FRANKFURT, Aug 14 (Reuters) - Deutsche Pfandbriefbank , the successor to failed German lender Hypo Real Estate that was nationalised during the financial crisis, has mandated Citigroup to help it with a planned privatisation, the German bank said on Thursday.
Citigroup advisers will be working closely with Pfandbriefbank executives and federal government officials in the coming weeks to evaluate various options for either a sale or an initial public offering of the lender, Pfandbriefbank chief financial officer Andreas Arndt said.
The European Union has demanded that Pfandbriefbank, or PBB, change ownership by the end of 2015 in exchange for allowing a state bailout during the financial crisis.
Pretax profit rose 45 percent to 45 million euros ($60 million) in the second quarter, putting the bank more than halfway towards its full year target of 140 million euros by the end of June. “What we show is what we’ve promised,” Arndt said.
The bank’s management hope a sharp jump in earnings this year and flourishing new business will bolster its valuation.
However, the privatisation of Pfandbriefbank may be dogged by precedent.
Its sister lender, Depfa bank, a part of the HRE group that specialised in lending to governments, had also been slated for privatisation, with Citigroup as adviser.
In Depfa’s case, the German government in the end decided against a privatisation, seeing a transfer of the lender’s assets to a state “bad bank” as a better option to limit the hit to taxpayers.
Berlin’s decision prompted Manuela Better, the chief executive of HRE and Pfandbriefbank, to resign. A replacement for Better has yet to be found. (1 US dollar = 0.7464 euro) (Reporting by Kathrin Jones; Writing by Jonathan Gould; Editing by Thomas Atkins/Mark Heinrich)