November 14, 2013 / 11:16 AM / in 4 years

Austria's Volksbanken dismisses report saying it needs more aid

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VIENNA, Nov 14 (Reuters) - State-backed Austrian lender Volksbanken dismissed as speculation a newspaper report saying it may need an extra 1 billion euros ($1.34 billion) of government support next year.

Austria took a 43 percent stake in Volksbanken last year as part of a rescue that cost taxpayers more than 1 billion euros in writedowns on previous aid, fresh capital and guarantees.

"We are in the midst of the planning process for 2014 and thus cannot at all understand the numbers being bandied about today," the bank said on Thursday in response to a Wiener Zeitung article citing unnamed sources close to the finance ministry.

Aid to stricken banks in full or partial state control is a key element of budget negotiations between Austria's two main political parties as they try to form a fresh coalition after September's elections.

Volksbanken is carrying out a drastic European Union-mandated restructuring and though it dismissed the newspaper speculation, it did reiterate that it expects to record a loss this year and that its management has never completely ruled out the need for more state assistance.

The bank's Tier 1 capital ratio rose to 11.4 percent at the end of the first half of the year, from 10.9 percent at the end of 2012, it said in August.

The restructuring plan required Volksbanken to wind down or sell 10 billion euros of non-core operations. Its total assets stood at 24.9 billion euros at the end of June, 2.8 billion less than at the end of 2012.

Volksbanken shrank its balance sheet by nearly a third in 2012 by selling assets including its eastern Europe arm VBI.

The bank still needs to sell its 51 percent stake in its deconsolidated Romanian banking business - which it has written down entirely - by the end of 2015, as well as its 50 percent stake in VB Leasing International by the end of 2014. ($1 = 0.7460 euros) (Reporting by Michael Shields; Editing by David Goodman)

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