Germany's BayernLB to slash 5,600 jobs

MUNICH — State bank BayernLB plans to cut 5,600 jobs — 29 percent of its total work force — through 2013 to weather the global financial crisis, the company said in a statement Monday.

Blaming the "ongoing turmoil on international financial markets," BayernLB said it "took the decision to rethink the bank's current business model and reposition the bank."

The moves will help it cut costs by euro670 million ($852.7 million) through 2013.

BayernLB, which has been hit hard by the global financial turmoil, is Germany's second largest state bank after Landesbank Baden-Wuerttemberg, with which it has also considered a merger.

BayernLB said in future it would focus its business more on Bavaria and selected regions in Europe as well as on middle-tier business lending, institutional clients and commercial real estate and retail customers.

The job cuts would affect at least 1,000 positions in Munich, where the bank is headquartered, and in branch offices. Another 200 cuts would be made outside Germany. The bank will close offices in Italy, China, Japan and India and streamline offices in London and New York.

It will restructure its European subsidiaries, including LBLux, LBSwiss, SaarLB and the eastern European unit Hypo Group Alpe Adria.

"Over the past few weeks, we have been working together with the shareholders, the state of Bavaria and the Bavarian savings banks, to create the sustainable business model needed to successfully tackle the grave impact of the international financial crisis on BayernLB," said Michael Kemmer, chairman of the BayernLB management board.

BayernLB and other public-sector wholesale banks — which are owned by a combination of state governments and municipally backed local banks — have faced hefty write-downs as a result of the subprime lending and credit crisis.

Last week BayernLB's main shareholder, the southern state of Bavaria said it would increase the bank's capital by euro7 billion in two tranches — euro3 billion this year and euro4 billion in the first quarter next year.

The bank said last week it would also reduce the amount it asked from the federal government in its bailout program to euro3 billion from euro5.4 billion.

BayernLB said the recapitalization, totaling euro10 billion, was required because of the "rapid economic slowdown" and because the value of its asset-backed securities portfolio had deteriorated during the financial market turmoil.

The bank said any future losses on its asset-backed securities portfolio — worth up to euro6 billion — would be guaranteed by the bank and the state of Bavaria for the entire term of the investments.

BayernLB also asked the federal government for a further euro15 billion in guarantees from its bailout fund on Nov. 10 to be able to issue new credit. The government has not yet issued a decision on the matter.

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On the Net:

http://www.bayernlb.de

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