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Raiffeisen Quarterly Profit Slides on Eastern Europe Woes

Raiffeisen Bank International AG (RBI), eastern Europe’s second-biggest bank, said second-quarter profit tumbled and capital ratios shrank amid an economic downturn in the region.

Net income fell 25 percent from a year ago to 120 million euros ($160 million), the Vienna-based bank said in a statement today. It was expected to report profit of 136 million euros, according to a poll of 22 analysts held by the company. Raiffeisen’s core Tier 1 ratio, a key measure of financial strength, slid to 10.4 percent on June 30 from 10.7 percent at the end of 2012.

“We are continuously evaluating the level and structure of our regulatory capital to be able to act promptly and flexibly,” Raiffeisen said. “Depending on market developments, a capital increase also continues to be a possible option.”

Bolstering capital is the biggest challenge facing Raiffeisen’s new chief executive officer Karl Sevelda, who was appointed in June. While investors and regulators have pushed for a share sale, he has to overcome opposition at Raiffeisen Zentralbank Oesterreich AG, the bank’s parent company that is owned by 494 local cooperatives.

Profit before tax in central Europe dropped to 71 million euros in the second quarter from 111 million euros a year earlier, due to lower income from asset valuations of financial investments and higher administrative expenses, the bank said. Pretax profit in southeastern Europe fell 19 percent to 154 million euros, it said.

Second-quarter net interest income rose 10 percent to 972 million euros while provisions for bad loans climbed less than 1 percent to 249 million euros.

To contact the reporter on this story: Jonathan Tirone in Vienna at jtirone@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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