WestLB inquiry into £1.17bn loss casts doubt over Saunders' future

Click to follow

The future of WestLB's high-flying financier Robin Saunders was in doubt yesterday after the German bank launched an investigation into her project financing department after a 1.67bn euro (£1.17bn) loss for the year.

Juergen Sengera, the chief executive of WestLB, fuelled speculation that Ms Saunders' future at the bank might be cut short when he failed to back her at a press conference to announce the bank's results.

Mr Sengera said: "You asked about my support for Robin Saunders. There I think we should be fair to all and we should also wait for the result of the investigation. Then we will make a statement."

Ms Saunders shot to prominence as a star financier by leading the $1.4bn refinancing of Formula One and her current project to finance the new Wembley stadium.

Her reputation was knocked earlier this week when it emerged that BaFin, the German banking regulator, is investigating a series of deals conducted by her department, including a deal to refinance the television rental business Box Clever.

WestLB shocked the market by announcing, which were substantially worse than its guidance in February that it was on course to make a loss of around 1bn euros.

The larger loss figure was largely due to the fact that the bank increased provisions for risks to 1.9bn euros, up from 566m euros in 2001. It said some of those provisions were down to the "weak economy" and individual cases of fraud such as Enron.

However, a substantial amount of the provisions are thought to relate to major write downs at Ms Saunders' project financing arm after its refinancing of Box Clever turned sour.

The bank's principal finance unit lent the company about £850m in 2000, shortly after it was formed by the merger of Nomura-owned Thorn and Granada's TV rental business.

The interest in WestLB's structured finance department from the German regulator has prompted speculation that the bank did not manage to shift much of the Box Clever debt, leaving most of the risk on its books.

WestLB in turn is thought to be unhappy with Nomura about the level of debt in Box Clever, which is struggling due to the declining market for rented television, and is considering its options including possible legal action against the Japanese bank.

The bank, which is not quoted, does not split out the record of its project finance division. But Mr Sengera pointed out that despite its 2002 losses, the project finance unit had contributed 50 per cent of the bank's pre-tax profits of the last four years.

Last year Ms Saunders is thought to have tried to persuade her German bosses to let her buy the business – a move which was rebuffed because the business was generating so much profit for WestLB.

However, there have been suggestions that the difficulties the Box Clever deal has encountered and wider concerns about the level of risk and complexity involved in structured financing have prompted WestLB – which is underwritten by the German government – to rethink whether it wants to be involved in this area.

A change of heart would probably suit Ms Saunders, who remains keen to take control of her department and, with friends such as Bernie Ecclestone and property tycoons the Tchenguiz brothers, would not be short of financial backers.

Friends of Ms Saunders also feel it is unfair she has had to take the rap over the Box Clever disaster. While her department was officially in charge and it was Ms Saunders who introduced the company to the bank, she did not oversee the deal because it was far more of a straight-forward loan by its nature, than her speciality of principal financing.

The level of blame attributed to Ms Saunders over the loss-making Box Clever may be unwarranted, but detractors say she has in the past attracted more than her fair share of praise for her deals, which are not viewed as having been particularly innovative.