Hypo Alpe-Adria-Bank International AG, the nationalized Austrian lender burdened with bad debt, reported a first-half net loss of 859.8 million euros ($1.14 billion), leaving it with a capital gap that has to be covered with fresh state aid.
The need to scale back in its eastern European markets led to a surge in risk provisions, which jumped to 623 million euros from 123.1 million euros a year earlier, the Klagenfurt, Austria-based bank said in an e-mailed statement today. As a result, its core capital fell short of minimum requirements by 618.8 million euros, it said. In the first half of 2012, the bank had a profit of 3.4 million euros.
Hypo Alpe said in July it needs a capital increase of 700 million euros to cover losses for the first half of the year after Austria accelerated the lender’s breakup. The measure has yet to be implemented as the bank waits for the European Commission to approve the more than 2 billion euros of state aid it has received over five years.
The additional adjustment of portfolios helps “maintain saleable units in a difficult market environment,” Chief Executive Officer Gottwald Kranebitter said in the statement. This is associated with “anticipated, yet unfortunate, large decreases in value,” he said.
The bank may need more cash in the second half of the year, Chairman Klaus Liebscher, who heads the government agency dealing with bank aid, told ORF radio last month. How much depends on the structure of a possible bad-asset unit, he said.
Hypo Alpe hired Sachsen Asset Management GmbH and Bankhaus Lampe KG to draft a plan for spinning off its bad assets, people with knowledge of the matter said last month. The unit may comprise at least 12 billion euros in assets, the people said.
Finance Minister Maria Fekter opposed the plan on concerns it may add to Austria’s government debt. Chancellor Werner Faymann and Vice Chancellor Michael Spindelegger told her to revisit the plans after non-performing assets caused losses and capital needs at Hypo Alpe that have burdened Austria’s budget.