guarantee obligations for Pfandbriefbank

Transkript

Erste Group Research
Credit Focus | Fixed Income | Austria
16 April 2015
Credit Focus: Austria Q2 2015
Sovereign, Sub-Sovereigns & Agencies, Covered Bonds
Analysts:
Margarita Grushanina
[email protected]
Ralf Burchert, CEFA
[email protected]
Christian Enger, CFA
[email protected]
Ratings Republic of Austria
Agency long-t. short-t. Outlook
Fitch
AA+
F1+
stable
Moody's Aaa
P-1
stable
S&P
AA+
A-1+
stable
DBRS
AAA
R-1
stable
Source: Bloomberg, Erste Group Research
Contents
Heta and the Implications for Austria
2
Retrospective: Hypo Alpe Adria Bank
International
2
Heta under control of the FMA – payment
moratorium imposed
3
The next steps in Heta's wind-down
6
Reaction of the rating agencies to Heta
measures
7
Sub-Sovereigns & Agencies (SSA)
10
Sovereign
16
Sub-Sovereigns & Agencies
Primary market
22
22
Covered Bonds
25
Appendix
26
Note:
Historical performance is no indicator for
future performance!
All price indications are given as at April
10th, 2015
Erste Group Research – Credit Focus: Austria
According to initial provisional results, the asset review at Heta Asset
Resolution AG has revealed an additional capital shortfall of EUR 4.0 to
7.6 bn. As a result of this, the planned wind-down strategy was changed
on 1 March 2015. The Republic won't transfer any additional taxpayer
funds to the company. Instead, the financial market supervisory authority
will implement a resolution according to the Bank Recovery and
Resolution Act. As a first measure, a moratorium on the bulk of Heta's
liabilities (excl. covered bonds) until 31 May 2016 has been imposed. As a
result, insolvency has been prevented for now, and the deficiency
guarantees granted by the province of Carinthia won't be triggered for the
time being. In our opinion, the further approach to Heta's wind-down
depends on a variety of factors, among which there is especially the
potential trigger event for the deficiency guarantees. However, it seems
clear that investors will have to contribute to the costs of the Heta winddown. The Heta proceedings are also affecting other institutions in Austria's
banking market (e.g. guarantees for the Pfandbriefstelle of the mortgage
bank sector).
In the SSA segment the reevaluation of guarantees should lead to greater
differentiation between individual issuers. A Heta debt haircut could possibly
lower the volume of the province's guarantees, legal uncertainty will
however remain high. In our opinion, Heta could become an important
catalyst for reform in Austria, and cast fiscal equalization in a fresh light as
well. For decades, Austria's provinces and municipalities have relied on the
federal government ultimately providing support in the event of a liquidity
squeeze. We don't interpret this as the end of intra-state solidarity, possibly
though as a shift in the balance of power, with an increase in the willingness
to enact reforms on every level of government.
Even though Austria's economic growth has exhibited above-average
strength over the past decade, this trend has come to an end in 2014.
Weaker economic momentum was on the one hand attributable to sluggish
consumer demand, and on the other hand to negative net exports. We
expect that Austria's GDP growth will remain below that of the euro area in
both 2015 and 2016. Effective reforms are essential to achieve sustainable
growth in the mid-term. The tax reform that comes into force in 2016 is a
first step, but will in our opinion only moderately affect private consumption
in the first year. Weaker economic development has an effect on the
budget and public debt as well. We expect that Austria's government will
remain on a consolidation path. If a debt haircut can be implemented at
Heta, a faster reduction in public debt over the coming years would be
possible.
Page 1
16 April 2015
[email protected]
Heta and the Implications for Austria
After the Republic of Austria has decided in early March to make no
additional taxpayer funds available to Heta, Austria's financial market
supervisory authority (FMA) has employed the Bank Recovery and
Resolution Act (BaSAG) that has come into force in January 2015 in order
to prevent the threatening insolvency of Heta. This decision by the Republic
is causing investors to think about the “value” of various types of guarantees
and sureties in Austria. As a result of this, our report has a strong focus on
the topic of Heta this time.
Retrospective: Hypo Alpe Adria Bank International
Emergency nationalization of
the former Hypo Alpe Adria
International at the end of
2009
Heta Asset Resolution AG was originally operating under the name
Hypo Alpe Adria International AG (HAA). HAA was a banking group
domiciled in Klagenfurt (Carinthia). The institution evolved out of “Kärntner
Landes-Hypothekenbank”, which was established in 1896 as a cooperative
credit institution. Due to pursuing aggressive growth without limiting risk, too
optimistic expectations and severe operational deficiencies in all important
areas, the bank ran into financial problems and became subject to an
emergency nationalization at the end of 2009. The institution was however
unable to recover from its financial difficulties and is in the meantime being
wound down as Heta Asset Resolution AG.
Basic structure of the winddown model: Only the winddown portfolio remains with
the original HAA
After a bankruptcy of HAA was initially examined as a possible option, the
government rejected this approach in mid-March 2014 following a difficult
struggle and decided to undertake an orderly wind-down. The legislative
package adopted for this purpose in June 2014 (HAA special law) provides
for the establishment of three federal holding companies, for which the
Republic isn't assuming an unlimited guarantee though. This is for one thing
AbbaubeteiligungsAG (ABBAG), which is holding HAA/Heta. Heta has a
balance sheet total amounting to approx. EUR 18 bn., and administers the
actual wind-down portfolio (mainly real estate, leasing business, nonperforming loans). Effective with 30 October 2014, the company has
returned its banking license. A separate entity by the name of HBI
Bundesholding AG was established for the Italian subsidiary (Hypo AlpeAdria Bank S.p.a./HBI). HBI continues to require a banking license, which
made it necessary to hive it off. At the shareholder meeting of
19 August 2014, it was resolved to transfer the Italian subsidiary Hypo AlpeAdria Bank S.p.a./HBI to HBI Bundesholding AG.
SEE network to be sold to a
consortium consisting of
Advent International and the
EBRD
The third company is Hypo SEE Holding, which comprises the South-East
European banking network (total volume approx. EUR 8 bn.). The SEE
network, which is operating under the name of Hypo Group Alpe Adria AG
(HGAA), was hived off from the former HAA and transferred to the Republic
of Austria as well, resp. to Finanzmarktbeteiligung Aktiengesellschaft
(FIMBAG). After intermittent complications, it was announced on
23 December 2014 that the company will be sold in line with an EU directive
on state aid (mandatory sale by 30 June 2015). US investment fund
Advent International, with a minority participation by the European
Bank for Reconstruction and Development (EBRD) will take over the
South-Eastern European activities. Closing of the transaction is still
contingent on a positive state aid decision by the European Commission
and the approval of the relevant supervisory authorities. Closing of the sale
is expected by mid 2015. However, a relationship between Heta and the
SEE network remains in place for the time being. This is because Heta has
agreed to continue to provide its refinancing lines to its former subsidiaries,
Page 2
16 April 2015
which amount to a not inconsiderable volume of EUR 2.2 bn. These will only
be reduced gradually.
It had been decided already in the originally presented wind-down model
that subordinated creditors (including those with deficiency
guarantees) and providers of participation capital would essentially
have to contribute to the costs of the wind-down. Thus the HAA special
law provides for the extinguishing of so-called restructuring liabilities. The
same applies to the associated deficiency guarantees of the province of
Carinthia. Should any assets be left after the wind-down proceedings have
been concluded, these will be distributed among the restructuring creditors –
with subordinated creditors enjoying seniority over shareholders. HAA's
liabilities with a deficiency guarantee of the province are part of ABBAG.
Contrary to subordinated bonds, little should change for senior bonds with a
deficiency guarantee for the moment. The province's guarantee remains in
place and former finance minister Spindelegger emphasized on
11 June 2014 that senior bond investors “will receive what has been
promised to them in full”. However, in the meantime a big question mark
hangs over this promise.
Heta under control of the FMA – payment moratorium imposed
Government changes Heta
wind-down strategy
Even though law suits have already been filed against the HAA special law,
in which creditors are mainly disputing the burden-sharing of restructuring
liabilities, the fundamental structure of Heta outlined above remains
essentially in force. However, the wind-down strategy was changed in
March of 2015, which has worsened the prospects of creditors.
Asset review will reveal
additional large impairment
requirements
Heta is currently conducting an asset review. This is intended to ascertain
the realistic liquidation value (long term economic value) of the company's
assets. According to the ministry of finance, the review is inter alia intended
to serve as the basis for the drafting of a wind-down plan as required by law.
In addition, the results would be reflected in the company's 2014 annual
report. In the meantime a first indicative interim result of the asset review
has been presented. This will lead – depending on the scenario – to a
further impairment of Heta's assets ranging between EUR 5.1 to 8.7 bn.,
which in turn results in additional financing requirements of EUR 4.0 to
7.6 bn. The most recent reports are indicating that the most probable
scenario is currently that Heta's capital requirement will amount to
EUR 4.6 bn., which is at the low end of the announced range. However, in
our understanding, two factors could drive the capital requirement to higher
levels. This is for one thing the outcome of the law suits filed against the
HAA special law. For another thing, closing of the SEE network's sale hasn't
taken place yet. There still exist a number of reservations that could end up
scuppering the transaction. Heta wants to present its balance sheet in midApril 2015, which should provide more clarity.
The Republic of Austria will
inject no additional money
into the company – the FMA
implements a resolution
according to BaSAG
At the beginning of the year, chancellor Faymann emphasized that while he
continued to support the orderly wind-down of Heta, the result of the asset
review could make it necessary to revise this strategy. This has now
happened. On 01 March 2015, the Republic has decided that it is no longer
willing to fund the shortfall described above. The Republic won't make any
additional tax payer funds available to Heta. In order to avert the threat of
the company's insolvency, Austria's financial market supervisory authority
(FMA) is making use of the recently adopted Bank Recovery and Resolution
Act (BaSAG). It has taken control of the company (management oversight)
Page 3
16 April 2015
Deferment of the bulk of
Heta's liabilities until
31 May 2016
and as a first measure has decreed that Heta doesn't have to make any
payments on the bulk of its liabilities (primarily bonds, subordinated
capital, promissory notes, claims of BayernLB) with respect to interest
or redemptions until 31 May 2016. Covered bonds are NOT included in
these eligible liabilities and are therefore not affected by this measure.
Heta is in resolution, which
has averted a bankruptcy –
deficiency guarantees are not
triggered
For a wind-down order to be given, three preconditions have to be fulfilled
according to BaSAG. These are the determination that an institution is in
default or is likely to default, the unavailability of private sector alternatives,
and safeguarding the public interest (among other things for the prevention
of negative effects on financial stability and to protect public funds). Inter alia
on the basis of the preliminary result of the asset review, the FMA assumes
that a state of over-indebtedness has already been reached in Heta's case.
