Hypo Group Alpe Adria (HAA), the Austrian banking network owned by German public bank Bayerische Landesbank, has been nationalised thanks to a proliferation of bad debt in its international leasing business.
The bank announced recently that it expected an annual loss of “significantly more than €1 billion” at year-end, after having already posted a €520 million loss in 2008.
It cited provisions for losses on leasing business as the major cause of this.
First bank bailout
HAA was the first Austrian bank to be bailed out by the state, receiving €900 million at the end of last year.
The injection, however, gave the Austrian state no control over the bank.
Shareholders including BayernLB (which owns 67 percent of the lender), insurer Grawe (20 percent) and the Austrian state of Carinthia (12 percent) met for an extraordinary meeting on 10 December to consider further capital injections.
If HAA was not recapitalised in some way, said Austrian financial watchdog FMA, it would fall below legal capital requirement levels.
As other shareholders held back from further investment, the Austrian state had to step in.
But not all of Austria’s big banks have fared so poorly, despite having sizable footprints in the CEE region.
Bank Austria, for example, the network owned by Italian UniCredit, is the only one of Austria’s major CEE networks to have declined state aid altogether – despite being the largest of the lot.
It managed to post a €1.2 billion net profit for the year’s first three quarters, with Erste Bank and Raiffeisen Zentralbank – the country’s second- and third-largest groups – also coming out of September in the black.
Not out of danger yet
Whereas no Austrian lender with foreign exposure is out of danger yet – the government has, tellingly, just pushed back the application deadline for state aid until the end of 2010 – it seems that an idea of who has won and who has lost is beginning to emerge.
The key, unsurprisingly, is in what type of lending has been done, and where it was conducted. After all, the countries of the CEE are far more complex and varied than the collective block of bad debt they are often portrayed as.
The main factor in HAA’s crippling losses has been a massive increase in bad debt provisioning for leasing businesses in Croatia, Bulgaria and Ukraine, as well as from cross-border financing based in Austria.
Many of the leases now being defaulted on concerned real estate assets, especially in the Balkan region, where HAA has made many acquisitions in recent years.
Through this explosive growth in Southeastern Europe, HAA has quadrupled its balance sheet since 2002 – a strategy that now seems to have backfired.