LONDON--(BUSINESS WIRE)--Fitch Ratings has placed Volksbanken-Verbund's (VB-Verbund) Viability Rating (VR) of 'bb+' on Rating Watch Negative (RWN). At the same time, VB-Verbund's and Oesterreichische Volksbanken-Aktiengeselleschaft's (OeVAG) Long-term Issuer Default Rating (IDR) of 'A' with Stable Outlook, Short-term IDR of 'F1', Support Rating of '1' and Support Rating Floor of 'A' have been affirmed. A full list of rating actions is at the end of this comment.
The rating actions follow the announcement on 13 October 2011 that OeVAG will report a significant loss for FY2011 primarily as a result of write-downs of the book values of its subsidiaries Investkredit Bank AG and Volksbank Romania S.A. At the same time, OeVAG has stated that it will not repay the first tranche (EUR300m) of the government participation capital received in 2009 and that it will postpone the planned demerger of the banking business of OeVAG to Investkredit until further notice.
In addition, and as part of its capital strengthening measures in preparation for Basel III implementation, VB-Verbund and OeVAG announced that they have decided to reorganise the structure of the group similar to Rabobank Group's ('AA+'/RWN), a development which Fitch views positively as it is likely to strengthen corporate governance, risk management control and consolidated supervision.
The RWN on VB-Verbund's VR predominately reflects Fitch's view that VB-Verbund's central institution, OeVAG, continues to face material challenges in relation to its capital position, risk profile and business model, despite considerable deleveraging efforts since 2008. As Fitch does not assign a Viability Rating to OeVAG, the rating action is taken at VB-Verbund level.
In its latest rating action commentary dated 19 July 2011, Fitch stated that should OeVAG's core capital not be strengthened as a result of the capital strengthening measures, VB-Verbund's VR would come under pressure. OeVAG represents a considerable proportion of VB-Verbund and for FY2011, net profit generated by the steadily performing VB-Verbund's primary banks will likely not be sufficient to offset OeVAG's expected sizeable loss (around EUR500m under IFRS on a consolidated level as publicly stated by management).
With the exception of the VBI sale, which is likely to increase the regulatory core Tier 1 capital ratio at end-2011, capital raising measures announced earlier this year are being postponed, which is of concern as capital raising measures are being delayed at a time when European banks are faced with increasing capital requirements.
Fitch expects to resolve the RWN in the near term once it has assessed the impact of the planned measures on the group's capital position, financial strength and business model. Depending on the outcome of Fitch's assessment, VB-Verbund's VR could be downgraded by more than one notch.
VB-Verbund's and OeVAG's IDRs are solely based on the agency's view of sovereign support by the Republic of Austria ('AAA'/Stable). In Fitch's view, VB-Verbund's sizeable domestic market share should improve as the result of the announced reorganisation and will therefore continue to be systemically important for the Austrian economy. However, should the Austrian government's propensity to support the bank weaken or become constrained by legislative changes, then this would result in a downgrade of VB-Verbund's and OeVAG's IDRs.
VB-Verbund, which is not a legal entity itself but a cooperative grouping of member banks, is Austria's fourth-largest banking group. OeVAG is the central institution of VB-Verbund, Austria's second-largest cooperative banking group. As such, Fitch has assigned OeVAG "group" ratings under Fitch's rating criteria for banking structures backed by mutual support mechanisms. Fitch does not assign OeVAG a Viability Rating.
The rating actions are as follows:
VB-Verbund
Long-term IDR: affirmed at 'A'; Stable Outlook
Short-term IDR: affirmed at 'F1'
Viability Rating: 'bb+'; placed on RWN
Individual Rating: 'C/D'; placed on RWN
Support Rating affirmed at '1'
Support Rating Floor: affirmed at 'A'
OeVAG
Long-term IDR: affirmed at 'A'; Stable Outlook
Short-term IDR: affirmed at 'F1'
Support Rating affirmed at '1'
Support Rating Floor: affirmed at 'A'
Government guaranteed bonds affirmed at 'AAA'
Market Linked Securities: affirmed at 'Aemr'
Senior Unsecured Notes: affirmed at 'A'
The ratings of the other VB-Verbund member banks have been affirmed at Long-term IDR 'A' with Stable Outlook and Short-term IDR 'F1'. The full list of VB-Verbund member banks (in addition to OeVAG) is as follows:
Bank fuer Aerzte und freie Berufe AG
Volksbank Weinviertel e.Gen.
