Happy Easter, Europe

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Real Trouble At Hypo

Troubled investment bank Hypo Real Estate was set to become the first nationalized bank in Germany since World War Two after the German government said on Thursday it had launched a takeover bid offer of 1.39 euros ($1.84) per share for 100.0% of the company, a 15.8% premium over the bank’s closing share price on Wednesday. Shares of ( HREHY - news - people ) rose 15.0%, or 18 euro cents (24 cents), to 1.38 euros ($1.82) in morning trading in Frankfurt. “I am surprised that the government has offered 1.39 when it was expected to offer between 1.20 to 1.30 euros per share,” said Dirk Becker, an analyst with Kepler Capital Markets. “But [the takeover by the government] has been expected to happen for months.” With its 100 billion euro ($132 billion) funding gap getting bigger and bigger, Hypo Real Estate was seen as too big to fail. Berlin has said it wants to take full control of the investment bank and restructure it. So far, the bank has received a total of 102 billion euros ($135.5 billion) in guarantees from the state and fellow banks but its financial condition remains uncertain. Despite harsh opposition against nationalizing the bank, the government passed a special new law that makes this possible and could potentially expropriate Hypo shareholders if they refuse to sell their stake by June 30. It is still unclear whether U.S. private equity investor J.C. Flowers, which owns nearly a quarter of Hypo’s shares, will refuse to sell. A spokesman for Flowers said the U.S. investor, who bought the st...
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ING, Barclays Boost Europe

LONDON -- Companies want cash, and investors like it. After Dutch insurer ING announced that it is looking to sell up to $10.6 billion worth of assets and reports surfaced that Barclays is one step closer to selling its iShares unit for $4.4 billion, European shares traded solidly higher, tracking Asian trading at midday Thursday.Meanwhile, the Bank of England surprised nobody by holding interest rates steady at 0.5% for the month of April. The central bank is also expected to continue with its program of pumping money into the British economy by buying government bonds (See: Quantitative Of Solace For British Banks). The Dow Jones Euro Stoxx 50 index rose 1.0%, to 2,208.52 points, with bank stocks up approximately 3.7%. National indexes in Hong Kong, Shanghai and Tokyo all ended the day up 1.4%-3.7% higher in Asia, on reports that Japan will launch yet another expanded stimulus package worth $150.0 billion.Jan Hommen, the newly appointed chief executive of twice-rescued Dutch insurer ( ING - news - people ) said on Thursday that the company could sell 10 to 15 businesses in the coming years, as part of a strategic overhaul. Shares jumped 10.6%, to 5.82 euros ($7.73), in Amsterdam.And ( BCS - ...
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Helping Hand For German Banks

Germany, which has accused Britain of crass Keynsianism, keeps resorting to state intervention. First there was the forced marriage of Commerbank and Allianz's Dresdner Bank, and now it's drafting a law that would allow it to forcibly nationalize financial institutions and bring troubled Hypo Real Estate bank into its control. On Wednesday, the cabinet agreed on a law that would allow them to temporarily nationalize troubled banks. The draft law, which still has to be approved by Parliament, would pave the way for a takeover of (other-otc: HREHY - news - people ). The commercial real estate lender is in dire straits and is currently being propped up with 102.0 billion euros ($128.5 billion) in loan guarantees from the state. Shares of Hypo Real Estate rose 48.7%, or 54 euro cents (68 cents), to 1.65 euros ($2.07), in Frankfurt on Wednesday morning. The law would amend a law passed last year to support financial institutions and would give the government powers to seize control of institutions whose failure could endanger the stability of the financial sector. It would reduce the minimum shareholder approval needed for fresh capital to 50.0% plus one vote, from just over 75.0%, and shareholders would be compensated based on the average price of a share during the two weeks prior to nationalization. Germany has so far been steering clear of the route followed by governments such as Britain, which has taken control of (nyse: ...
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Another Modest Bailout From France

