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BayernLB aims for 2010 profit after Hypo disaster

German state bank BayernLB aims to turn profitable again this year after its disastrous investment in Austria's Hypo Group Alpe Adria caused it to post the second bumper loss in as many years in 2009.

BayernLB said writedowns and losses due to the Austrian bank, which had to be bailed out by the Austrian government late last year, totaled €3.3 billion ($4.4 billion), bringing the group's net loss to €2.6 billion in 2009.

BayernLB gave away to Austria its 67% stake in Hypo, which has run up billions of euros in bad debt mainly in its Croatian unit, in December to avoid a collapse that would have been felt throughout Europe's banking sector.

Closing the book on its ill-fated Hypo purchase, which prosecutors in Germany, Austria and Croatia are now trying to clean up, BayernLB said its restructuring was progressing well and it was hoping to turn profitable again this year.

“The Bank had to face the consequences of strategic decisions in the past and take appropriate action,” Chief Executive Stefan Ermisch said in a news conference. “We will ... forge ahead systematically with our transformation program.”

“Our goal for the year is to achieve a return to profitability for the group,” he added.

The 2009 loss came after toxic US assets had already caused a net loss of €5.1 billion in 2008, after which BayernLB had to be bailed out by the German state of Bavaria and the German federal government.

BayernLB said it expected the state aid it received to be approved by the European Union in the first half of this year.

Hypo, now fully owned by the Austrian government, is facing a breakup after restructuring its loanbook, planning to reduce its total assets by about half. (Reuters)