UniCredit injects 1 billion euros into Bank Austria as part of unit split

A Bank Austria logo is seen behind traffic lights at a branch office in Vienna, Austria, June 6, 2016. REUTERS/Heinz-Peter Bader

VIENNA (Reuters) - Bank Austria has received a cash injection of 1 billion euros (£847.1 million) from its parent UniCredit CRDI.MI to strengthen its capital as its central and eastern Europe arm is transferred to UniCredit, the Austrian bank has said.

In a statement issued on Saturday, Bank Austria confirmed media reports that its shareholders had approved the shift of UniCredit’s central and eastern Europe (CEE) business, which it manages, over to Milan.

“The completion of the demerger of Bank Austria’s CEE business ... and its transfer into UniCredit are subject to the relevant regulatory approvals and are expected to be executed simultaneously with effect from 1 October 2016,” Bank Austria said in the statement.

UniCredit has said it aims to formally transfer the (CEE) business, currently run by Bank Austria, to its headquarters in Milan this year but it has said most of the roughly 500 CEE jobs in Vienna will stay put.

The shift will, however, affect Bank Austria’s capital position, and a source familiar with the matter said last month that European regulators might impose tougher capital requirements on Bank Austria as a condition for approving the transfer of the CEE assets to Milan.

Bank Austria denied on Thursday that regulators had made any such demand, though its statement said that UniCredit made a cash injection into Bank Austria that day.

“The reorganization project is on track and will allow Bank Austria to fully focus on the development of the Austrian business, leveraging on a strengthened capital structure thanks to a cash contribution of 1 billion euros made by UniCredit SpA on 4 August 2016,” Bank Austria said.

Any capital injection is a sensitive issue for UniCredit as two sources close to the matter said last week that it is looking at ways to plug its own estimated capital shortfall of 7 billion to 8 billion euros through a share issue and asset sales.

Reporting by Francois Murphy, editing by David Evans