Bank reports 4.3b euro writedown

Bayerische Landesbank reported 4.3 billion euros in writedowns from the subprime-market collapse, double its previous estimate and the biggest of any German state bank.

Profit fell to 175 million euros last year from 989 million euros in 2006, the Munich-based company said in a statement published yesterday.

Germany's second-biggest state-owned bank and its owners agreed to cover as much as 6 billion euros in possible losses from 24 billion euros in assets that will be shifted to a new finance affiliate.

The credit-market slump has forced Germany's state-owned banks to slash the value of investments by more than 11 billion euros and cost BayernLB Chief Executive Officer Werner Schmidt his job. Smaller competitor WestLB AG on Wednesday reported its first loss in three years after 2.01 billion euros in markdowns.

"The main problem is no one can tell today how the market will develop in the future," said new CEO Michael Kemmer, who replaced Schmidt last month.

The bank is unable to estimate how much more it will have to write down, he said.

BayernLB said in February it would write down 1.9 billion euros.

Yesterday's total includes 1.2 billion euros booked for last year and another 1.1 billion euros for the first quarter. It chalked up the remaining 2 billion euros in revaluation reserves, affecting the bank's balance sheet rather than its earnings.

The company has about 33 billion euros in asset-backed securities including 3.79 billion euros in investments backed by subprime mortgages, US home loans to borrowers with poor credit histories.

The bank announced earlier today that Chief Risk Officer Gerhard Gribkowsky was fired and will be replaced by management board member Ralph Schmidt.

'Embarrassed'

Former CEO Schmidt stepped down after he "embarrassed" the lender's administrative board and its deputy chairman Erwin Huber, finance minister of the German state of Bavaria, by seeking to publish figures on BayernLB's subprime losses without first informing them, the German newspaper Sueddeutsche Zeitung reported on Feb 15.

The state of Bavaria and the Bavarian savings bank association each own half of BayernLB.

Deutsche Bank AG, Germany's biggest bank, announced earlier this week that it had reduced the value of securities and loans by 2.5 billion euros in the first quarter, saying that conditions have become "significantly more challenging".

Zurich-based UBS AG reported a 12 billion-Swiss franc ($11.9 billion) quarterly loss after $19 billion in extra writedowns.

Overall the world's biggest banks and securities firms have announced more than $232 billion in writedowns and losses, a sum that may rise to $600 billion, according to German financial regulator BaFin.

Agencies

(China Daily 04/04/2008 page17)