“I like Austria, I like Austrians, and I’m happy when an Austrian wins the ski jumping – but Austria doesn’t deserve to have a government like this,” he said at the bank’s annual press conference on Wednesday.
"We have to see that we get back onto a rule of law basis," he added.
"We want our money back," Bavaria's finance minister Markus Söder said, adding that the precarious state of Hypo's "bad bank" Heta Asset Resolution was the fault of its Austrian management.
BayernLB is 75 percent owned by Bavaria, with local savings banks holding the rest. It posted a €1.32 billion ($1.45 billion) loss in 2014 after booking a €1.2 billion writedown on the value of loans to bank Hypo Alpe Adria, which it sold to Austria in the financial crisis.
Risk provisions spiked to €1.5 billion from €320 million in 2013, mainly for expected losses tied to Hypo, which it owned from 2007 to 2009, the bank said on Wednesday.
A new law that Austria passed on Hypo last year has made it less likely BayernLB will recoup all of the €2.4 billion it considers loans to Hypo, but which Austria views as equity.
According to Bundesbank statistics, German banks have €5.5 billion of exposure to Heta Asset Resolution, with BayernLB accounting for €2.4 billion.
The Munich-based lender and Hypo are locked in a legal battle over who is to pay for the mess at Hypo, the near-collapse of which has already cost taxpayers in Austria and Germany billions of euros.
Germany's five banking associations this month wrote a letter to the EU Commission, arguing that Austria's actions infringed the free movement of capital guaranteed by EU law.