In addition, prior to the moratorium, insolvency was threatening “in the near
future (in 2016 at the latest)”, which is evident from the company's liquidity
planning. The FMA regards the other two preconditions as fulfilled as well.
Therefore, it has now ordered the resolution of Heta in line with the BaSAG,
but hasn't filed for the opening of insolvency proceedings. This means
explicitly that the guarantees of the province of Carinthia for senior
unsecured bonds with a deficiency guarantee will remain dormant for
the time being. The latter are according to §1356 ABGB (Austrian civil
code) literally solely defined as assumptions of liability in the event of
bankruptcy (see Credit Focus Austria Q3 2014, p.10 ff.).
Effects of final wind-down
strategy especially noticeable
in Austria's mortgage bank
sector
The measures for the final wind-down of Heta have not only affected the
group itself, but have an effect on other institutions in Austria's banking
market as well. Pfandbriefstelle is a pooling platform of the provincial
mortgage banks, which has been used frequently especially in the past. As
of 30 June 2014, its balance sheet total amounted to EUR 6.1 bn. Heta, the
roots of which are also in the mortgage banking sector, has issued bonds
totaling EUR 1.2 bn. (as of 30 June 2014) through Pfandbriefstelle, resp. its
subsidiary Pfandbriefbank (Oesterreich) AG. These Heta liabilities of
Pfandbriefbank (AT) are also included in the moratorium. Moody's has
placed the 'A2' rating of the pooling company on negative credit watch
(“review for downgrade”). Pfandbriefstelle doesn't have shareholders, but
members. These are the nine (original) Austrian provincial mortgage banks:
1. Hypo-Bank Burgenland AG
2. Austrian Anadi Bank AG
3. Heta Asset Resolution AG
4. Niederösterreichische Landesbank – Hypothekenbank AG
5. Oberösterreichische Landesbank AG
6. SALZBURGER LANDES-HYPOTHEKENBANK AG
7. Landes-Hypothekenbank Steiermark AG
8. HYPO TIROL BANK AG
9. Vorarlberger Landes- und Hypothekenbank AG
Guarantee for the liabilities of
Pfandbriefstelle
According to §2 of the Pfandbriefstelle law, the member institutions are
jointly and severally liable for Pfandbriefstelle's obligations. The
guarantors/owners of the member institutions are jointly and severally liable
for all liabilities of Pfandbriefstelle created on or before 02 April 2003, as
well as all liabilities that have been created in the transitional period from
02 April 2003 up to and including 01 April 2007, the agreed maturity of
which doesn't go beyond 30 September 2017.
With that, the nine provincial mortgage banks and the respective
provinces with the exception of Vienna are liable for all liabilities of
Pfandbriefstelle as joint debtors. The limitation with respect to issuance
Page 4
16 April 2015
date and maturity is applicable to the liability of the provinces. In the event of
a default, creditors have recourse to every single member institution as well
as its guarantor/owner.
The member institutions have explicitly confirmed that owners of debt
securities issued by Pfandbriefbank (AT) can rely on the former being jointly
and severally liable for these liabilities. It is our understanding that in the
wake of the Heta moratorium eight provincial mortgage banks as well as the
eight respective provinces are footing the bill for the liabilities of
Pfandbriefbank (AT). Indications that every province and its associated
provincial mortgage bank will provide one eighth of the total, i.e.,
EUR 150 m., are currently becoming stronger. A final decision on how these
two parties will distribute their respective share of these payment obligations
internally hasn't been taken yet. Statements issued thus far however
indicate that there will be province-specific differences. We expect though
that a short term agreement will be made between the mortgage banks and
the provinces. Nota bene, the initial step “only” concerns the provision of
liquidity to Pfandbriefbank (AT). Press releases by the provincial mortgage
banks to date are indicating that a sufficient amount of liquid funds is
available in the sector. From our perspective it is more important how the
losses that are to be expected will be distributed. Several mortgage banks
have already reported significant negative effects on their earnings as a
result of having to set aside loan loss reserves.
Provincial guarantees for credit institutions (amounts as of year-end
2013)
Province
Burgenland
Carinthia
Lower Austria
Upper Austria
Salzburg
Styria
Tyrol
Vorarlberg
Vienna
Total
Guarantee
volume
(EUR m)
2,155
12,883
5,316
2,663
55
2,463
4,683
4,720
6,758
41,696
Credit institution
Hypo-Bank Burgenland AG
Hypo Alpe-Adria-Bank AG, HAA Int. AG
HYPO NOE Gruppe Bank AG
Oberösterreichische Landesbank AG
Salzburger Landes-Hypothekenbank AG
Landes-Hypothekenbank Steiermark AG
Hypo Tirol Bank AG
Vorarlberger Landes- u. Hypo.bank AG
UniCredit Bank Austria AG
Share
0%, sold
0%, sold
100%
51%
10%
25%
100%
76%
0%, sold
Source: closed accounts of federal provinces, Courts of Auditors of the federal provinces,
Federal Court of Auditors, Erste Group Research
Page 5
16 April 2015
The next steps in Heta's wind-down
Proceedings over the coming
months: Evaluation of Heta's
assets and liabilities –
working out a final wind-down
strategy
Servicing of the majority of Heta's liabilities is suspended for
15 months (until 31 May 2016). This time will be used to evaluate Heta's
assets and liabilities on the basis of the 2014 annual report and to work out
a strategy for the final wind-down of Heta. In the course of this it will also be
determined which resolution instruments will need to be employed, and to
what extent. At the end of the moratorium there are different options. The
goal of Austria's government is to transfer no additional tax payer funds to
Heta. With respect to the deficiency guarantees of the province of Carinthia,
finance minister Schelling has said that one would attempt to “wiggle out
from this”. Alas and alack, the question is: How?
Guarantees of province of
Carinthia continue to exist
A crucial point for assessing the further proceedings is in our opinion the
question of the guarantees granted by the province of Carinthia. Even
though these haven't been triggered for the time being, they continue to
exist and could accordingly still come into force in the future. However,
experts are arguing over the value of these guarantees. In the statutes
deficiency guarantees are defined as a liability in the event of insolvency. In
our opinion it is not clear whether a debt haircut would be legally equivalent
to insolvency and would therefore trigger payment by Carinthia (trigger
event). Moody's doesn't assign any rating uplifts based on the deficiency
guarantees. Due to its accessory nature (in contrast to an abstract
guarantee, it is tied to the underlying debt), the agency sees a low
probability that any claims against Carinthia will arise in the event of an
(involuntary) haircut. In our opinion this corresponds to a literal interpretation
of a deficiency guarantee according to §1356 ABGB (Austrian civil code),
which is defined as a liability in the event of insolvency. FMA chairman Ettl
stated an opposing view in a roundtable discussion (“Runder Tisch”) on
Austrian TV on 02 March 2015. In his opinion, creditors will have a claim
arising from the provincial guarantee on that portion of the debt that will be
subjected to a haircut. Carinthia however is investigating whether the
guarantees are legally valid at all. A suspension of the guarantees is in our
opinion most closely aligned with Fitch's expectations.
No legal provisions for the
insolvency of a province yet
National Bank president Ewald Nowotny was chairman of the so-called task
force, which was charged with working out various wind-down models for
HAA. In this function, he stated in the spring of 2014 that a very detailed
legal examination had come to the conclusion that in the event of
HAA/Heta insolvency, Carinthia's guarantees would come due
immediately. As long as Carinthia's outstanding volume of guarantees still
amounted to EUR 10.2 bn., Heta insolvency would threaten to push
Carinthia into insolvency as well, unless the federal government was to
provide a bailout. An important argument in favor of the chosen HAA
wind-down model was therefore inter alia that there exist no legal
provisions for the threatened subsequent insolvency of a federal
province. In our opinion, it is at least improbable in the short term that
political decision makers would risk such an experiment. However, a clear
commitment that the Republic would provide support to a province if needed
was however not provided.
Possible repurchase offer for
senior bonds with a
deficiency guarantee under
discussion
On occasion of the presentation of the original wind-down model in
H1 2014, then finance minister Spindelegger added three complements to
the proposals of the task force. One was that Carinthia had to take
responsibility and provide funds for the HAA wind-down. In addition,
subordinated creditors and providers of participation capital were to share in
the burden as well. Lastly, in the context of a general settlement, Bayerische
Page 6
16 April 2015
Landesbank was requested to also contribute to the restructuring costs. For
the implementation of Carinthia's contribution a possible repurchase offer for
outstanding senior bonds with a deficiency guarantee is increasingly often
discussed. However, whether a repurchase makes sense depends in our
opinion strongly on the trigger event question. Should the accessory
character of the deficiency guarantees prove to be correct, such an offer
becomes less attractive for Carinthia. Should the deficiency guarantees be
triggered by a debt haircut as well, investors could in our assessment only
accept such an offer if....
… they have doubts about the validity of the surety
… they have concerns about the Republic's willingness to lend support to
Carinthia
… they are questioning the timing of the provision of funds
… they are shying away from having to pursue potential claims through the
courts.
The further approach to Heta
in our opinion depends on
several factors, which is why
Austrian decision makers
have to date kept many
options open
In our opinion the further approach to the Heta wind-down depends
also how various legal disputes will turn out. These concern inter alia
the participation of restructuring liabilities and the legal disputes with
BayernLB. According to representatives of the FMA, it is clear that all
creditors will be treated equally according to the category of their claims.
The claims of BayernLB are however not covered by a deficiency
guarantee, which means that it would get the short end of the stick in the
event of a (later) insolvency of Heta. Against this background of significant
uncertainty regarding a number of factors it is in our opinion sensible that
Austrian decision makers have to date kept many options for action open.
It seems clear that investors
are supposed to contribute to
the wind-down costs of Heta
From the perspective of investors in senior bonds (with a deficiency
guarantee), no haircut has been imposed yet. It seems however clear
that they are expected to contribute to the wind-down costs. The FMA will
probably stipulate a haircut near the end of the moratorium (31 May 2016)
per decree. Alternatively it is possible that the moratorium will be extended,
even though this is in our opinion not a desired outcome. Similar to what
happened on occasion of the adoption of the HAA special law in summer of
2014, decision makers in Austria are optimistic that the most recent actions
will be able to withstand judicial review. It appears to be less doubtful that
law suits will once again be filed.
Reaction of the rating agencies to Heta measures
Approach to Heta leads to
negative rating actions by
Moody’s
To date these measures have caused only Moody's to take negative
rating actions. As a direct consequence, the agency has downgraded
Heta's bonds with a provincial deficiency guarantee from 'Caa1' to 'Ca'.
