IKB Deutsche Industriebank

Infobox_Company
company_name = IKB Deutsche Industriebank AG
company_
company_type = Public (FWB|IKBG)
company_slogan =
foundation = 1974
location = Düsseldorf, Germany
key_people = Günther Bräunig (CEO and chairman of the management board), Werner Oerter (Chairman of the supervisory board)
num_employees = 1,840 (2008)
industry = Financial services
operating_income = profit €132.5 million (yr - Mar 08)cite web |url=http://www.ikb.de/content/en/ir/financial_reports/annual_report_2007_2008/Konzern_englisch_080814_sicher.pdf |title=Annual Report 2007/2008 |accessdate=2008-08-21 |publisher=IKB Deutsche Industriebank]
net_income = loss (€32.0 million) (yr - Mar 08)
assets = €50.24 billion (Mar 08)
parent = Lone Star Funds (pending)
products = Corporate, real estate and structured financing, private equity
homepage = [http://www.ikb.de www.ikb.de]
intl = yes

IKB Deutsche Industriebank (FWB|IKBG) is a bank based in Düsseldorf, Germany .It is specialized in lending to small and medium-sized companies.

In August 2007, it had to be bailed out due to bad losses in the subprime market meltdown.

IKB's fiscal year ends March 31 of each year.

Corporation

IKB was granted its banking license in 1924 as "Bafio" ("Bank für deutsche Industrieobligationen", Bank for German Industry Obligations). Bafio dealt in long-term real estate financing in an effort to aid the German economy grow under the weight of the World War I reparations the country owed.

The bank was incorporated under Germany's stock law ("Aktiengesetz") in 1945. In 1974 it merged with Deutsche Industriebank to become IKB Deutsche Industriebank.

IKB's main area of business is financing for small and medium enterprises in Germany. In addition to corporate financing, they also undertake real estate financing.

The German government's financing bank, KfW (formerly "Kreditanstalt für Wiederaufbau"), owns a 38% stake in IKB. [cite web|url=http://www.ikb.de/content/en/about_us/the_bank/history/index.jsp|title=The Bank: History|publisher=IKB Deutsche Industriebank|accessdate=2008-08-21] After several months of consideration of the sale of the IKB stake, [cite news|url=http://www.reuters.com/article/innovationNews/idUSL2739887720070927|title=German public banks eye stake in IKB|last=Halstrick|first=Philipp|coauthors=O'Donnell, John|date=27 September 2007|work=Reuters|accessdate=2008-08-21] it was announced on 21 August 2008 that private equity firm Lone Star Funds would acquire an almost 91% holding in the bank. [cite news|url=http://www.cnbc.com/id/26324192|title=Lone Star to Get 90.8% of Stricken Bank IKB |date=21 August 2008|work=Reuters|publisher=CNBC|accessdate=2008-08-21]

2007 subprime crisis

Losses

When the subprime market in the United States crashed in the summer of 2007, the global reach of the crisis was not immediately obvious. Several European banks, however, became victims of the crisis due to investment history; IKB was the first European bank to declare financial trouble due to the subprime disaster. [cite news|url=http://www.nytimes.com/2007/08/27/business/worldbusiness/27german.html|title=Mortgage Crisis Forces Sale of German Bank|last=Clark|first=Nicola|date=27 August 2007|work=The New York Times|accessdate=2008-08-21] [cite news|url=http://www.nytimes.com/2007/10/02/business/worldbusiness/02bank.html|title=Some Banks in Europe Suffer, Too|last=Landler|first=Mark|coauthors=Werdigier, Julia|date=2 October 2007|work=The New York Times|accessdate=2008-08-21]

In July 2007, IKB announced that it had been affected by the subprime mortgage crisis in the United States. Only a week earlier the bank had released a statement saying it expected to meet it earnings goals for the year. "Rhinebridge", a structured vehicle operated by IKB, had invested heavily in the U.S. subprime market. [cite news|url=http://online.wsj.com/article/SB119274057426563882.html|title=European SIVs Struggle To Avert Fire Sale of Assets|last=MacDonald|first=Alistair|coauthors=Mollenkamp, Carrick|date=19 October 2007|work=The Wall Street Journal|accessdate=2008-08-21]

To control the effects of the crisis in Germany, KfW, along with numerous commercial and coop banks (including Deutsche Bank and Commerzbank), formed a rescue fund to bail out the group. The funds used to bail out the bank amounted to 3.5 billion euro. Although IKB's stocks fell drastically, the bank avoided default, and the rescue is credited with having spared the German economy drastic fallout from the subprime crisis. [http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-10-16T070521Z_01_L16106714_RTRIDST_0_IKB-SUBPRIME-UPDATE-1.XML ]

In February 2008, the German government announced that IKB would require another rescue package to remain liquid, largely because peer banks were reluctant to invest further in the bank. The rescue package was announced in mid February at an amount of 1.5 billion euro. [cite news|url=http://afp.google.com/article/ALeqM5gfwBIUvlGjyqOSzRX3szCXv3V4Cg|title=Troubled IKB bank to get 1.5-billion-euro rescue package: minister|date=13 February 2008|work=Agence France Presse|publisher=Google News|accessdate=2008-08-21] As a result of the losses suffered by IKB, the company was demoted from Deutsche Börse's mid-cap MDAX stock market index to the small-cap SDAX in March 2008. [cite web|url=http://deutsche-boerse.com/dbag/dispatch/en/notescontent/gdb_navigation/home/INTEGRATE/mr_pressreleases?notesDoc=A4362EE98F99EBCFC1257403007326C5|title=Hamburger Hafen Replaces AWD in MDAX|date=5 March 2008|publisher=Deutsche Börse|accessdate=2008-08-21]

Investigations and controversy

Misconduct investigation by the Federal Republic of Germany

After the crash of its shares, the German financial watchdog BaFin and the Ministry of Finance opened an investigation into allegations of reporting and accounting misconduct. Although no charges were brought against the bank, four of the five executives of IKB stepped down between 1 August and 1 November 2007. [cite web|url=http://www.ikb.de/content/de/presse/pressemitteilungen/2007/071016_PwC_Gutachten.jsp|title=PricewaterhouseCoopers-Bericht liegt vor – IKB treibt Neuausrichtung voran|date=16 October 2007|publisher=IKB Deutsche Industriebank|language=German|accessdate=2008-08-21]

tate aid investigation by the European Union

Shortly after the IKB crash, the European Union opened an investigation into the rescue package to determine if the package contravened its state aid regulations. [cite news|url=http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/cnmortgage107.xm|title= US housing crisis deepens as American Home Mortgage and other lenders face defaults|last=Evans-Pritchard|first=Ambrose|date=7 August 2007|work=The Daily Telegraph|accessdate=2008-08-21] After protracted talks with the EU, the German government submitted an official notification of the rescue measures and possible future restructuring measures in January 2008. [cite news|url=http://www.forbes.com/markets/feeds/afx/2008/01/21/afx4553907.html|title=EU says received IKB aid notification; awaiting SachsenLB and WestLB measures|date=21 January 2008|work=AFX News|publisher=Forbes|accessdate=2008-08-21] As of February 2008, no ruling has been made by the European Court on the IKB case.

References

External links

* [http://www.ikb.de/content/en/index.jsp IKB Deutsche Industriebank]