FRANKFURT, July 30 (Reuters) — The American subprime mortgage crisis claimed the lender IKB as a first victim in Germany today, setting off sharp falls in other German bank shares on fears that they, too, could face sudden problems.
IKB, a small-company lender, surprised markets with a profit warning linked to problems in the American subprime market and announced that its chief executive had stepped down, sending its share price down more than one fifth.
IKB’s biggest shareholder, the state bank KfW, stepped in to prop up the bank’s creditworthiness in the wake of the difficulties.
But IKB’s exposure to complicated American mortgage investments was the first time the subprime specter had loomed in Europe’s biggest economy. It scared investors, fuelling worries that other German banks could be affected in the same way.
Shares in Deutsche Postbank were down 1.2 percent at 55.06 euros by mid-afternoon here, having fallen as low as 52.60 earlier in the session, despite assurances from the company that it would not suffer from the subprime market.
An international property financier, Hypo Real Estate, dropped 3.5 percent to 44.71 euros, while Commerzbank was down 2.7 percent at 30.84 euros.
Deutsche Bank , which had declined to tell investors about its exact exposure to subprime markets, was down 0.7 percent at 97.25 euros, off a day’s low of 95.85.
It will unveil its second-quarter results on Wednesday, and the shares had already tumbled last week on fears of a profit warning.
Simon Adamson, an analyst at the credit research firm CreditSights, said that banks had generally failed to explain their obligations stemming from such structured finance deals.
“This announcement from IKB will confirm the fears of a lot of investors that we don’t really know what the scale of the problem is,” he said. “If you look through banks’ annual reports you will not find information to tell you what this potential liability is and that is one of the main reasons that the market has been so worried recently.”
Mr. Adamson also said that the IKB case showed how quickly subprime problems could get out of control. Just 10 days ago IKB had confirmed its profit goal for the year.
But credit rating agencies played down the prospect of ripples from the United States endangering the country’s top-tier banks.
“We don’t see any significant impact on the big German banks directly from U.S. sub-prime mortgage problems,” said Stefan Best, an analyst with the rating agency Standard & Poor’s, which recently surveyed big German banks about their exposure.
Thomas von Luepke, chief German banks analyst at the ratings agency Fitch, said much depended on whether the American problems spread to the country’s real estate market generally and the United States and European economies.
“Most German banks are well-positioned to digest any shock of a limited size,” Mr. von Luepke said.
The German financial watchdog BaFin, which oversaw the IKB rescue, said the deal ensured there would be no fallout for the country’s banking system.
Default rates on mortgages to high-risk or subprime borrowers in the United States have been creeping up, after years of low interest rates and loosening credit standards.
This has led to problems for the banks doing the lending as well as those sharing the risk, culminating in the recent crisis.
