Stuttgart - A German bank is "perfectly likely" to bill an eastern German state for hundreds of millions of euros in losses blamed on the world credit crisis, its chief executive, Siegfried Jaschinski, was quoted saying Sunday. Jaschinski's Landesbank Baden-Wuerttemberg (LBBW) acquired its Sachsen LB unit from the state of Saxony and contends that the former owner must compensate it for losses not yet discovered at the time of sale.
At worst, the eastern state could face a bill of 1.2 billion euros (1.89 billion dollars) under a guarantee it offered in the sale transaction, Jaschinksi told the newspaper Boersen Zeitung. "Even in the best case it will be several hundred million euros."
LB Sachsen came to grief last summer because of liability linked to sub-prime US mortgages. Its new owner is the biggest state bank in Germany and is controlled by the state of Baden-Wuerttemberg.
Saxony faces a budget strain after setting aside 830 million euros for possible payments under the terms of its December guarantee.