This is the second-lowest rating assigned by the agency, and it generally
means that the instrument concerned is highly speculative. A default thus
has either occurred already or will occur shortly. There is however a chance
of obtaining some restitution of principal and interest. Moody's 'Ca' rating
doesn't take the value of the deficiency guarantee into account and is
therefore solely based on an analysis of the size of the losses. The agency
expects that these will range from 35% to 65%. The rating outlook remains
however negative and reflects the considerable uncertainty over the
prospective size of the losses bondholders (with a deficiency guarantee) will
bear. With the exception of the bond issue guaranteed by the federal
government (XS086348035), the rating of which has been confirmed and
will remain in line with that of the Republic of Austria ('Aaa'), Heta's
subordinated bonds are rated at the lowest possible rating of 'C' (expected
Page 7
16 April 2015
loss exceeding 65%). As a result they no longer have an outlook assigned
to them. Heta's covered bonds are explicitly not affected by the moratorium.
Moody's has nevertheless downgraded them as well, from 'Baa3' to 'Ba1'.
Moody’s IDRs of Hypo
Vorarlberg (‚A2‘) and Hypo
Tirol (‚Baa2‘) „under review“
The measures for the final wind-down of Heta have an effect on other
institutions in Austria's banking market as well. The 'A2' rating of
Pfandbriefstelle/Pfandbriefbank (AT), the pooling platform of the mortgage
banking sector, has been placed on negative credit watch. Within the Hypo
sector, Moody's only assigns issuer ratings to Hypo Vorarlberg ('A2')
and Hypo Tirol ('Baa2'). Due to the liability for the obligations of
Pfandbriefbank (AT), Moody's has placed their ratings on negative credit
watch (review for downgrade) as well. As a result of the joint liability
mechanism of Pfandbriefbank (AT), the agency sees heightened risks for
the earnings situation and the capital resources of these institutions. At the
moment, Moody's estimates that both banks will have to bear a burden
ranging from EUR 60 m. to 111 m. each due to Pfandbriefstelle. During the
review period the agency wants to evaluate whether the groups have
sufficient buffers against additional downside risks and whether their current
ratings are still in line with the challenges they are facing at present.
Six Austrian covered bond
programs from the mortgage
banking sector find
themselves on negative credit
watch
As a result of the review of bank ratings, Moody's has also placed six
Austrian covered bond programs on negative credit watch:

Hypo NOE Gruppe Bank AG's Mortgage Covered Bonds
(‚Aaa‘/‚review for downgrade‘)
 Hypo NOE Gruppe Bank AG's Public Sector Covered Bonds
(‚Aaa‘/‚review for downgrade‘)
 Hypo Tirol Bank AG's Mortgage Covered Bonds (‚Aa3‘/‚review for
downgrade‘) – TPI Leeway ‚0‘
 Hypo Tirol Bank AG's Public Sector Covered Bonds (‚Aa1‘/‚review
for downgrade‘) – TPI Leeway ‚0‘
 Vorarlberger Landes- und Hypothekenbank AG's Mortgage Covered
Bonds (‚Aaa‘/‚review for downgrade‘) – TPI Leeway ‚1‘
 Vorarlberger Landes- und Hypothekenbank AG Public Sector
Covered Bonds (‚Aaa‘/‚review for downgrade‘) – TPI Leeway ‚2‘
Apart from the above mentioned Hypo Vorarlberg and Hypo Tirol, Hypo
NOE Group is also affected by this measure. Moody's hasn't published a
rating for the unsecured instruments issued by the group. There exists only
an assessment by S&P, which rates the company 'A'/'stable'.
In coming months, Fitch will
adjust support assumptions
Europe-wide, which will affect
Austrian institutions as well.
Fitch has confirmed the rating of the Heta subordinated bond with a federal
guarantee (XS086348035). However, the agency in this case relies strongly
on the guarantee of the Republic of Austria for this instrument. Heta-specific
changes to the ratings of Austrian institutions are probably not going to be
taken. However, Europe-wide, Fitch wants to take a decision this year
regarding the reduction of support assumptions in the banking sector due to
the change in the regulatory framework. Analogous to its competitors, the
agency so far only assigns a negative outlook to the ratings of Austrian
institutions. However, as a result of the measures concerning Heta, it
confirms that bank ratings in the Alpine Republic will likely decline to their
stand-alone ratings (viability ratings). This implies downgrades of between
two to three notches.
Page 8
16 April 2015
S&P states that the recent
actions will have no direct
rating effects on Austrian
institutions
S&P states explicitly that the approach to Heta won't have any direct effects
with respect to assumed support probabilities of the Republic for
systemically important banks. There is a rising willingness to shift the costs
of bank restructurings, resp. resolutions to senior unsecured creditors.
However, at least in the short term, the agency expects that the Austrian
authorities would act differently from their approach to Heta in the event of
problems at banks with large deposit volumes. In these cases, possible
solutions could also include government support. Nevertheless, effects on
ratings have already been in evidence in the past. For one thing, S&P has
downgraded Austria's large banks in the fall of 2014 due to the adoption of
the HAA special law. As a result of the associated uncertainty, the agency
has adjusted its rating component for “additional factors” downward by one
notch. For another thing, bank ratings have been on negative credit watch
for the past month. Together with Germany, the UK and Switzerland, Austria
has implemented the legal adoption of the bail-in instruments as of
01 January 2015. Many other countries are taking a year longer for this.
With the possibility to make use of bail-in instruments, it becomes inherently
more difficult to forecast the probability of government support measures for
operating companies. The agency expects that a rating decision will be
taken at the beginning of May 2015. Implementation of the bail-in
instruments is however not the sole trigger for potential downgrades. With
respect to large Austrian banks, S&P points to numerous risks, so that
downgrades of up to two notches could well be issued.
Rating overview of selected Austrian institutions
Issuer
Erste Group
Bank Austria
RBI
RLB OOE
BAWAG
RLB NOE-Wien
HAA/HETA
ÖVAG
Oberbank
Hypo NOE
RLB Steiermark
Hypo Vorarlberg
Spk. OOE
Kommunalkredit
BTV
Hypo OOE
Hypo Tirol
Total Assets
(as of 30.06.2014)
198.398
183.124
127.279
38.600
34.527
28.634
25.153
18.782
17.544
15.026
14.637
14.044
12.454
12.370
9.342
9.073
8.514
S&P Issuer
Rating
A*BBB+ *A*A
A+
-
Moody's Issuer
Rating
Baa2 *+
Baa2 *
Baa2 *
Baa1 *
Baa2
Baa1 *
B2 *A3
*A2
*Ba1 *Baa2 *-
Fitch Issuer
Rating
A
A
A
B
*A
-
Source: Bloomberg, companies, Erste Group Research
Page 9
16 April 2015
Ralf Burchert, CEFA
[email protected]
Sub-Sovereigns & Agencies (SSA)
Federal government and the provinces: a new balance of
power?
In our opinion, Heta could turn out to be an important catalyst for
reform in Austria and cast a fresh light on fiscal equalization as well.
From the perspective of investors, the reevaluation of guarantees
results in a stronger differentiation of investments in the SSA sector.
By the end of the payment moratorium, the FMA is likely to decree an
official debt haircut on the basis of the new banking legislation.
Investors are therefore faced with questions over the value of sureties
and guarantees (see also Credit Focus Austria Q3 2014).
The provinces and municipalities for their part have for decades relied
on the notion that the federal government will ultimately step in if there
is a liquidity squeeze. The blanket assumption of this unwritten
“implied guarantee” is hereby history. “There is no federal guarantee
for a province”, as finance minister Schelling (OeVP) pointedly noted
with respect to the current legal situation. Vice chancellor Mitterlehner
(OeVP) is going one step further and is thinking out loud about a new
provincial bankruptcy law analogous to BaSAG (Bank Recovery and
Resolution Act). We aren't interpreting this as the end of intra-state
solidarity, possibly though as a shift in the balance of power, and
definitely as new chapter of greater self-reliance, which could also
dissolve the reform gridlock.
Moody´s expects recovery
of 35-65%
With the wind-down strategy including the moratorium and a bail-in of
creditors an insolvency and with it the triggering of Carinthia's
(Baa3/negative) deficiency guarantees is supposed to be prevented for
the time being (EUR 10.2 bn. compared to Carnithia's provincial budget of
approx. EUR 2.4 bn. according to the 2015 draft budget). A debt haircut by
the resolution authority (financial market supervisory authority, FMA) could
pursuant the principle of accessoriness lower the volume of the guarantees
accordingly. However, there also exist opposing legal opinions, according to
which the guarantees for the part subject to a haircut would be triggered.
According to finance minister Schelling, negotiations between Carinthia and
the creditors are planned following a debt haircut. Until then, the guarantees
remain however frozen and thereafter they would still be considerably large
even under conservative assumptions: Moody's expects a recovery of 3565%. This would be compatible with a debt haircut scenario of up to 65%,
thus the remaining volume would amount to EUR 4.6 bn. A demand by the
federal government's that Carinthia contribute to the wind-down costs to the
tune of EUR 500 m. was already previously taken into account in the rating
– this remains thus far open. There remain therefore considerable
uncertainties for the province, which is why Moody's has lowered its rating
on 06.03.2015 from A2 to Baa3. A negative outlook was assigned due to
“event risks” and due to legal risks as a result of law suits filed by creditors.
Page 10
16 April 2015
Guarantees are coming
under close scrutiny
Risks related to guarantees have recently been far more intensely
scrutinized by the rating agencies. Primarily the quality of guarantees, the
credit profile of the guarantor and not least legal certainty are in our opinion
critical questions, as even the rating agencies seem to have been surprised
by the implications of the first implementation of the EU banking law
(BRRD).
EUR 1.5 trn. in guarantees
in Europe, Austria in top
place
Assumptions of liability, resp. guarantees, are employed all over Europe.
According to the most recent Eurostat data, EUR 1.5 trn. (2013) in liabilities
are guaranteed Europe-wide. The mean level is at around 11% of GDP, in
Germany the level is at 18%. With a guarantee volume of 35% of GDP,
Austria is in top place in the EU, which is attributable to the high importance
of the export sector, off-budget activities (Germany is currently engaging in
similar deliberations with regard to the transport sector) and credit
institutions partly owned by the provinces. The guarantees of Austrian
provinces (incl. Vienna) amounted to approx. EUR 53 bn. as of the end of
2013, of which EUR 40.3 bn (76%) consisted of guarantees for credit
institutions partly owned by the provinces, which should largely mature until
2017 and consequently improve the credit profiles of the provinces.
