IKB Eyes Huge Loss
German lender IKB Industriebank AG, hit by its exposure to the U.S. subprime lending crisis, expects to lose up to €700 million ($954 million) this fiscal year as it aims for a “fresh start,” the company said Monday.
However, the bank - which has won help from the state-owned KfW development bank and other banks to help protect its exposure to subprime mortgage securities - said its “liquidity position for the next six months is covered without raising new capital market funds.”
IKB’s problems sprang from its Rhineland Funding investment vehicle’s apparent inability to cover its funding needs because of exposure to U.S. subprime real estate loans, made to borrowers with weak credit histories.
In late July, IKB abandoned a profit forecast for the 2007-2008 fiscal year of €280 million ($382 million). It said it had “felt the impact of the crisis in the U.S. sub-prime mortgage market,” and said its chief executive, Stefan Ortseifen, had resigned.
Germany’s bigger banks so far have reported only minimal exposure but we will have to see what the truth is, as more reports come in.