Berlin poised to inject equity into WestLB
* Berlin mulls 3 billion euro equity injection - source
        * Decision on equity help for WestLB expected next week
        * WestLB sees higher credit risk provisioning requirements
        * 9-mth pretax profit 262 mln eur vs 604 mln
          (Adds further details, background)
        By Matthias Sobolewski and 
Jonathan Gould
        BERLIN/FRANKFURT, Nov 12 (Reuters) - Berlin looks set to  bolster the equity capital of another troubled bank, this time a public sector one, with a 3 billion euro ($4.5 billion) injection into WestLB [WDLG.UL].
        Berlin and its bank rescue fund Soffin are keeping a close eye on WestLB, which is restructuring in response to the financial crisis and state pressure to merge with its peers.
        A government source told Reuters on Thursday that an effort by Soffin to shore up WestLB's capital base was "anything but fanciful," adding that a 3 billion-euro injection was under discussion.
        A second source close to the country's governing coalition said a capital injection by the state was "very likely".
        WestLB's owners -- the state of North Rhine-Westphalia and regional savings banks -- are in talks with Berlin and Soffin about the move, the government source said, with a view to having a plan ready for presentation early next week.
        WestLB declined to comment.
 The discussions underscore how the financial and economic crisis continues to reverberate through banks in Europe's biggest economy.
        Soffin took a 25 percent stake in the country's second-biggest lender, Commerzbank (
CBKG.DE), in exchange for an equity capital injection, and also took complete control of property financier Hypo Real Estate, since renamed Deutsche Pfandbriefbank. 
        It has also helped property lender Aareal Bank (
ARLG.DE).
        Sources close to WestLB's owners told Reuters this week that the owners would have no problem in giving up majority control of the lender. 
 GOOD BANK, BAD BANK
        The aim is to help WestLB in its effort to split itself in two, offloading around 85 billion euros worth of risky assets to a "bad bank" and creating a healthy core bank that will focus on corporate customers. [ID:nL7593651]
        The country's big stockmarket-listed lenders, such as Deutsche Bank (
DBKGn.DE), Commerzbank and Deutsche Postbank (
DPBGn.DE), have said they do not need to establish bad banks.
        WestLB predicted on Thursday that rising loan losses and restructuring charges would squeeze profit, mirroring problems at peers as the public sector landesbanks gird for consolidation.
        WestLB, Germany's third-biggest landesbank, said loan loss provisions rose to 582 million euros in the first nine months of the year from 345 million euros in the same period last year.
        Rival BayernLB [BAYLB.UL] this week said its risk provisions for bad loans had nearly quadrupled to 1.3 billion euros in the first nine months of the year.
        BayernLB, the country's second-biggest landesbank, said it expects to post a loss of more than 1 billion euros this year because of ballooning credit losses in the former Yugoslavia. [ID:nLA640367]
        Bavaria Premier Horst Seehofer on Thursday said his state was unwilling to provide any more cash to BayernLB beyond the 10 billion euros in fresh capital it granted the lender a year ago.
        As the patience of local politicians and savings banks to keep supporting their landesbanks runs thin, the chances are growing for speedier consolidation among the landesbanks.
        The European Commission has even made a change of ownership a condition for approving state aid to WestLB.
        Banking industry observers have suggested the country's seven independent landesbank groups, which serve as wholesale banks for area savings banks, could be merged to form two or three big groups.