Hypo Alpe-Adria-Bank International AG, the nationalized Austrian lender loaded with bad debt, said its capital need rose 46 percent to 2.19 billion euros ($2.8 billion) as of the end of April.
Austria’s Financial Markets Authority told the bank it has until March 31 to fill the shortfall, which would boost Hypo Alpe’s equity ratio to 12.67 percent, according to a statement from Klagenfurt, Austria-based Hypo Alpe today. The FMA said a year ago that the bank had a 1.5 billion-euro gap.
Hypo Alpe, which is the third-biggest lender in the former Yugoslav nations, is one of three banks Austria has rescued since 2008 after shareholders walked away. The risk of further state capital injections into banks was one of the main reasons the Alpine republic lost its AAA rating at Standard & Poor’s and was put on negative outlook at Moody’s Investors Service earlier this year.
The bank, led by Chief Executive Officer Gottwald Kranebitter, will “continue to do everything to strive to reduce risk and to create conditions that allow an adequate capital ratio without direct injections from its owner,” it said in the statement.
Hypo Alpe has received 1.35 billion euros in state capital and a 200 million-euro guarantee already, of which the federal government wrote off 700 million euros in last year’s budget. About 16.7 billion euros of its funding is also guaranteed by Austria and the province of Carinthia, Hypo Alpe’s former owner.
The regulator increased the bank’s capital ratio requirement to 12.67 percent from 12.04 percent because of a “more conservative” assessment of its credit risk and the increasingly tight situation on the financial markets, Hypo Alpe said. The ratios for the bank’s units in Italy and Slovenia were set at 10 percent and 9 percent, respectively, and are already met, it said.
The March 31 deadline is a three-month extension from the previous end-of-year date. The bank has until Sept. 28 to comment on the FMA’s demands.
Austria’s Finance Ministry said that while it acknowledged the FMA’s suggestion, this only was a draft with Hypo Alpe still able to reply to the regulator. The ministry will wait for a final verdict before it commented, it said in an e-mailed statement today.
Hypo Alpe’s common equity Tier 1 ratio, a measure of financial strength, rose to 2.6 percent in the first half from 2 percent at the end of last year as it cut assets and bought back hybrid capital, it said in a presentation for investors last month. Its Tier 1 ratio, a broader measure, fell to 6.1 percent from 6.2 percent.
While the lender swung to a loss in the first six months of this year, the units it put up for sale were all profitable, according to the presentation. The biggest, in the former Yugoslavia, had after-tax profit of 26 million euros, down from 32.3 million euros a year earlier.
Profit almost doubled in Croatia and narrowed in Serbia, while the bank had losses in Slovenia and Montenegro. Hypo Alpe’s larger rivals in the former Yugoslavia are UniCredit SpA and Nova Ljubljanska Bank dd.