UniCredit losses put BA under pressure
Bank Austria (BA) chief Willibald Cernko has said he plans to reduce the financial institute’s workforce level to get through the crisis.
The banker announced yesterday (Mon) BA would have only 10,000 employees in Austria in 2015, 800 fewer than it had at the moment. Cernko underlined that sackings were not planned. He explained some staff may leave the company for personal reasons. The BA boss added that the bank planned not to replace retiring employees.
BA manages UniCredit’s operations in the whole of Central and Eastern Europe (CEE) except Poland. Cernko said yesterday BA would not leave any of the markets it was currently doing business in despite UniCredit’s troubles. The Italian bank, which owns BA, sustained a loss of 10.6 billion Euros in the third quarter of 2011. UniCredit chief Federico Ghizzoni said on Monday his bank planned a capital increase next month. It has to be seen whether shareholders give the green light to the endeavour considering the tumbling value of UniCredit’s stocks.
Contracts say that BA will run UniCredit’s CEE businesses until 2016. Newspapers are speculating that the Italian bank may put some CEE representations up for sale to rake in urgently needed money – rumours both Ghizzoni and Cernko vehemently dismissed yesterday. UniCredit has 160,000 staff. It plans to lay off more than 5,000 in the coming years, according to Italian business dailies. Cernko said BA planned to increase workforce levels in Eastern Europe (EE) by 1,135 in the next four years – despite a decrease of value of UniCredit’s affiliates in Ukraine and Kazakhstan.
Investors from Qatar and China consider bolstering UniCredit with their assets, it has been reported. BA achieved a net profit of 4.5 million Euros in the first nine months of this year, down from 723.5 million Euros in the same time span of 2010. The CEE business operator of UniCredit had to lower the value of Greek government bonds it was holding due to the economic turmoil in the debt-stricken member of the European Union (EU) and the Eurozone.
Cernko succeeded Erich Hampel as CEO of BA two years ago. He stressed yesterday BA was, in contrast to UniCredit, not in need of extra money. The banker said BA would not have to increase its equity ratio to meet the upcoming Basel III rules. The more stringent financial market regulations force Europe’s leading banks to ensure their core capital ratio was at least nine per cent. The measure should ensure the finance institutes could weather another recession. Cernko said BA’s current equity rate was 10.42 per cent. “We will not need fresh capital in the foreseeable future,” he announced yesterday.
Cernko warned already in December of last year that the tougher rules and higher taxes may increase banks’ difficulties in finding investors. The ex-HypoVereinsbank manager said: “I think the debate over investors should have an Austrian background or come from abroad, is totally misleading. The decisive question will be whether we (the Austrian banks) will find investors at all who are willing to make capital available.”
Cernko told the Kurier in December 2010 that Austrian banks were “condemned to make profits”. He made clear many times in the past months that his bank would pass on extra costs created by a disputed bank levy to customers. The heads of other leading banks said the same in a reaction to the federal government coalition’s decision to implement the so-called bank solidarity tax.
Social Democratic (SPÖ) Chancellor Werner Faymann justified the measure as “nothing but fair and balanced” considering the billions of state aid some Austrian banks received from the state during the crisis. He also underlined the difficult situation of people who earned little while some banks paid high bonuses to their managers, shareholders and supervisory board members.
The People’s Party (ÖVP) showed less outspoken support for the bank tax but eventually supported its coalition partner’s appeal to set it up. The taxation measure came into effect in January. Faymann said it should help the state to extra earnings of half a billion Euros a year.
Cernko said in November 2010 when it became imminent that the SPÖ-ÖVP coalition intended to implement the bank solidarity tax: “We (BA) might be forced to lower our costs – which could mean reducing staff figures.”
Faymann argued loss-making banks like Hypo Group Alpe Adria (HGAA) and Kommunalkredit were nationalised because they were considered as relevant to the system and the banking sector. The SPÖ boss said workers on low salaries wished the same would be said about them.
Cernko said in June Austria “did well” in fighting the immediate impact of the crisis which started in 2008 after US investment bank Lehman Brothers went bust – but criticised that there was no “effective European crisis mechanism” to tackle the long-term impact of the recession and the downward spiral of this year.