IKB Deutsche Industriebank AG, the first German casualty of the collapse of the U.S. subprime- mortgage market, forecast a wider loss and said it will need a fourth government bailout.
IKB fell as much as 14 percent in German trading after saying the loss will be about 800 million euros ($1.2 billion) KfW Group, the state-owned development bank that controls IKB, will inject another 450 million euros to shore up the lender.
IKB was the first German bank hit by contagion from the U.S. subprime market last year after its finance affiliate couldn't raise funding. The German bank has received emergency aid totaling 9 billion euros. IKB, based in Dusseldorf, had previously forecast a loss of 550 million euros.
"The markets have continued to worsen" and each month "is reducing the chances of IKB coming unscathed out of this," said Robert Mazzuoli, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, who recommends selling the shares.
IKB fell 14 cents, or 2.8 percent, to 4.92 euros in Frankfurt today. They have lost 20 percent since the beginning of the year, valuing the lender at 476 million euros.
"IKB is becoming an investment for speculators and our advice is continue to stay away from it," said Thomas Nagel, a trader at Equinet in Frankfurt. "The shares could fall to 1.50 euros."
Credit Suisse, WestLB
Credit Suisse Group, Switzerland's second-largest bank, today said it will probably post its first quarterly loss since 2003 after writing down debt securities that were deliberately mispriced by traders and because of worsening market conditions. The world's biggest financial firms have fired more than 30,000 workers in the last seven months and reported at least $195 billion in writedowns and losses since the beginning of last year, data compiled by Bloomberg show.
In Germany, Landesbank Baden-Wuerttemberg, the country's biggest state-owned bank, earlier this month completed the takeover of Landesbank Sachsen AG to save it from closure because of investments in subprime loans. WestLB AG, the state-owned bank that like IKB is based in Dusseldorf, had a full-year loss of about 1 billion euros and may set aside the same amount for further writedowns for subprime investments and bad trades.
Four IKB management board members, including Chief Executive Officer Stefan Ortseifen, were relieved of their duties last year after an audit by PricewaterhouseCoopers found the crisis was a result of "flawed" risk management. Prosecutors searched board members' homes last November as part of a probe into the bank's investments in subprime mortgages, loans provided to U.S. home buyers with patchy credit histories.
`Higher Probability of Default'
IKB "temporarily" stopped the sale of investments "due to the current market environment," the bank said today. It expects further writedowns of about 450 million euros from the sale of a portfolio with a "higher probability of default" on which it already had markdowns of 630 million euros.
This brings the total losses on the portfolio, which has a nominal value of 3 billion euros, to 2.1 billion euros. Additional writedowns of 140 million euros on a 2.8 billion-euro portfolio with "assets carrying a lower risk profile" are expected on top of 320 million euros in losses reported last month.
The bank "will not post any or very low profits" for the next financial years," IKB said.
"Investors won't receive any payouts for the years to come," said Andreas Weese, a Munich-based analyst at UniCredit SpA, who recommends selling the shares. "IKB is a relatively worthless stock and still overvalued at today's price."
source: 23mar2008
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