Germany's crisis-hit BayernLB to axe every fourth job

Dec 1, 2008, 10:05 GMT

Munich - Hard-hit by the global financial crisis, German state-owned bank Bayerische Landesbank is planning to axe about every fourth job as it launches a new restructuring drive, banking industry sources told Deutsche Presse-Agentur dpa on Monday.

The 5,600 job cuts in its workforce of 19,000 are to fall both in the Munich-based BayernLB's domestic and international operations.

The ailing bank said in October that was tapping the Federal Government's special 500-billion-euro (645-billion-dollar) bank rescue package to help it limp through the financial crisis. The bank is half-owned by the Bavarian state government.

In future, Germany's second-biggest state-owned bank will wind back its international operations to focus on small-to-medium-sized German companies. As a result, the restructuring plan throws into doubt the prospects for its investment banking business.

After being badly hit first by the fallout and corresponding big writedowns from the US subprime mortgage market meltdown, BayernLB's problems grew in the wake of losses caused by the shakeout in Iceland's banking sector.

The BayernLB's announcement in October that it had run up bigger- than-forecast losses was a factor in the resignation of Bavarian Finance Minister Erwin Huber.

However, the sense of crisis at BayernLB appears to have continued to deepen with the Bavarian state government saying on Friday it had pieced together a new financial lifeline for the troubled bank comprising cash injections and guarantees of more than 30 billion euros.

BayernLB is expected to outline details of the restructuring at a press conference set down for Monday.