VOLKSBANK OBERES WALDVIERTEL rGmbH
Gaertnerbank, rGmbH
Volksbank Tullnerfeld eG
Volksbank Bad Goisern eingetragene Genossenschaft
Volksbank Osttirol rGmbH
Volksbank Oetscherland eG
Volksbank Fels am Wagram e.Gen.
Volksbank Krems-Zwettl AG
Volksbank Laa eGen
Volksbank Marchfeld e.Gen.
Volksbank, Gewerbe- und Handelsbank Kaernten AG
VOLKSBANK fuer den Bezirk Weiz rGmbH
Volksbank Tirol Innsbruck-Schwaz AG
Volksbank Altheim-Braunau rGmbH
Volksbank Feldkirchen, rGmbH
Volksbank Schaerding eG
Volksbank Steirisches Salzkammergut, rGmbH
VOLKSBANK BADEN e.Gen.
VOLKSBANK OBERKAERNTEN rGmbH
VOLKSBANK VOECKLABRUCK-GMUNDEN e.Gen.
Volksbank Wien AG
Volksbank Enns- und Paltental rGmbH
Volksbank Bad Hall e.Gen.
Volksbank Linz-Wels-Muehlviertel AG
Volksbank Gmuend eingetragene Genossenschaft
Allgemeine Bausparkasse rGmbH
Volksbank Alpenvorland e.Gen.
Waldviertler Volksbank Horn rGmbH
Volksbank Ost rGmbH
Volksbank Kufstein eG
Volksbank Ried im Innkreis eG
Volksbank Enns-St. Valentin eG
Volksbank Friedburg rGmbH
Oesterreichische Apothekerbank eG
Volksbank Voecklamarkt-Mondsee rGmbH
Volksbank Gailtal eG
Volksbank Niederoesterreich Sued eG
Volksbank Oberndorf rGmbH
Volksbank Obersdorf-Wolkersdorf-Deutsch-Wagram e.Gen.
VOLKSBANK GRAZ-BRUCK e.Gen.
Volksbank Muerztal-Leoben e.Gen
Volksbank Eferding-Grieskirchen rGmbH
Volksbank fuer die Sued- und Weststeiermark rGmbH
Volksbank Donau-Weinland rGmbH
Wiener Spar- und Kreditinstitut rGmbH
Volksbank Salzburg eG
Volksbank Almtal e.Gen.
VOLKSBANK VORARLBERG e.Gen.
VOLKSBANK LANDECK eG
Volksbank Aichfeld-Murboden rGmbH
SPARDA-BANK VILLACH/INNSBRUCK rGmbH
Volksbank Kaernten Sued e.Gen.
IMMO-BANK AG
Volksbank Niederoesterreich-Mitte e.G.
Volksbank Sued-Oststeiermark e.Gen.
Volksbank Suedburgenland rGmbH
SPARDA-BANK LINZ rGmbH
VB Factoring Bank AG
Volksbank-Quadrat Bank AG
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 16 August 2011 and 'Rating Criteria for Banking Structures backed by Mutual Support Mechanisms', dated 11 April 2011 are available at www.fitchratings.com.
Related Research:
Volksbanken Verbund Full Rating Report (January 2011)
Oesterreichische Volksbanken AG Update (January 2011)
Fitch Affirms Volksbanken Verbund and OeVAG on Announced VBI Sale (July 2011)
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171
Rating Criteria for Banking Structures Backed by Mutual Support Mechanisms
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=591785
Volksbanken Verbund
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595627
Volksbanken Verbund
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=539483
Oesterreichische Volksbanken Aktiengesellschaft
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=539484
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