Emerging Europe: The past is not the future for Addiko
When Austria’s Hypo Alpe Adria collapsed after the financial crisis, it left a network of small Balkan banks – private equity firm Advent International has taken up the challenge of turning them into a profitable franchise, rebranded, root-and-branch reformed and under new management. CEO Ulrich Kissing is open-eyed about the challenges Addiko Bank faces.
Of all the spectacular banking blow-ups triggered by the financial crisis, few can compete with that of Hypo Alpe Adria. Fuelled by the patronage of far-right state governor Jörg Haider, what should have been a sleepy Austrian regional lender blazed through the Balkans in the 1990s and early 2000s, disbursing billions of euros against the dubious security of high-end resorts, golf courses and luxury yachts.
Problems with this asset-based business model started to emerge even before 2008 and snowballed as real estate bubbles burst across southeastern Europe in the aftermath of the financial crisis. Subsequent investigations revealed not only irresponsible lending but also large-scale fraud across the network. Several senior executives, including long-time CEO Wolfgang Kulterer, ended up in jail.
The fallout from this debacle hit Germany’s Bayerische Landesbank, which paid €1.7 billion for a controlling stake in Hypo Alpe Adria in 2007, and threatened to bankrupt the Austrian lender’s home region of Carinthia by triggering more than €20 billion in guarantees. Immediate disaster was averted by the nationalization of the bank at the end of 2009, but the saga was far from over.