HGAA hopes for black 2011

Hypo Group Alpe Adria (HGAA) managed a solid performance, according to its CEO.

Gottwald Kranebitter said yesterday (Mon) the bank could have reached the black in 2011. Kranebitter stressed that final figures for the past year would not be released before March. He said the current course was increasing the chance to find a new owner of the bank which had to be nationalised in 2009.

Former HGAA managers but also businesspeople from all over Europe could face legal action for illicit deals and embezzlement as prosecutors are still investigating who is to blame for the finance institute’s near demise. HGAA made a loss of one billion Euros in 2010. The bank’s current board informed investigators of around 1,000 possible cases of fraud and corruption carried out by former decision-makers.

Kranebitter emphasised that the plan was to sell HGAA’s Italian and Austrian departments in 2012. He said that the bank’s South European divisions were not for sale due to the strong position of HGAA in the region. “Ninety per cent of our customers are situated there,” he said about the area which includes the countries of former Yugoslavia.

The HGAA chief refused to name a date for a takeover of HGAA Italy and the bank’s Austrian section, claiming that developments on the markets would determine when the deals could take place. Kranebitter underlined that HGAA would not carry out fire sales and said that the current economic circumstances were not ideal for a deal due to the nervousness of Europe’s financial sector.

HGAA is not considered as a bank relevant to the domestic or international financial system, meaning that it must not fulfil the European Banking Authority’s (EBA) capital criteria. EBA want Europe’s leading banks to ensure a core tier capital ratio of nine per cent. HGAA’s ratio is 10 per cent at the moment, according to Kranebitter – who criticised the Austrian Financial Market Authority (FMA) for ordering it to jack up the rate by another two per cent.

Kranebitter claimed HGAA could do without additional financial support by the state. The Klagenfurt-based finance institute received around 1.5 billion Euros in participation capital in the past years. HGAA recently decided to withdraw from nautical leasing. It also started selling real estate and shares it held in companies to focus on its core service functions such as providing firms and individuals in Southeast Europe with credits.

HGAA was not examined by EBA in either of the authority’s stress tests on Europe’s banks. Volksbank AG (ÖVAG) was the only Austrian bank to fail the EBA’s criteria established in its second check which took place last year. EBA’s team of experts wanted to find out whether Europe’s banks could weather a further worsening of the economic climate.

Vienna-based Erste Bank Group AG (Erste Bank) was among the 82 banks which passed the check. Erste Bank CEO Andreas Treichl made headlines around half a year ago by accusing politicians of being “too stupid” to understand economic developments. He criticised that lawmakers failed to set up tougher rules for financial sector firms engaging in high-risk deals. Treichl called on politicians to improve circumstances for banks which focused on providing small and medium-sized enterprises (SMEs) with credits. Erste Bank is strongly engaged in Eastern Europe (EE) this way.

Treichl hit out at Austria’s political leaders one more last week when he claimed that they failed to react to the crisis in time. The banker claimed lawmakers could have avoided a downgrading of the country by starting to carry out reforms earlier and more determined.

Standard & Poor’s (S&P) recently lowered Austria’s soundness estimation from AAA to AA+. The world’s other leading rating agencies, Moody’s and Fitch, confirmed Austria’s triple-A shortly before S&P downgraded Austria and eight other European Union (EU) member countries.