BERLIN, April 10 (Reuters) - The German state of Lower Saxony is considering a cash infusion of over 1 billion euros ($1.2 billion) as one of several options to strengthen the balance sheet of state-backed lender NordLB, a source familiar with the situation told Reuters.
The bank and the state, NordLB's majority owner, last month said they were reviewing a wide range of options, but no decisions had been made.
NordLB posted a record loss of 2 billion euros in 2016, weighed down by its 9 billion euro shipping portfolio, although banking sources say it returned to profitability in 2017.
Lower Saxony holds 59 percent of the bank, with the state of Saxony-Anhalt and other municipally-owned savings banks owning the rest.
The source said the goal was to structure the cash injection to avoid breaching European Union regulations on state aid.
A second source familiar with the situation said a capital increase, however structured, was clearly needed.
German newspaper Frankfurter Allgemeine reported earlier that Lower Saxony could provide the bank with at least 3 billion euros, a report referred to by the state's finance minister Reinhold Hilbers as "speculation."
"We are not being forced into any action at the moment. NordLB is not a takeover candidate," he said. "The goal is to strengthen NordLB for the future and ensure its success, because our medium-sized businesses rely on it for financing."
Other possible options include bringing in private investors, although that would require changing the bank's structure, the first source said.
The bank, which is due to report its 2017 earnings next week, declined to comment, as did the state's municipally owned savings banks, the second largest shareholder block in NordLB.
($1 = 0.8092 euros) (Reporting by Klaus Lauer; Writing by Andrea Shalal; Editing by Mark Potter)