BayernLB said on Tuesday it expected a second straight loss of more than €1bn ($1.5bn) this year in spite of an improvement in 2009 for Germany’s second-largest public sector bank.

The admission comes after BayernLB lifted risk provisions substantially in the third quarter and warned of the fragile state of its Hypo Group Alpe Adria subsidiary in Austria, which is heavily exposed to south-eastern Europe.