In a blue Funke

15 January 2008 By George Hay Follow @gfhay

Hypo Real Estate s problems are not lifethreatening, as were the losses suffered by IKB last summer. But it doesn t reflect well on the German lender’s management. Either they knew the risks of the toxic debt products and ignored them, or didn t understand them.

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Shares in Hypo Real Estate fell 35% to E22 on Tuesday after the German lender briefed the market ahead of annual results next month.

The bank said it would make a writedown of E390m on its E1.5bn exposure to US collateralised debt obligations. The aftertax loss is expected to be E295m.

At third quarter results in October, Hypo's chief executive Georg Funke said no negative effects on profit targets were expected from the company's indirect subprime exposure.

S&P yesterday downgraded all seven rated entities of Hypo Real Estate from "stable" to "negative".

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