FRANKFURT (AFP) — German bank IKB said Tuesday it has drawn the "personal consequences" of its excessive exposure to the US market for high-risk home loans, with the departure of two directors and a retroactive slashing of its 2006/2007 results.
Markus Guthoff, a board member in charge of real-estate management, and Frank Braunsfeld, head of risk management, will leave the bank "effective immediately," a statement said.
IKB, which lends to small and medium sized businesses, was saved from bankruptcy in August when KfW bank, the government's financial arm, gave it a line of credit worth 8.1 billion euros and other German banks agreed to add another 3.5 billion if needed.
KfW is now seeking to sell its 38 percent stake in IKB, which has become the target of takeover rumours.
IKB said it would also revise downwards its operating profit for its 2006/2007 fiscal year that ended on March 31, from 263 million euros (373 million dollars) to 180 million.
The difference stems from the retroactive consolidation of IKB's Rhineland Funding unit, the results of which had not been entered in the balance sheet, it said.
Rhineland Funding was responsible for IKB's financial debacle because of its heavy exposure to losses in the market for high-risk, or subprime, US mortgages, which collapsed earlier this year and sparked a credit crunch that is still affecting banks worldwide.
For the current fiscal year, IKB now forecasts a loss of around 700 million euros while it resolves problems incurred in the US subprime market.
On Monday, the German lender unveiled the results of an audit by PricewaterhouseCoopers which said the bank had suffered from "weaknesses in its risk management."
Copyright © 2009 AFP. All rights reserved. More »
