Page last updated at 14:02 GMT, Thursday, 3 April 2008 15:02 UK

Sub-prime crisis hits German bank

Michael Kemmer, chairman of BayernLB
German banks have been particularly hard hit by the credit crisis

Exposure to the US sub-prime crisis has cost German bank Bayerische Landesbank (BayernLB) a total of 4.3bn euros (3.4bn) in writedowns on risky assets.

The bank's 2007 net profit fell to 175m euros, down 82% from 2006, because of the higher-than-expected charges.

Several German banks have suffered from to the collapse of the US market for high-risk, or sub-prime, mortgages.

BayernLB said it needed a 6bn euro guarantee fund to help it absorb the mounting losses on risky investments.

"The markets again fell massively at the start of 2008," said the bank's new chief executive Michael Kemmer.

The bank's former boss, Werner Schmidt, resigned last month.

Hard hit

German banks have been particularly hard hit by the turmoil in credit markets.

WestLB reported a net loss of 1.6bn euros on Wednesday and IKB Deutsche Industriebank has been bailed out by the German government.

Sachsen Bank, formerly known as SachsenLB, had to be taken over after it came unstuck in the credit crisis, and Deutsche Bank reported writedowns totalling 2.5bn euros in the first quarter.

BayernLB has said it is contemplating buying parts of IKB not hit by sub-prime turmoil.

BayernLB made the writedowns in two stages, with 2.3bn euros taken in 2007 and the rest charged in the accounts for the first quarter of 2008.

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