Erste, Raiffeisen and the other Austrian banks have lent a combined $266 billion to borrowers in eastern Europe, about 70 percent of the Alpine nation’s gross domestic product. That figure doesn’t include the Italian-owned Bank Austria.
A large part of the banks’ loans are refinanced with local deposits, limiting the risk for the parent company, though that’s not the case in Hungary and Romania, which has prompted the Austrian central bank to issue new rules for lending in eastern Europe.
“We take note of the attempt by the Austrian regulator to reduce the funding mismatch in the central and eastern European countries where it is present, but we think that this is going to take a while,” Muehlbronner said.
Erste has shelved plans to repay 1.2 billion euros in state aid after writing down assets that will lead to a loss for last year. Raiffeisen hasn’t given a date to repay its 1.75 billion euros in state aid, while Bank Austria didn’t get any aid.
No Additional Aid
All three institutions have ruled out asking for more, and Finance Minister Maria Fekter said today that no other bank has done so.
“We’re monitoring the overall situation of banks and whether they are on a sound footing,” Fekter told journalists, calling Moody’s outlook change “regrettable.”
Austria nationalized Oesterreichische Volksbanken AG (VBPS)’s Kommunalkredit unit in 2008. The state will back its “bad bank” KA Finanz AG for years to come as it winds down 24 billion euros of assets including credit-default swaps on Greece. That bank may need fresh capital this year, depending on the terms under which Greece swaps its debt.
The state also nationalized BayernLB’s Hypo Alpe-Adria-Bank International AG in 2009. That institution’s wind-down unit is holding about 10 billion euros of assets that are non-performing or unsellable.
Volksbanken, which was relieved of Kommunalkredit in 2008 and received 1 billion euros of state aid in 2009, will report another loss of at least 825 million euros for 2011 and has failed to repay 300 million euros of state aid last year.
The bank is planning to spin off a wind-down unit, which some of its owners would like to foist on the government, Format magazine reported last year. Fekter has said her desire to nationalize Volksbanken is “very limited.”
While the concerns about Austria’s banks are “not new,” Moody’s said that the country’s debt level is higher than when it last supported banks in 2008 and 2009 and is on an “upward trajectory.”
“Some of the measures in the Austrian budget package haven’t been confirmed yet, such as the financial transaction tax or the tax treaty with Switzerland,” Muehlbronner said. “There is some uncertainty whether everything will be in place.”
France and the U.K. also had their top ratings put on a negative outlook by Moody’s yesterday, while Italy, Malta, Portugal, Slovakia, Slovenia and Spain’s ratings were cut.
“This Moody’s report does not just refer to Austria, it refers to a significant part of the overall developments of Europe,” European Central Bank Governing Council member Ewald Nowotny said today in an interview broadcast by state-run ORF radio. “The savings package is part of the overall perspective, but it shows it was important to conclude this package.”