German Bank Shares Up On Government Rescue Plan;Details Awaited
Monday October 13rd, 2008 / 9h02
By Ulrike Dauer Of DOW JONES NEWSWIRES FRANKFURT -(Dow Jones)- Shares of Germany's financial firms were higher in early trade Monday, buoyed by relief over a bailout package of up to EUR400 billion agreed on the weekend, which is expected to help restore trust in the sector. At 0716 GMT, shares of Deutsche Bank were up EUR4.62, or 15%, at EUR35.85, outperforming the wider market, which was up 5.5%. Shares of Commerzbank were also up EUR1.50, or 15%, at EUR11.20. Shares of Deutsche Postbank were up EUR2.74, or 12%, at EUR25.36. Shares of Allianz were up EUR3.13, or 4.4% , at EUR74.08. A senior lawmaker of Germany's ruling grand coalition party Sunday confirmed the government's financial sector bailout package, to be announced in full Monday, would total up to EUR400 billion. Volker Kauder, parliamentary floor leader of the ruling conservative parties CDU and CSU said on German ARD television that as part of the package, state guarantees for the interbank market would "certainly be around EUR200 billion, EUR250 billion." He also said the government would also recapitalize German banks. Kauder's announcement is roughly in line with a leaked figure of a total EUR300 billion to EUR400 billion package disclosed to Dow Jones Newswires by a person familiar with the situation Saturday. That person also said the government is mulling recapitalizing German financial institutions with an injection of EUR50 billion to EUR100 billion. The German rescue measures will be limited to the period through the end of 2009, which is in line with a euro-zone plan involving a basket of instruments to deal with the financial crisis, which was agreed earlier Sunday. The German government, along with other European governments, will announce more details of the plan at 1300 GMT Monday. Landesbank Baden-Wuerttemberg analyst Olaf Kayser called the package "a positive signal to markets," should the volume be confirmed. "Both the state guarantee and the possible capital injection should help bring back confidence in the sector," Kayser said. "The capital injection will strengthen bank's capital base and the state guarantee should ensure that the interbank market will start to function properly again, as there's no more reason for banks to hold liquidity back - and the liquidity is there," Kayser said. Merck Finck analyst Konrad Becker said there are three important aspects to the measures which are positive, though he expects banking shares to be vulnerable to a roller-coaster ride Monday, as more details of the plan become available. "The volume of the package, the comprehensive measures and the fact that many countries have agreed on similar measures should contribute to calm markets," Becker said. "However, the success of the measures will hinge on how quickly they will be implemented, and that individual governments refrain from watering them down," he added. Kayser said some of the open questions for him are how much the measures will cost the banks and what regulatory and accounting changes are still being planned. -By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500; ulrike.dauer@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=sQY0DJ%2Bu%2BYcnaTOVohJAQA%3D%3D. You can use this link on the day this article is published and the following day.