Comparison to Germany
Germany is about two years ahead in this context: its cut-off date was
18.7.2005 (Austria: 01 April 2007). All liabilities issued until then and limited
to a term to maturity until 31.12.2015 (Austria: 30.9.2017) are still covered
by guarantor obligations (deficiency guarantees). Without these guarantees,
Austria's total volume of guarantees would amount to approx. 22% of GDP.
The remaining guarantor liabilities of the provinces are mainly resulting from
residential construction subsidies, hospitals or regional economic stimulus
measures. The guarantees of the federal government concern mainly export
promotion (42%, OeKB), transportation (35%, primarily ASFINAG and
OeBB) and the EFSF (12%).
No insolvency law for the
provinces before 2017
In light of Carinthia's deficiency guarantees, vice chancellor Mitterlehner has
announced that he wants to study the creation of a “LaSAG” (provincial
recovery and resolution law), a law that would be an analogue of BaSAG for
the provinces. Such a law is not to be expected before 2017. However, such
a mechanism would only become effective at a much later stage than e.g.
the regulations in Germany, which are focusing on an earlier stage, namely
when financial problems resp. a coming budgetary emergency first become
visible. Subsequent to this, it is envisaged in Germany that a recovery
program is agreed upon jointly with the federal state concerned. The stability
council, a joint committee of the federal government and the states, has the
central function in this. It is tasked with regular oversight over the federal
budget as well as of state budgets and to ensure compliance with fiscal
consolidation obligations, which must currently be fulfilled by the states of
Berlin, Bremen, Saarland, Sachsen-Anhalt, and Schleswig-Holstein, in order
to receive “consolidation aid” until 2019 (EUR 800 m. in total between 2011
and 2019).
Page 11
16 April 2015
Fiscal council vs. stability
council
Austria's stability pact by contrast offers greater leeway and the Austrian
equivalent to the stability council, the fiscal council, has solely analytical
tasks with the character of recommendations. While there are a number of
fiscal rules, which are oriented along the lines of EU directives, the stability
pact's sanctions mechanisms are lacking in bite (consultation mechanism,
evaluation procedure, final instance is the constitutional court).
LaSAG perspective
A “LaSAG” could in our opinion serve as an attractive political instrument for
the federal government to toughen up the stability pact. However, the
preconditions are different from those that apply to the wind-down of banks,
since a regional authority and its tasks remain in force, which means that a
“going concern” assumption is retained. Even in §16 F-VG (fiscal
constitutional law, see page 15) – concerning the possibility of pledging the
revenues and assets of provinces – sets a framework with respect to
collateral. A LaSAG that isn't planned before 2017, can give investors in
bonds issued by the provinces resp. in bonds of their agencies better
orientation, could however also, as Moody's assumes, lead to a further
qualification of provincial guarantees.
Reordering of relationship
between federal
government and the
provinces?
The relationship between the federal government and the provinces is
currently subject to a process of change, which is framed by weak economic
data and a reform gridlock, and could only be driven forward by more
creatively oriented policy. Minister Schelling called the tax reform a “first
step”: additional measures are supposed to follow in the areas of labor
markets (non-wage labor costs), pensions, subsidies and budget
consolidation.
Tax reform as a reform
accelerant
With respect to the provinces, the federal government is increasing reform
pressure with the tax reform that was adopted on 17.03.2015 as well. We
expect that provinces and municipalities will have compensatory financing
needs of EUR 1 bn. in total, primarily due to lower revenues from their tax
revenue share. Thus they must also take compensatory funding steps in the
context of the tax reform, in order to maintain their medium term budget
path. Given that the tax reform comes into force on 01.01.2016, the time
window for additional reforms is already defined.
Page 12
16 April 2015
Share of Austrian provinces in revenues, expenses, debts and
guarantees (2013, in EUR bn.)
EUR bn.
*) provinces including Vienna.
Source: Statistics Austria, Erste Group Research
Reform projects
Once the still outstanding budget reform has been undertaken (“VRV new”),
the key will be the reordering of competences between the federal
government and the provinces (reform of tasks, administrative reform and
even government reform), in order to create the preconditions for solving
long-term problems, resp. tackling the budget pressures of coming years.
Among these are for instance stationary health care (hospitals), pensions
and wide-ranging subsidy schemes (residential construction, economy,
regional subsidies). In terms of subsidies a total volume of savings of EUR
1.1 bn. has been mentioned. Not least due to the events surrounding Heta,
we have had the impression in recent months that the federal government is
pressing ahead with reforms – and is increasingly prepared to make use of
already existing legal instruments.
Reform framework
conditions
The constitutional regulations regarding fiscal equalization and the
credit system essentially leave the federal government in a very strong
position.
Fiscal equalization and
financing of provinces in
Austria
Current financing – fiscal equalization
With respect to fiscal equalization, the fiscal constitutional law regulates that
the federal government and the remaining regional authorities are in
principle liable for the expenses resulting from pursuing their tasks (§2).
Taxation powers are regulated by federal legislation in this context (§3).
While the provinces are empowered to charge municipal levies, this can be
limited by federal laws (§3(2)). However, the federal government is obliged
to take the distribution of burdens in public administration into account, so
that the capabilities of the regional authorities concerned are not exceeded
(§4). In practice, this is the subject of negotiations between the regional
authorities. The result is reflected in the fiscal equalization law (FAG),
currently valid for the time period 2008 – 2016.
Page 13
16 April 2015
Legal Framework – Fiscal Constitutional Law (F-VG 1948)
I. Fiscal equalization
§2. The federal government and the other regional authorities bear, unless stipulated
otherwise by relevant legislation, the expenses which arise from the execution of
their tasks
§3. (1) Federal legislation regulates the distribution of taxation powers and tax
revenues between the federal government and the provinces (municipalities) and
may moreover grant these regional authorities financial allocations from general
federal funds for their administrative expenses as such as well as grants for specific
purposes.
(2) The provinces have the right to levy charges from municipalities or where
applicable, municipal associations, by means of provincial legislation. Federal
legislation can limit the maximum extent of provincial levies. To the extent that
municipal associations exist on the day of this federal constitutional law coming into
force, provincial legislation regulates the apportionment of their requirements.
§4. The regulation provided for in §§ 2 and 3 has to be congruent with the
distribution of burdens in public administration and has to take into account that the
limits of the capabilities of the regional authorities concerned are not exceeded.
Share of the federal
government in the
financing mix approx. 30%
The fiscal equalization law provides the provinces (and municipalities)
however with wide-ranging financial autonomy with respect to financing;
bond issues and loans are explicitly mentioned. Nevertheless, the federal
government is financing a considerable part of about 30% of the liabilities of
the provinces through the federally owned financing agency (OeBFA). Here
too, the federal government, namely the federal minister of finance, plays a
decisive role, not least because he must issue a “request” in order for
funding for the provinces being obtained.
Financing of provincial debts (2013)
Page 14
16 April 2015
Fiscal Constitutional Law 1948 in its present form
IV.
Credit Act
§14. Provincial legislation regulates the issuance of bonds (taking up of loans) of
provinces, municipal associations, and municipalities. §9 shall apply mutatis
mutandis.
§15. The federal government may grant loans to the provinces (municipalities) solely
on the basis of a special federal law or the federal fiscal law. The same holds for
shares of provinces (municipalities) in revenues of the federal government, which
are not stemming from taxation. §13 shall apply mutatis mutandis in these cases as
well.
V.
Budgeting Law and Financial Statistics
§16.
….......
(2) The transfer or pledging of taxation powers, shares in tax revenues and claims
involving economic interests, which the regional authorities with the exception of the
provinces, the provincial capitals and statutory cities are entitled to receive from the
federal government or other regional authorities based on the fiscal equalization law,
is prohibited. Compulsory enforcement actions with respect to such rights or claims
cannot take place. The federal minister of finance may upon request by a provincial
government grant exemptions from this prohibition.
Federal Law on the Administration and Coordination of Fiscal and Other
Federal Debts – Federal Financing Law (1992, in the 2014 version)
§2 …....
Upon request by the federal minister of finance, OeFBA must on behalf of and for
the account of the federal government under consideration of the goals according to
§2 of the Federal Budget Law, BGBL Nr. 213/1986,
1. perform and settle credit operations for the provinces and then extend loans to
them from these funds
2. enter into currency exchange agreements and then enter into agreements with the
provinces in order to alter obligations arising from credit operations of these
provinces retroactively by transferring in substance claims and obligations arising
from these currency exchange agreements.
Page 15
16 April 2015
Margarita Grushanina
[email protected]
Sovereign
Economic trend: below average growth compared to the euro zone
Over the past decade Austria has exhibited above average economic
growth (2004-2013 average AT: 1.6%; EA: 0.9%; DE: 1.2%). However, 2014
brought this trend to a halt: for the first time in more than 10 years Austria’s
GDP growth rate fell behind that of its European peers (2014 AT: 0.3%; EZ:
0.9%; DE: 1.2%). What were the reasons for disappointingly weak growth
reported last year?
Snapshot economic situation:
Q2/14
GDP (%, q/q)
Unemployment (%)
Q3/14
0.0
5.4
0.1
5.6
Q4/14
-0.2
5.6
Inflation (%)
1.6
1.5
1.2
Industrial production (%, y/y)
0.5
-2
-1.4
Exports (%, y/y)
0.5
2
1.5
Retail sales (%, y/y)
0.4
0.4
-0.3
2014 2015 (f) 2016 (f)
GDP (%, y/y)
0.3
0.8
1.4
5.6
5.6
5.8
Unemployment (%)
1.5
1.2
1.5
Inflation (%)
Government debt (% GDP)
84.5
84.4*
83.8*
2.4
2.2**
1.9**
Budget deficit (% GDP)
Source: Statistics Austria, Eurostat, Erste Group Research
*Erste Group Research estimate
**Projection by WIFO
For one thing, private consumption, which has contributed positively to GDP
growth even during the crisis period, became sluggish in 2013 (with a small
negative contribution to GDP for the first time in years and only a minor
positive contribution in 2014). For another thing, net exports, which were the
main driver of positive economic growth in 2013, have delivered a strongly
negative contribution (-0.4%). This was the result of relatively strong growth
in imports (2.5% in 2014 vs -0.3% in 2013), which couldn't be offset by
moderate growth in exports (2014: 1.5%, 2013: 1.4%). Investment activity
remained limited despite favorable financing conditions due to the low
interest rate environment. Although gross fixed capital formation (GFCF)
has improved from -1.5% in 2013 to 0.7% last year, it nevertheless only
delivered a minor contribution to economic growth.
