Hypo Reports $1B Net Loss in Q2

Despite the decline, Hypo executives told investors in the earnings report that the company is making strides in restructuring to be more viable. Already Hypo has closed 15 office locations, with another seven closures due by the end of the year. Another four will be closed before 2011. Additionally, offices will be consolidated in many major cities worldwide. Office will consolidated in Munich, Dublin, London, Madrid and Paris. The New York City offices completed consolidation efforts during Q2.

More than 300 employees have been laid off, with more expected by the end of 2009. Hypo is also looking to implement "selective outsourcing" in areas like IT infrastructure to further reduce costs.

In late July, Hypo chairman Michael Endres said the company would likely need more government money to prevent the company from going under. As reported by GlobeSt.com, the bank is estimated to need up to $14.2 billion to be financially viable again. The Q2 report further emphasized this fact, "Further significant capital support [is] necessary, given that write-downs, risk provisions and costs of liquidity support as well as costs for repositioning will further affectequity substantially."

In early June, Hypo investors agrees to nationalize the company in order to receive a $4.3 billion capital infusion. Before the shareholder vote the German government held a 47% share in the company. It now has a 90% stake.

The move to turn the company into a state-run entity came after Hypo received $135.5 billion in guarantees from the German government and Hypo still continued to flounder.

Trouble seemed eminent after Hypo's Q1 numbers showed a pre-tax loss of $540.5 million. As reported by GlobeSt.com in early May, Hypo Real Estate's total portfolio declined from $558.7 billion of assets at year-end 2008 to $547.3 billion at the end of Q1. This set the stage for the government-led takeover, which had been rumored since January.