UPDATE 1-BayernLB to return 10 bln euros in state aid

* Bavarian minister says bank no longer depends on state aid

* BayernLB says can shoulder burdens of HGAA unit

* BayernLB says HGAA unit may need capital hike

(adds detail, background)

MUNICH, Oct 22 (Reuters) - German Landesbank BayernLB [BAYLB.UL] will return 10 billion euros ($14.93 billion) in state aid, Bavarian Finance Minister Georg Fahrenschon said on Thursday.

It follows news last month that Germany's second-biggest lender, Commerzbank CKKG.DE would repay outstanding state guarantees immediately and signals banks are striving to wean themselves from a dripfeed of state aid. [nL9694630]

At the end of 2008, BayernLB had run up losses of 5 billion euros and was forced to seek a bailout from the German government and local savings banks.

German rescue fund SoFFin granted 15 billion euros in guarantees for the bank, of which BayernLB used 5 billion.

The finance minister, who is also BayernLB's chairman, said the bank was no longer dependent on state aid and could step in to prop up its Austrian unit Hypo Group Alpe Adria, or HGAA.

He said a capital hike for the unit could not be ruled out as HGAA has large exposure to problem loans in Eastern Europe.

BayernLB own a majority stake in HGAA.

BayernLB was able to raise 1 billion euros on the capital markets at the beginning of the month, a sign that market confidence has returned to the bank.

(Reporting by Christian Kraemer; writing by Edward Taylor; editing by Michael Shields)

((Reuters Messaging: edward.taylor.reuters.com@reuters.net; +49 69 7565 1242))

($1=.6678 Euro)

($1=.6697 Euro) Keywords: BAYERNLB/AID

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