WestLB is to cut up to 1,500 jobs as part of a plan to turn the troubled German regional lender around after it sustained heavy losses on US sub-prime loans.

The restructuring, which is intended to cut costs by €300 million, will see the axing of between 1,300 and 1,500 positions - or around one-quarter of WestLB’s 6,000 headcount - by 2010.

Alexander Stuhlmann, chairman of the managing board of WestLB, said: "Headcount reductions are always painful. But there is no alternative. We have to begin quickly to shape the future of WestLB and make the remaining jobs as safe as possible."

Owners of the third-biggest German regional bank have agreed to provide guarantees of up to €5 billion to ringfence losses from dubious trades and securities backed by US sub-prime home loans.

WestLB said its owners have decided to transfer “core risks” with a face value of €23 billion from the bank’s investment portfolio into a special purpose vehicle that would be covered by the €5 billion guarantee.

Potential losses of up to €2 billion would be covered by the main shareholders in proportion to their stakes in WestLB. A second portion of up to €3 billion would be covered by the state of North Rhine-Westphalia (NRW).

WestLB had previously estimated its 2007 losses at €1 billion.

Michael Breuer, the head of WestLB supervisory board, said the bank could now “fully concentrate on its future”, which included a possible merger with another Helaba, a rival regional bank.

RSGV and WLSGV, the regional savings banks associations, own 50.3 per cent of WestLB between them. NRW holds around 38 per cent.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts