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Hypo Alpe Says Liquidation Most Expensive for Austria

Hypo Alpe-Adria-Bank International AG, the nationalized Austrian lender loaded with bad debt, said it will continue to sell and wind down assets gradually because this will keep the burden for taxpayers as low as possible.

Risks for taxpayers may materialize if the bank is liquidated immediately, Hypo Alpe Chief Executive Officer Gottwald Kranebitter said late yesterday, when asked about a report in Format magazine that the bank would need more than 5 billion euros ($6.1 billion) if it was dissolved.

Kranebitter, speaking to reporters in Vienna, said he rejects this strategy and that Hypo Alpe only calculated the costs of liquidation and of accelerated asset sales on request of the European Commission’s probe into state aid the lender received. He declined to comment on specific numbers.

“I always said, and I still say today, that liquidation is the most expensive scenario for the taxpayer,” Kranebitter said. “The European Union, as in every state aid probe, requires us to calculate a liquidation scenario,” he said. “Our scenario is a going-concern scenario in which we have a banking part that we’re giving back to the market, and a wind-down part which we are reducing bit by bit.”

Hypo Alpe is one of three banks which Austria rescued from looming collapse since 2009 after shareholders walked away. The risks of further capital injections into those and other banks was one of the main reasons the Alpine republic lost its triple-A rating at Standard & Poor’s and was slapped with a negative outlook at Moody’s earlier this year.

Capital Needs

Kranebitter declined to say precisely how much less his plan for the bank would cost taxpayers. Hypo Alpe has received 1.35 billion euros in state capital and a 200 million-euro guarantee so far, and the government wrote off 700 million euros of that in last year’s budget. About 17.5 billion euros of its funding is also guaranteed by Austria and the Province of Carinthia, Hypo Alpe’s former owner.

The Austrian central bank has demanded the bank, a third of whose loan book is delinquent, increase its capital buffers by 1.5 billion euros by the end of the year. Kranebitter said the central bank will recalculate the requirement over the summer and may reconsider the deadline.

“If the result is an additional capital need, it will be our job to meet it so that it is as gentle on taxpayers as possible,” Kranebitter said, adding that the bank’s efforts to reduce assets were partly offset by the worsening economy in the region.

Hypo Alpe has hired advisers to sell its biggest unit, which is the third-biggest lender in the former Yugoslavia after UniCredit SpA and Nova Ljubljanska Banka dd, as well as its Austrian and its Italian banks. Its “wind-down” branch has risky or non-performing assets of about 10 billion euros.

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