FRANKFURT (AFP) -- Bavarian savings banks want to see a merger get underway this year of regional bank LBBW with BayernLB, which has been hit by sub-prime related losses, a press report said Tuesday.

The savings banks, which are major shareholders in both banks, would like to see a process begin in the third quarter of the year to create one regional bank covering all of southern Germany, the economic daily Handelsblatt said.
But the operation would have to wait until after regional elections, since German states also have major holdings in the country's regional banks.
In November, Bavarian regional finance minister Erwin Huber voiced staunch opposition to a tie-up of BavarianLB with its western neighbor LBBW, stemming rumors that a deal was being worked out.
Germany has 11 public regional banks and sector consolidation has been expected for months, but several ran into trouble owing to heavy investments in securities backed by the U.S. market for high-risk, or sub-prime mortgages.