Rock of the Rhine

28 November 2007 By John Foley Follow @johnsfoley

The cost of the quasistate bailout of the German lender has doubled to E4.8bn. IKB shareholders deserve nothing but they are likely to be bought out. As a result, they are still sitting on equity with a market value of E750m curiously almost exactly what Rock is worth.

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KfW, the German stateowned bank that stepped in to protect IKB Deutsche Industriebank over the summer, increased the amount it had set aside to meet potential losses from E2.3bn to E4.8bn on Tuesday. KfW owns 38% of IKB, which it is considering selling.

IKB's main role was originally to generate loans for mediumsized German companies. But it emerged in July that an offbalance sheet vehicle, Rhineland Funding, had invested heavily in US subprime mortgage securities, and was unable to refinance its debts.

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