THE GERMAN savings bank Nassauische Sparkasse (Naspa) is giving up its Dublin-based subsidiary, with a balance sheet worth €4.2 billion, after 15 years, writes Derek Scallyin Berlin.
The fate of the company's 21 Dublin employees was unclear ahead of the sale, expected to be finalised tomorrow, for €250 million to the Hessische Landesbank (Helaba).
The deal, given impetus by losses incurred by the collapse of Lehman Brothers, marks a rearrangement of the Irish operations of Naspa's owner, the Savings Bank Association of Hesse and Thuringia, which also holds 85 per cent of Helaba.
In a statement on its website yesterday, Naspa said it was exiting the capital markets business to concentrate on lending to its retail, corporate and municipal clients.
Naspa was the only one of Germany's 430 Sparkasse Savings Banks with a foreign subsidiary.
It was attracted to Dublin in 1992 by low corporate taxes.
The Garras Bank-Naspa Dublin was awarded its bank licence in 1995 but was seen by new management in Germany as a "foreign body", out of place with Naspa's core business and a risk in the current financial climate after last year's Sachsen LB debacle.
"Naspa simply had no business being in Dublin," the source told The Irish Times. "Its Irish business was anathema to the Sparkasse business model."
While the deal was presented in public as a strategic reorganisation, sources said that Helaba would be charged with winding up the Naspa portfolio.
Naspa's owners, the Savings Bank Association of Hesse and Thuringia, said the portfolio was attractive, apart from the Lehman exposure, estimated to be about €50 million.
With the sale, Naspa is avoiding estimated writedowns in the "mid- to high two-digit million" euro range, it said.
"Apart from the Lehman exposure, there is no toxic waste in the portfolio," said Dr Michael Auge, group spokesman.
Any financial exposure in the US was with banks covered by the federal rescue package, he said, while the only mortgage-backed securities are in European countries. "Naspa wasn't a case like Sachsen LB - it could still make its payments," said Dr Auge.
"All we've done is relieve Naspa of its ballast to allow it to concentrate on its core business."
Separately, Bert Ruerup, who heads chancellor Angela Merkel's council of economic advisers, said Germany's economy may shrink next year and the government should broaden its stimulus programme to bolster domestic demand.
"Downside risks prevail," Mr Ruerup said. "The package put together by the government is surely well-intentioned but insufficient in its size. They should think about adding on." - (Additional reporting: Bloomberg)