Real GDP growth recently lower than Germany's
Real GDP indexed, 2005=100
Negative net exports und stagnation of investment
and consumption dampen growth
GDP y/y, contribution of components to GDP in %
5%
115
115
4%
3%
2%
1%
105
105
0%
-1%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
-2%
Austria
Euro Area
Q3 2014
Q1 2014
Q3 2013
Q1 2013
Germany
Source: Eurostat, Erste Group Research
Disappointing performance of
net exports
Q3 2012
Q1 2012
Q3 2011
Q1 2011
Q3 2010
Q1 2010
Q3 2009
Q1 2009
Q3 2008
Q1 2008
Q3 2007
Q1 2007
Q3 2006
Q1 2006
Q3 2005
95
Q1 2005
95
-3%
-4%
-5%
Net exports
Govt. cons.
GFCF
Private cons.
GDP y/y
The poor performance of net exports can be attributed to two main reasons:
lower than expected growth in exports and relatively strong growth of
imports, especially in comparison with sluggish export growth momentum.
One of the factors responsible for last year’s subdued growth in exports was
that the recovery in several of Austria’s major export destinations was
weaker than expected. Another reason for the decline in exports (and by
contrast to this, accelerated import growth) is the recently elevated
differential between inflation rates in Austria and the euro zone – Austria's
largest trading partner.
However, for several reasons, we expect exports to pick up in 2015 and
2016. Firstly, the gap in inflation rates between Austria and the euro zone
should begin to narrow and will therefore have a smaller impact on exports
Page 16
16 April 2015
A decline in the inflation gap and
the devaluation of the euro should
lend support to exports
from the second half of 2015 onward. This is also going to be reflected in a
change in unit labor costs, which are expected to decline throughout 2015
by both the OeNB and WIFO. This would be positive for exports, as it
increases the relative competitiveness of Austrian goods and services.
Secondly, the QE program initiated by the ECB should boost exports to
non-EA countries as well, due to the euro's devaluation vs. other currencies.
Lastly, the recovery in Austria's main export destinations should stimulate
demand there, including demand for imported goods. Thus we expect
exports to grow by 3.4% in 2015, followed by acceleration in growth of
up to 4.5% in 2016.
Sluggish economic output in main export
destinations pressures exports
Goods exports, y/y
Growing gap between inflation rates in Austria and
the euro zone
Total HICP, y/y
3,5%
4%
2,5%
3%
1,5%
2%
0,5%
1%
-0,5%
IT
CEE
FR+UK+NE+SP
Q3 2014
Q4 2013
Q1 2013
Q2 2012
Q3 2011
-1%
HICP AT
DE
Q4 2010
Q1 2010
Q2 2009
Q3 2008
Q4 2007
Q1 2007
Q2 2006
Q3 2005
10 2014
07 2014
04 2014
01 2014
10 2013
07 2013
04 2013
01 2013
10 2012
07 2012
04 2012
01 2012
10 2011
07 2011
Q4 2004
Q1 2004
0%
-1,5%
HICP EA
Scandinavia
Low growth of disposable income
and high savings rates are
dampening consumption
One of the major factors hampering private consumption in 2014 was lower
than expected growth in disposable household income. This was
undermined by weak wage growth as well as concurrently high inflation
(and core inflation) in the country and intensified by a relatively high
household savings rate compared to the euro zone average (7.3% in
Austria vs 6.6% in the EZ in 2013). As sentiment indicators are signaling
uncertainly about the future, households are not inclined to increase their
spending and reduce their rate of saving. Another factor that leads to high
savings rates having less effect on consumption in Germany and France
than in Austria is Austria's very high income tax in compared to most of the
euro zone's core countries. After taking inflation and taxes into account,
Austrian consumers thus have less spending power than many of their
European neighbors.
The tax reform should only have a
moderate impact on private
consumption in 2016
This once again underscores the necessity and importance of the
announced tax reform for the economy, which comes into force in 2016. We
would expect the reform to initially have only a moderately positive effect on
household consumption in 2016, as there is usually a time lag of several
months between the change in a factor and the actual, visible effects on a
macroeconomic variable such as consumption. We expect that the full
effect of the reduction in taxes won't become noticeable before the end
2016.
Another crucial, possibly even the most important factor that explains the
deviation in private consumption is core inflation. By excluding energy, food
and beverages from the calculation, we have deducted a significant part of
Page 17
16 April 2015
the consumption of staples. This cannot fluctuate a lot when economic
conditions change. What is left is the price increase of less basic goods and
services, the consumption of which consumers can reduce or completely
abandon in difficult times. We expect core inflation to decrease in line with
headline inflation (if at a somewhat slower rate) and that disposable income
will therefore begin to slowly pick up in 2015. We are forecasting
moderate growth in private consumption of 0.6% in 2015 and 0.9% in
2016.
Low core inflation is positive for
consumer demand
Private consumption hampered by low growth of
disposable income
HH & NPISH consumption and disposable income y/y,
smoothed
10%
3,5%
8%
2,5%
6%
High core inflation prevents expansion of private
consumption
Core inflation, HH & NPISH final demand, y/y
Forecast
3,5%
-2%
3,0%
-1%
2,5%
Weak economy and subdued
sentiment weigh on investment
Core inflation, y/y
Q1 2016
Q3 2014
Q1 2013
Q3 2011
5%
Q1 2010
Q4 2014
Q1 2014
4%
0,0%
Q3 2008
HH & NPISH disposable income, y/y, smoothed (rhs)
HH & NPISH consumption, y/y, smoothed (rhs)
Q2 2013
Q3 2012
Q4 2011
Q1 2011
Q2 2010
Q3 2009
Q4 2008
Q1 2008
Q2 2007
Q4 2005
Q3 2006
Q1 2005
Q2 2004
Q3 2003
Q4 2002
Q1 2002
Q2 2001
-1,5%
Q3 2000
-4%
3%
0,5%
Q1 2007
-2%
2%
1,0%
Q3 2005
-0,5%
Q1 2004
0%
1%
1,5%
Q3 2002
0,5%
Q1 2001
2%
0%
2,0%
Q3 1999
4%
Q1 1998
1,5%
-3%
Private consumption, y/y (rhs, inv)
The sluggish trend in private consumption and exports had a dampening
influence on investment growth in the course of 2014. In view of less than
expected domestic and external demand for domestic goods, inventories
could not be fully sold, which has held producers back from investing in the
further expansion of production facilities. Moreover, the decline of sentiment
indicators, which was inter alia influenced by the conflict between Russia
and Ukraine and the unexpectedly weak performance of exports, has
reflected uncertainty about future sales volumes, which has slowed down
capital expenditures as well.
The accumulation of inventories leads to capacities not being fully utilized,
as fewer production facilities are employed. However, the expected
acceleration in export growth is cause for optimism with respect to
investment, as it will improve perceptions regarding potential sales volumes.
A slow recovery in domestic demand should help to reduce inventories and
increase capacity utilization, which in turn should result in an increase in
investment activity.
However, these adjustments will take time, thus the full effects of the above
mentioned factors should only become visible by the end of 2015. We
therefore expect investment to grow only moderately in the first half of
2015 and reach an annual growth rate of 1.1%, which should increase
to up to 2.2% in 2016.
Page 18
16 April 2015
WIFO early warning indicator shows decline in
manufacturer sentiment
WIFO early warning indicator, GFCF, y/y
Growing exports create room for investment GFCF,
Exports, y/y
Forecast
2
10%
17%
8%
1
12%
5%
0
7%
3%
0%
2%
-1
-5%
-3%
-2%
-2
-8%
-10%
-3
-13%
-7%
-18%
GFCF y/y
Source: Eurostat, WIFO, Erste Group Research
Economic recovery to remain
moderate in 2015
Q1 2016
Q1 2015
Q1 2014
Q1 2013
Q1 2012
Q1 2011
Q1 2010
Q1 2009
Q1 2008
Q1 2007
Q1 2006
Q1 2005
Q1 2004
Q1 2003
Q1 2002
Q1 2001
Q1 2000
-23%
Q1 1999
-12%
Q1 1998
BAI j/j (rhs)
WIFO Early Warning Indicator FLASH
Q2 2014
Q3 2013
Q4 2012
Q1 2012
Q2 2011
Q3 2010
Q4 2009
Q1 2009
Q2 2008
Q4 2006
Q3 2007
Q1 2006
Q2 2005
Q3 2004
Q4 2003
Q1 2003
Q2 2002
Q3 2001
Q4 2000
-15%
Q1 2000
-4
Exports y/y (rhs)
We expect Austria to exhibit real GDP growth of 0.9% in 2015 (euro
zone: 1.3%), followed by an acceleration to 1.4% in 2016 (euro zone
1.5%). According to our estimate, the main drivers of economic growth will
be consumer demand and beginning in the second half of 2015, exports as
well. The contribution of investment should remain moderate until 2016.
Public finances: despite ESA 2010 and Heta, debt levels lower than
initially expected
2014 budget deficit and public
debt revised lower
According to the new revised data of Statistics Austria (30.3.), public
finances are in a better state in terms of debt levels and the budget deficit in
2014 than was initially expected. Thus government debt amounted to EUR
278.1 bn. (84.5% of GDP) at the end of 2014, and the budget deficit to EUR
7.9 bn. (2.4% of GDP). One-off effects due to the establishment of Heta
amounted to EUR 4.5 bn. (1.4% of GDP) with respect to the budget deficit
and to EUR 13.4 bn. (4.1% of GDP) with respect to total public debt.
2012 and 2013 debt revised
lower - ESA influence not as
large as initially expected
The deficits and debt levels for the years 2012 and 2013 were also revised
lower compared to the estimate of September 2014. The main reason cited
for this by Statistics Austria was that the effects of off-budget entities which
have been reclassified in the framework of ESA 2010, contributed less to
indebtedness than was previously assumed. According to the new
calculations, the budget deficit stood at 1.3% of GDP in 2013 (instead of
1.5%) and the debt ratio amounted to 80.9% of GDP instead of 81.2% of
GDP.
At present there is no recent information regarding precise estimates of the
new consolidation path. However, due to previously released statements by
the ministry of finance, we are of the opinion that the government will stick to
its debt reduction program. According to our simulation of the consolidation
path, we have made the following assumptions:
Page 19
16 April 2015
-
Growth rate of nominal GDP:
-
-
Year
2015
2016
2017
2018
2019
Nominal GDP, y/y
2.0%
2.9%
3.2%
3.3%
3.6%
The government is able to capitalize approx. EUR 1 bn. per year
from Heta activities. To exercise caution, we have not assumed a
1
debt haircut .
The consolidation path corresponds to the calculations by WIFO
from January 2015.
