Germany's WestLB bank is the latest subprime victim; to make a loss in 2007
15 November 2007
German bank WestLB has warned that it expects a loss this year instead of a profit. The bank is the latest victim of a global credit crisis set off by US sub-prime mortgage lending.
WestLB says it expects to report a full-year pretax loss in the low, triple-digit, million-euro range, even though operating earnings have come up to plan. "The substantial price losses of structured securities in the past weeks are the main reason for this development," the bank said in a statement.
Earlier this year, proprietary trading blunders pushed the bank to a first-half pretax loss of €38 million ($55 million). But the bank, which made a pre-tax profit of €1 billion in 2006, announced in August it still expected to make a profit for 2007. That hope has been dashed by the sub-prime crisis.
The finance ministry of the German state of North Rhine Westphalia directly and indirectly owns 38 per cent of WestLB. It said it stood behind the bank and would make a decision about its future only after it had seen a report from Citigroup, which is advising the state government about a possible sale of WestLB.
The head of Germany''s banking association said on Monday that Germany was over the worst of the crisis. Europe''s biggest economy was one of the first countries to suffer from the sub-prime fallout, with the near collapse of two banks.