A proprietary trading scandal and suspect trades now under investigation pushed WestLB, the German state-owned bank, into the red in the first half of the year.

Today, the bank admitted that It had lost €604 million (£409 million) in spread positions trading ordinary and preferred shares. That contributed to a net trading loss of €309 million.

Earlier this year, WestLB said it had incurred losses of at least €243 million from suspect trading in the first half. There is speculation that this deficit could have hit more than €500 million.

The combined losses were enough to push WestLB into a pre-tax loss of €38 million in the first half, sharply down from a €239 million profit for the same period a year ago.

Alexander Stuhlmann, WestLB's chief executive, said: "Our profit has been severely hit by the losses incurred in our proprietary trading.”

Yesterday it emerged that state prosecutors in Düsseldorf are investigating seven present and former board members of WestLB in connection with massive trading losses.

Thomas Fischer, the former chief executive, who stood down from WestLB last month in the wake of the trading scandal, is among those being investigated.

Mr Fischer’s departure from WestLB came after an extraordinary supervisory board meeting that was called to investigate whether the management board had acted improperly in failing to report on positions taken by its proprietary equities trading business.

The six other suspects in the investigation were not named.

Prosecutors are investigating allegations that the managers failed to keep the supervisory board informed of the bank’s activities. WestLB declined to comment and a spokesman for Mr Fischer was not available.

BaFin, the German securities watchdog, has also started an investigation after WestLB initiated criminal proceedings against a former management board member and a former managing director in connection with the trading losses.

WestLB traders are alleged to have manipulated share prices in large companies, including the carmakers BMW and Volkswagen, to inflate the bank’s trading profits and boost their own bonuses.

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