Simulation of future government debt, taking into account Heta and
lower economic growth
Government debt, % of GDP
86
84.5
84.4
83.8
84
82
4.1
3.7
82.7
3.3
2.9
80
80.8
2.6
78.4
78
2.2
76
74
72
2014
2015
Effects of Heta
2016
2017
Other debt
2018
2019
Total debt
Source: WIFO, Statistics Austria, Erste Group Research
Rating agencies are concerned about high indebtedness and the
banking sector's exposure to the CESEE region
Fitch has downgraded the
Republic of Austria
All three rating agencies have updated their assessments of Austria in the
first three months of 2015. While Standard & Poor’s and Moody's have
maintained both their ratings and outlooks, rating agency Fitch has
downgraded the Republic of Austria on February 13 by one notch to
AA+/F1+/stable. The main reason for the downgrade was a higher than
previously expected level of general government debt, whereby it is
expected that it will remain at an elevated level for longer than previously
assumed. According to Fitch's estimates, Austria's general government debt
ratio should reach its peak at approx. 89% of GDP in 2015 (with the
contribution of support provided to the banking sector amounting to more
than 11% of GDP), which is higher than for all countries in the 'AAA'
category with the exception of the US, and significantly reduces the
government's ability to absorb shocks. Another factor of concern to Fitch is
also the higher than initially planned budget deficit.
1
In case of successful implementation of a debt haircut on Heta (including reduced deficiency
guarantees by the provinces) the level of government debt will decline faster.
Page 20
16 April 2015
The rating agencies expect that
the government will stick to the
consolidation path
While all three rating agencies have estimated Austria's debt levels to be
several percentage points higher in 2014 than the level published by
Statistics Austria at the end of March, Moody's and S&P are more
optimistic in their assessment of the momentum of debt and deficit
reduction. Moody's expects the budget position to be balanced in structural
terms already by 2017, while S&P expects a zero deficit to be reached by
2019. Both agencies are of the opinion that the government will in principle
stick to the consolidation path, and assess the efforts with respect to debt
reduction as positive. S&P has assumed in its calculations that the tax
reform planned for 2016 won't lead to large revenue losses for the budget.
Since currently only rough estimates exist regarding compensatory
financing for the tax reductions, it is difficult to judge whether this
assumption has merit.
Heta moratorium is differently
assessed by the rating agencies
Another point the effect of which the rating agencies assess differently is
the implementation of the new legislation in connection with the planned
bail-in of creditors of nationalized Heta. According to Moody's, “questions
arising regarding the predictability of Austrian government policies are not
conducive to Austria's investment climate”. S&P by contrast assesses the
Heta moratorium as positive, as it reduces the potential for the Republic's
contingent liabilities being triggered.
Economic growth and reforms
crucial
All three rating agencies agree, however, that the recent slowdown in
economic growth to some extent represents a threat for the consolidation
path, as well as to medium term economic expectations, and that
economic stimulus measures as well as structural reforms are necessary.
Fitch even mentions an immediate implementation of effective structural
reforms as a precondition necessary for a rating upgrade. The other two
agencies are somewhat more optimistic in their assessment of Austria's
economic trends and emphasize the strong foundations of Austria's
economy, especially in comparison to other countries in the euro zone's
core as well as European AAA peers. We concur with this view. The most
recent “output gap” shows that Austria will be unable to get an above
average growth trend back on track in the medium term without
implementing efficient reforms.
Large CESEE exposure of banking
sector could represent a risk
Another point about which the agencies are in agreement is the large
exposure of Austria's banking system to the CESEE region and the
associated risk. The high level of non-performing loans in some CESEE
countries and the uncertainty with respect to developments in the
Russian/Ukrainian conflict represent a potential threat to the quality of
bank assets.
Page 21
16 April 2015
Ralf Burchert, CEFA
[email protected]
Sub-Sovereigns & Agencies
Primary/secondary market
Comparison of ASW spreads (in basis points) of
EUR benchmarks of ASFINAG, OeBB Infra, ELG
Performance comparison iBOXX EUR RAGB
government bonds as well as SSA segments
(indexed, 2.1.2013=100)
Sources:
Bloomberg, markit/iBOXX, Erste Group Research
In the new year, the performance trend has continued again, with
government bonds exhibiting extraordinary strength. Driven by lower
sovereign yields and a lower spread over Germany, which at times had
declined to just 10 bps, agencies have likewise continued to exhibit positive
performance. In the 10-year segment, the spread of the OeBB Infra
benchmark bond is by now e.g. below 10 bp. However, premiums have
recently stabilized, resp. widened a bit in the short term, resp. even begun to
enter an uptrend, which we would however not necessarily ascribe to the
events surrounding Heta. The ASW spread of OBND 3 7/8 06/30/25
currently stands at approx. -10 bps. Relative to each other, a slightly
stronger differentiation in favor of ASFINAG is noticeable, we would
however not expect this to become a sustainable trend.
Primary market
OeKB already on the
market with three new
issues
New issuance volume in Austria in the sub-sovereigns and agencies sector
stood at approx. EUR 6.0 bn. in 2014, and thus remained slightly below
redemptions of more than EUR 7.5 bn., which will amount to approx. EUR
6.0 bn. in 2015. Oesterreichische Kontrollbank (OeKB, Aaa/stable,
AA+/stable) predominated in Austria's SSA primary market in the first three
months of 2015, with total issuance volume of a converted EUR 1.3 bn.
(USD 1.2 bn. an AUD 200 m.). In early February a new USD benchmark
bond over 1 bn. with a maturity of 5 years and a 1.375% fixed coupon was
issued (as of 10.2). Pricing stood at mid swaps +3 bps and with that fills
precisely the gap between the existing USD 3/12/2019 issue over USD 1.25
bn. and the 20/01/2021 issue over USD 1 bn. The transaction took place a
few days after the topping up of the USD 200 m. LIBOR floater issued in
September 2014 maturing in 2018. In a third issue, AUD 125 m. with a
maturity of 10.5 years and a fixed coupon of 3.2% was placed at 64 bps
Page 22
16 April 2015
above the sovereign benchmark. Another AUD 75 m. followed in the wake
of this at +67.5 bps. In 2015 a total of EUR 4.2 bn. in redemptions is
planned, of which the majority is denominated in USD, with the total
amounting to USD 3.5 bn. in 2015. One of three USD benchmark issues
(March, July and October) has already matured in March, and in addition to
this a CHF benchmark issue will be redeemed in October as well (CHF
1.050 m.). The long term annual financing volume has been estimated at
approx. EUR 3-4 bn. in 1-2 issues, primarily in USD and EUR.
ELG sold EUR 50 m. with a
5 year maturity
Erdoel-Lagergesellschaft (ELG, AA+/stable), the central crude oil storage
facility of the Republic of Austria that ensures the country's supply with
energy, resp. oil over a time period of 90 days, has issued a bond over EUR
50 m. with a 2019 maturity. The fixed coupon was set at 0.25%, pricing was
seen at 46 bps over RAGB 1.95 06/19, resp. 13 bps above mid-swaps
(source: Bloomberg). With that, ELG has a total volume of EUR 753 m.
outstanding, but will only have redemptions again in 2016, of two CHF
bonds over CHF 30 m. and CHF 45 m. respectively.
New issues in the SSA segment in Austria (since January 2014)
Name
OKB 2 12/17/18
OKB 1 1/8 07/24/20
OKB 1 5/8 03/12/19
NIEDOE 0 10/20/18
ASFING 1 3/8 04/09/21
NIEDOE 0 10/20/23
OBND 2 1/4 05/28/29
NIEDOE 0 07/28/21
NIEDOE 0 07/02/18
NIEDOE 0 09/13/32
NIEDOE 0 09/13/32
KAERTN 3 06/25/26
LKABG 2.38 06/26/25
MRKGUN 3.9 07/18/44
KARNTN 0 09/12/19
KARNTN 2.178 09/12/24
KARNTN 3.05 09/12/39
KARNTN 2.621 09/12/29
OKB 0 09/18/18
NIEDOE 0 10/01/19
NIEDOE 0 1/2 10/27/22
NIEDOE 0 3/8 04/27/21
NIEDOE 1.12 11/17/23
OBND 1 11/18/24
BUNIMM 0 12/01/20
BUNIMM 0 12/02/16
OKB 0 09/18/18
OKB 1 3/8 02/10/20
OKB 3.2 08/25/25
ERDLAG 0 1/4 07/17/19
Collateral
Date of issue
GOVT GUARANTEED 03.02.2014
SR UNSECURED
12.03.2014
UNSECURED
22.05.2014
UNSECURED
28.05.2014
UNSECURED
28.05.2014
UNSECURED
02.06.2014
UNSECURED
02.06.2014
SR UNSECURED
25.06.2014
UNSECURED
26.06.2014
SECURED
18.07.2014
SR UNSECURED
12.09.2014
SR UNSECURED
12.09.2014
SR UNSECURED
12.09.2014
SR UNSECURED
12.09.2014
SR UNSECURED
01.10.2014
SR UNSECURED
27.10.2014
SR UNSECURED
27.10.2014
SR UNSECURED
17.11.2014
UNSECURED
01.12.2014
SR UNSECURED
02.12.2014
SR UNSECURED
09.03.2015
Maturity
17.12.2018
24.07.2020
12.03.2019
20.10.2018
09.04.2021
20.10.2023
28.05.2029
28.07.2021
02.07.2018
13.09.2032
13.09.2032
25.06.2026
26.06.2025
18.07.2044
12.09.2019
12.09.2024
12.09.2039
12.09.2029
18.09.2018
01.10.2019
27.10.2022
27.04.2021
17.11.2023
18.11.2024
01.12.2020
02.12.2016
18.09.2018
10.02.2020
25.08.2025
17.07.2019
Curr.
