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IKB Postpones First-Half Results, to Consolidate Conduit

The biggest shareholder in Germany's troubled IKB Deutsche Industriebank said Thursday that the pool of banks that stepped in to support IKB after it was attered by the U.S. subprime lending crisis will cover additional risks estimated at $520 million.

The banks agreed that "full protection will be provided for all remaining risks of IKB" related to liquidity lines that were provided to the lender, the state-owned KfW development bank said in a statement.

In a separate announcement Thursday, IKB said it was postponing the release of its first-half earnings for the second time in order to complete accounting changes following a special audit. The results had been expected Friday, and IKB did not give a new date.

In July, IKB, which lends to small and medium-sized German companies, abandoned a profit forecast for the 2007-2008 fiscal year of 280 million euros ($416 million). It said it had "felt the impact of the crisis in the U.S. subprime mortgage market," and said its chief executive, Stefan Ortseifen, had resigned.

The bank's problems sprang from its Rhineland Funding investment vehicle's apparent inability to cover its funding needs because of exposure to U.S. subprime loans, made to borrowers with weak credit histories.

KfW -- its biggest shareholder with nearly 38 percent of the company -- and other lenders then formed a banking pool of 350 million euros to protect IKB.

Earlier this week, KfW said it had raised the resulting risk shield for IKB by 2.3 billion euros ($3.4 billion) to 4.8 billion euros ($7.1 billion) on the basis of new information regarding the valuation of risks covered by Rhineland Funding, and because of a "dramatic worsening" of markets' assessment of default risks in the subprime segment.

In postponing its results, IKB said that accounting changes would be made, particularly regarding the consolidation of Rhineland Funding. That, it said, is an "extremely complex" process.

The bank said that its performance in its core business units "continued to be encouraging in the first half of the financial year."

IKB shares were up 5.2 percent on the Frankfurt exchange at 8.47 euros ($12.53).