ÖVAG and BAWAG ‘will not merge’

FIMBAG boss Klaus Liebscher has admitted uncertainties regarding whether the state will ever again see any of its Volksbank AG (ÖVAG) participation capital.

Liebscher told radio station Ö1 today (Thurs) it was impossible to make a definitive statement regarding the issue. He admitted that it was unlikely that the more than one billion Euros would flow back “in the coming years”. The former National Bank (OeNB) governor gave a similar forecast for the situation concerning the state aid invested into Hypo Group Alpe Adria (HGAA) and Kommunalkredit.

All three banks had to be nationalised in the past years. The partial nationalisation of ÖVAG only occurred in February. Especially the outlook on the future of Kommunalkredit and its bad bank KA Finanz seems bleak due to the large number of Greek government bonds the financial institute still holds.

FIMBAG manages the shares the state holds in banks. The authority came under fire in the crisis for having allegedly watched on too long as the condition of some of Austria’s banks worsened. Speaking to Ö1, Liebscher underlined that FIMBAG “does not have the same rights as shareholders”.

Asked whether ÖVAG would soon cooperate with another finance institute, Liebscher said the plan was to rebuild its strength without assistance from competitors. Business papers have speculated that ÖVAG could merge with BAWAG PSK (BAWAG). Former BAWAG deputy chief Stephan Koren is expected to succeed Gerald Wenzel as CEO of ÖVAG. Wenzel’s contract expires by the end of this month.

ÖVAG dared a quick expansion in Eastern Europe (EE) in the past years. The Vienna-based bank almost collapsed in the first wave of the global economic crisis of 2008 and 2009. It managed to make a profit of 55 million Euros in 2010. Its condition worsened despite generous financial support from the Republic of Austria. ÖVAG was partially nationalised a few days after it emerged that it made a loss of more than 1.3 billion Euros in 2011.

Sberbank, Russia’s leading finance institute, acquired ÖVAG’s international branch earlier this year. Sberbank transferred 505 million Euros for Volksbank International (VBI). ÖVAG bosses had hoped to rake in more than 700 million Euros by selling the EE operations department. Sberbank officials said on Tuesday they would invest 300 million Euros on VBI’s restructuring – and reviled plans to operate in Austria. Sberbank said it would target business clients in the country.

Meanwhile, a financial sector expert claimed that the state would never see any of the capital it injected into ÖVAG, HGAA and Kommunalkredit ever again. Franz Hahn of the Institute for Economic Research (WIFO) said the billions of Euros were definitely gone for good – but also justified the decision to carry out nationalisations. He said it had been essential to the domestic banking sector to “lower systemic risks”. Hahn explained that a collapse of any of the struggling banks would have cost the state much more.