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Hypo Group´s Capital Shortfall at € 2.2bn

Published: September 6, 2012; 17:42 · (Vindobona)

Today, the Austrian Financial Market Authority (FMA) announced its new estimation regarding the nationalized banking group. Insiders fear that Hypo Group needs even more money.

Hypo Group´s Capital Shortfall at € 2.2bn / Picture: © Wikipedia / JJ55 (30 March 2008)

One year ago, the capital shortfall was estimated to reach € 1.5bn. The bank´s equity ratio should exceed 12%, OeNB and FMA stated. After OeNB has published the capital shortfall in fall 2011, Hypo Group asked to government to extend the time limit and to recalculate the figure.

Due to the recession in Southeastern Europe and the decrease in real estate markets, the gap widened further. Now, FMA and the Austrian Central Bank (OeNB) report that Hypo Group needs a capital injection of € 2.2bn. The capital shortfall must be closed until the end of March 2013. Thus, this is the second time OeNB granted a postponement.

Hypo Group´s CEO Gottwald Kranebitter said that the increased capital shortfall is no surprise. “The required equity base reflects the tensioned situation of the financial markets. Especially the core countries of Hypo Group are affected.” Kranebitter underlined that risky assets could be reduced by € 5.0bn since 2009. However, it would be highly dissatisfying that the economic development damages the progress made since then, he said. Nevertheless, Kranebitter states that the business banks in Austria, Italy and Southeastern Europe would be sufficiently capitalized.

At the moment, the Hypo Group has a risky exposure of more than € 10bn. In the worst case scenario, the capital shortfall may reach up to € 5.0bn, insiders say. Despite the recession in Southeastern Europe, Hypo Group tries to downsize its assets drastically.

Hypo Group will not be able to achieve the required capital quota, however. Hence, new capital injections by the Austrian state will be needed. Only a few months ago, Finance Minister Fekter said that there won´t be new injections. As the state budget is rather strained, the Austrian government was said to put pressure on OeNB. According to OeNB´s director Andreas Ittner, the Austrian Central Bank will make its calculations thoroughly. “We will not submit to any pressure from outside.” he said and emphasized that there was no political pressure. The Austrian Ministry of Finance did not react yet.

The heads of Hypo Group´s management board ant of the supervisory board hope that the capital shortfall will not be covered by the taxpayers. “We hope that the bank will be able to reduce its risky assets as soon as possible.” Fimbag´s President Klaus Liebscher said. Fimbag´s Vice-President Hannes Androsch argued that the foundation of a bad bank or another capital injection will be inevitable. Both alternatives would increase public debt, he added. Regarding Kranebitter´s outlook Androsch shows skepticism. A few months ago, Androsch said that Hypo Group may need up to € 5.0bn in the worst case scenario.