Another German Casualty: WestLB Reports Losses of €1.6 Billion
One of Germany's biggest regional banks reported its results for 2007 on Wednesday -- and the losses are far worse than predicted. Some experts believe only a merger with another bank can save the company in the long run.
WestLB is one of Germany's biggest casualties of the US financial crisis, losing 1.6 billion last year.
WestLB, based in Dusseldorf, suffered a higher-than-expected deficit because of the international financial crisis and trading losses. According to the bank, exposure to the turbulances of the financial crisis alone cost it more than 2 billion ($3.1 billion) in 2007. During a presentation of the company's 2007 results Wednesday, WestLB's outgoing CEO Alexander Stuhlmann said that the US financial crisis had thrown the bank into "arguably the most difficult situation in its history."
To save costs, WestLB is planning to lay off around 1,350 staff -- nearly a quarter of its workforce -- by 2010. The redundancies and other cost-cutting measures are expected to lead to savings of 300 million ($ 474 million) a year.
During Wednesday's presentation, Stuhlmann -- who is stepping down as CEO in May after only a one year spell at the top -- said the restructuring of WestLB was already well under way. He added that in the future the bank would focus more on its small and middle-size company business and work more closely with savings banks. Its investment banking arm, he said, would concentrate on its core competences.
Although WestLB is expecting more bad results this year because of the "necessary" restructuring, the bank was on a stable footing, Stuhlmann told the audience. He said a 5 billion ($7.8 billion) rescue package by the bank's owners, which include the state of North Rhine-Westphalia, created a stable platform for the recovery of WestLB.
Stuhlmann will be replaced by Heinz Hilgert, a former managing director of DZ Bank, on May 1. Under Hilgert's stewardship the bank will probably have to continue to look for another bank to team up with.
According to the Associated Press, the bank's previous business model -- a strong focus on lucrative but risky foreign markets -- has proven dangerous and, in recent years, repeatedly led to losses that threatened the company's existence. Although the bank has changed the focus of its business, many experts are reported to be questioning whether the changes will be enough to safeguard the future of WestLB. It is widely assumed that the bank will have to merge with another financial institution.
According to internal papers from Germany's Financial Services Authority, BaFin, obtained by SPIEGEL, the global financial crisis could cost financial institutions up to 380 billion ($600 billion) in total.
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