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Raiffeisen Too Cheap to Sell Shares in First Half, RZB Says

Raiffeisen Bank International AG, eastern Europe’s third-biggest lender, won’t sell new shares until June because current prices would mean “giving away” the bank, the chairman of its majority owner said.

Raiffeisen and 78.5 percent owner Raiffeisen Zentralbank Oesterreich AG will fill a capital gap found by the European Banking Authority in the first half of the year without a share sale, RZB’s Christian Konrad told journalists in Vienna late yesterday. As Raiffeisen trades below book value, other ways to boost capital are preferable, Konrad said.

“We would like to do it, but it has to make sense,” Konrad said about a share sale. While “we do want to raise capital for further growth,” selling shares now “would mean giving away half the bank,” Konrad said. “I know we’ll satisfy the EBA by June 30, and until then we won’t sell stock. We will raise capital, but there are other ways to do it.”

Raiffeisen, which operates in Austria and in 15 former communist countries, is seeking to beef up capital on the EBA’s orders and as Hungarian losses depleted reserves. About a third of its capital consists of state aid and other forms that will be phased out. The Vienna-based lender shelved plans for a share sale last year after Hungary’s decision to force foreign lenders to swallow currency losses on mortgages denominated in Swiss francs pushed Raiffeisen’s local unit into a loss and sent the lender’s stock down by more than 50 percent.

Share Sale Revisited

It revisited the plans when shares more than doubled to more than 30 euros last month from a 12-month low in November, making it the best-performing stock in the 43-member Bloomberg European Banks and Financial Services Index in that period, four people with knowledge of its talks with banks said at the time. The lender may seek as much as 1 billion euros ($1.3 billion), two of the people said.

They rose 2.8 percent to 26.04 euros at the 5:30 p.m. close in Vienna, the fifth-biggest advance in the index which rose 0.3 percent today, led higher by KBC Groep NV and Commerzbank AG.

Konrad said he considered a share sale at those prices a giveaway because Raiffeisen’s book value was 35 euros to 36 euros a share. The average estimate of 19 analysts surveyed by Bloomberg is 38.36 euros a share as of the end of last year.

Capital ‘Gift’

Raiffeisen and RZB are filling a capital gap of 2.1 billion euros and have raised the equivalent of 1.4 billion euros, including making some forms of capital compliant with the EBA’s rules and reducing assets. The EBA recognized 1.75 billion euros of hybrid capital Raiffeisen got from the state, as it did for Austrian peer Erste Group Bank AG and other European lenders.

“The Austrian participation capital is a gift,” said Riccardo Rovere, a banking analyst at Mediobanca SpA, referring to the non-voting capital. “It costs much less than equity. So there is no rush.”

Raiffeisen had core Tier 1 capital of 9.3 percent at the end of 2011, up from 7.9 percent at the end of September, it said last month. Excluding state capital and other hybrid capital phased out by regulators, and applying new rules by the Basel Committee on Banking Supervision, the ratio was at 5.7 percent, according to UBS AG.

Raiffeisen Chairman Walter Rothensteiner said Sept. 22 that there would be no share sale at prices similar to the close a day earlier at 22.10 euros.

Standard & Poor’s said last year it may cut Raiffeisen’s debt rating if the lender doesn’t sell stock in the “short to medium term.”

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