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Shares of Germany's First Subprime Casualty Soar

By Insert Byline
Wednesday, 23 Apr 2008 | 12:02 PM ET

Shares of German lender IKB jumped more than 16 percent Wednesday. The company said late Tuesday it expected a smaller full-year loss than previously expected.

Instead of the forecast 800 million euro operating loss in fiscal 2007-08, the bank now expects an operating loss of 200 million euros ($316.8 million).

IKB is due to present its audited first half results for 2007-08 on April 29.

The difference comes from a 250 million euro increase in the positive valuation effects of liabilities now currently valued at 1.5 billion euros after deferred taxes.

Also, the favorable valuation effect from the debtor warrants of 350 million euros had not been included in the previous forecast, IKB said.

The debtor warrants were an element of major shareholder KfW's capital injection made in February and March 2008 that totaled 1.05 billion euros.

"It has to be accounted for as liability in the IFRS group accounts and shown at the present value of the future payments. The difference between nominal value and present value has to be recorded in the income statement," IKB said in a statement.

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