November 14, 2012 / 9:18 AM / 5 years ago

UPDATE 1-Austrian government to pump 500 mln euros into Hypo

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VIENNA, Nov 14 (Reuters) - Austria is to pump another 500 million euros ($636 million) into state-owned bank Hypo Alpe Adria to help the troubled lender shore up its balance sheet, Hypo said on Wednesday.

The bank, nationalised in 2009 to avert a collapse which would have been felt throughout the region, is scrambling to meet regulatory requirements to boost its balance sheet by 1.5 billion euros by the end of the year.

Hypo Alpe Adria said it would issue 204 million new shares, which only its sole shareholder, the Austrian government, would have the option to buy.

The figure of 500 million euros exceeds the 300 million that Finance Minister Maria Fekter had said was earmarked for aid to Hypo, and will make it harder for her to get the state budget deficit below its target of 3 percent of gross domestic product.

The bank's plans to improve its financial health by divesting units have run into trouble in tough markets. It also needs another 700 million euros of extra capital by the end of March 2013 as a buffer against recession and jittery markets.

Sources close to the situation have told Reuters that Hypo is also readying a roughly 1 billion-euro state-backed hybrid bond.

$1 = 0.7867 euros Reporting by Georgina Prodhan; Editing by Jane Baird and Mark Potter

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