IKB In Subprime Trouble...State Owned KfW To The Rescue

This is a real shocker! IKB is listed in the MDAX and one of the midsized German banks. Isn´t it funny when your main target group is the German "Mittelstand" and you brand yourself the leading player in this field and you have taken on huge bets on the riskiest assets out there that have nothing to do with your business. The thing is getting worse...All this action has taken place while the state owned KFW is the main shareholder. The main goal for the KfW (presentation) is........ to provide help through special credit programs, export financing etc for the Germany economy and especially the "Mittelstand". Now they have to provide liquidity to prevent further damage. ... Needless to say that the analysts had 12 buy, 5 holds and only 2 sells on the stock.....

Das ist doch mal ein Wochenauftakt. Wer von uns hätte gedacht das die angeblich so solide IKB die sich in erster Linie als Mittelstandsbank sieht sich heftigst im US Hypothekenmarkt verzockt hat. Das ganze wird noch trauriger wenn man bedenkt das die staatliche KfW mit fast 40% der Hauptaktionär ist und dieses Geschäftsgebaren jeglichen Zielen der KfW zuwiderläuft. Zum Dank für das offensichtlich vollkommen losgelöste oder kaum vorhandene Risikomanagement darf jetzt die KfW mit Bereitstellung von Liquidität einspringen. Meiner Meinung nach sollten auch bei der KfW Köpfe rollen. Überflüssig zu erwähnen das die Analysten 12 Kauf, 5 Neutral und nur 2 Verkaufsempfehlungen am Start hatten.... :-)

Konzerngeschäftsbericht 2006/07 der IKB / PDF Annual Report:

The capital released through our securitisation activities over recent years has been used to expandour national and international lending business. Additionally, the capital has also been used to investing international loan portfolios. Two thirds of ourinvestments are focused on US investment-gradeportfolios (including, for example, credit card claims,mortgage loan claims and corporate loans), with theremaining third being invested in similarly structured European portfolios.

Das durch die Verbriefung während der letzten Jahre freigesetzte Kapital haben wir für die Ausweitung unseres nationalen und internationalen Kreditgeschäftes genutzt. Darüber hinaus haben wir dieses Kapital verwendet, um in internationale Kreditportfolien zu investieren. Unsere Investments konzentrieren sich zu zwei Dritteln auf mindestens Investmentgrade-geratete US-Portfolios (wie zum Beispiel Kreditkartenforderungen, Hypothekenkreditforderungen sowie Unternehmenskredite) sowie zu einem Drittel auf europäische Portfolien mit ähnlichen Strukturen.

> This strategy has worked just fine........ Just as everybody wants to invest in Germany and limit US exposure the IKB is doing the opposite......In the 270 page thick annual report the word subprime isn´t mentioned once!

> Einfach genial........ Just zu Zeiten wo internationale Investoren unbedingt in Deutschland investieren wollen und nach Möglichkeit Ihre US Positionen abbauen wollen schlägt die IKB den umgekehrten Weg ein. Zudem besonders lustig das das Wort "Subprime" in den kompletten 270 Seiten nicht ein einziges Mal erwähnt wird.

Presseschau Deutschland:
Financial Times Deutschland Warum die US-Krise die IKB erwischt
Manager Magazin Subprime-Krise erreicht Deutschland
Handelsblatt Deutsche Banken müssen um ihr Geld bangen
FAZ Eine Kreditlinie wurde der IKB zum Verhängnis

KFW stützt IKB mit 8,1 Milliarden Euro

IKB Targetgroup:
The upmarketGerman mid-sized companies–the engine of the German economy

•Specialist in long-term corporate finance
•Market leader in long-term corporate lending in Germany (market share: 13.5%)

•Investments in international loan portfolios*: (March 2007)
-€7.0 billion of direct investments
-€12.7 billion of investments underadvisory in a conduit

Data and Charts taken from IKB Presentation (PDF)
IKB Deutsche Industriebank AG (IKB) has felt the impact of the crisis in the US sub-prime mortgage market, as spreads widened sharply during last week’s violent fluctuations, causing massive uncertainty amongst institutional investors. In this context, the ability of the Rhineland Funding conduit (managed by IKB) to access funding appeared to be threatened, in which case IKB would have been drawn upon liquidity facilities provided to Rhineland Funding. Rhineland Funding – and, to a lesser extent, IKB itself – have invested in structured credit portfolios, which include exposures to US sub-prime real estate loans. Despite market discounts affecting the valuation of such assets, to date there have been few loan defaults, and only some rating downgrades affecting portfolio investments. Nevertheless, towards the end of last week IKB’s creditworthiness was being questioned due to said exposures. There was a risk that this confidence crisis would deteriorate further.

KfW, IKB's main shareholder holding a 38% stake, took immediate action, implementing measures to safeguard IKB's creditworthiness without delay. Specifically, KfW will assume IKB’s financial obligations under the liquidity facilities vis-à-vis Rhineland Funding with effect from 30 July 2007. In addition, KfW will protect IKB against risks resulting from certain portfolio investments. These measures will maintain IKB’s strong creditworthiness, in particular in its banking business with German medium-sized businesses.

> today around 18 € down 17 percent

Given the developments outlined above, IKB is no longer in a position to maintain its earnings forecast of € 280 million for the 2007/08 financial year. From today’s perspective, results will be significantly lower.

Bloomberg IKB Cuts Profit Forecast Amid Rout in U.S. Mortgages

IKB Deutsche Industriebank AG, the German bank that reported 10 days ago it won't be affected by ratings downgrades on U.S. subprime mortgages, replaced its chief executive officer and said profit will be ``significantly'' lower than forecast.

Disclosure: Short MDAX (including IKB)