Austria May Be Unable to Support Banks’ Foreign Units, S&P Says
By Boris Groendahl
Nov. 9 (Bloomberg) -- Austria may not be able to provide enough capital to its banks to underpin their business in eastern Europe in case they have to resort to state aid again, Standard & Poor’s Ratings Service said today.
“The Austrian government may not have the capacity to support all the foreign operations of the large domestic banks,” S&P analysts led by Markus Schmaus said in a statement. Austrian lenders including Erste Group Bank AG and Raiffeisen Bank International AG are the biggest lenders to borrowers in eastern Europe, according to the Bank for International Settlements.
Erste, Raiffeisen, nationalized Hypo Alpe-Adria-Bank International AG and other Austrian banks together lent $266 billion to governments, companies and households in the former communist part of Europe by the end of June, according to the BIS. The biggest exposure is to the Czech Republic, Romania and Hungary, according to the BIS.
The government provided about 9 billion euros ($12.3 billion) in capital and guarantees to the country’s banks in 2009 and 2010 and didn’t restrict the use of the funds to domestic operations. It has 6 billion euros left to provide, it said Oct. 13. Erste, Raiffeisen, Hypo and Oesterreichische Volksbanken AG all said they don’t plan to tap any more of the state funds.
S&P lowered Austria’s banking industry country risk assessment, or BICRA, to Group 2 from Group 3 today. A BICRA is scored on a scale from 1 to 10, with 1 representing the lowest risk and 10 the highest. The economic risk score was downgraded to 2 from 1, while the industry risk score was assigned as 3, S&P said in the statement.