LBBW piles up loss of €2 billion

LBBW piles up loss of €2 billion
Photo: DPA
Germany's biggest stated-owned regional bank Landesbank Baden-Württemberg (LBBW) said Friday it was raising billions of euros in fresh capital and considering tapping a government rescue package after being hit by the financial crisis.

Stuttgart-based LBBW is bracing itself for an estimated loss of more than €2 billion for the coming financial year, shareholders told news agency DPA on Friday.

The bank has run up an €800 million debt in October alone, after contracting a loss of €900 million within the first nine months of the calendar year.

LBBW shareholders now hope to raise the equity ratio, which reflects the proportion between the bank’s own funds and issued credits, from 7.3 percent to 9 percent with a capital injection of €5 billion. Main stakeholders are the federal state of Baden-Württemberg and the German Savings Bank Association, each holding 35.6 per cent of the company.

LBBW also said it would consider tapping Chancellor Angela Merkel’s

€480-billion banking rescue package to secure between €10 and €15 billion

in loan guarantees.

“This is primarily being done in order to be able to ensure, in light of the current macroeconomic situation, a sustained supply of credit to the bank’s core markets in the future,” a statement said.

Germany’s statebanks have been major casualties of the financial crisis

after the loss of state-backed guarantees in 2005 prompted them to invest in

higher-risk financial instruments, many of which have since turned sour.