DealZone

Haider’s heirs disown troubled Hypo bank

November 20, 2009

When the late Joerg Haider, the hard-right populist governor of the southern Austrian state of Carinthia, sold most of his government’s stake in Hypo Group Alpe Adria in 2007, he said, beaming: “Ladies and Gentlemen, Carinthia is rich.”

BayernLB, which like many other German landesbanken appears to have never met a toxic asset it didn’t like, had just paid 1.65 billion euros for a 50 percent stake in Hypo. Around half of that went into Haider’s government’s coffers.

Haider/Porsche

True to his pork-barrel politics, Haider used the funds to, among other things, subsidise Carinthian teenagers’ driving licence fees, scrap kindergarten fees, and pay out cash to Carinthian families to “offset inflation” in 2008, conveniently timed shortly before an election.

This worked to cement Haider’s image as the generous leader looking after the man on the street. But since his death in a car crash last year, it shows that the basis of this policy was not sustainable. Hypo is now in urgent need of another year-end emergency capital injection of more than 1 billion euros, after it went cap in hand to the Austrian government and BayernLB for 1.6 billion euros last year already.

Hypo’s breakneck expansion in the former Yugoslavia is the main reason for its continued losses this year. Haider and his confidante, ex-CEO Wolfgang Kulterer, started and presided over this expansion, which let Hypo’s balance sheet balloon to more than four times what it was in 2002. (This is the same Kulterer who pleaded guilty last year of false accounting during his time as Hypo CEO.)Hypo HQ

But Haider’s heirs in Carinthia, which still owns 12 percent of the bank, refuse to tap into the proceeds from the Hypo sale to help BayernLB prop up the bank’s balance sheet. They call for the Austrian federal government to step in.

“You can’t portray Hypo as the bad guy and pretend all other banks losing money in eastern Europe were just ‘unlucky,’” said Gerhard Doerfler, Haider’s successor as governor of Carinthia. “Hypo must not be treated worse just because it’s not based in Vienna.” (The big Austrian players in eastern Europe will all remain profitable this year and either won’t come for a second helping from the government’s banking package or didn’t tap it in the first place.)

Austria’s finance ministry is so far holding its course and says recapitalising the bank is first and foremost an issue for the owners. They, including Carinthia, will meet on Dec. 10. Financial watchdog FMA has told the bank they need to approve a capital injection then or face sanctions. Carinthians will know then how much more wealth the government will be able to spread.


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