Bloomberg News

Austria Gets Another Bank Warning as Fitch Confirms AAA Rating

November 09, 2012

Austria’s highest debt rating was confirmed with a stable outlook by Fitch Ratings today, as the company said further state aid for banks is a risk to the Alpine republic’s finances and its creditworthiness.

Fitch confirmed Austria’s long-term issuer default ratings at AAA saying the nation’s high economic output per capita, lowest unemployment rate in the European Union and moderate private sector debt underpinned the assessment. The biggest danger may come from continued support required by the banks Austria has bailed out, Fitch said.

“Risks from the government’s contingent liabilities arise mainly from the Austrian financial sector,” Fitch said. “Unexpected costs arising from the continued restructuring of banks already receiving official support could put pressure on public finances and the rating.”

Austria’s three nationalized banks, bailed out between 2008 and 2012, will cause the nation’s budget deficit to widen this year, even as Greece, Italy and Spain trim their shortfalls. Austria’s budget gap will expand to 3.1 percent of gross domestic product this year from 2.6 percent in 2011, swollen by unplanned additional aid for the banks.

Standard & Poor’s stripped Austria of its AAA grade in January, saying its banks cause higher contingent liabilities than in any other top-rated country. Moody’s Investors Service also cited the risk of cash needs for the banks when it put a negative outlook on the nation’s AAA rating in February.

The nationalized banks are KA Finanz AG, Hypo-Alpe-Adria International AG and Oesterreichische Volksbanken AG. (VBPS) They needed more than 1 billion euros ($1.3 billion) each of aid this year, equivalent to more than 1 percent of the nation’s GDP. More funds for KA Finanz and Hypo Alpe are already earmarked in next year’s budget.

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

To contact the editor responsible for this story: Jonathan Tirone at jtirone@bloomberg.net


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