France is shoring up its banking system for a second time, and modestly, following the comprehensive package unveiled by the British government on Monday. French economy ministry Christine Lagarde said late Tuesday that a second tranche of capital worth 10.5 billion euros ($13.6 billion) for banks was being prepared to boost capital ratios by 50 basis points for each bank. As with the previous bailouts, the participating banks would have to increase their lending by a minimum of 3.0%. But the bailout comes with more strings this time around. French banks will have to limit their dividends to shareholders and scrap dividends for senior management. For Lagarde, known for her support of light-touch regulation, this marks a change in tone. (See "Say 'Non' To Regulation.") France's biggest banks are already going along with the plan: (other-otc: SCGLY - news - people ), BNP Paribas and (other-otc: CRARF - news - people ) have announced that their chairmen and chief executives will not get a bonus this year. The need for a second French bank bailout will meanwhile raise questions about whether the first, delivered in October, was adequate. (See ...
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Bank Bailout Part Deux

France has become the latest European government to shore up its banking system for the second time. French economy ministry Christine Lagarde said late Tuesday that a second tranche of capital worth 10.5 billion euros ($13.6 billion) for banks was being prepared to boost capital ratios by 50 basis points for each bank. As with the previous bailouts, the participating banks would have to increase their lending by a minimum of 3.0%. But the bailout comes with more strings this time around. French banks will have to limit their dividends to shareholders and scrap dividends for senior management. For Lagarde, known for her support of light-touch regulation, this marks a change in tone. (See "Say 'Non' To Regulation.") France's biggest banks are already going along with the plan: (other-otc: SCGLY - news - people ), BNP Paribas and (other-otc: CRARF - news - people ) have announced that their chairmen and chief executives will not get a bonus this year. The need for a second French bank bailout will meanwhile raise questions about whether the first, delivered in October, was adequate. (See "A Modes...
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Gloom In Japan Infests Europe

European stocks fell steeply on Monday after Japan slipped into recession and Citigroup announced plans to cut a total of 53,000 jobs. The Dow Jones Euro Stoxx index of 50 leading shares fell 4.9%, to 2,361.95 points. Britain's FTSE 100 fell 2.7%, while France's CAC-40 fell 3.3% and Germany's DAX fell 3.3%. Leading shares in Italy and Portugal fell by 3.6% and 1.4%, respectively. Spain's IBEX index of 35 leading shares was down 3.8%. Shares fell across the sectors, with banks, media and automaker stocks being hit the hardest. German carmaker Volkswagenfell 9.5%, after noting that group vehicle sales fell 5.1% in October, becoming one of biggest losers in early trading. Banks slid as (nyse: C - news - people ) it said that its workforce would fall by 20.0% from its 2007-peak. (nyse: HBC - news - people ) said it was cutting 500 jobs in Asia, with 90.0% of the losses in Hong Kong, and fell 1.4%. (nyse: UBS - news - people ), which announced that its top executives wouldn't be receiving their bo...
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Hypo: Dead Bank Walking

Hypo Real Estate sank to a quarterly loss of 3.0 billion euros ($3.8 billion) on Monday, burdened by write-downs on its Irish subsidiary Depfa and the effect of volatile financial markets on its debt portfolio. Though the German lender had managed to snag a 50.0 billion-euro ($63.3 billion) liquidity lifeline from the government earlier this month, it is unlikely to turn a profit until at least 2010."The earnings outlook is not good," said Philipp Haessler, an analyst at Equinet. "Next year I do not expect Hypo to earn any money, and in 2010 there is not a high probability of making a significant profit."Shares of (other-otc: HREHY - news - people ) advanced 1.6%, or 5 euro cents (6 cents), to 3.27 euros ($4.14), during midday trading in Frankfurt on Monday. On a conference call to announce the results, Hypo's Chief Executive Axel Wieandt said that interested buyers had approached the bank to buy certain assets, but that the low price environment would make a deal unlikely for the time being.Although Hypo's third-quarter loss on Monday was largely due to 2.5 billion euros ($3.2 billion) in writedowns on Depfa--the Irish bank it acquired last year before the financial crisis hit--the lender's attention will now shift to the heavy price it is paying for taxpayers' help. The bank said on Monday that it predicted an "extremely negative" result for 2008, and warned that the costs of liquidity lines and capital assistance would put a "major strain" on business in 2009.The bank has agreed to put up 60.0 billion euros' ($76.0 billion) worth of collateral to obtain the 50.0 billion-euro ($63.3 billion) government facilit...
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