Tue, Aug 26, 2008 page10

• Two European banks face takeovers

  BUMPY RIDE Dredner Bank may become the property of Commerzbank, Germany’s second-biggest bank, while Denmark’s central bank will take over Roskilde Bank

  • AFP
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  Germany’s second-biggest bank, Commerzbank, will this week decide whether to take over the subprime crisis-hit Dresdner Bank, the Financial Times Deutschland said yesterday.

  Commerzbank will hold an exceptional meeting of its supervisory board at the end of the week and make its decision following months of tough talks with Dresdner and its parent company, the insurance group Allianz, the newspaper said.

  An unofficial source said later however that it was not sure a meeting would take place.

  A Commerzbank spokesman contacted by reporters declined to comment on the report.

  Several questions remained to be settled, including how much Dresdner Bank was worth and the level of risk each side was ready to assume, the newspaper said.

  Dresdner Bank is to split into two at the end of the month, with one section focusing on retail and business banking and the other on investment banking after suffering heavy losses from the collapse of the US market for high-risk, or subprime, home loans.

  Weekend press reports said both sides have agreed that Commerzbank would take over Dresdner in the event a deal is reached, rather than an earlier suggestion of a merger of equals.

  The Sunday edition of Die Welt said Allianz planned to retain slightly less than 30 percent of a new bank.

  The Sueddeutsche Zeitung, which quoted sources close to the talks yesterday, reported “it is possible an agreement will be reached in the next two weeks.”

  The newspaper said the banks were locked in intensive talks and that several meetings were planned in the coming days.

  It added that Dresdner Bank’s sale price was currently in a range of US$13.2 billion to US$14.7 billion.

  ROSKILDE

  Meanwhile, Denmark’s troubled Roskilde Bank will be bought by the country’s central bank in a partnership with a group of Scandinavian financial institutions, a statement said on Sunday.

  “Danmarks Nationalbank and the financial sector in Denmark have entered into an agreement with the board of directors of Roskilde Bank A/S, via a new bank, on buying all assets and taking over all debt and other liabilities, except from hybrid core capital and subordinated loan capital in Roskilde Bank A/S,” the central bank statement said.

  “The auditing of Roskilde Bank’s interim report has revealed additional losses in the bank to the extent that Roskilde Bank does not meet solvency requirements,” it said.

  Under the agreement, Denmark’s Nationalbank and Det Private Beredskab were to contribute approximately 4.5 billion kroner (US$890 million) in capital base.

  “The takeover of Roskilde Bank follows the fact that no offers, domestic or foreign, were received after a thorough sales process on either all or parts of Roskilde Bank,” the statement said.

  Denmark’s Nationalbank said it “sees the Roskilde Bank situation as very serious.”

  “It is expected that the takeover of Roskilde Bank will contribute to limiting the negative effect on the Danish financial system,” the bank said.

  The operations of Roskilde Bank are to continue in a new bank under the same name.

  The statement said the government confirmed that it supports the arrangement and that it would submit a new document to the finance committee of the Folketing (parliament) concerning a government guarantee to cover any losses the Danish Nationalbank may suffer in connection with the takeover and the discontinuation of Roskilde Bank.

  After Roskilde was hit by the global credit crunch and a crisis in the Danish housing market, the Danish central bank gave Roskilde an emergency credit line last month, guaranteed by private investors and the state.

  Bailouts are rare in Denmark, where the central bank has only rescued a handful of banks in crisis since World War II.

  Roskilde needed a bailout to stay afloat after it said it would have significantly bigger writedowns than expected on its real estate loans and had put itself up for sale. The amount of writedowns was not disclosed.
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