German bank Commerzbank has sold two commercial real estate (CRE) portfolios amounting to €2.9 billion at an overall discount of roughly three percent, it announced in a statement.
JP Morgan and Lone Star picked up a €2.2 billion pan-European portfolio while Oaktree Capital purchased a €700 million non-performing portfolio of German assets.
The transactions will significantly improve the bank’s risk profile and will lead to a positive net capital effect for Commerzbank of around €105 million in the third quarter, due to the release of €1.9 billion in risk-weighted assets (RWA).
The deals also reduce the bank’s CRE book by a total of 17 percent. As at the end of March 2015, Commerzbank held €17.5 billion in its non-core asset segment. Its domestic CRE black book will reduce by approximately 40 percent with the Oaktree sale.
The loan book sold to JP Morgan and Lone Star also contains non-performing and performing loans and encompasses exposure to 14 countries including Austria, Belgium, Czech Republic, Cyprus, Denmark, Finland, Hungary, Luxembourg, Netherlands, Romania, Sweden, Switzerland, Slovakia and Turkey. The volume of CRE non-performing loans at Commerzbank stood at €3 billion as at the end of March and reduces further by €1.3 billion as a result of the transactions.
Commerzbank will continue to reduce its portfolios in commercial real estate and in shipping finance. The exposure at default in these units was €30 billion, as of 31 March 2015.
“Both transactions show that we are continuing to press ahead with our value-preserving run-down, and that we are significantly reducing both risk and complexity,” Sascha Klaus, divisional board member non-core assets commercial real estate, said, adding: “In this respect we are taking advantage of market opportunities, in order to achieve best possible results through competitive bidding procedures.”