Dec. 15, 2009, 11:31 a.m. EST · Recommend · Post:
Worries over Volksbanken hit Austrian banks
Firm says it's well capitalized after report it was placed on watch list
By Simon Kennedy, MarketWatch
LONDON (MarketWatch) -- Worries over the state of the Austrian banking industry continued Tuesday after a report -- swiftly denied by the bank itself -- that Oesterreichische Volksbanken had been put on a watch list by a concerned central bank.
The report in Austrian newspaper Die Presse said the country's fourth-largest financial institution was viewed as systemically important and had been asked to put forward a new strategy. It came a day after Austria said it had nationalized Hypo Group Alpe Adria, its sixth-biggest lender, on the heels of rising loan losses in Eastern Europe that threatened to bring down the bank. See story on Hypo Alpe's nationalization.
Oesterreichische Volksbanken responded swiftly, saying it is well capitalized with an equity ratio nearly double the required minimum.
"Volksbank is in no way comparable to Hypo Group Alpe Adria. We expect a comfortable equity ratio at the end of this financial year," said CEO Gerald Wenzel.
He added that the group expects to be profitable again in 2010 but that "even under the most severe stress test conditions for next year we will still be above the required minimum capitalization ratios."
The central bank also said that there is no watch list and that Volksbanken remains sufficiently capitalized, Dow Jones Newswires reported, citing a spokesman for the central bank. The response, however, wasn't enough to stop fears about the wider banking industry in Austria from sending ripples through markets.
The worries contributed to a decline for the euro against the dollar, with the single currrency changing hands at $1.4564, down from $1.4653. See story on the euros decline.
Banking stocks moved lower in Austria, with Erste Group Bank /quotes/comstock/23k!bebo (DE:EBO 27.11, -0.05, -0.18%) down 3.1% and Raiffeisen International /quotes/comstock/11e!fraw (DE:RAW 39.74, -2.69, -6.34%) down 6.1%. The country's ATX index dropped 2%, giving up 49.15 points to 2,456.38. Also see Europe Markets.
Oesterreichische Volksbanken had a pretax loss of 607 million euros ($888 million) in the first nine months of the year, as it was hurt by losses linked to its exposure to Eastern Europe.
Hypo Alpe Adria also suffered from heavy losses in Eastern Europe, in particular in Croatia, Bulgaria and Ukraine, which contributed to the bank's prediction last month that it would incur an annual loss of "significantly more" than 1 billion euros.
Larger problem
The exposure of Western European banks to once-fast-growing Eastern European economies has been seen for months as a growing risk, with Moody's Investors Service warning toward the start of the year that it was concerned about potential losses among banks' subsidiaries in the region. See archived story on Moody's warning.
Greek banks were also down Tuesday, retreating amid worries about the country's debt crisis. A speech by Prime Minister George Papandreou on steps to repair its finances did little to provide support for markets.
Greek markets have been under increasingly heavy pressure in recent weeks amid mounting worries about the country's ability to repay debt, including a steep fall last week when Greece's credit rating was reduced by Fitch Ratings.
Shares of National Bank of Greece /quotes/comstock/13*!nbg/quotes/nls/nbg (NBG 5.06, -0.28, -5.24%) dropped 4.9% on Tuesday, as Piraeus Bank /quotes/comstock/11i!bpiry (BPIR.Y 6.21, +0.20, +3.39%) fell 4.8%.
Simon Kennedy is the City correspondent for MarketWatch in London.
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