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HVB seeks rapid Bank Austria IPO
FRANKFURT, Germany (Reuters) -- HVB Group, Germany's second-biggest bank, said on Thursday it would rush through a flotation of 25 percent of its profitable Bank Austria unit this year to bolster its depleted finances. "The proceeds will help us increase HVB Group's capital resources very efficiently because this measure will enable us to avoid a substantial dilution of HVB's earnings per share,'' HVB Chief Executive Dieter Rampl said in a statement. Banking sources told Reuters on Wednesday that the group would sell assets to raise funds rather than asking investors for extra cash through a convertible bond. HVB shares were trading 5.6 percent firmer at 8.07 euros by 0830 GMT after opening 7.2 percent up. "The decision makes a lot of business sense,'' said Georg Kanders, analyst at WestLB Panmure. "I expect that the IPO could bring about 1.25 billion euros ($1.34 billion) of new capital into the group.'' Investor concern that HVB may issue a mandatory convertible bond -- effectively a delayed capital increase -- has contributed to a 50 percent decline in its market value so far this year. Bank Austria, bought by HVB for over seven billion euros in 2000, is a leading player in central European banking with a market share of 28 percent. The Vienna-based bank runs HVB's central and eastern European operations and had a pre-tax profit of 504 million euros in 2002. Rapid listingHVB said the Bank Austria public offering would take place ``as soon as possible'' before the bank's announced carve out of its commercial real estate operations scheduled for the fourth quarter of 2003. The shares will be listed in Vienna. Due to the size of its loan book -- Europe's biggest -- HVB has been hit harder than its rivals by a flood of corporate failures. Last month, it posted a fourth-quarter loss of 926 million euros and scrapped its dividend. Weak capital markets, thin lending margins and high costs have also taken their toll, reducing HVB's core capital ratio -- a measure of financial fitness -- to 5.6 percent, below the six percent level seen as a minimum by market participants. Spinning off the real estate operations into a new mortgage bank is at the core of HVB chief Rampl's goal to return the group to profit and lift its core capital ratio towards seven percent. Industry sources said shareholders in HVB will be offered one share in the new mortgage bank for every four they own in the group. The restructuring envisages HVB cutting its risk-weighted assets by 100 billion euros, or almost 30 percent, in 2003 to ease the strain on its finances. But analysts have said that if the new mortgage bank is to have sufficient capital and HVB is to make significant progress towards its seven percent target, it would need to find 1.5 billion euros in new funds. HVB's Munich neighbours, Allianz and Munich Re, both announced measures to bolster their strained finances in the past week -- Allianz via a rights issue and Munich Re from the bond market. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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