Sunday, September 02, 2007

IKB to Post Full-Year Loss of as Much as $954 Million

It looks like the IKB saga ( see part one & two) is coming to an end. Would be great to know what the costs for the German taxpayer for this bailout will be in the end. But we will have to wait until the state owned KfW will come up with more details on how much risk from the conduit they have taken in their own books. According toHandelsblatt & Wirtschaftswoche the KfW has set aside several billions ( worst case) to deal with the IKB mess. I´ll bet that 12 month from now the IKB will be sold. Let the takeover speculation begin......

Es sieht so aus als wenn die unschöne IKB Saga (siehe Teil 1 & 2 ) Ihrem vorläufigen Ende entgegengeht. Leider geht aus diesem Bericht nicht hervor wieviel das ganze Debakel den deutschen Steuerzahler durch das eingreifen der KfW gekostet hat und welche Risiken evtl. in die Bücher der KfW übernommen worden sind. Lt. Handelsblatt & Wirtschaftswoche hat die KfW bereits jetzt mehrere Mrd. € ("worst case") zurückgelegt um das IKB Schlamassel abzuwickeln. Ich wage mal den Ausblick das die IKB binnen der nächsten 12 Monate nicht mehr eigenständig sein wird und verkauft wird. . Ab heute dürfte die Übernahmespekulation hohe Wellen schlagen......
Sept. 3 (Bloomberg) -- IKB Deutsche Industriebank AG, the German bank being bailed out by the government, will post a full- year loss of as much as 700 million euros ($954 million) and stop investing in international securities after wrong-way bets on subprime loans.

IKB will book the loss for the 2007-2008 fiscal year, it said in a statement today. The shortfall stems from ``hidden accounting losses as well as further restructuring measures,'' the company said. For the year ended March 31, IKB earned 179.6 million euros.

The company has replaced top executives and delayed reporting results after losses on securities related to risky U.S. home loans almost caused it to collapse. Landesbank Sachsen Girozentrale, the German state-owned bank that got 17.3 billion euros in emergency funds last month, said Aug. 31 it may post a loss for 2007.

> The loss will be roughly 8 € a share..... Not insignificant when you compare this to the Stock price of 14 €.........

> Bei einem Börsenkurs von rund 14 Euro macht die Mittelstandsbank damit in diesem Jahr voraussichtlich fast acht Euro je Aktie miese

IKB's board ``is convinced that a comprehensive one-off balance sheet adjustment is required for a successful fresh start,'' according to the statement.

The bank will focus on ``core'' units, including domestic corporate finance, leasing and private equity, following a review of its business model, IKB said. Investments in ``international securities portfolios'' won't ``remain an integral part of the business model.''

Germany's state-owned KfW Group and banking associations have agreed to cover as much as 3.5 billion euros of potential losses at IKB. Fitch Ratings last month cut IKB's individual credit rating to ``F'' from ``C,'' saying the bank would have defaulted without the rescue by KfW.

IKB has enough money to cover its operations for the coming six months without having to raise new funds, it said today.
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Anonymous Anonymous said...

With all the bookkeeping shenanigans the bankers and corporations can legally do, how do they know when they are broke? They say, well, we were broke two years ago, but didn't realize it. I know when I am flat busted, and no amount of (illegal for me) financial gyrations change that fact in the least. It is funny to watch these big bloated bankers heave their chests out when they talk, when actually they are bums! LMAO!

9:13 AM  
Anonymous Anonymous said...

Me again! The money from the German taxpayer where does it go? Who gets it? Can someone please explain? Joen

11:03 AM  
Anonymous Anonymous said...

I did forget... I also don't understand to whom the IKB lost the money. Where have to 954 Million gone? Does someone get very rich on the expense of tax payers? Joen

11:17 AM  
Anonymous Anonymous said...

KfW as 38% shareholder, and another govt. entity with 10-20%(?) take their share of the losses. In addition they have costs associated with the 8.1 billion Euros liquidity lines they provided/are providing to Rhineland, and loss of any fees etc (but also maybe losses) of the 6.5 billion Euros lines that other banks provided.

The 900m, if associated with loss of value of the Rhineland holdings
assets has presumaby gone to whoever sold the securities in the portfolio.

12:43 PM  
Anonymous Anonymous said...

The taxpayer does not appear to have had to come up with any cash yet. They have taken a loss on a portfolio holding which here represents an opportunity cost. They will have had a better return investing their money elsewhere.

A big part of the losses may be mark to market meaning again that they are not cash and may eventually be recovered. But the effect may be to have given up some growth due to a smaller Kfw and IKB equity restricting business growth.

Presumably the state holdings do not need to be sold, but presumably pay dividends. The restriction or stopping of dividend payments represents a direct loss to state coffers and to taxpayer. If the state needs to borrow elsewhere to fund programs operations due to the missing dividends this is additional cost. The losses also mean that IKB and Kfw pay less corporate taxes for some period.

1:08 PM  
Blogger jmf said...


thanks for the comments.

The 100% state owned KfW is with 37 percent the largest shareholder.

The biggest problem for the taxpayer is that Rhinland Funding
went completely to the KfW.

So we don´t know exactly how big the loss will be after they have unwind the portfolio.

On top of this is is not clear how big the impact on other state sponsored programs is that the KfW is designed to promote.

10:12 PM  
Anonymous Anonymous said...

Note they also took the US$2.4bn Rhinebridge conduit onto their balance sheet.

6:38 AM  
Blogger jmf said...


German Conduits with subprime exposure

I hope the link works ( maybe subscription ) required

7:28 AM  

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