AUSTRIA will nationalise its sixth biggest bank, it announced yesterday, the second time the country has taken over a bank since the beginning of the financial crisis.
Hypo Alpe-Adria Bank International will be injected with as much as €450m (£404m) of state funds, while majority shareholder, German state owned bank Bayerische Landesbank, will sell its 67 per cent stake for the symbolic price of one euro and also pour €825m into the company, writing off its €2.3bn investment.
BayernLB chief executive Michael Kemmer resigned over the matter yesterday. He will be temporarily replaced by the firm’s chief financial officer Stefan Ermisch.
Straining under up to €1.7bn of write downs and loan losses, Hypo Group announced in November it would make an annual loss of greater than €1bn.
As part of its bailout last year, BayernLB gained €10bn in capital and €4.8bn in guarantees from the Bavarian state.
Bavarian premier Horst Seehofer described the affair as “painful, but unavoidable”.
European Central Bank President Jean-Claude Trichet personally intervened over the weekend to stop the Austrian bank collapsing.
“It’s a disaster for BayernLB, but in my experience it can be expected that losses at Hypo Alpe-Adria will be even higher in one year’s time, so it’s good that BayernLB was able to draw a final line,” said
Wolfgang Gerke, president of the Bavarian Center of Finance in Munich.
The nationalisation comes after Austria’s rescue of Kommunalkredit, the municipality lender, in November 2008.