Hypo Alpe-Adria-Bank International AG, the nationalized Austrian lender, may need as much as 2 billion euros ($2.6 billion) in extra capital due to concessions Austria will make to win state aid approval from the European Union.
A restructuring plan for the lender, due in two days, foresees tighter deadlines for asset sales, curbs on new business and a larger unit for winding down assets, according to two people with knowledge of the situation, who asked not to be identified because talks with the EU are confidential. The measures will reduce the value of the Klagenfurt, Austria-based lender’s units and lead to a loss that will trigger the capital requirement, they said. The amount could be lower if a unit to wind down the bank’s bad assets is set up, they said.
Andreas Perotti, a spokesman for the Finance Ministry, said the plan is being completed on schedule. He declined to provide details. Nikola Donig, spokesman for Hypo Alpe, declined to comment.
Joaquin Almunia, the EU’s top antitrust official, told Austria in March that its restructuring plan for Hypo Alpe wasn’t good enough to justify retaining about 2.2 billion euros of state aid the lender has received since 2008, and he may order Hypo Alpe to pay it back. The government installed a task force led by former central bank governor Klaus Liebscher to satisfy Almunia by drafting a new plan.
The bank has already accelerated the sale of its Austrian unit, agreeing to sell it for 65.5 million euros to Anadi Financial Holdings Pte. Ltd. The transaction hasn’t been completed.
The bank’s biggest unit -- a network of banks in Croatia, Serbia, Montenegro and Bosnia and Herzegovina -- will be sold more quickly than an original deadline of 2016, the people said. The shorter deadline means the unit has to be categorized as listed for sale under international accounting rules, creating the need for a writedown, the people said.
Hypo Alpe will also accept restrictions on how much new business it can do in ex-Yugoslavia, where it competes with French, Austrian and Italian banks including UniCredit SpA (UCG) and Erste Group Bank AG. (EBS) That is to ease EU concerns that it distorts competition because of the financial aid it has received.
The company’s Italian bank will stop doing new business entirely, according to the people. Additional assets will be shifted to Hypo Alpe’s wind-down unit. Those measures will add to writedown needs, they said.
The unit containing assets to be wound down will grow to as much as 16 billion euros, the people said. Hypo Alpe is also seeking advisers for how to structure that part of the bank in a way that limits the need for taxpayer funds, they said.
If the unit is spun off and operates without a banking license, it may free up capital and therefore require less funding, the people said. Austria has set aside 700 million euros of capital for Hypo Alpe in this year’s budget.
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