IKB shares soar as German government backs rescue package

Feb.14, 2008 in Market Outlook

IKB’s shares soar as Germany backs rescue deal

By Simon Kennedy, MarketWatch

Last Update: 7:58 AM ET Feb 14, 2008

LONDON (MarketWatch) — Struggling German bank IKB Deutsche Industriebank saw its
shares rally Thursday, surging as much as 26% after the German government stepped
in to arrange a new rescue package valued at 1.5 billion euro ($2.2 billion).

Late Wednesday, Economics Minister Michael Glos said the government will provide
1 billion euros to support IKB (DE:806330), while the remainder will have to come
from other banks and private investors.

The minister’s announcement came after a lengthy board meeting conducted by
state-owned lender KfW, which holds some 40% of IKB’s shares.

The news came as a relief to shareholders: German newspaper Frankfurter
Allgemeine Sonntagszeitung reported on Tuesday that KfW might not be willing to
provide further support to IKB.

IKB’s shares climbed 15.6% in Frankfurt, having gained as much as 26% in early
trading. The gain more than wiped out losses from earlier in the week.

IKB has already received two previous funding lifelines totaling more than 6
billion euros. Subprime investments on its balance sheet and in a structured
investment vehicle threatened to sink the bank.

Also, IKB announced further write-downs. The firm said a fall in the value of its
on-balance sheet investments exceeds existing risk provisions by 950 million
euros, including about 630 million euros on a higher-risk portfolio that includes
a significant element of subprime holdings.

More banks coming clean

IKB wasn’t the only bank to provide another update on its subprime position.

Also Thursday, UBS (UBS) said it still has $27.6 billion of subprime exposure and
another $26.6 billion of Alt-A mortgages as the Swiss banking giant confirmed it
took $13.7 billion in write-downs during the fourth quarter.

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