Hypo Group Alpe Adria, the Austrian banking network owned by
German public bank Bayerische Landesbank, may be facing
nationalisation, breakup or sale thanks to proliferation of bad
debt in its international leasing business.
The bank announced recently that it expected an annual loss of
“significantly more than €1 billion” at year end, after having
posted a €520 million loss in 2008.
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The main factor in this loss was a massive increase in bad debt
provisioning for Hypo’s leasing businesses in Croatia, Bulgaria and
Ukraine, as well as from cross-border financing based in
Austria.
“We see the historical weak risk management practices combined
with low profitability as the main reason for Hypo’s losses”
Dominique Nutolo, an analyst at ratings agency Moody’s, was quoted
as saying.
Hypo, the sixth biggest bank in Austria by asset base, has grown
its balance sheet more than four times since 2002, having expanded
rapidly through purchases in the Balkan region.
More recently, Hypo was the first Austrian bank to be bailed out
by the state, receiving €900 million at the end of last year. The
injection, however, gave the Austrian state no control over the
bank.
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By GlobalDataNow, shareholders of Hypo, including BayernLB (which owns 67
percent of the lender), insurer Grawe (20 percent) and the Austrian
state of Carinthia (12 percent) will meet for an extraordinary
meeting on December 10, to consider further capital injections.
If Hypo is not recapitalised in some way, says Austrian
financial watchdog FMA, it will fall below legal capital
requirement levels.
Whereas Carinthia has indicated it cannot give Hypo further
capital, it seems BayernLB is prepared – after all, it has already
capitalised the bank to the tune of €2.8 billion since 2007.
The other most likely source of capitalisation would be the
Austrian state, which would most likely want to receive some voting
rights in the event of buying a new stake in Hypo.
BayernLB, having received state aid itself from Germany, is
under pressure from the European Union to sell Hypo. Even if it
does so, however, it will likely need to recapitalise the bank
before it can find a buyer.
Fred Crawley
