Oesterreichische Volksbanken AG (VBPS), the lender bailed out by Austria three times since 2008, won European Union approval for government support after agreeing to sell or wind down more than a third of its assets.
Volksbanken, whose decade-long, fivefold balance sheet expansion unraveled since 2008, will focus on supporting local cooperative banks under a plan negotiated with the EU, the Brussels-based European Commission said in a statement today. The lender will stop large corporate and real estate financing and subsidiaries not focused on the support functions.
“I welcome the bank’s objective to focus on its core business of providing services to the local and regional” credit cooperatives, European Competition Commissioner Joaquin Almunia said in the statement. “Making sure that banks that received state aid throughout the EU change their business model will help build a healthier financial sector.”
Austria has spent about 12 billion euros ($15.6 billion) to bail out or support its banks since 2008 and has been told by ratings companies Standard & Poor’s and Moody’s that lenders are the biggest risk to its sovereign creditworthiness. The Alpine nation may miss its 2012 budget target because of additional capital needs at nationalized banks this year.
Volksbanken is responsible for the biggest chunk of taxpayer aid. Its Kommunalkredit unit, then co-owned by Franco- Belgian Dexia SA (DEXB), was nationalized in 2008 and has since required capital and guarantees of 2.2 billion euros. Volksbanken itself received government capital injections of 1.25 billion euros in 2009 and 2012 and an asset guarantee of 100 million euros. Austria owns 43 percent of Vienna-based Volksbanken since a second aid deal in April.
Volksbanken has carved out a segment called “non-core business” that had 12.6 billion euros of assets at the end of June, according to its quarterly report. It has already sold most of its eastern European banks, its property subsidiary, retail lenders it owned directly and a container-leasing unit.
The next biggest hole into which the Austrian government is pumping cash is Hypo Alpe-Adria-Bank International AG, which was nationalized in December 2009 after then-owner BayernLB withdrew its support. Hypo Alpe has been ordered by Austrian bank regulator FMA to raise 1.5 billion euros of fresh capital this year and 700 million euros next year, which aren’t yet provided for in Austria’s budget plan.