Reply #10: U.S. subprime problems claim first German victim [View All]

[UpInArms]

U.S. subprime problems claim first German victimhttp://www.reuters.com/article/bondsNews/idUSL301222220070730?sp=true

FRANKFURT, July 30 (Reuters) - The U.S. sub-prime mortgage crisis claimed its first victim in Germany on Monday when small-business financier IKB (IKBG.DE: Quote, Profile, Research) announced a surprise profit warning caused by the problems.

IKB said it expected "significantly lower" earnings this year and that its chief executive had stepped down after sub-prime problems at a fund it managed, sending its share price down more than 18 percent.

IKB, which mainly gives loans to German small and medium sized or Mittelstand firms, said its biggest shareholder, state bank KFW, had stepped in to prop up its creditworthiness in the wake of the difficulties.

German financial watchdog Bafin, which helped broker the deal, welcomed the move and said it ensured there would be no fallout for the country's banking system.

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At the heart of problem are borrower defaults on adjustable-rate mortgages as higher interest rates filter through.

Standard & Poor's Best said that should the problems trigger a broader crisis, all banks would suffer.

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