By Patricia Nann

DUESSELDORF, Germany (Reuters) - The supervisory board of stricken German lender IKB (IKBG.DE: Quote, Profile, Research) was not aware of the subprime risks lurking in the bank's investment portfolio until too late to avoid a crisis, its chairman said on Thursday.

"We had no chance of recognising the risks or avoiding this existential crisis," IKB Chairman Ulrich Hartmann told the bank's annual shareholder meeting.

IKB, once a little-known lender to small German companies, shot to fame last year as Germany's first casualty of the subprime mortgage crisis in the United States, when billions of euros of its investments turned sour.

Hartmann said IKB's management informed the supervisory board of the risks only on July 27, setting off the first of a series of rescue efforts that have now cost its main shareholder KfW [KFW.UL], the German government and other banks more than 8.5 billion euros ($13.4 billion).

The spiralling cost of the rescue and the use of taxpayer money to bail out the bank has fuelled political tensions as the government tries to sell the lender.

IKB's shares are worth less than a fifth of what they were a year ago and angry shareholders have said they planned to oppose the formal signing-off on IKB's management and supervisory boards over the 2007 performance at the shareholder meeting.

Hartmann recommended postponing a formal vote on the supervisory board's performance in 2007.

A rebuke from shareholders would have little practical impact but would embarrass the government for its role in supervising the bank. State development bank KfW is IKB's main shareholder, with a 43 percent stake.