BayernLB will cut staff by 5,000

Bayern Landesbank has confirmed it will cut 5,600 of its 19,200 jobs in Germany and around the world, more than a quarter of its workforce.

The job losses will be seen in Germany and in BayernLB's worldwide operations in the five years to 2013.

It will receive an extra 10bn euros from the Bavarian state and has applied for 15bn euros of debt guarantees from the German government's bailout fund.

The state of Bavaria is the largest shareholder in the Munich-based bank.

Like other banks, BayernLB has lost money in the sub-prime mortgage market is subsequently taking urgent measures to beef up its capital.

Germany has pledged up to 500bn euros ($670bn; £387bn) in loan guarantees as part of a financial rescue package for the country's beleaguered banks.

Shake-up

At least 1,000 jobs in total will be shed in Munich, home of Germany's second-largest state bank, while a further 200 will be lost outside Germany.

The news will only add to the gloom that has pervaded the German financial sector.

The country's economy is already experiencing a downturn as are the economies of its European counterparts.

The job cuts are part of a larger reorganisation and repositioning of the bank which will see the bank focus on Munich, Germany and certain parts of Europe and withdraw from operations which are not profitable in the long term.

It is also seeking to save 670 million euros across the group in the period to 2013.

"We will secure the bank's continued existence, make it fit to meet the challenges ahead and, after an extensive programme of restructuring has been completed, it will be an even stronger partner, particularly for the Bavarian economy," said Dr Michael Kemmer, chairman of the BayernLB board of management.

Turmoil

The news comes shortly after the Bavarian state - the bank's largest shareholder - said it would boost Bayern LB's capital with a 7bn euro ($8.8bn, £5.9bn) cash injection in two stages - 3bn euros this year and 4bn euros in the first quarter of 2009.

Last week Bayern said last week it would reduce the amount it had asked from the federal government's bailout programme to 3bn euros from an earlier request for 5.4bn euros.

It will get an additional 20bn euros of state guarantees enabling it to borrow money more easily.

BayernLB will receive one of the most substantial European rescue deals since the start of the global economic crisis.

Several German banks have been shaken by the sub-prime mortgage and have incurred losses.

Investment bank Hypo Real Estate, Commerzbank and small-business lender IKB have already suffered the fallout from the contraction of the financial sector.

Like other state-owned regional lenders, BayernLB had been resisting pressure from Berlin to merge with other Landesbanks to form a more consolidated sector.

Landesbanks are often a source of strong regional pride and local politicians had been loath to give them up.

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