Hypo Real Estate bank has posted a profit of €163m in the first quarter of its fiscal year, which is a substantial improvement over the €324m loss it made a year ago.
The positive numbers show the magical power of the good-bank/bad-bank approach taken by European banking regulators. HRE’s “bad bank”, into which HRE tipped €176bn of toxic assets, announced a loss of €3bn. That’s almost all of the of the €3.9bn in equity it was given at the beginning of its sorry life. Where’d the money go? Risk provisions. It’s ok, though. Tax payers will definitely be more than happy to come up with additional cash. What could possibly go wrong?