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State-backed BayernLB to repay state aid ahead of schedule - sources
November 3, 2015 / 3:18 PM / 2 years ago

State-backed BayernLB to repay state aid ahead of schedule - sources

FRANKFURT/MUNICH, Nov 3 (Reuters) - German public-sector lender BayernLB is planning to repay the remainder of state bailout money three years ahead of schedule, a move which would allow it to broaden its overseas footprint, several people familiar with the matter said.

Germany’s second-biggest landesbank wants to return 2.3 billion euros ($2.52 billion) in state aid next year and subsequently close EU state aid proceedings, the people said.

That would allow BayernLB to open up branches in Asia to strengthen its business with its German corporate clients and to expand its real estate business, they added.

In the financial crisis, the German federal state of Bavaria injected 10 billion euros in capital into the lender and gave it 4.8 billion in guarantees for a portfolio of complex securities that turned sour after the collapse of Lehman Brothers.

At the time, BayernLB agreed to repay 5 billion by 2019, while the remaining 5 billion euros would remain in the bank as part of Bavaria’s 75 percent stake in the lender. Local savings banks own the rest.

The guarantee became obsolete with the sale of the remainder of the toxic assets last year, when BayernLB also returned a tranche of the state aid.

The European Central Bank as BayernLB’s banking supervisor still needs to approve the deal as does the European Commission, which is tasked with ensuring that companies receiving state aid does not hamper competition.

Two sources said that the ECB wants to scrutinize BayernLB’s situation very carefully before giving the green light for a early repayment as it would weaken BayernLB’s capital buffers.

BayernLB, its owners, the ECB and the European Commission declined to comment. ($1 = 0.9129 euros) (Reporting by Andreas Kröner and Jörn Poltz; Writing by Arno Schuetze; Editing by Victoria Bryan)

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