* LBBW 2009 net loss 1.5 bln eur, HRE net loss 2.2 bln eur
* LBBW says markets show crisis not yet overcome
* LBBW says impossible to give forecast for 2010 earnings
* HRE says won't be profitable before 2012
(Adds quotes, detail, background)
FRANKFURT, March 26 Germany's state-backed lenders LBBW [LBBW.UL] and Hypo Real Estate remained deep in the red in 2009, hit by heavy loan losses, and signalled a long slog to return to health.
LBBW, the country's biggest landesbank, predicted financial conditions would remain difficult this year, making it impossible to give a precise earnings forecast, after it posted a net loss of 1.5 billion euros ($2 billion) in 2009.
"The latest ructions in the euro area government bond market as well as the continued high volatility in securities markets show that the financial crisis is not fully overcome," LBBW said in a statement on Friday.
LBBW's 2009 results were hit by a 73 percent increase in loan loss provisions as well as charges for a European Union mandated restructuring and follow a net loss of more than 2 billion euros in 2008.
LBBW's state owners bailed out the lender with a 5 billion euro capital increase and a 12.7 billion euro risk shield but, like fellow landesbank lenders WestLB [WDLG.UL] and BayernLB [BAYLB.UL], LBBW had to agree to a wide-ranging restructuring to gain EU approval for the help.
Meanwhile, Hypo Real Estate, once a blue-chip property lender but now a ward of the state after Berlin was forced to nationalise it last year, posted a 2.2 billion euro net loss for 2009 and said it would not return to profit before 2012.
Manuela Better, on her first day as Hypo Real Estate's interim chief executive after former CEO Axel Wieandt abruptly stepped down on Thursday, said the bank's results would take a significant hit in 2010 from costs linked to the set up of a run-off bank to which Hypo will spin off bad assets.
"We want to dampen the losses relative to 2009, but as long as the volume and structure of the planned run-off bank has not been decided, we have to continue to assume that the group will not return to profit before 2012," she said.
HRE aimed to regain its independence on the capital markets by 2012 or 2013 and doing so was a precondition for leaving the government nest for privatisation, Better said.
People familiar with the matter told Reuters on Thursday that Wieandt, a former Deutsche Bank executive who had only headed HRE since October 2008, had clashed with Soffin, which is the German bank rescue fund and now HRE's sole owner, over how much independence Hypo Real Estate should have. [ID:nLDE62O1X0]
Credit rating agency Fitch said earlier this month that it expected mainly the state sector banks such as HRE, WestLB and maybe one or two other landesbanks to turn to run-off institutions or "bad banks" to restructure their toxic assets. [ID:nFIT404854]
Spinning off such assets to bad banks helps lenders improve their capital ratios and risk profiles as well as reducing the volume of wholesale funds needed. They also allow management to focus on restoring the health of the good bank.
Separately, the Financial Times Deutschland reported on Friday that another formerly state-controlled bank, IKB IKBG.DE, may be put up for sale by its current owner, U.S. private equity company Lone Star [LS.UL].
Without citing sources, the paper said Lone Star had held talks to sell IKB to HSBC Trinkaus, but those negotiations collapsed due to differences over purchase price.
IKB and HSBC declined to comment. Lone Star was unavailable for comment. (Additional reporting by Angelika Gruber in Stuttgart and Christian Kraemer in Munich, editing by Will Waterman) ($1=.7502 Euro)