March 12, 2013 / 8:02 AM / 5 years ago

UPDATE 2-Hypo Alpe Adria pleads for time to revamp

* CEO says bank needs time to sell assets for fair price

* Total capital ratio rises to 13.0 pct at end-2012

* Sees European Commission decision in H1 on revamp plan

* Aims to divest Austrian bank unit this year (Recasts with CEO quotes from news conference)

By Michael Shields and Angelika Gruber

VIENNA, March 12 (Reuters) - Nationalised Austrian lender Hypo Alpe Adria pleaded on Tuesday for enough time to divest assets at fair prices in a revamp that the European Union’s competition chief has criticised for dragging on.

At stake are billions of euros in aid for the country’s seventh-biggest bank, which is trying to shrink back to health after a disastrous decade of unbridled growth and expansion into the Balkans that pushed it to the brink of insolvency.

“Time pressure destroys money, especially at a time when buyers are not exactly standing in line. If we are put in the shop window with an ‘everything must go’ sign, then losses are automatic,” Chief Executive Gottwald Kranebitter told reporters.

European Competition Commissioner Joaquin Almunia signalled on Friday his displeasure with the restructuring process, saying an Austrian bank he did not name faced possible closure for failing to adequately reorganise.

Hypo Alpe Adria is the only Austrian bank under EU review.

“This bank started receiving public support in 2008 and still the Austrian authorities have not been able to present to us a final decision or a sensible restructuring plan for this bank,” Almunia said.

“There should be a bigger restructuring, an orderly liquidation or an orderly resolution plan.”

The bank says emergency asset sales could trigger a need for more state aid, and a theoretical quick shutdown could saddle taxpayers with losses of 5 billion to 6 billion euros.

Fresh state aid helped Hypo Alpe Adria boost its total capital ratio to 13.0 percent at the end of 2012, above the level required by regulators even for the end of 2013.

That may relieve immediate pressure on Austria to provide more aid to a bank it had to buy in 2009 to avoid a collapse with regional implications, but much depends on the European Commission review of the lender’s revamp plans.

CAPITAL IDEA

Hypo - which is breaking itself up and selling off units in Austria, Italy and southeastern Europe - said it expected a Commission decision on the restructuring plan in the first half of the year.

Hypo aims to sell its Austrian business this year and said preparations to divest its Balkans network were far advanced, but its ability to close a deal in a way that preserved the most value hinged on the Commission’s timetable and market demand.

Hypo and the Austrian government would like years more to complete the divestment process, but Kranebitter gave no specific timeframe on Tuesday.

Austria injected another 500 million euros ($651 million)into Hypo and guaranteed a 1 billion euro hybrid bond late last year. Together with buybacks of hybrid instruments and a reduction in risk-weighted assets, that raised the capital ratio from 9.8 percent at end-2011.

Regulators had told Hypo to have a capital ratio above 12 percent of risk-weighted assets by the end of 2012 and one of 12.4 percent by the end of this year. Austria has budgeted 700 million euros in 2013 to help Hypo hit that goal if needed.

Hypo’s 2012 net profit fell to 3 million euros from 69.3 million in 2011 as provisions for bad debt rose and revenue fell. It reversed into a loss of 28 million euros under Austrian accounting rules, which means it will not make coupon payments on hybrid capital instruments.

The bank said it saw tentative signs of recovery in southeastern European economies but that a lasting rebound was expected only after 2013. ($1 = 0.7684 euros)

Editing by Georgina Prodhan and David Cowell

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below