force, by 2013 as it cuts costs following a government-backed rescue.

Troubled German lender Hypo Real Estate Holding AG on Saturday announced plans to cut about 1,000 jobs, more than half its current work force, by 2013 as it cuts costs following a government-backed rescue. [Agencies]

Hypo Real Estate said it would reduce the number of employees from nearly 1,800 to about 1,000 over the next three years, with two-thirds of those jobs outside Germany. It said a further 200 jobs would go by 2013.

The commercial property lender, which said part of the cuts would be achieved through outsourcing and divestments, said it expects to reduce annual costs by some euro200 million ($282 million) by 2011, and by euro250 million by 2013.

Hypo Real Estate also said it was terminating the contracts of two former managers, including former chief executive Georg Funke, and two current managers.

The company ran into trouble in mid-September after its Dublin-based unit Depfa Bank PLC failed to attract short-term funding amid the widening credit crunch.

The German government put together a rescue package worth euro50 billion. Hypo Real Estate later turned to a separate financial sector rescue fund set up by the government for further loan guarantees.

The company has now "taken necessary steps paving the way for its return as an active market participant in the medium term," Chief Executive Axel Wieandt said. "The focus is now on discipline in managing the balance sheet, as well as costs and risks, and on consistently implementing the restructuring measures."

Hypo Real Estate said its restructuring drive would incur one-time costs of euro400 million, about two-thirds of that in the fourth quarter. In view of worsening business conditions on the global credit and real estate markets, it said it expects "significant additional burdens" to fourth-quarter results and a full-year loss.

Separately, Hypo Real Estate said its supervisory board decided to terminate the contracts of former CEO Funke and another former managing board member, Bo Heide-Ottosen, with immediate effect. It said it also was parting company with current board members Markus Fell and Frank Lamby.

The company did not give reasons for that decision.

However, it said in October that it had hired a law firm to examine possible breaches of duty by Funke, who stepped down as CEO earlier that month, and Heide-Ottosen.

Earlier this week, Munich prosecutors searched Hypo Real Estate's offices and the homes of unidentified people who were on the board in 2007-2008 as they investigated suspicions that the company's situation was misrepresented and possible market manipulation.