April 17, 2014 / 8:22 AM / 4 years ago

Hypo Alpe Adria eyes Balkans network sale in 2014

VIENNA, April 17 (Reuters) - Nationalised Austrian lender Hypo Alpe Adria may sell its Balkans banking network this year, ahead of the mid-2015 deadline set by the European Commission in return for approving state aid for the loss-making lender, it said on Thursday.

Hypo sees its southeastern Europe (SEE) network as its prime asset as it winds down other businesses via a “bad bank”. The SEE network comprises banks and leasing operations in Slovenia, Croatia, Serbia, Bosnia and Montenegro.

Deutsche Bank is running the sale.

“The privatisation process begun in May 2012 has at the turn of the year entered a phase that makes closing the sale to a financial or strategic investor this year appear realistic,” it said in a statement ahead of its results news conference.

Hypo said late on Wednesday its 2013 group loss ballooned to 1.86 billion euros ($2.57 billion), as forecast last week.

Hiving off non-performing assets into its own internal “bad bank” reduced the SEE network’s total assets to 8.5 billion euros from 10.1 billion in 2012, while its non-performing loan ratio fell to 12.3 percent from 15.0 percent a year earlier.

The unit’s operating profit before risk provisions more than halved to 48.3 million euros in what it called tough markets that showed no signs of substantial improvement in 2014.

Hypo said deposits at home and abroad had suffered in the fourth quarter as a result of the public debate about whether to let the group go bust as a potential way to get creditors to help pay for its wind-down costs.

The government finally ended months of uncertainty in March by deciding to adopt a bad-bank model that will swell state debt and deficits this year.

After swallowing more than 5.5 billion euros in state aid since 2008 - including a 750 million-euro capital shot approved this month - Hypo posted a tier 1 capital ratio of 9.8 percent of risk-weighted assets, up from 8.6 percent a year earlier.

It has said it will need around 700 million euros more to cope with writedowns and maintain minimum capital levels until its transfers around 18 billion euros worth of assets into the bad bank supposed to be set up by September.

$1 = 0.7243 Euros Reporting by Michael Shields; Editing by Georgina Prodhan

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