German bank WestLB has been so damaged by the fallout from the sub-prime crisis that it will slash a quarter of its jobs and take a $7.2 billion handout from its owners.
Its owners will provide over $7 billion dollars of relief to the bank to be invested in an off-balance-sheet vehicle to cover its losses.
The majority of the risk guarantee will be put up by the state of North Rhine-Westphalia, while two regional savings banks will make up the rest in proportion to their stakes.
Losses for the whole of 2007 totalled $1.4 billion and in the first half of the year chief executive officer Thomas Fischer was forced to leave WestLB after poor performance.
WestLB said it would cut 1,500 of its 5,900 staff in order to save about $435 million over the next two years.
In a further bid to save its balance sheet, WestLB is searching for a merger partner to rescue it, with Landesbank Hessen-Thueringen the prime candidate.
"WestLB was the most powerful state-owned bank in Germany about ten years ago,'' Dieter Hein, an analyst at Fairesearch told Bloomberg. "Now it's been hit by trading problems and subprime and is seeking a merger from a weakened position.''
During a dreadful year for the bank, traders gambled the bank's money and incurred losses and an investigation last July found that executives had not fully reported the risks.
