Moody’s Downgrades German Bank Subordinated Debt


Josef Ackermann Bilderberg 2010 in Sitges (Click on image to enlarge.)

18 Feb. (Bloomberg) — German banks’ subordinated debt securities valued at 24 billion euros ($33 billion) were downgraded by Moody’s Investors Service on the prospect that new legislation will increase the risk of losses among debt holders.

Moody’s cut the ratings of lower Tier 2 notes, a layer of debt that’s subordinated by coming behind senior bonds in the queue for repayment after a bank collapses. Like other governments seeking to ensure creditors pay up before taxpayers have to contribute, German law now removes the protection Tier 2 bonds enjoyed from the authorities’ preference for saving lenders before they fail.

“The new legislation materially reduces the likelihood of government support for LT2 securities and therefore took out the state support uplift,” BNP Paribas SA analysts Olivia Frieser and Ivan Zubo wrote in a note to clients today. “The downgrades are as harsh as we had expected, which may weigh on sentiment.”

The cost of insuring German bank debt rose, according to CMA prices for credit-default swaps. Contracts on the subordinated debt of Deutsche Bank AG jumped 12 basis points to 160, the highest in five weeks. Swaps linked to Commerzbank AG’s junior debt climbed 25 basis points to 450 and senior contracts rose 10 to 190.
Toughening Rules

Read moreMoody’s Downgrades German Bank Subordinated Debt

Banksters sue Banksters for €33m in unpaid bonuses

Commerzbank-Logo in Frankfurt
Commerzbank-Logo in Frankfurt

Seventy-two City bankers are suing Dresdner Kleinwort and Commerzbank for €33m ($47.8m) worth of unpaid bonuses in the biggest case of its kind in the UK.

The lawsuit, filed on Tuesday in the High Court, is the latest sign that bankers are ready to fight for their pay packets in spite of public outrage over the size of the rewards on offer in an industry widely blamed for the financial crisis.

An additional 25-30 former employees at Dresdner, which was bought by Germany’s Commerzbank late last year, are expected to file a separate suit in the coming weeks.

Read moreBanksters sue Banksters for €33m in unpaid bonuses

Dresdner Kleinwort bankers threaten to sue over bonuses

250 Dresdner Kleinwort bankers are preparing legal action to recover tens of millions of pounds of bonus payments

As many as 250 Dresdner Kleinwort bankers are preparing legal action to recover tens of millions of pounds after the German bank’s new owner reneged on bonus payments.

Several of the bankers, who worked for Dresdner Kleinwort in the City of London until it was sold to Commerzbank in September, are claiming bonuses in excess of £1 million with the disputed payments totalling around £50 million.

Read moreDresdner Kleinwort bankers threaten to sue over bonuses

More toxic U.S. assets to hit German banks – report

FRANKFURT, Jan 17 (Reuters) – Major German banks have so far written off only around a quarter of the nearly 300 billion euros ($397.7 billion) in toxic U.S. assets on their books, Der Spiegel magazine reported, citing a survey of 20 big lenders.

That means banks face more huge losses as they mark down the value of U.S. assets backed by mortgages and student loans, the magazine said on Saturday, reporting on a study prepared for the government by the Bundesbank and markets regulator BaFin.

German article:
Deutsche Banken sitzen auf Giftpapieren in Milliardenhöhe
(Spiegel Online)

The finance ministry in Berlin assumes that the entire German banking sector is carrying around 1 trillion euros of risky assets on its books, the magazine said.

A spokeman for the Finance Ministry said it believed banks still had “significant amounts” of risky assets but declined to confirm the figures in the report.

Read moreMore toxic U.S. assets to hit German banks – report

Merkel makes £44bn U-turn to try to save sinking German economy

The taxpayer looting and unsustainable debt creating ‘Paulson-Bernanke-Brown’ virus spreads rapidly around the world. Even financially relatively sound countries are now affected. ‘Sound economics’ resistance is now at close to 100%.


Critic of UK’s ‘crass Keynesianism’ offers package of tax cuts and state spending

Angela Merkel will make her sharpest political U-turn since becoming German Chancellor this week when her government unveils a €50bn (£44bn) package of tax cuts and incentives to protect Europe’s biggest economy from deepening recession.

The “Pact for Germany” programme contains a battery of tax cuts, health insurance reductions and special government funds designed to stimulate an economy forecast to contract by 3 per cent this year.

The measures, expected to be agreed at a crisis cabinet meeting tomorrow, will be announced only weeks after Mrs Merkel’s grand coalition government heaped scorn on Britain for “tossing around billions” in its efforts to tackle the credit crunch.

Germany’s Finance Minister, Peer Steinbrück, went so far as to condemn Gordon Brown’s VAT cuts as “crass Keynesianism” and said that it would take Britain a “whole generation” to work off the debt. Mrs Merkel insisted that spending one’s way out of recession did not work. (Absolutely correct!)

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Yesterday, however, Mr Steinbrück announced plans to slash the basic tax rate from 15 to 12 per cent to persuade poorer families to keep spending.

