Current Subprime Wave Washes Up On Asia's Shores [Housing Tracker]

Quote Of The Day 

"Shame on institutional investors who can not differentiate between bonds and equity. It is really unjustified to say that Chinese banks will be badly impacted by this latest crises. This is nothing like the subprime mortgage crisis." - Samuel Chen, an analyst with JP Morgan. (Reuters UK, July 15^th) 

Global Subprime Fallout

China Banks Tank On Fears Of US Mortgage Lender Fallout. “Shares in top Chinese lenders tanked on Tuesday, with the nation's biggest bank ICBC falling over 5%, as investors fretted over their likely exposure to the beleaguered U.S mortgage lenders. Shares in ICBC and Bank of China fell the most in a month after other banks in the region were seen to be invested in troubled Freddie Mac (FRE) and Fannie Mae (FNM). Other Asian financial stocks also headed south on Tuesday. But analysts said Chinese banks were only invested in the safer option of agency bonds issued by the U.S. mortgage lenders and did not have any equity exposure.”  (Reuters UK, July 15^th)

Santander Bids For UK Lender.  “Spanish banking giant Banco Santander said Monday it has agreed to buy the British mortgage lender Alliance & Leicester PLC in a deal valued at $2.5 billion. Banco Santander, which also owns Britain’s Abbey National Bank, said that under the terms of the proposed takeover, Alliance & Leicester shareholders would receive one share in Santander for every three shares they hold in the British lender… Alliance & Leicester It is one of several British banks which have been badly bruised by tightening credit market following the collapse of the U.S. subprime mortgage market.”  (Cay Compass, July 14^th) 

Australian Shares Outlook - Lower Due To Local Bank Exposure To Subprime Crisis. “On Friday the National Australia Bank disclosed it may make additional provisions for its $1.1 billion worth of collateral debt obligations exposure in the U.S.”  (Thomson Financial via Forbes, July 13^th)

U.S. Subprime Mortgage Crisis Hits Discount And Leumi Too.  “Shares of Israel Discount Bank and Bank Leumi had a very bad time last week… Discount has a large investment in the two firms' mortgage-backed securities, and if as feared Fannie and Freddie have to raise a total of $75 billion in the near future - a near-impossible task - the value of the securities held by Discount will plummet. They were valued at NIS 9.3 billion at the end of Q1. This sum is even larger than the bank's entire equity value of only NIS 9.2B… It seems Mizrahi-Tefahot is still the Israeli bank with the lowest exposure to the U.S. credit markets.”  (Haaretz, July 13^th)

The Subprime Crisis Reaches North. “Statistics Canada reported that our country lost 39,200 full-time jobs last month, pushing up the unemployment rate. Though it would be much too simplistic to attribute all those job losses to American woes, Canadians are paying a steep price for lax U.S. regulatory oversight. When many U.S. consumers have a hard time making their food, fuel or mortgage payments, they are unlikely to buy Canadian goods and services. And when U.S. mortgage-finance giants teeter on the brink, the scale of their difficulties threatens financial markets around the world.”  (Globe & Mail, July 12^th)

Subprime-Hit German Bank IKB Posts Slightly Higher Full-Year Loss. "The German bank IKB, which flirted with bankruptcy after the US subprime housing crisis erupted, posted Friday a full-year loss of €32 million ($50M), slightly more than initially estimated. On July 3 the company had said that it expected its annual loss to come to €24M owing to a favourable tax effect. The new provisional figure is still much less than an initial evaluation of the bank's losses a few months ago which put the figure at around €200M… The specialist in loans to small and medium-sized enterprises has benefited from significantly lower deferred taxes than initially expected, it said.”  (AFP, July 12^th)

IKB Wins Dismissal of Two Suits Over Subprime Risks.  “IKB Deutsche Industriebank AG won dismissal of two shareholder lawsuits over claims the bank misled investors. The Regional Court of Dusseldorf threw out the cases because the plaintiffs couldn't explain why they bought IKB while the stock was falling... The two cases are among 50 that were filed against the bank. The cases are based on a July 2007 statement in which IKB said it would meet its profit target and downplayed the effects from [subprime mortgages]. Ten days later, IKB said it would miss its full-year goals because of the subprime fallout and replaced its CEO. A month ago, IKB won the dismissal of two similar suits.”  (Bloomberg, July 11^th)

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