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Postbank Gets Massive Cash Injection as Outlook Turns Dire

Germany's Postbank has announced an emergency capital increase of up to 1 billion euros. The effects of the credit crunch are going to be felt long into next year, said the bank's CEO.

Postbank sign

Parent group Deutsche Post is to bail out Postbank despite financial troubles of its own

Postbank had lost 449 million euros ($567 million) before taxes in the third quarter of 2008, it said on Monday, Oct. 27. The collapse of US investment bank Lehman Brothers took the biggest toll on the bank, costing it 364 million euros. Devaluation of its stock portfolio also put the bank under pressure.

"Postbank has been hit hard by the finance crisis," said chief executive Wolfgang Klein, adding that 2009 would be a "challenging year in a recession environment."

As a result of the losses, parent group Deutsche Post has agreed to back the capital injection of up to 1 billion euros by underwriting its shares at a purchase price of 18.25 euros.

Deutsche Post already owns about a 50-percent stake in Postbank.

Bonn-based Postbank has reportedly declined participation in the federal government's bank rescue package. Germany's 480 billion euro bailout fund provides capital to banks in exchange for a number of concessions on the part of the institution, which include limiting managers' salaries and giving the state a say in the bank's activities.

Deutsche Post said the planned sale of a 29.75-percent stake in Postbank to Deutsche Bank was not in jeopardy.

Deutsche Post stock price sunk by 19 percent early Monday after word of the deal, with Postbank stock falling by 17 percent.

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