GBP
CHF
USD
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
USD
EUR
CHF
CHF
EUR
EUR
EUR
EUR
USD
USD
AUD
EUR
Face value
350,000,000
175,000,000
1,250,000,000
20,000,000
750,000,000
5,000,000
500,000,000
5,000,000
3,000,000
25,000,000
25,000,000
150,000,000
30,000,000
30,500,000
27,800,000
28,100,000
1,200,000
1,500,000
300,000,000
210,000,000
175,000,000
125,000,000
35,000,000
1,000,000,000
32,500,000
100,000,000
200,000,000
1,000,000,000
200,000,000
50,000,000
Cupon
2.000
1.125
1.625
0.577
1.375
0.757
2.250
0.704
0.654
0.752
0.752
3.000
2.380
3.900
1.049
2.178
3.050
2.621
0.234
0.234
0.500
0.375
1.120
1.000
0.281
0.262
0.243
1.375
3.200
0.250
Yield
Type
Cupon
(YTM)
FIXED
1.03
FUNGED
FIXED
1.30
FLOATING
FIXED
0.12
FLOATING 0.03
FIXED
0.67
FLOATING 0.01
FLOATING -0.01
FLOATING 0.16
FLOATING 0.16
FIXED
1.50
FIXED
0.54
FIXED
FLOATING 0.05
FIXED
0.60
FIXED
1.04
FIXED
0.91
FLOATING 0.28
FLOATING -0.01
FIXED
0.09
FIXED
0.04
FIXED
0.72
FIXED
0.36
FLOATING 0.00
FLOATING -0.04
FLOATING 0.28
FIXED
1.50
FIXED
2.93
FIXED
0.48
Sources: Bloomberg, Erste Group Research
Page 23
16 April 2015
Agencies versus Sovereigns, Republic of Austria and Germany
Yield (YTM, in %)
Time to maturity(years)
ASFiNAG
OeBB Infra
OeKB
BIG
ELG
Rating overview of Austrian agencies
ASFING
Aaa
AA+
stable
stable
9.0
Republik
Österreich
OBND
Aaa
AA+
stable
stable
15.2
Republik
Österreich
OKB
Aaa
AA+
stable
stable
21.2
Austrian
banks
BUNIMM
Aaa
-stable
-2.3
Republik
Österreich
ERDLAG
-AA+
-stable
0.7
oil companies
explicit
explicit
--
--
Legal foundation
ASFINAGGesetz
Bundesbahngesetz
explicit
AFFG,
AusfFG
BIG-Gesetz
EBG
Most recent opinion:
S&P
Moody´s
08.08.2014
01.09.2014
08.08.2014
06.11.2014
08.08.2014
09.12.2014
02.09.2014
27.02.2015
-
Rating-Update:
Agency
S&P on 27.2.2015
regarding ELG: AA+ with
stable outlook confirmed
Bloomberg
Rating Moody's
Rating S&P
Outlook Moody´s
Oulook S&P
Amount outstanding
Owner
Guarantuees
Source: Rating agencies, companies, Bloomberg, Erste Group Research
Vienna
Bloomberg
0621076D KARNTN NIEDOE 1234Z SALZLD 1000Z 1146Z
Rating Moody's
-Baa3
Aaa
----Rating S&P
AA
-AA/u
AA+
-AA
AA+
Outlook Moody´s
-negative stable
----Oulook S&P
stable
-stable stable
-stable stable
Amount outstanding
-0.5
1.4
-0.2
---
Moody´s on 6.3.2015 reg.
province of Carinthia:
downgrade from A2 to
Baa3, outlook change from
stable to negative
Vorarlberg
Tyrol
Styria
Salzburg
Upper Austria
Lower Austria
Carinthia
Province
Burgenland
Rating-Overview Sub-Sovereigns (Austrian provinces)
-------
VIENNA
Aaa
-stable
-0.2
Source: Rating agencies, issuers, Bloomberg, Erste Group Research
Page 24
16 April 2015
[email protected]
Covered Bonds
Primary/secondary market
Four large volume covered
bond issues in Austria in
Q1 2015
In the first three months of 2015 Austrian issuers have joined what was an
overall quite lively primary market activity. Four large volume Austrian
covered bonds with mortgage cover were issued. Erste Group led the
proceedings with a EUR 500 m. bond issued at the end of January 2015.
The ten-year security was placed in the market at a spread of 6 bps above
mid-swaps. It was followed in early February 2015 by Hypo Vorarlberg. The
company issued a covered bond (a Pfandbrief according to Austrian
Pfandbrief law) in the sub-benchmark segment (EUR 300 m.) with a spread
of 7 bps above mid-swaps (maturity 2025). In mid-February 2015 UniCredit
Bank Austria and Raiffeisenlandesbank Niederoesterreich-Wien scraped up
the courage to enter the market as well. These issuers each chose a
10 year maturity for their mortgage covered bonds. Bank Austria paid a
spread of 3 bps above mid-swaps, while RLB NOE-Wien was able to score
a risk premium of only 1 bp above mid-swaps a few days later.
Spread widening in Austrian
covered bonds and senior
unsecured bonds
On 1 March 2015, the Alpine Republic let it be known that it wouldn't make
any fresh taxpayer funds available to Heta. Since then not only Austrian
primary market activity has ground to a halt, but in the secondary market, a
widening of spreads could be observed counter to the general trend,
especially in senior unsecured bonds. Until May of 2014, Heta bonds were
also components of the senior index. However, after these had been
downgraded into junk territory and were thus removed from the index, the
average risk premium of Austrian unsecured senior bank bonds traded in
mid-2014 close to the overall market average of EUR benchmark issuers. In
the beginning of 2015, spreads began to widen after the Swiss National
Bank discontinued its minimum exchange rate and the announcement of
RBI's reorganization. After an initial slight easing of tensions, renewed
spikes can recently be observed again due to the Heta problems.
Covered Bonds: Spread history (ASW in BP)
(EUR benchmark IG issuers)
Source: iBoxx, BondRadar, Bloomberg, Erste Group Research
Bank senior unsecured: Spread history (ASW in BP)
(EUR benchmark IG issuers)
Source: iBoxx, BondRadar, Bloomberg, Erste Group Research
Page 25
16 April 2015
Appendix
Calendar Austria
Date
Event
08.04.2015 Retail trade - Sales Indices
10.04.2015 External trade (imports, exports)
17.04.2015 Consumer price index (CPI/HICP)
24.04.2015 Production index and other economic indicators
29.04.2015 Unemployment according to international definition
04.05.2015 Economic statistics (production inc. construction)
06.05.2015 Retail trade - Sales indices
03.06.2015 Retail trade - Sales Indices
29.06.2015 Household income and saving
03.07.2015 Retail trade - Sales indices
Source: Statistik Austria, Erste Group Research
Period
Feb.15
Jan. 15
Feb.15
Mar. 15
Feb.15
Mar. 15
Jan. 15
Mar. 15
Feb.15
Apr.15
Mar. 15
Mar. 15
Feb.15
Apr.15
Apr.15
Mar. 15
Apr.15
May 15
Apr.15
Jul.05
May 15
1Q2015
Mar. 15
May 15
Calendar of issues of bonds by the Republic of Austria
Issue date
13.01.2015
13.01.2015
10.02.2015
10.02.2015
03.03.2015
03.03.2015
07.04.2015
07.04.2015
05.05.2015
09.06.2015
07.07.2015
04.08.2015
01.09.2015
06.10.2015
03.11.2015
15.12.2015
Name
1.65% BA 2014-2024/1
0.25% BA 2014-2019/2
2.40% BA 2013-2034/1
1.65% BA 2014-2024/1
1.65% BA 2014-2024/1
0.25% BA 2014-2019/2
4.85% BA 2009-2026/2
3.50% BA 2006-2021/1
Auktion / Auction
Auktion / Auction
Auktion / Auction
(Reserve Date)
Auktion / Auction
Auktion / Auction
Auktion / Auction
Auktion / Auction
ISIN
AT0000A185T1
AT0000A19XC3
AT0000A10683
AT0000A185T1
AT0000A185T1
AT0000A19XC3
AT0000A0DXC2
AT0000A001X2
-
Value date
16.01.2015
16.01.2015
13.02.2015
13.02.2015
05.03.2015
05.03.2015
09.04.2015
09.04.2015
07.05.2015
11.06.2015
09.07.2015
06.08.2015
03.09.2015
08.10.2015
05.11.2015
17.12.2015
Maturity
TTM % p.a. Type
21.10.2024
9.5
1.65
A
18.10.2019
4.5
0.25
A
23.05.2034 19.1
2.40
A
21.10.2024
9.5
1.65
A
21.10.2024
9.5
1.65
A
18.10.2019
4.5
0.25
A
15.03.2026 10.9
4.85
A
15.09.2021 6.4
3.50
A
-
Source: OeBFA, Erste Group Research
VOL TVOL covered*
440 8,630
2%
660 5,320
6%
495 4,556
8%
605 9,235
12%
495 9,730
14%
605 5,925
17%
528 8,451
20%
627 14,257
23%
-
Total 4,455
TTM… term to maturity
2015 planned of Government Bonds: 15-19bn
Type... increase (I) or new (N)
% completed 23%-30%
(T)VOL… (total) amount (EUR mn)
Financing 2015 total: 22-24bn
* % of maximum refinancing need in 2015
Page 26
16 April 2015
Maturity profile Republic of Austria
(Bond principal, money market, in EUR million)
Face value
Maturity of federal debt
Time structure (as at 31. March 2015)
Source: OeBFA, Erste Group Research
Page 27
16 April 2015
Austria: Sub-Sovereigns & Agencies
Agencies: Total volume outstanding (currencies, in EUR bn., % )
25
JPY; .5418;
1%
JPY
20
USD;
12.2808;
25%
USD
15
NOK
10
CHF;
7.5852;
16%
NOK;
.1769; 0%
GBP
EUR
5
GBP; .6930;
2%
CHF
EUR;
27.0549;
56%
0
ASFING
OBND
OKB
BIG
ELG
Number of issues (all currencies):
Volume outstanding (EUR bn):
Average duration (years):
Number of EUR issues ≥500m:
Average volume (EUR bn)
113
48.3
6.6
22
1.1
7.6
Agencies: Maturities (all currencies, in EUR mn)
7,000
ELG
6,000
BIG
5,000
OKB
OBND
4,000
ASFING
3,000
2,000
1,000
0
Agencies: Residual time to maturity (years)
and yield (YTM, % )
1.5
1.0
0.5
0.0
0
5
10
15
20
25
30
-0.5
ASFING
OBND
OKB
BIG
ELG
AT SOVEREIGN
DE SOVEREIGN
-1.0
Page 28
16 April 2015
ASW-Spreads (EUR-Benchmarks, in BP)
60
50
40
30
20
10
0
-10
0
5
10
15
20
-20
ASFING
-30
OBND
ELG
Sub-Sovereign: amounts outstanding in currencies
(translated into EUR bn and shares % )
1,600
1,400
1,200
CHF;
950;
21%
1,000
800
EUR
600
CHF
400
ATS
200
EUR;
3,622;
79%
WOHNAV
VIENNA
Total amount outstanding (EUR m):
Issues
Average size (m):
WIENHG
SALZLD
NIEDOE
LINZ
LKABG
LIG
LIGK
KIG
KARNTN
KARWFF
GRZCTY
BURLHG
BELIG
0
4,551
85
54
EUR Issues ≥100m:
Average volume (EUR m):
10
187
4.1
1,400
WOHNAV
WIENHG
1,200
VIENNA
1,000
SALZLD
NIEDOE
800
LKABG
LINZ
600
LIGK
400
LIG
KIG
200
KARWFF
0
2039
2038
2037
2036
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
KARNTN
GRZCTY
Page 29
16 April 2015
Contacts
Group Research
Head of Group Research
