Subprime Whacks Japan, Wanes in China - Housing Tracker

Global Subprime Fallout

IKB Reports First-Half Loss of EU1 Billion on Writedowns. “IKB Deutsche Industriebank AG, the German bank being sold after a bailout over U.S. subprime investments, had a first-half loss after writing down the value of financial assets. The net loss in the six months through Sept. 30 was €1 billion ($1.6B)… IKB didn't provide a year- earlier figure. IKB became the first German casualty of the U.S. subprime market collapse last year after its finance affiliate couldn't raise funding amid a credit crunch. The German bank has received emergency financial aid totaling more than €8B.” (Bloomberg, Apr. 29th)

BOC Rises on Profit Growth, Waning Subprime Concerns. “Bank of China Ltd., the nation's third-largest bank, rose in Shanghai trading after first-quarter profit beat some analysts' estimates on rising fees and loan income. Bank of China's report yesterday after markets closed that profit jumped 85% to 21.7 billion yuan ($3.1B) spurred optimism that earnings will weather mortgage-related losses and a clampdown on bank lending in China. BOC reported $203 million in first-quarter losses from subprime mortgage-backed securities.” (Bloomberg, Apr. 29th)

Dubai World Says Subprime Crisis Slowed Investment. “Dubai World, the investment firm of the Dubai government, said on Tuesday it is holding on to U.S. real estate assets amid a property downturn, and that the subprime crisis has slowed its investment decisions this year. CIO Yu Lai Boon: "I'm more cautious because I don't think there's total transparency on how bad the situation is.” He said… the concern is that the contagion… could spread to Japan and China. Dubai World [and] subsidiaries Nakheel and Istithmar, have a multi-billion dollar global portfolio [including] over $20 billion in real estate assets globally outside Dubai.” (Reuters, Apr. 29th)

Bank Hapoalim Cutting Its Subprime Mortgage Losses And Selling Portfolio. “Bank Hapoalim is negotiating to sell a large share of its mortgage-backed securities portfolio – and take a $1 billion loss on its investment. The bank is expected to sell off subprime asset-backed bonds known as Alt-A and Alt-B, which make up the riskiest part of its holdings – about $2.5B-$3B worth. Sources are talking about a price of 60-70 cents on the dollar for the securities, [equaling] a loss of between $70 million-$1.2B loss… in addition to the permanent write-downs of about $300M it has already recognized… Bank Hapoalim will remain holding another $2B [of] higher quality and less risky MBS.” (Ha’aretz, Apr. 29th)

Deutsche Bank Says It Had First Loss in Five Years. “Deutsche Bank AG (DB), Germany's biggest bank, reported its first quarterly loss in five years after writing down the value of loans for leveraged buyouts and asset- backed securities by €2.7 billion ($4.2B). DB’s first-quarter net loss of €131 million, after earning €2.12B a year earlier… Analysts [expected] a loss of €174M. Earnings were lifted by €854M from selling stakes in companies and by a tax gain. Deutsche Bank, led by Chief Executive Officer Josef Ackermann, avoided the worst of the subprime contagion because of early bets against the U.S. housing market.” (Bloomberg, Apr. 29th)

Japan Finance Sector Feels Pain. “Companies have become cautious about raising money through [Japanese] public share offerings… Brokerage houses saw their commissions from underwriting shrink. In Daiwa’s case, commissions from securities underwriting slumped 33% to ¥6.51 billion for Q1. It also posted trading losses of ¥9.48B, compared with a profit of ¥47.04B a year earlier… Mizuho Securities has twice delayed a long-planned merger between its brokerage unit and Shinko Securities Co. because Mizuho Securities’ massive subprime losses make its true asset value difficult to determine… Mizuho also plans to cut its workforce by about 15%, or 300 jobs, from a total of 1,850 employees in the current fiscal year.” (Wall St. Journal, Apr. 29th)

Nomura, Mizuho Slip into Red on Subprime Fallout. “Nomura Holdings fell into the red for the first time in nine years as it booked ¥258 billion of subprime-linked losses in the year that ended in March… Five of the six other firms--Daiwa Securities Group Inc., Mitsubishi UFJ Securities Co., Tokai Tokyo Securities Co., Mizuho Investors Securities Co. and SMBC Friend Securities Co.--suffered hefty falls in their group net profits in F2007 due to the stock market slump reflecting the subprime crisis. Okasan Holdings Inc. alone secured a net profit increase on a consolidated basis… Nikko Citigroup Ltd., a wholesale securities firm… incurred an unconsolidated net loss of ¥6.7B.” (Japan’s Corporate News Network, Apr. 28th)

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