WestLB posts loss of €1.6 billion on subprime mess
AFP · 2 Apr 2008, 16:26
Published: 02 Apr 2008 16:26 GMT+02:00
A month ago WestLB said it expected a net loss of about €1 billion, following a gain of €799 million in 2006.
"WestLB has seen one of the most difficult situations in its history," said boss Alexander Stuhlmann, who was named to the post in mid 2007 as the bank fell into crisis, and who plans to step down in early May.
The regional bank was one of Germany's primary casualties of the collapse of the US market for high risk, or subprime, mortgages, which threw international financial markets into a prolonged period of turbulence. But WestLB also suffered major losses on fraudulent trading by some staff of shares in Volkswagen, BMW and the German retailer Metro.
On Monday, the German state of of North-Rhine Westphalia said it would back a €5-billion rescue package for the regional bank, in which it holds a direct or indirect stake of around 38 percent. Regional state-owned savings banks hold more than 50 percent of the shares in WestLB.
The bank also plans to eliminate 1,350 jobs by 2010 as part of a plan to turn the business around and possibly prepare it for a sale or merger. The figure represents almost one quarter of its workforce.
Stuhlmann told media that WestLB "had stabilized itself on its own," adding "we will of course play an active role in the consolidation of regional banks" that many expect to follow the financial crisis.
But he declined to comment specifically, in particular concerning a possible interest in another subprime-hit bank, the troubled business lender IKB.