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By John O'Donnell and Patricia Nann

FRANKFURT (Reuters) - IKB (IKBG.DE: Quote, Profile, Research), the German bank which nearly went bust after its subprime investments crashed, is searching for up to 2 billion euros ($2.9 billion) to stay afloat, sources with direct knowledge of the situation told Reuters.

The corporate lender became one of Germany's highest-profile casualties of the global credit crisis in late July. It has since been propped up by two rescues, shouldered mainly by its top shareholder, state bank KfW.

Now IKB again needs to beef up its capital base, which is threatened with fresh write-downs on billions of euros of toxic investments still left on its books, the sources said.

It needs up to 2 billion euros of fresh capital, without which the bank could go out of business, two of the sources told Reuters, news which sent the company's shares tumbling.

"The question is not whether a capital increase is necessary but who takes part," said one.

German government-owned lender KfW, which together with a foundation controls roughly half of IKB, is reluctant to foot the bill alone. It has already spent 5 billion euros putting the Duesseldorf-based bank back on its feet.

Now KfW is in talks with the German banking association, which represents the country's commercial banks, to persuade it to help out with this third rescue as it has in the past, the sources said.