The German bank WestLB, under investigation by the country's financial regulator, is set to sell its controversial principal finance business headed by the high-profile financier Robin Saunders within the next two years.
Johannes Ringel, who became chief executive at the struggling bank last month, has decided the complex and risky loan portfolio does not fit with WestLB's long-term ambitions to become a more domestic, savings-orientated bank. However, he does not want to rush a sale of principal finance.
WestLB has asked Ms Saunders - who has come under criticism for losses accrued at the television rental chain BoxClever, one of the deals her department backed - to stay on to manage the portfolio in the meantime. Announcing a €359m (£253m) loss for the half-year yesterday, Mr Ringel said: "Robin is part of our exercise to improve the value of the portfolio we have in principal finance. Robin has to support us to make even more out of it."
The bank said Mr Ringel was giving his public support to Ms Saunders continuing in her job. Relations were tense between Ms Saunders and some senior WestLB directors after the losses at BoxClever emerged. But she has always got on well with Mr Ringel.
Ms Saunders has seen her reputation widely attacked in the past few months after problems at BoxClever prompted Germany's banking regulator, BaFin, to investigate the amount of risk WestLB was retaining on its books. She has decided to weather the storm at the bank because she remains very interested ultimately in buying the business from her German bosses.
BoxClever, which WestLB loaned £850m to in 2000, was the subject of a further write-down in the six months to 30 March. The bank increased its bad debt provisions by €615m, with about €220m of that going towards possible further losses at BoxClever. The rest of the provision was for other loans WestLB has made, though none other than BoxClever came from the principal finance arm.
The bank, still being investigated by BaFin, said its provisions were "very prudent".Reuse content