Bloomberg News

Hypo Alpe Gets More Time to Meet Regulator’s Capital Demands

December 30, 2011

(Updates with detail on demands in second paragraph.)

Dec. 30 (Bloomberg) -- Hypo Alpe-Adria-Bank International AG, a nationalized Austrian lender, said a deadline to raise its capital ratio was extended by nine months through the end of next year by the country’s financial-markets regulator.

Hypo Alpe, whose main assets are its banks in the former Yugoslavia, has to raise its “own funds” ratio to 12 percent from 10.5 percent at the end of October, the Klagenfurt, Austria-based lender said in a statement today. The Finanzmarktaufsicht regulator had previously given the company until March to reach the ratio, which would have been the equivalent of raising 1.5 billion euros of capital ($1.9 billion).

“The deadline extension recognizes the bank’s successful revamp of its risk management and its risk reduction by way of winding down, selling and restructuring assets,” Hypo Alpe said in the statement. The precise amount needed to reach the capital demand will depend on asset reductions next year, it added. The “own funds” ratio is a broad measure of reserves under Austrian banking law that includes hybrid and subordinated debt on top of common stock.

Austria took over Hypo Alpe in December 2009 to avert the bank’s collapse after an increase in bad debts, mostly linked to real-estate projects in the former Yugoslavia, and after former owners including Germany’s Bayerische Landesbank withdrew their support. The lender has posted three consecutive annual losses since 2008 totaling 3.2 billion euros and almost a third of its loan book is overdue or in default.

Hypo Alpe sought to sell its Italian and Austrian units this year and then put the planned disposals on ice after a decline of European banks’ share prices in the second half made it less likely it could offload the businesses at book value. The firm now is preparing to sell its banks in Croatia, Serbia, Slovenia, Montenegro and Bosnia and Herzegovina next year, the lender said in the statement.

--Editors: Stephen Taylor, Frank Connelly

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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