July 14, 2020 / 8:19 AM / a month ago

Austrian banks well capitalised but eastern Europe could hurt them -ONB

FILE PHOTO: Austria's central bank building is seen in Vienna, Austria, November 22, 2017. REUTERS/Heinz-Peter Bader

VIENNA (Reuters) - Austrian banks are well capitalised but the uncertainty around the coronavirus pandemic’s economic impact is “exceptionally high”, the country’s central bank said on Tuesday, warning that lenders’ exposure to eastern Europe may hurt their profits.

In a statement on its half-yearly Financial Stability Report published on Tuesday, the Austrian National Bank (ONB) reiterated that Austrian banks have improved their resilience in recent years, but their credit risk and non-performing loans will only become more visible in the second half of this year.

“Rising credit risk provisioning in Austria and Central, Eastern and Southeastern Europe – an important market for Austrian banks – may put a strain on Austrian banks’ profitability in the future (after it had improved in recent years),” the central bank said.

It urged banks to take measures such as postponing share buybacks to preserve capital and it repeated its position that companies should consider dividend payments and bonuses carefully rather than banning them altogether.

“Recent scenario analyses conducted by the ONB show that the Austrian banking sector is currently well capitalised despite the negative effects of the crisis,” the central bank said.

“Although measures to contain the spread of the virus and to keep trade and businesses afloat have shown good results, the economy will need several years to recover,” it added.

Reporting by Francois Murphy; Editing by Michelle Martin

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