BayernLB, the second largest partially state-owned wholesale bank in Germany, has made a non-binding offer for beleaguered lender IKB Deutsche Industriebank, edging a sale process which began in January a step further and heightening the probability of further consolidation in the country's banking sector this year.

Merrill Lynch is advising IKB's largest shareholder, KfW, the state development bank, which holds 43.4% of the lender's shares, on the sale.