Friedrich Mostböck, CEFA
Major Markets & Credit Research
Head: Gudrun Egger, CEFA
Ralf Burchert (Agency Analyst)
Hans Engel (Senior Analyst International Equities)
Christian Enger, CFA (Covered Bonds)
Margarita Grushanina (Economist AT, CHF)
Alihan Karadagoglu (Senior Analyst Corporate Bonds)
Peter Kaufmann, CFA (Corporate Bonds)
Stephan Lingnau (International Equities)
Carmen Riefler-Kowarsch (Covered Bonds)
Rainer Singer (Senior Economist Euro, US)
Bernadett Povazsai-Römhild (Corporate Bonds)
Gerald Walek, CFA (Economist Euro)
Katharina Böhm-Klamt (Quantitative Analyst Euro)
Macro/Fixed Income Research CEE
Head CEE: Juraj Kotian (Macro/FI)
Zoltan Arokszallasi (Fixed income)
Katarzyna Rzentarzewska (Fixed income)
CEE Equity Research
Head: Henning Eßkuchen
Franz Hörl, CFA (Basic Resources, Real Estate)
Daniel Lion, CIIA (Technology, Ind. Goods&Services)
Thomas Unger; CFA (Banks, Insurance)
Vera Sutedja, CFA (Telecom)
Vladimira Urbankova, MBA (Pharma)
Martina Valenta, MBA (Real Estate)
Editor Research CEE
Brett Aarons
Deniz Gurgen
Research Croatia/Serbia
Head: Mladen Dodig (Equity)
Head: Alen Kovac (Fixed income)
Anto Augustinovic (Equity)
Ivana Rogic (Fixed income)
Milan Deskar-Skrbic (Fixed income)
Davor Spoljar, CFA (Equity)
Research Czech Republic
Head: David Navratil (Fixed income)
Head: Petr Bartek (Equity)
Vaclav Kminek (Media)
Jiri Polansky (Fixed income)
Dana Hajkova (Fixed income)
Martin Krajhanzl (Equity)
Lubos Mokras (Fixed income)
Jan Sedina (Fixed income)
Research Hungary
Head: József Miró (Equity)
Gergely Ürmössy (Fixed income)
András Nagy (Equity)
Vivien Barczel (Fixed income)
Tamás Pletser, CFA (Oil&Gas)
Research Poland
Head: Magdalena Komaracka, CFA (Equity)
Marek Czachor (Equity)
Tomasz Duda (Equity)
Adam Rzepecki (Equity)
Ludomir Zalewski (Equity)
Research Romania
Chief Economist, Director: Radu Craciun
Head: Mihai Caruntu (Equity)
Head: Dumitru Dulgheru (Fixed income)
Chief Analyst: Eugen Sinca (Fixed income)
Dorina Cobiscan (Fixed Income)
Raluca Florea, CFA (Equity)
Marina Alexandra Spataru (Equity)
Research Turkey
Head: Can Yurtcan
Evrim Dairecioglu (Equity)
M. Görkem Göker (Equity)
+43 (0)5 0100 11902
+43 (0)5 0100 11909
+43 (0)5 0100 16314
+43 (0)5 0100 19835
+43 (0)5 0100 84052
+43 (0)5 0100 11957
+43 (0)5 0100 19633
+43 (0)5 0100 11183
+43 (0)5 0100 16574
+43 (0)5 0100 19632
+43 (0)5 0100 17331
+43 (0)5 0100 17203
+43 (0)5 0100 16360
+43 (0)5 0100 19632
+43 (0)5 0100 17357
+43 (0)5 0100 18781
+43 (0)5 0100 17356
+43 (0)5 0100 19634
+43 (0)5 0100 18506
+43 (0)5 0100 17420
+43 (0)5 0100 17344
+43 (0)5 0100 11905
+43 (0)5 0100 17343
+43 (0)5 0100 11913
+420 956 711 014
+90 212 371 2538
+381 11 22 09 178
+385 72 37 1383
+385 72 37 2833
+385 72 37 2419
+385 72 37 1349
+385 72 37 2825
+420 224 995 439
+420 224 995 227
+420 224 995 289
+420 224 995 192
+420 224 995 172
+420 224 995 434
+420 224 995 456
+420 224 995 391
+361 235 5131
+361 373 2830
+361 235 5132
+361 373 2026
+361 235 5135
+48 22 330 6256
+48 22 330 6254
+48 22 330 6253
+48 22 330 6252
+48 22 330 6251
+40 3735 10424
+40 3735 10427
+40 3735 10433
+40 3735 10435
+40 3735 10436
+40 3735 10428
+40 3735 10429
+90 212 371 2540
+90 212 371 2535
+90 212 371 2534
Sezai Saklaroglu (Equity)
Nilufer Sezgin (Fixed income)
Ilknur Kocaer (Equity)
Research Slovakia
Head: Maria Valachyova, (Fixed income)
Katarina Muchova (Fixed income)
+90 212 371 2533
+90 212 371 2536
+90 212 371 2531
+421 2 4862 4185
+421 2 4862 4762
Treasury - Erste Bank Vienna
Saving Banks & Sales Retail
Head: Thomas Schaufler
Equity Retail Sales
Head: Kurt Gerhold
Fixed Income & Certificate Sales
Head: Uwe Kolar
Treasury Domestic Sales
Head: Markus Kaller
Corporate Sales AT
Head: Christian Skopek
+43 (0)5 0100 84225
+43 (0)5 0100 84232
+43 (0)5 0100 83214
+43 (0)5 0100 84239
+43 (0)5 0100 84146
Fixed Income & Credit Institutional Sales
Institutional Sales
Head: Manfred Neuwirth
Bank and Institutional Sales
Head: Jürgen Niemeier
Institutional Sales AT, GER, LUX, CH
Head: Thomas Almen
Bernd Bollhof
Rene Klasen
Marc Pichler
Dirk Seefeld
Charles-Henry de Fontenilles
Bank and Savingsbanks Sales
Head: Marc Friebertshäuser
Fabian Bütger
Mathias Gindele
Andreas Goll
Ulrich Inhofner
Sven Kienzle
Jörg Moritzen
Michael Schmotz
Bernd Thaler
Klaus Vosseler
Institutional Sales CEE and International
Head: Jaromir Malak
Central Bank and International Sales
Head: Margit Hraschek
Christian Kössler
Institutional Sales PL and CIS
Pawel Kielek
Marcin Chmielewski (Fixed Income)
Institutional Sales Slovakia
Head: Peter Kniz
Sarlota Sipulova
Institutional Sales Czech Republic
Head: Ondrej Cech
Milan Bartos
Radek Chupik
Pavel Zdichynec
Institutional Sales Croatia
Head: Antun Buric
Natalija Zujic
Željko Pavičić
Institutional Sales Hungary
Norbert Siklosi
Attila Hollo
Institutional Sales Romania
Head: Ciprian Mitu
Institutional Solutions and PM
Head: Zachary Carvell
Brigitte Mayr
Mikhail Roshal
Christopher Lampe-Traupe
+43 (0)5 0100 84250
+49 (0)30 8105800 5503
+43 (0)5 0100 84323
+49 (0)30 8105800 5525
+49 (0)30 8105800 5521
+43 (0)5 0100 84118
+49 (0)30 8105800 5523
+43 (0)50100 84115
+49 (0)711 810400 5540
+49 (0) 151 53810580
+49 (0)711 810400 5562
+49 (0)711 810400 5561
+43 (0)50100 85544
+49 (0)711 810400 5541
+49 (0)30 8105800 5581
+43 (0)5 0100 85542
+43 (0)5 0100 85583
+49 (0)711 810400 5560
+43 (0)50100 84254
+43 (0)5 0100 84117
+43 (0)5 0100 84116
+48 22 544 5610
+43 50100 85611
+421 2 4862 5624
+421 2 4862 5629
+420 2 2499 5577
+420 2 2499 5562
+420 2 2499 5565
+420 2 2499 5590
+385 (0)7237 2439
+385 (0)7237 1638
+385 (0)72 37 14 94
+36 1 2355 842
+36 1 2355 846
+40 373 516 532
+43 (0)50100 83308
+43 (0)50100 84781
+43 (0)50100 84787
+49 (0)30 8105800 5507
Page 30
16 April 2015
^x Group Bank AG
Erste
1010 Wien, Börsegasse 14/DG1
Telefon: +43 (0)5 0100 interior 11902
Disclaimer
This publication has been prepared by the Major Markets& Credit Research department within EG Research. This
report is for information purposes only.
Publications in the United Kingdom are available only to investment professionals, not private customers, as
defined by the rules of the Financial Services Authority. Individuals who do not have professional experience in
matters relating to investments should not rely on it.
The information contained herein has been obtained from public sources believed by EGB to be reliable, but which
may not have been independently justified. No guarantees, representations or warranties are made as to its
accuracy, completeness or suitability for any purpose.
This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument or any
other action and will not form the basis or a part of any contract.
Neither EGB nor any of its affiliates, its respective directors, officers or employers accepts any liability whatsoever
(in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or
otherwise arising in connection therewith. Any opinion, estimate or projection expressed in this publication reflects
the current judgement of the author(s) on the date of this report. They do not necessarily reflect the opinions of
EGB and are subject to change without notice. EGB has no obligation to update, modify or amend this report or to
otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or
estimate set forth herein, changes or subsequently becomes inaccurate.
The past performance of financial instruments is not indicative of future results. No assurance can be given that
any financial instrument or issuer described herein would yield favourable investment results.
EGB, its affiliates, principals or employees may have a long or short position or may transact in the financial
instrument(s) referred to herein or may trade in such financial instruments with other customers on a principal
basis. EGB may act as a market maker in the financial instruments or companies discussed herein and may also
perform or seek to perform investment banking services for those companies. EGB AG may act upon or use the
information or conclusion contained in this report before it is distributed to other persons.
This report is subject to the copyright of EGB. No part of this publication may be copied or redistributed to persons
or firms other than the authorised recipient without the prior written consent of EGB.
By accepting this report, a recipient hereof agrees to be bound by the foregoing limitations.
Possible conflicts of interest
Disclosure of potential conflicts of interest of EGB AG, its subsidiaries, affiliates and employees in respect to the
issuers of financial instruments, which are analysed in this document, is done at the end of the publication of this
document.
For information on the companies included in compendium by analysts of Erste Group, please follow this link:
https://produkte.erstegroup.com/Retail/en/PDF/Research_Disclaimer_Credit/index.phtml
Copyright: 2015 EGB AG. All rights reserved.
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