KfW could face huge losses

FRANKFURT – Exposure to the US market for more risky home loans at troubled German lender IKB could cost its main, state-run owner more than five billion euros (N$49,5 billion), reports said yesterday.

KfW owns 38 per cent of the shares in IKB, which invested heavily in securities backed by high risk US home loans, and could now pay a high price in turn, KfW board spokeswoman Ingrid Matthaeus-Maier told the Sueddeutsche Zeitung newspaper. “It’s possible that it is less than five billion euros, but also more, if market conditions worsen further,” she said.KfW, which is the financial arm of the German government, has already had to increase its provisions by 4,95 billion euros to cover potential losses at IKB and has written down the value of its stake by 400 million euros.Should other risks emerge at the business loan specialist, “measures will have to be taken to associate other IKB shareholders, which have been spared until now,” Matthaeus-Maier warned.The investment bank Sal Oppenheim owns a 5,0 per cent holding in IKB.KfW now wants to sell its stake but must wait until after IKB’s 2006/2007 results have been published.It is still struggling to recover after taking heavy hits in connection with the collapse of the US market for high-risk mortgages.A German banking pool that threw a 3,5-billion-euro lifeline to the bank in August agreed recently to another credit line of 350 million euros but said it wanted no involvement with any future rescue plans.A credit of 8,1 billion euros was provided to IKB when the US sub-prime crisis emerged earlier this year.Nampa-AFP”It’s possible that it is less than five billion euros, but also more, if market conditions worsen further,” she said.KfW, which is the financial arm of the German government, has already had to increase its provisions by 4,95 billion euros to cover potential losses at IKB and has written down the value of its stake by 400 million euros.Should other risks emerge at the business loan specialist, “measures will have to be taken to associate other IKB shareholders, which have been spared until now,” Matthaeus-Maier warned.The investment bank Sal Oppenheim owns a 5,0 per cent holding in IKB.KfW now wants to sell its stake but must wait until after IKB’s 2006/2007 results have been published.It is still struggling to recover after taking heavy hits in connection with the collapse of the US market for high-risk mortgages.A German banking pool that threw a 3,5-billion-euro lifeline to the bank in August agreed recently to another credit line of 350 million euros but said it wanted no involvement with any future rescue plans.A credit of 8,1 billion euros was provided to IKB when the US sub-prime crisis emerged earlier this year.Nampa-AFP