Investment banking drags down Kaupthing
Kaupthing, the Icelandic bank, was hit by a loss in its capital markets business and suffered a fall in profits in its investment banking division as it became the second of the nation's financial institutions to show pain from the credit crunch in the three months to March.
Profit from capital markets fell from a ISK13.4bn (€116m) profit in the first quarter of last year to a ISK4.5bn loss this year, as Kaupthing was hit by what it described as “challenging conditions” in the financial markets.
The fall in profits came a day after Icelandic bank Straumur reported a two-thirds fall in profits on the back of proprietary trading and capital markets losses.
Investment banking profits at Kaupthing fell by 52% to ISK3.1bn, though profits in its treasury operation more than tripled to ISK14.9bn.
The results are Kaupthing’s first since it was pressured by the Icelandic authorities to drop a €3bn ($4.7bn) takeover of Dutch financial group NIBC over fears that its finances might become too stretched.
Kaupthing said yesterday it had entered talks to merge with smaller Icelandic retail bank SPRON in which it already owns a 25% stake and said the talks would be completed within the next four weeks.
Commenting on Kaupthing’s results chief executive Hreidar Már Sigurdsson said the bank was well prepared if the credit crisis became “protracted” and said its pipeline and prospects were “satisfactory”.
He said: "In the current market environment it is crucially important that we have been able to protect the bank's robust liquidity, and this will continue to be the management's key priority."
Overall Kaupthing reported a 28% fall in its net financial income and a 9% drop in the size of its balance sheet.
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