Volksbanken said to meet ministry as owners balk at restructure   

Oesterreichische Volksbanken AG, the Austrian lender that failed European stress tests last year, is meeting the finance ministry and shareholders today as some of its minority owners balk at the bank’s restructuring plan, according to three people familiar with the agenda.

The lender, which was bailed out by Austria in 2008 and 2009, is due to present a plan approved last week by its majority cooperative bank owners, said the people, who declined to be identified because the meeting is private. Other shareholders include Germany’s DZ Bank AG, Raiffeisen Zentralbank Oesterreich AG and a unit of Munich Re, some of which have criticized the plan informally, they said. Walter Groeblinger, a spokesman for Volksbanken, declined to comment on whether or not a meeting was planned. Finance Ministry spokesman Harald Waiglein didn’t return calls seeking comment.

Volksbanken’s executives are meeting state officials as credit-rating companies warn that Austria’s financial-services industry is the main threat to the national credit rating.

The lender’s majority owners last week voted in favor of a pact that would carve out a new institution that takes on the business Volksbanken does to support the 62 regional banks. That new body would combine its assets and liablities with that of the regional banks in a cross-guarantee pact. Volksbanken would keep the remaining business and sell it or wind it down over time, according to the plan. It would also own 49 percent of the new business, while the regional banks would control 51 percent of it.

That plan would leave the other shareholders exposed to undesirable businesses, while giving them only an indirect and smaller stake in the sounder part, said the people. It is also unclear how the Volksbanken rump would be able to keep access to funding without additional government aid, they said. The regional lenders own 61 percent of Volksbanken, DZ Bank owns 23 percent, Munich Re 9.4 percent, and RZB 6 percent.

Austria is already saddled with bad assets Volksbanken ran up through 2008 in its municipal-lending unit, Kommunalkredit, which it co-owned with Dexia SA, the Belgian lender being broken up in the wake of losses. Volksbanken also received 1 billion euros ($1.3 billion) in government capital in 2009.

Finance Minister Maria Fekter has said her desire is “limited” to exercise the right to nationalize the bank, which kicked in after Volksbank’s failed to repay part of the aid last year. Volksbanken Chief Executive Officer Gerald Wenzel last week said the state can only be the last resort when all other sources, especially its shareholders, are exhausted.

The Alpine republic is under pressure from ratings companies and bond investors concerned about “contingent liabilities” from the nation’s financial-services industry. Standard & Poor’s cut the country’s rating to AA+ last month, citing banking risks. Moody’s lowered its outlook to “negative” in Feb. 13, saying it may cut the nation’s Aaa rating if banks need more aid.

Bloomberg