Read moreMerkel makes £44bn U-turn to try to save sinking German economy

Germany takes 25 pct stake in Commerzbank for cash

* Germany to take 25 pct stake in Commerzbank
* Commerzbank gets extra 10 bln euros of capital
* Allianz bolsters Dresdner capital by 1.45 bln euros
* Purchase of Dresdner to close within days

FRANKFURT, Jan 8 (Reuters) – Germany is taking a stake of 25 percent plus one share in Commerzbank (CBKG.DE) in return for an additional 10 billion euro ($13.6 billion) capital injection, the country’s second-biggest listed bank said on Thursday.

It is the first time Berlin has partially nationalised a major bank in response to the global financial crisis and follows similar moves by London and Washington. Commerzbank will get a total of 18.2 billion euros in state capital plus 15 billion in guarantees.

“We are weatherproofing our bank for an economically stormy environment,” Chief Executive Martin Blessing said in a statement.

Read moreGermany takes 25 pct stake in Commerzbank for cash

Allianz Posts 2 Billion Euro Loss, May Miss Forecast

Nov. 8 (Bloomberg) — Allianz SE, Europe’s second-biggest insurer by market-value, posted a 2 billion-euro ($2.6 billion) loss and said it may miss operating profit forecasts for this year and next because of the turmoil in financial markets.

Allianz had a net loss including discontinued operations in the third quarter, compared with net income of 1.9 billion euros a year earlier, the Munich-based insurer said in a statement today. That was less than the 3.85 billion-euro estimate of 14 analysts surveyed by Bloomberg. Net income from continuing operations, which reflects the sale of Dresdner, was 545 million euros, the company said, missing analysts’ estimates of 782 million euros.

“Without a major equity market recovery, the operating profit outlook of 9 billion euros before banking for this year and next year cannot be reached,” Allianz Chief Financial Officer Helmut Perlet said in the statement.

Allianz, led by Chief Executive Officer Michael Diekmann, agreed on Aug. 31 to sell Dresdner Bank to Frankfurt-based Commerzbank AG for cash and stock. Commerzbank shares lost about 40 percent of their value in the month ended Sept. 30. Discontinued operations, which reflect the sale of Dresdner effective from Sept. 1, accounted for “transaction-based impairments according to IFRS 5” of 1.4 billion euros as well as for a net loss of 1.2 billion euros from Dresdner’s operations, Allianz said.

Read moreAllianz Posts 2 Billion Euro Loss, May Miss Forecast

Euro banks spread gloom as profits, forecasts fall


NP Paribas Chief Executive Officer Baudouin Prot speaks during a news conference to announce the bank’s third-quarter results in Paris November 5, 2008.

PARIS (Reuters) – A raft of European bank results did little to lift gloom around the sector on Wednesday, with a recurring trend of falling profits and rising bad debts stemming from the global financial crisis.

France’s biggest bank BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) posted a 56 percent fall in third-quarter profits, Allied Irish Banks (ALBK.I: Quote, Profile, Research, Stock Buzz) cut its earnings forecast, and Greece’s Emporiki Bank (CBGr.AT: Quote, Profile, Research, Stock Buzz) swung to a loss.

Capital rebuilding continued in the face of a tough outlook as Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) looked to raise up to 3 billion pounds ($4.7 billion) from a government-backed bond, and Austria’s Raiffeisen Zentralbank said it may ask the government for 2 billion euros ($2.6 billion).

By 7:15 a.m. EST the DJ Stoxx banking index was down 0.7 percent, led by 4 percent falls for BNP and Allied Irish.

Profits have tumbled across the sector, and several banks have warned of more writedowns and rising bad debts this year, though there is optimism that government rescue packages have left balance sheets strong enough to withstand more losses.

Read moreEuro banks spread gloom as profits, forecasts fall

France threatens to seize banks, German bail-outs escalate

The French state has threatened to seize control of the country’s banks and fire top staff unless they do their part to stabilise the economy by stepping up lending to companies in need.

“The banks have got to open up credit to business: they have the means to do it,” said prime minister Francois Fillon, accusing lenders of hoarding cash. “We don’t think the banks are stepping up to task as necessary. We can withdraw the credit that we have extended to them under the state’s contract with the banks, and that will put them in difficulty. At that moment the question arises whether we should take an equity stake, change their managers, and assume control over their strategy.”

Speaking on French television, he warned: “Broadly speaking, we’ll be able to judge over the next 10 days whether they are playing the game as they should, or not.”

Read moreFrance threatens to seize banks, German bail-outs escalate

Commerzbank accepts €8.2bn state funding

Commerzbank, Germany’s second-largest bank, today said it would accept a €8.2bn (£6.44bn) capital injection from the state and a further €15bn in guaranteed funding.

Commerz, which is taking over Dresdner, its smaller rival, said it had agreed to pay no dividends for the next two years. It will also scrap all boardroom bonuses in 2009 and 2010 and cap its chief executive’s salary at €500,000.

The bank made its moves as it reported a net loss of €285m in the third quarter when it was heavily exposed to both Lehman Brothers, the bankrupt US investment bank, and Iceland, the virtually insolvent country.

It said it made a combined operating loss of almost €900m through these two events. In the first nine months its pre-tax earnings of €2.3bn a year ago shrank to €419m.

Germany’s private sector banks have been under considerable pressure from chancellor Angela Merkel to join her government’s €500bn stabilisation package, with the biggest, Deutsche, creating a storm by saying it would be “ashamed” to take part.

Read moreCommerzbank accepts €8.2bn state funding