Fitch affirms big Austrian bank ratings at "A"

Tue May 24, 2011 11:33am EDT

Related Topics

* Erste, RBI, Bank Austria, Volksbanken Verbund affirmed

* Issuer Default Ratings for all four have stable outlooks

* Individual ratings for Erste, RBI, Bank Austria upgraded

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VIENNA, May 24 (Reuters) - Fitch Ratings has affirmed four big Austrian banks' A debt ratings with stable outlooks and upgraded three of them on a standalone basis.

The long-term issuer default ratings for Erste Group Bank (ERST.VI), Raiffeisen Bank International (RBIV.VI), UniCredit Bank Austria (CRDI.MI) and Volksbanken Verbund held steady, Fitch said in a statement.

It raised Erste's individual rating -- or where it stands without any outside support -- to B/C from C, and RBI's and Bank Austria's individual ratings to C from C/D.

It kept at C/D the individual rating at VB-Verbund -- the entity that includes Oesterreichische Volksbanken (OTVVp.VI) and the unlisted cooperative banks that are its majority owner.

Fitch said its upgrade of Erste, RBI and Bank Austria reflected the banks' "continued resilient financial performance in a still challenging operating environment", their largely successful efforts to contain asset quality deterioration, and the three banks' adequate funding profiles.

"However, their individual ratings also consider Fitch's expectation that impaired loans in some (central and eastern European) markets have yet to peak and -- in the case of Erste and notably RBI -- the banks' only modest capitalisation if the forthcoming repayment of government participation capital and preparations for Basel III are taken into account," it said.

It was referring to non-voting capital banks got from the state at the height of the financial crisis and to new capital rules that aim to make banks more resistant to crises.

VB-Verbund's individual rating at C/D reflected Fitch's view that "its earnings generation capacity and capitalisation has disproportionately suffered in the past three years and that the bank will have to make structural changes in the short- to medium-term to ensure that capitalisation remains adequate."

It said VB-Verbund's earnings capacity, already weaker than peers, would fall further if its CEE subsidiary Volksbank International were sold as planned. [ID:nLDE73H0JN]

Fitch noted "an extremely high probability" that the four banks would get more support from Austria given their dominant domestic market shares and importance for the Austrian economy.

It pointed out that Erste's, RBI's and VB-Verbund's capital structures contain a large proportion of non-core Tier 1 capital as defined by Fitch.

At the end of 2010, Tier 1 capital ratios excluding state participation capital for RBI (at around 7.8 percent) and especially Volksbanken AG (at 5.8 percent) were relatively low in international comparison, it said. (Reporting by Michael Shields; Editing by David Cowell)

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