The disposal of the business is part of Commerzbank’s strategy drawn in 2012 to slash its €56bn commercial-real-estate portfolio by approximately 60% by the end of 2016, as reported by The Wall Street Journal.
The proposed sale will enable the lender to decrease its risk-weighted assets by €1.5bn, which also reflects that how European banks are weighing to curtail their real estate exposure following the emergence of financial crisis of 2008.
Commerzbank chief financial officer Stephen Engels was quoted by the news agency as saying, "With this transaction, we are accepting a charge on earnings in 2013, to take out risks in the coming years."
"This portfolio sale is attractive from a risk perspective since we transfer future risk from our U.K. operating platform to the buyers," Engels added.
Based on the terms of the agreement, the loans that were sold included the full commercial real estate financing activities of Hypothekenbank Frankfurt in the UK, which are primarily concentrated on London.
Post transaction, Wells Fargo will take over £2.7bn of portfolio’s performing loans, while it will also offer financial assistance to Lone Star for £1.3bn in nonperforming assets.
Commerzbank, which is 17% owned by German government, employs 53,000 staff at group level, recently announced to cut approximately 5,000 full-time jobs, in a bid to slash operational cost and bring the business on profitability track.
