Austria’s Kommunalkredit Returns to Profit Ahead of SaleAlexander Weber
Kommunalkredit Austria AG, the nationalized municipal lender being sold, returned to profit last year after losses from Greek assets didn’t recur.
Net income was 18.2 million euros ($23.6 million), compared with a 148.7 million-euro loss in 2011, when Greek writedowns weighed on profits, the Vienna-based bank said today in a statement. Interest income dropped to 43.9 million euros from
48.5 million euros after the bank sold loans with a face value of around 400 million euros.
Bids for Kommunalkredit, nationalized in 2008 following Lehman Brothers Holdings Inc. bankruptcy and ensuing financial crisis, are being reviewed by Austria and the European Union. The EU has ordered the sale to be completed by the end of June.
The bids are “determined by the prevailing market environment,” Chief Executive Officer Alois Steinbichler told reporters in Vienna today. Banks trade at discounts to their book value at the moment, which is about 200 million euros in Kommunalkredit’s case, he said.
The sale, which is being managed by Morgan Stanley, would leave Austria with KA Finanz AG, a so-called “bad bank” which is winding down securities, loans and swaps that aren’t part of Kommunalkredit’s main business. The lender reduced its risks by
4.9 billion euros to 14.5 billion euros at the end of 2012, and by another 900 million euros in the first quarter of this year, it said in a separate statement.
No Additional State Aid
KA Finanz, which received 1.9 billion euros by Austrian taxpayers, won’t need additional state aid beyond the 250 million euros budgeted for this year to meet Basel III capital rules, Steinbichler said.
“From today’s perspective, the capital requirement will be clearly below this level,” he said.
The bank had written credit-default swaps guaranteeing a net 6.18 billion euros by the end of last year, down from 6.98 billion euros six month earlier after some securities expired and others were sold. It held CDSs worth around around 2.2 billion euros for cash-strapped countries on Europe’s periphery, according to Bloomberg calculations. Most of the credit-default swaps expire between 2015 and 2017.
It would cost 1.5 billion euros to close all positions and shut down the bank immediately, according to Steinbichler. At the same time, the 1.9 billion euros in state aid would be lost, he said, adding “I don’t recommend this.”