Volksbanken Rules Out Capital Need This Year, Sees No Aid

Oesterreichische Volksbanken AG, the part-nationalized Austrian lender, said it probably won’t need new capital before next year and plans to avoid fresh state aid even as its wind-down causes more losses.

Considering the bank’s total capital ratio of 19.1 percent of risk-weighted assets, “I don’t see a capital need this year,” Chief Executive Officer Stephan Koren told journalists in Vienna today. Fresh funds that may be needed after that because of stricter capital rules and further asset sales “don’t necessarily have to come from the government,” he said.

Austria owns 43 percent of Volksbanken after having bailed out the lender three times since its decade-long, fivefold balance sheet expansion began unraveling in 2008. A wind-down agreed with the European Commission will continue to cause losses until at least 2016, the bank said in November.

Volksbanken, one of the six Austrian banks covered by the European Central Bank’s asset quality review, had a net loss of 100 million euros ($138 million) in 2013, it said in an e-mailed statement. In 2012, it had a profit of 418.7 million euros that was caused by Austrian bail-out measures.

The Austrian government, faced with the task of winding down 17.8 billion euros of assets of nationalized Hypo Alpe-Adria-Bank International AG, has said it won’t provide fresh aid to Volksbanken. Moody’s Investors Service last month cut the bank’s credit rating one level to Ba1, below investment grade, citing the government’s weakened willingness for further support.

Subordinated Debt

Volksbanken may plug new capital holes by issuing subordinated debt, Koren said. It plans to reduce the number of regional lenders in its Association of Volksbanks to nine from 48 and cut costs to become more profitable and be able to sell Tier 1-compliant debt by 2017, he said. The bank needs to replace about 900 million euros of capital over the next eight years because of the new Basel III standards, he said.

Volksbanken hired Rothschild to manage the sale of its 51 percent stake in Volksbank Romania SA, which has to be completed by the end of 2015 under the EU plan, board member Michael Mendel said. The unit this week agreed to sell non-performing loans with a face value of 490 million euros, he said, declining to elaborate on the terms.

The bank sold most of its eastern European business to OAO Sberbank in 2012. Volksbank Romania, which had a loss of 103.6 million euros last year, is the only unit Sberbank didn’t purchase.

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