Global Subprime Fallout, Continued... - Housing Tracker

Quote of the Day

"You're in a different world." - Michael Deppler, director of the IMF's European department on Britain’s subprime crisis versus the American subprime crisis. Deppler said mortgage standards were higher and foreclosures much lower than the U.S. (Reuters, Apr. 21st)

"The economic downturn can be mitigated if decisive and timely actions are taken by policy makers in the United States and elsewhere. However, if such actions by the authorities are not taken within the next three to four months, it will be left to the market forces of supply and demand to stabilise the US housing market before we can see the light at the end of the tunnel.” – GIC deputy chairman and executive director Tony Tan, speaking at the opening of GIC's inaugural staff conference, warning that the global economy could sink into its worst recession in 30 years. (AFP, Apr. 21st)

Global Subprime

Top German Bank Responds To Credit Crunch By Staff From Putting Brothels On Expenses. “Germany's biggest bank today banned staff from visiting brothels on expenses and putting hotel TV porn channels on their company credit card. The crackdown came in new rules issued to executives as Deutsche Bank (DB) cuts costs after losing at least £2billion so far in the global credit crunch… Whether the ruling was prompted by a recent upsurge in executives seeking erotic relief from subprime deals that have gone bad was not specified… Employees stepping off of overnight flights who are expected… at a business meeting are now to shower at the airport instead of booking a hotel room to do so.” (Daily Mail, Apr. 21st)

German Banks Prop Up Property Lender, Plan Sale. “Germany's BdB banking association has taken control of property lender Duesseldorfer Hypothekenbank and plans to sell it, after the lender ran into problems linked to the financial market crisis, the BdB said Monday. The bank's owners decided to temporarily transfer the lender to a guarantee fund run by the banking association. "A new owner will be found for the bank in an orderly sale. That will allow the bank to get through the difficulties that it had run into in the current tense market situation," BdB said, adding that the bank's ability to service its covered bonds was secure.” (Reuters, Apr. 21st)

Sumitomo Mitsui Is Buying Loans in China, Chan Says. “Sumitomo Mitsui Financial Group Inc. is buying high-yielding loans from Chinese banks and will target lending to state-owned companies in [China], said Chris Chan, the bank's first Chinese director: “We did buy loans, but from mainland banks, and some of them are very good quality, with deep discounts”… Sumitomo Mitsui and larger rival Mitsubishi UFJ Financial Group Inc. are poised to expand in China while their Wall Street and European rivals struggle with mounting losses from the… U.S. subprime mortgage market… Japan's three biggest banks [have] invested more than $1 billion in the region's financial firms in the last 12 months.” (Bloomberg, Apr. 21st)

As Capital Gets Tighter, Some Banks Rethink Investments. “Bank of America (BAC) considers lowering its 9% stake in China Construction Bank, after reporting $2 billion in write downs related to bad loans Monday… American Express, Goldman Sachs and Allianz Group paid $3.8B for a stake in Industrial and Commercial Bank of China in 2006; Royal Bank of Scotland bought a 5% stake in Bank of China for $1.6B in 2005; and Citigroup bought 10% of HDFC Bank of India in 2006… Many U.S. and European banks took stakes in their Chinese counterparts before they went public, and are now sitting on sizable profits even after recent losses in the Chinese stock market.” (Int’l Herald Tribune, Apr. 21st)

Singapore's GIC Reiterates Faith In UBS, Citigroup. “Government of Singapore Investment Corp [GIC] deputy chairman and executive director Tony Tan: "We regard our investments in UBS and Citicorp as long-term investments which will give us good returns when markets stabilize and economic conditions return to normal levels.” GIC in December announced it would inject 11 billion Swiss francs ($10.8B) into UBS. A month later it said it would pump $6.88B into Citigroup… Citigroup on Friday reported a $5.1B net loss during Q1. Earlier this month UBS revealed an additional $19B in writedowns.” (AFP, Apr. 21st)

Britain Does Not Face Subprime Crisis, Says IMF. “Michael Deppler, director of the IMF's European department: Britain does not face a U.S.-style subprime mortgage crisis, but the Bank of England's latest move to help out commercial banks can only be one element in easing credit market tensions… On Monday, the Bank of England announced about £50 billion of assistance to British banks that the main solution to the credit crisis lay in banks being more open about their losses and recapitalizing.” (Reuters, Apr. 21st)

UBS' Subprime Postmortem. “In a 50-page report, Swiss bank UBS attributed its massive [$37 billion in subprime writedown] losses to a litany of errors, including faulty risk management and a focus on revenue growth, which blinded it to the dangers in its substantial subprime portfolio… The report [said] UBS' troubles began with its U.S.-based hedge fund Dillon Read Capital Management, which closed last year, and accounted for around 16.0% of its total losses. The investment bank's global rates division, which held collateralized debt obligations, and an asset-backed securities trading portfolio managed by its foreign exchange trading division also took heavy hits.” (Forbes, Apr. 21st)

RBS To Announce Cash Boost. “The Royal Bank of Scotland said Monday it would ask shareholders for a cash boost… Britain's second largest bank gave no details about the exact amount and timing of the cash call but… media reported that RBS was to launch a rights issue for more than £10 billion (€12.6B, $19.9B) on Tuesday, after being hit by subprime-linked losses plus surging costs from last year's consortium takeover of Dutch group ABN Amro. The Times said Monday that RBS would announce the sale of train leasing company Angel Trains for £3.5B.” (AFP, Apr. 21st)

Spain Cleanup Jolts Property Owners. “Enforcing a much-neglected 1988 law, the Socialist government is getting tough about what constitutes coastal public domain — the strip of land stretching back from the water's edge — and telling thousands of house and apartment owners their properties do not really belong to them… The fears of losing coastal villas come as Spain's real estate market is turning sour, a situation tied by some to the international banking crisis and its parent, the U.S. subprime mortgage scandal… The Costa del Sol Association of Builders and Promoters reported in February that sales of tourist property in southern Malaga province fell nearly 50% last year.” (AP, Apr. 21st)

Asian Banks' Subprime Exposure Well Reserved With Modest Valuation Losses- Fitch. “Fitch Ratings said major Asian banks' potential losses on subprime exposure are generally well reserved and that it expects modest valuation losses on CDOs, SIVs, and on US 'Alt A' mortgages for most Asian banks in relation to their earnings and capital. The ratings agency said the major banks in Asia ex-Japan in aggregate have only a modest total exposure to subprime-related securities, CDOs, SIVs and other structured credit investments... Fitch said Indian banks have not been unscathed by the credit crisis but stand to incur real losses only if corporate default rates rise significantly.” (Forbes, Apr. 21st)

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