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IKB Deutsche Industriebank

From Wikipedia, the free encyclopedia
IKB Deutsche Industriebank AG
Company typePublic (FWB: IKBG)
IndustryFinancial services
Founded1924
Defunct1974 Edit this on Wikidata
HeadquartersDüsseldorf, Germany
Key people
Dr. Michael H. Wiedmann (CEO and Chairman of the Management Board), Dr. Karl-Gerhard Eick (Chairman of the Supervisory Board)
ProductsCorporate and Structured financing, Private Equity
€221 million (1 January 2021 to 31 December 2021)[1]
Total assets€16.0 billion (31. December 2021)[1]
Number of employees
548 (31 December 2021)[2]
ParentLone Star Funds
Websitewww.ikb.de

IKB Deutsche Industriebank AG (FWB: IKBG) is a bank headquartered in Düsseldorf, Germany. It was established in 1924 under the name Bank für Industrie-Obligationen (lit. 'Bank for Industrial Bonds'). IKB supports medium-sized enterprises in Germany and Europe with loans, risk management, capital market services and advisory services. The online offering for retail banking customers covers overnight and term money, bank savings schemes, bank deposits and selected commercial papers. The bank has six branches in Germany. Single shareholder is the investment company Lone Star.

Corporation

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Share of the Industriekreditbank AG, issued in December 1949

IKB (Industriekreditbank) 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), owned a 38% stake in IKB. After several months of consideration of the sale of the IKB stake,[3] it was announced on 21 August 2008 that private equity firm Lone Star Funds would acquire a 90.8% holding in the bank.[4] The sale process of KfW's shares to Lone Star Funds was closed on 29 October 2008.[5]

2007 subprime crisis

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Losses

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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 among the first European bank to declare financial trouble due to the subprime disaster.[6][7]

In July 2007, IKB announced that it had been affected by the subprime mortgage financial crisis in the United States. Only a week earlier the bank had released a statement saying it expected to meet its earnings goals for the year. "Rhinebridge", a structured vehicle operated by IKB, had invested heavily in the U.S. subprime market.[8]

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. 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.

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.[9] 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.[10]

Investigations and controversy

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Misconduct investigation by the Federal Republic of Germany

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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.[11]

State aid investigation by the European Union

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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.[12] 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.[13] As of February 2008, no ruling has been made by the European Court on the IKB case.

Goldman Sachs SEC lawsuit

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IKB was mentioned by the U.S. Securities and Exchange Commission (SEC) in court fillings when it sued Goldman Sachs and one of Goldman's Collateralized debt obligation (CDO) traders on 16 April 2010. The SEC alleged that IKB was on the wrong side of the CDO instruments Goldman was creating and that Goldman defrauded both IKB and ABN AMRO in failing to disclose that the CDOs that IKB was purchasing were not assembled by a third party, but instead through the guidance of a hedge fund that was counterparty in the CDS transaction. This hedge fund, Paulson & Co., stood to earn great benefit in the event of default[14] The suit by the SEC alleges that IKB lost $150 million which Paulson gained.[15]

References

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  1. ^ a b "IKB Annual Report 2016/2017" (PDF). IKB Deutsche Industriebank AG. Retrieved 6 March 2017.
  2. ^ "IKB Annual Report 2015/2016" (PDF). IKB Deutsche Industriebank AG. Retrieved 6 March 2017.
  3. ^ Halstrick, Philipp; O'Donnell, John (27 September 2007). "German public banks eye stake in IKB". Reuters. Retrieved 21 August 2008.
  4. ^ "Lone Star to buy IKB, the German subprime casualty". The New York Times. 21 August 2008. Retrieved 7 November 2015.
  5. ^ "Sale process of KfW's shares in IKB closed Lone Star acquires 90.8% of IKB". KfW. 29 October 2008. Retrieved 7 November 2015.
  6. ^ Clark, Nicola (27 August 2007). "Mortgage Crisis Forces Sale of German Bank". The New York Times. Retrieved 21 August 2008.
  7. ^ Landler, Mark; Werdigier, Julia (2 October 2007). "Some Banks in Europe Suffer, Too". The New York Times. Retrieved 21 August 2008.
  8. ^ MacDonald, Alistair; Mollenkamp, Carrick (19 October 2007). "European SIVs Struggle To Avert Fire Sale of Assets". The Wall Street Journal. Retrieved 21 August 2008.
  9. ^ "Troubled IKB bank to get 1.5-billion-euro rescue package: minister". Agence France Presse. 13 February 2008. Archived from the original on 20 May 2011. Retrieved 21 August 2008.
  10. ^ "Hamburger Hafen Replaces AWD in MDAX". Deutsche Börse. 5 March 2008. Archived from the original on 11 May 2008. Retrieved 21 August 2008.
  11. ^ "PricewaterhouseCoopers-Bericht liegt vor – IKB treibt Neuausrichtung voran" (in German). IKB Deutsche Industriebank. 16 October 2007. Archived from the original on 24 June 2009. Retrieved 21 August 2008.
  12. ^ Evans-Pritchard, Ambrose (7 August 2007). "US housing crisis deepens as American Home Mortgage and other lenders face defaults". The Daily Telegraph. Retrieved 21 August 2008.[dead link]
  13. ^ "EU says received IKB aid notification; awaiting SachsenLB and WestLB measures". Forbes. AFX News. 21 January 2008. Retrieved 21 August 2008.[dead link]
  14. ^ "SEC Goldman Suit Court Fillings". 16 April 2010.
  15. ^ "Complaint against Goldman Sachs and Fabrice Tourre" (PDF). U.S. Securities and Exchange Commission. 15 April 2010. Retrieved 17 April 2008.
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