* Erste, RBI, Bank Austria, Volksbanken Verbund affirmed
* Issuer Default Ratings for all four have stable outlooks
* Individual ratings for Erste, RBI, Bank Austria upgraded
(Adds quotes and background)
VIENNA, May 24 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)