European Union regulators reached an agreement on Bayerische Landesbank’s bailout during the financial crisis, the last outstanding state-aid investigation of a German lender.
EU Competition Commissioner Joaquin Almunia told reporters in Brussels today that he agreed to the final details with German authorities that would allow EU regulators to approve a German bailout for Munich-based BayernLB, the country’s second-biggest state-owned lender.
Under the agreement, BayernLB will sell its mortgage-lending unit, LBS Bayern, to the Bavarian savings banks, which will also increase their stake in BayernLB by converting a silent participation. The savings banks owned half of the lender before the bailout in 2008, in which they didn’t participate.
“We have reached an agreement on a restructuring plan that will reduce the scope of the business model of BayernLB but will give strength to this business model and to the bank,” Almunia said. “My intention is, building on this agreement, to adopt a formal decision on July 25.”
BayernLB, led by Chief Executive Officer Gerd Haeusler and majority owned by the German state of Bavaria, is the last of the country’s state-owned lenders, the so-called Landesbanken, that awaited a verdict from the European Commission on conditions for its bailout. The lender received 10 billion euros ($12.3 billion) in capital and a 4.8 billion-euro risk shield from the Bavarian government, as well as 15 billion euros in loans from Germany’s bank-rescue fund to save it from a collapse in 2008.
The Bavarian savings banks will contribute 1.65 billion euros by converting capital and by the takeover of LBS Bayern, they said in a separate statement.
EU regulators must approve large government subsidies to avoid harm to rivals and customers. They may require banks to sell off assets as a condition for receiving the aid. The commission wanted BayernLB to dispose of assets given that it accepted state aid, and that the Bavarian savings banks, which owned a 50 percent stake before the bailout, didn’t participate in the lender’s recapitalization.
Other German lenders that had their state aid examined by the commission included Hypo Real Estate Holding AG, WestLB AG and HSH Nordbank AG.
Real Estate Units
EU regulators are “at the end” of their investigation, Almunia said in Brussels on May 8.
As part of its revamp, BayernLB this year agreed to sell its DKB Immobilien AG real estate unit to Hamburg-based TAG Immobilien AG for 160 million euros in cash. The company has also said it will sell its GBW AG real estate unit, of which it holds 92 percent. GBW owns about 32,000 homes in the southern German state of Bavaria, according to its website.
BayernLB announced plans in 2008 to refocus its business and reduce the workforce by 2013. While the lender’s online venture, DKB Deutsche Kreditbank, is an “indispensable” part of the business, Budapest-based subsidiary MKB Bank may be sold at some point, the company has said.
BayernLB said in March it plans to pay back 5 billion euros in capital over the next five to seven years to Bavaria, which owns 94 percent of the bank following the bailout.