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UPDATE 2-Austria's Hypo loss triples as bad debts mount
August 27, 2010 / 8:25 AM / 7 years ago

UPDATE 2-Austria's Hypo loss triples as bad debts mount

* H1 net loss 499 mln eur vs 162 mln eur loss year ago

* Asset clean-up, Balkan crisis lets bad debt charges double

* Nationalised bank still sees break-even in 2011

* Bank set to claim hundreds of millions in damages

(Adds quotes from news conference, detail, background)

By Boris Groendahl

VIENNA, Aug 27 (Reuters) - Austrian nationalised bank Hypo Group Alpe Adria lost almost half a billion euros in the first half of 2010 as its asset clean-up and the economic crisis in the Balkans made charges for bad loans nearly double.

The scandal-ridden bank, whose former boss was arrested two weeks ago on suspicion he diverted bank funds, said on Friday its net loss tripled to 499 million euros ($634 million) and reiterated it would return to profit only next year.

The group will lose less in the second half of the year, so will probably not need another state capital injection, Chief Executive Gottwald Kranebitter told journalists in Vienna.

“Seen from today we have a sufficient capital base and that will also be the case at the end of the year,” he said.

Kranebitter, a former KPMG auditor appointed in April by the Austrian government after it took over the bank last year, is cleaning up and downsizing Hypo to knock it into shape so it can be sold again in three to five years.

Hypo, Austria’s sixth-largest bank, will sell or wind down its franchises in Italy, Montenegro and other countries but aims to keep its Slovenian, Croatian, Serbian and Bosnian business pending European Union approval for its state bailout.

Kranebitter said bad debt charges would reach around 1 billion euros this year -- after 667 million by end-June -- partly because of a review of Hypo’s loan portfolio but also due to the adverse economic environment in Croatia and Serbia.

The group had 8.2 billion euros of non-performing loans on its balance sheet at the end of June, more than 28 percent of its entire loan book, the bank said.

Hypo, then controlled by German public bank BayernLB [BAYLB.UL], was nationalised last December to avoid a collapse that supervisors feared could have sent shockwaves through the region. [ID:nLDE5BD00D]

BayernLB’s ill-fated investment in Hypo has cost the German bank 3.7 billion euros. Prosecutors in Germany, Austria and Croatia are investigating former managers, shareholders and business partners of Hypo and BayernLB on suspicions they lined their pockets at the expense of the banks. [ID:nLDE67C17M]

Kranebitter said he was also going after “those who have inflicted damage on the bank” and would start with “a handful” of lawsuits seeking compensation next month. He declined to say whom he would sue.

The bank will continue to file such lawsuits whenever it has compiled enough evidence, and Kranebitter said he thought damage claims would likely total several hundred million euros. (Reporting by Boris Groendahl; Editing by David Holmes and Michael Shields) ($1=.7867 Euro)

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