IKB to suffer heavy losses

3 September 2007

Losses of as much as $954 million will be posted by German bank, IKB Deutsche Industriebank AG, after its heavy investment in the US sub-prime loan market.

The bank will focus on domestic corporate financing, leasing and private equity, structured financing, and real estate financing.

Investments in international structured securities will be restricted as part of the new business model that, according to IKB, "creates a suitable platform for generating stable future returns, although at a significantly lower level compared to previous financial years."

In a statement the board of directors said: "It is expected that IKB's profit participation certificates and preferred shares will be negatively affected by the loss."

Speaking to Bloomberg, Johannes Thormann, an analyst at WestLB AG said: "We knew it would cost a lot of money so this didn’t come as a shock."

The board said the bank's liquidity position was covered for the next six months without having to raise new capital market funds.

PriceWaterhouseCoopers will publish a special audit for the restructuring and the results for the first quarter ending June 30th 2007.

KfW Group and German banking associations bailed out IKB after mortgage-based securities lost value.

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