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Moody´s Confirms Austria´s Rating Despite Hypo Group Disaster

Published: March 1, 2014; 09:20 · (Vindobona)

The rating agency has reiterated Austria´s top sovereign debt rating. Moreover, the outlook was upgraded from “negative” to “stable”.

Moody´s Confirms Austria´s Rating Despite Hypo Group Disaster / Picture: © Vindobona.org

“Uncertainty over the future of Hypo Alpe-Adria Bank International AG (Hypo Alpe) does not affect the 'AAA' rating of its government guaranteed subordinated debt.”, Fitch Ratings says. “A change in the Austrian sovereign rating is the main rating sensitivity of the notes guaranteed by the Republic of Austria. We expect Hypo Alpe's eventual fate to have limited implications for other, rated Austrian banks.” The rating agency stated in a press release published yesterday in the late evening.

According to Moody´s, Austrian banks do not face downgrades yet. “Access to and costs of funding for other, rated Austrian banks may change depending on Hypo Alpe's future or if uncertainty continues. But barring a worst-case outcome - Hypo Alpe's insolvency, which we do not expect - Hypo Alpe's wind-down should have no immediate impact on these banks' ratings.”

Moreover, Moody´s underlined that the three big Austrian banks still enjoy a high degree of investor confidence. “The three rated large Austrian banking groups (Erste Group Bank, Unicredit Bank Austria and Raiffeisenbank International) have well-established and diversified international funding franchises. RBI's recent successful equity and subordinated debt issuances, for instance, signal that primary market investor confidence remains thus far unshaken by Hypo Alpe's situation.” Moody´s stated.

In view of the stable banking sector, Moody´s also confirmed the Austrian sovereign debt rating. The “AAA” rating was kept unchanged. Moreover, the outlook was upgraded from “negative” to “stable”. According to Moody´s, the danger of further bail-outs in the Eurozone was down substantially. Besides that, the Austrian fiscal performance is still satisfying, Moody´s added.

Because of the Hypo Group disaster, the Austrian public debt quota will increase to 81% from 75% this year. Until 2017, the debt-to-GDP ratio will go down to 75%, Moody´s forecasts. In the same time, the budget deficit is expected to shrink gradually.

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