VIENNA, Feb 28 (Reuters) - Winding down nationalised lender Hypo Alpe Adria should not affect the ratings of big Austrian banks including Erste Group, Raiffeisen Bank International and UniCredit’s Bank Austria, Fitch Ratings said.
Lenders’ access to finance and funding costs may change depending on Hypo Alpe’s future or if uncertainty continues, it said in a note on Friday.
“But barring a worst-case outcome - Hypo Alpe’s insolvency, which we do not expect - Hypo Alpe’s wind-down should have no immediate impact on these banks’ ratings,” Fitch said.
Austria is debating setting up a “bad bank” that would absorb toxic assets from Hypo, relieving its chronic need for fresh capital to meet regulatory minimums. But this could push state debt to 80 percent of gross domestic product.
The government refuses, however, to rule out letting Hypo go bust or getting its creditors to contribute to resolution costs. A decision is due by the end of March.
“We believe that given the repercussions and considerable contagion risk, the possibility of Hypo Alpe’s insolvency remains remote,” Fitch said.
It noted that “persistent and erratic newsflow” - a reference to the prolonged debate about what should be done with Hypo - might have greater impact on banks in full or partial state ownership such as Volksbanken AG, Kommunalkredit and KA Finanz.
“We believe the government’s bail-in threat is specific to Hypo Alpe, due to the still-unresolved burden-sharing relating to its bailout. If so, this would also limit a crisis of confidence at these banks,” it said. (Reporting by Michael Shields; Editing by Mark Heinrich)