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US sub-prime loan crisis claims first victim


US sub-prime loan crisis claims first victim


A German bank has become the first victim of the crisis in American high-risk mortgage lending – so-called sub-prime loans. IKB surprised the markets by announcing a profit-warning linked to problems in the US sub-prime market. The chief executive has gone, and its main shareholder has had to step in to shore-up IKB’s credit-worthiness. Sam Stovall, the Chief investment strategist at Standard and Poor’s Equity research said: “Investors are worried that there will be a bleeding effect from the decline in the sub-prime lending area that could work its way into other areas, either in mortgages or mortgage-backed securities etc. And a lot of the large cap (capitalised) banks as well as the investment banks have been dragged down because of that worry.” Shares in Germany’s Postbank, Hypo Real Estate, Commerzbank and Deutsche Bank all fell as investors’ worried about just how deeply the lenders are involved with the complex US sub-prime market.

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