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Austrian bad bank KA Finanz sees no need for more state aid
March 28, 2014 / 1:00 PM / 3 years ago

Austrian bad bank KA Finanz sees no need for more state aid

VIENNA, March 28 (Reuters) - State-owned Austrian “bad bank” KA Finanz does not expect to need any more state aid as it winds down its shrinking portfolio of assets, Chief Executive Alois Steinbichler said.

“From today’s perspective we plan no further capital injections,” as long as the vehicle was not forced to accelerate the wind-down process for a remaining 7.2 billion euros ($9.9 billion) in risk assets, he told reporters.

KA Finanz was split off from nationalised lender Kommunalkredit in an attempt to secure a viable future for the rest of the public sector finance specialist, which was brought low by the global financial crisis.

It has reduced its portfolio by nearly three quarters from the 30 billion euros it inherited in late 2008. It has now eliminated its credit default swap (CDS) risks.

KA Finanz got two more capital injections totalling 350 million euros from the state last year to help cover wind-down costs and meet minimum regulatory capital ratios.

The state has provided a net 2.18 billion euros in capital so far, excluding 662 million in fees the bank has paid on the aid.

KA Finanz has no sovereign debt risk above 500 million euros for any country other than Austria, Steinbichler said late on Thursday in remarks for release on Friday.

Kommunalkredit, the “good bank” left over from the split, made a 2013 net profit of 5.1 million euros under IFRS accounting standards. It forecast annual profits of 7-8 million should markets remain stable.

Austria failed to sell Kommunalkredit last year as agreed under a European Commission-approved bailout plan for the bank. It is now being wound down and cannot write new business.

$1 = 0.7278 Euros Reporting by Michael Shields; Editing by Mark Potter

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