Wednesday, February 13, 2008

IKB Bailout Hatrick

Click here to read my earlier rants on the IKB mess.... Here comes another good rant from the FT Let it fail, Mitteleuropa edition

Klickt bitte here um sich meine vorherigen Tiraden zur IKB anzusehen.... Hier als Nachschlag noch ein deftiger Kommentar der FT Let it fail, Mitteleuropa edition
Comment from the anual report before the troube began.....
Auszug aus dem Konzerngeschäftsbericht 2006/07 der IKB / PDF als die Welt noch in Ordnung war ......

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 our investments 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 "adventure" combined with incompetence from the board, management and oversight has cost the German taxpayer now close to € 7 billion....... It´s almost like MBIA, Ambac & Co that earned easy money with their muni bond insurance and got greedy..... IKB was once the leading German Mittelstandsbank with superior knowledge and a very high reputation. But they have decided to leave their core business....
Dieser "Ausflug" kombiniert mit totaler Inkompetenz vom Management, Aufsichtsrat und der Aufsicht hat den deutschen Steuerzahler mal eben die Kleinigkeit von 7 Mrd € gekostet......Man kann das wohl mit MBIA, Ambac & Co vergleichen die ebenfalls auf einer Art Gelddruckmaschine saßen und dann zu gierig wurden und den Bereich der öffentlichen Anleihen verlassen haben. Die IKB war einst die führende Mittelstandsbank in Deutschland mit erstklassiger Expertise und einem ausgezeichneten Ruf. Nachdem man sich entschieden hat anstelle des Mittelstandes lieber waghalsige US Hypotheken und Konsumenten zu unterstützen sollte der tiefe Fall nicht weiter überraschen. Schade nur das für Banken offenbar andere Maßstäbe als für die restlichen Branchen gelten......
NYT FRANKFURT — The German government said on Wednesday that it would participate in a third bailout of IKB Deutsche Industriebank, the lender whose near-collapse in July heralded the arrival in Europe of the crisis stemming from the faltering subprime mortgage market in the United States.

The German finance minister, Peer Steinbrück, said in Berlin that the federal government would contribute two-thirds of a rescue package totaling 1.5 billion euros ($2.2 billion). The question of where the remaining euros would come from was open, he said, but a government spokesman said that private banks were expected to contribute.

Mr. Steinbrück spoke after a lengthy meeting of the board of KfW, the state-owned bank that is the largest shareholder in IKB.

The rescue package aims to resolve the problems at IKB, based in Düsseldorf, which was once a conservative corporate bank but became a global symbol of risky excess.

Like many banks, IKB speculated in securities linked to American mortgages. But the market value of those investments has fallen significantly, forcing KfW, which owns 38 percent of the bank, and a consortium of private banks, to recapitalize the lender.

As it became clear that IKB was close to using all of the 5.65 billion euros previously committed to cover losses, discussions began about how to permanently rescue the bank. .....

KfW primarily focuses on development projects abroad and selected lending programs in Germany. It has been able to finance previous rescues of IKB — the last one was in late November — from its existing resources, but needed more money from Berlin to both support IKB and keep up its other work.

The prospect of direct state support for IKB generated cries that the banking industry, having profited from speculation in subprime-linked securities, was now handing the German taxpayer the bill for its losses.



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7 Comments:

Anonymous eh said...

J-M,

It's just 'soziale Gerechtigkeit' in action. Nichts anders wäre zu erwarten.

But I see that IKB is actually publicly traded (eine AG), and that it is expected to rise strongly at the open today. Very strange. That could be an investment strategy: look for German banks in trouble, and jump in after the stock declines.

12:03 AM  
Blogger jmf said...

Moin Eh,

stock up 23 percent.....

The strategy will work just fine.....

I think the same could be said about every national "icon"

Amazing to see the yen weakening with strong data coming out of Japan. The Carry trade and risk taking attitude is creeping back...

12:26 AM  
Anonymous eh said...

I think the same could be said about every national "icon"

Wahrscheinlich. Too bad no one in die Bundesregierung oder Bundestag advised Daimler not to buy Chrysler -- that would've been helpful as well.

Given the way things are playing out right now in the equity markets -- look how the big ISM triggered decline in the US has been almost completely retraced in little more than one calendar week, and on really no or bogus (Buffett, increased retail sales due to higher gas prices) 'good news' -- you have to wonder when, or if, realities like this will have an effect:

By the end of this year as many as 15 million U.S. households may owe more on their mortgages than their homes are worth, according to an estimate from Jan Hatzius, chief U.S. economist of New York-based Goldman Sachs Group Inc. That may fuel an increase in foreclosures, erode prices, and increase mortgage bond losses..."If borrowers who are underwater go into foreclosure, the properties are likely to be sold at discount prices and will further depress the price of housing," said Robert Engle, a Nobel laureate in economics who teaches at New York University's Stern School of Business in Manhattan. "It becomes a spiral." ...Thirty-nine percent of people who purchased a home two years ago already owe more than they can sell it for, according to a Feb. 12 report from Zillow.com, a real estate data service...

1:03 AM  
Blogger jmf said...

Moin Eh,


Barry Ritholtz
sums it up....

On a positive note it gives a new opportunity to load up some shorts....

The nice part is that gold is performing better when the other asset classes are also moving up..... So this makes it much easier to withstand the totally bogus market reaction.....

1:54 AM  
Anonymous eh said...

UBS A Canary For US Banks

?

7:25 AM  
Blogger 2and20 said...

Amazing to see the yen weakening with strong data coming out of Japan.

I read http://japanjapan.blogspot.com/ a fair bit, and there seems to be only negatives coming out of Japan. I don't get everyone's bullishness on the currency, they have too much debt and have had deflation and low growth for a decade and a half. And they look like they are sliding into another recession, even with rates at 0.5%. Sell Yen, buy AUD or NZD, your carry is huge (6-7% a year of breakeven) and you are buying into a country (Oz anyway) that has a bunch of resources that the rest of the world wants/needs.

Unfortunately I took my profits on my AUDJPY long and GBPAUD short a few weeks ago, although I am currently long Swiss Francs versus short Yen, on the basis that at least Swissies still get the safe haven bid, but have higher rates and the country might even get some growth. Plus when the Eastern European currencies implode, all the folk who took out Swiss Franc mortgages in Hungary etc will force a huge bid for CHF.

Anyway I've digressed enough...

5:04 PM  
Blogger jmf said...

Moin 2and20,

thanks for the info on the Swiss Franc and the yen.

I´m no expert on currencies in general and my biggest bet/asset is that almost all fiat currencies are doomed :-)

That´s why i´m a big fan of gold.

Moin Eh,

the UBS Horror show is far from over.....

10:56 PM  

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