BayernLB Reports Quarterly Loss on Restructuring Costs

Bayerische Landesbank, Germany’s second-biggest state-owned lender, reported a fourth-quarter pretax loss on reorganization costs and its Hungarian unit.

The pretax loss was 520 million euros ($718 million), the Munich-based lender said in a statement today. That compares with a pretax profit of 405 million euros a year ago. Full-year net income fell 84 percent to 120 million euros.

Chief Executive Officer Gerd Haeusler will hand over his job to Johannes-Joerg Riegler at the end of the month. The new CEO will have to carry on with a restructuring that includes the sale of MKB Bank by 2016 on orders from the European Union and the return of 5 billion euros in state aid to Bavaria by 2019. Haeusler said at a press conference in Munich today that he’s “optimistic” a sale of MKB can be done this year. “It will be a joyless event,” he said.

Riegler joins from state-run Norddeutsche Landesbank Girozentrale, where he was the management board member responsible for business with savings banks and risk management. Among his main tasks will be resolving legal disputes over the 2007 takeover and 2009 sale of Austrian lender Hypo Alpe-Adria-Bank International AG, whose two-year ownership has resulted in losses of about 3.7 billion euros for BayernLB.

‘Strong’ Position

“Our legal position is very strong,” Haeusler said today, referring to the legal disputes with Hypo Alpe-Adria. “We haven’t been contacted about a general settlement of the matter and I can hardly imagine that we would abandon such a strong position easily.”

Haeusler has been proposed to become chairman of BayernLB’s supervisory board in October. The bank also appointed Markus Wiegelmann, head of group controlling, to succeed Stephan Winkelmeier as chief financial officer at the end of the month.

MKB Bank weighed on the lender’s results with a pretax loss of 409 million euros last year. Banque LBLux, which BayernLB is selling, had a loss of 44 million euros.

BayernLB also booked 135 million euros of charges related to a plan announced last year to further reduce administrative costs at the main banking unit. It will eliminate 450 positions by 2017 at the division, which has about 3,000 employees.

A further reduction of positions is not expected after 2017, Haeusler said at the press conference today.

Loan Provisions

BayernLB’s provisions for risky loans increased to 408 million euros in the fourth quarter, up from 165 million euros set aside a year ago.

As part of a restructuring agreement with the European Commission needed to get its 2008 government bailout by the state of Bavaria approved, BayernLB already sold real estate units GBW AG and DKB Immobilien AG, mortgage-lending unit LBS Bayern, and other assets.

Following the bailout and subsequent rearrangements of the capital structure, the Bavarian Savings Bank Association owns 25 percent of BayernLB and the state of Bavaria the remainder.

Landesbank Baden-Wuerttemberg, Germany’s biggest state-owned bank, said on Feb. 20 that pretax profit rose 18 percent last year to 471 million euros.

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