HGAA achieves profits after all

Hypo Group Alpe Adria (HGAA) has made a profit for the first time in four years.

The struggling finance institute – which had to be nationalized in December 2009 – said it managed to make profits of 59 million Euros last year. The Klagenfurt-based bank headed by Gottwald Kranebitter sustained a loss of more than one billion Euros in 2010.

It reported a loss of 1.58 billion Euros in 2009 and losses of around 520 million Euros in 2008. These unpleasant annual performance figures followed years of an ambitious expansion in Southeast Europe. State prosecutors in Vienna, Klagenfurt and Munich, Germany, are currently trying to find out whether ex-managers’ lending policies had been too lenient. Dozens of bankers and businesspeople could face abuse of office and embezzlement charges.

Kranebitter announced on Wednesday that HGAA’s goal for the near future was to avoid further burden for taxpayers. Kranebitter admitted that he could not rule out that HGAA needed additional capital injections. The bank, which is strongly engaged in southern Austria and Croatia, needed more than 1.5 billion Euros of participation capital from the Republic of Austria in the past years. HGAA has so far been unable to pay any interest on the provided capital.

Kranebitter said HGAA’s total assets were reduced from 39 billion to 55 billion Euros to get part of the finance institute in shape for a sale. The bank’s board has been urged by the Austrian government coalition of Social Democrats (SPÖ) and People’s Party (ÖVP) and the European Commission (EC) to correct the financial institute’s focus. Now HGAA wants to operate only in areas where it is making a profit. Its Austrian and Italian affiliates are up for sale.

Kranebitter refused to reveal whether his team envisaged a specific date for a deal with a competitor. He explained that the European financial markets’ volatility could delay a takeover. Only last month, Russian banking sector powerhouse Sberbank acquired HGAA rival Volksbank AG’s (ÖVAG) international operations subsidiary company. Sberbank paid around 500 million Euros for Volksbank International (VBI). ÖVAG had hopes to rake in more money by selling most of VBI’s branches. The SPÖ-ÖVP coalition decided to nationalise ÖVAG only a few days after the deal between ÖVAG and Sberbank was finalised.

ÖVP Finance Minister Maria Fekter recently rejected claims that the substantial stabilisation of HGAA could cost up to 10 billion Euros. She branded the sum Austrian papers speculated about last week as a “fantasy figure”. Business newspapers reported about a secret Austrian National Bank (OeNB) document which allegedly identified an amount between five billion and ten billion Euros as a possible sum HGAA might need. OeNB Governor Ewald Nowotny said the reports lacked any truth.